Perception of paper industry as eco-unfriendly is misplaced

Written by Sandip Das | Updated: Sep 2 2014, 07:32am hrs
The paper industry with an estimated annual turnover of R40,000 crore is passing through a tough phase because of raw material scarcity, rising input prices and a sudden rush of duty-free imports. Sanjay Singh, vice-president, Indian Paper Manufacturers Association, spoke to FE's Sandip Das on the challenges faced by the industry.

What are the issues confronting the industry right now

The primary challenge is raw material scarcity. India is deficient in wood fibre. Domestic paper producers need to import substantial quantities of wood pulp and waste paper to meet raw material deficit. Notwithstanding the industrys initiative to promote agro-forestry, wood availability has dwindled and domestic players are compelled to import wood logs or chips, something that has never happened before. The industry imported a million tonne of wood last year at a high landing cost. Raw material pricing is also a major issue. In 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 make up 35-40% of the cost of paper production and prohibitive cost is hurting the industry.

Are cheap imports from South East Asian countries hurting the industry

India has signed free trade agreements with South East Asian nations, following which 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 a favourable cost. Manufacturers in Indonesia and China enjoy export incentives.

What is the industry doing to change its perception as an environment harming industry

There is a prevailing myth about the pulp and paper industry. The organised paper industry has laid special thrust on sustainability, unmatched by many other industries. The 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 fields. Integrated paper mills in India generate 60% of the power they use by utilising black liquor from the pulping process. New breakthrough ideas are coming up to recycle effluents. A few years ago, we used to consume 200 cubic metre of water to produce a tonne of paper. Now, integrated mills have reduced that to 50 cubic metre. Efforts are on to bring it to 40 cubic metre. So the perception of the industry as environment harming is grossly misplaced.

What are some key steps the government must take to protect the industry

Paper being a key manufacturing industry with large employment potential should rank high on the priority list. More than any other segment of manufacturing, the paper industry has the potential to play an important role in meeting three national objectives education, literacy,and employment generation that too in rural areas and hence it is better placed to drive the governments 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 has been made. This is making the entire investment of more than $ 5 billion by the industry in the last five years unviable. Besides, if no capacity creation happens, because of lack of raw material availability there will be import of one million tonne of paper every year, resulting in ever increasing forex outgo. 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 capability to service the growing demand and also to create huge employment avenues.