We grow more trees than we harvest: Sanjay Singh, Vice President, Indian Paper Manufacturers Association (IPMA)
The Indian Paper Industry with an estimated annual turnover of Rs 40,000 crore is passing through a tough phase because of scarcity in raw material scarcity, rising input prices and a sudden rush of duty free imports are hitting the industry. Sanjay Singh, Vice President, Indian Paper Manufacturers Association (IPMA) spoke to www.indianagribusiness.com on the challenges the industry.
Q: At present, what are the key challenges being faced by the paper industry?
Primary challenge is that of raw material scarcity. India is a wood fibre deficient country. The domestic paper producers need to import substantial quantities of wood pulp and waste paper to meet raw material deficit. Notwithstanding industry’s initiative to promote Agro–forestry across the country, wood availability in the country has rapidly dwindled and the domestic players are compelled to import wood logs or chips which has never happened before. Paper industry imported one million tonne of wood last year at a high landing cost.
Not only availability, raw material pricing is also a major issue. In the last two years, wood prices have increased by 90%. Raw material prices in India are much higher than other competing paper manufacturing nations such as Indonesia and China. Raw Materials constitute 35% – 40% of cost of paper production and prohibitive cost is hurting the industry.
Q: Is the cheap imports from South East Asian countries hurting the domestic industry?
India has signed Free Trade Agreements with South East Asian Nations, following which the paper imports from countries such as Malaysia, Indonesia, Thailand are now duty free. Unfortunately, the domestic paper industry is at a significant disadvantage for, it has no access to captive plantation to manage raw material cost while players in many South East Asian countries have in-built advantage of conducive production plantation policies and ability to procure wood at favourable cost. Manufacturers in Indonesia and China particularly enjoy injurious amount of export incentives as competitive advantage. These export led economies in Asia have continued to target the fragile Indian Market and now the threat is all the more serious.
Q: What is industry doing to change its perception as an environment harming industry?
There is a prevailing myth about the image of the pulp & paper industry. Organised paper industry has laid special thrust on sustainability, unmatched by many other industries. Paper industry is wood positive. We grow more trees than we harvest. We recycle most of the waste paper that is generated. We recycle agricultural waste which otherwise would have been burnt in the fields. Integrated paper mills in India generate 60% of the power they use by utilising the black liquor from the pulping process. New breakthrough ideas are coming up to recycle the effluents. A few years ago, we used to consume 200 cubic metre of water to produce a tonne of paper. Now, the integrated mills have reduced that to 50 cubic metre. Efforts are on to bring it further down to 40 cubic metre. So the perception of Paper Industry as environment harming industry is grossly misplaced.
Q: What are key steps the government must take to protect the industry?
The government’s support on increasing competitiveness in manufacturing is unmistakable. We believe, Paper being a key manufacturing industry with large employment potential should rank high up on the priority list. More than any other segment of manufacturing, Paper industry has the potential to play an important role in meeting the three national objectives — education, literacy, and employment generation – that too in the rural areas and hence it is better placed to drive the Government’s initiatives.
There have been proposals by various agencies for allocation of degraded forest land for growing pulp wood. However, till date, no significant head way is made in this case. This is making the entire investment of more than $ 5 billion by the industry during the last five years unviable. In absence of adequate domestic raw material availability there is likely to be foreign exchange outgo to the tune of $ 500 million per year. Besides, if no capacity creation happens, because of lack of raw material availability there will be import of one million ton of paper every year resulting in ever increasing foreign exchange outgo year after year.
The demand projections show that the overall paper consumption scenario is projected to increase to 18.5 million tonne in 2016-17 and reach 43.9 million tonne in 2026-27. The Indian paper industry has potential and also capabilities to service the growing demand and also to create huge employment avenues. What is essentially needed is support from the Government in terms of conducive enabling policies to build up the competitiveness of the industry.