Cheap paper imports from China hurting Indian agro-forestry sector

Written by M Sarita Varma | Thiruvananthapuram | Updated: Nov 19 2009, 05:01am hrs
Sudden rise in import of wood-based products like paper and paperboard from China and Indonesia is hitting Indias agro-forestry sector.

As India is among world's fastest growing paper markets, domestic paper industry is also worried that the rich raw material base of the country will become vulnerable if imports are not curbed.

"The infamous price crash in poplar wood (wood widely used in manufacturing of paper and cheap plywood) market could happen this time, in pulpwood (timber grown with the purpose of making wood pulp for paper production)," cautions Piare Lal, General Secretary, Agro Forestry Farmers Association (AFFA).

In four poplar-growing states of Punjab, Haryana, Uttarakhand and Uttar Pradesh, assets worth Rs 1,800-crore has been wasted between 2001-2005 due to lack of timely market-intervention from the government.

Panic-stricken poplar farmers had uprooted even one-year-old saplings in their plantations. Plywood industry still faces acute raw material crisis as the once-bitten poplar farmers are yet to gather confidence.

This time the Jalandhar-based farm outfit AFFA, representing four lakh agro-forestry farmers, has approached the Director General of Safeguards (under Ministry of Finance) for curbing imports. They have also sent a petition to the ministry of finance.

"About 85% of pulpwood used by integrated pulp and paper mills is supplied by about two lakh farmers in India," Piare Lal told FE.

Industrial wood is cultivated in almost all states, but Andhra Pradesh, Tamil Nadu, Karnataka and Punjab are the main producers. Scarcity of raw material has also shaken the paper mills, as availability of local pulpwood is in jeopardy.

Coated paper imports in the first quarter have gone up by as much as 70%, compared to the last quarter of 2008-09, according to data available with Indian Paper Manufacturers Association (IPMA).

Import prices collapsed in the six months from weighted average CIF (Cost, Insurance, Freight) value of $817 a tonne in September 2008 to $680 a tonne in February 2009.

Correspondingly, the import of coated paper from China has gone up from 13345 MT in January-March 2009 quarter to 19165 MT in April-June 2009 period. The consuming industry sees the Chinese imports as much as farmer livelihood issue as a sourcing issue.

Traditionally, about 80% of the needs of wood-based industries are fed by locally produced wood, but unhindered imports are slowly changing this.

However, the governments policy response to the problem is hardly consistent. Even when DG, (Safeguards), granted a provisional safeguard duty of 20% ad valorem on all imports of uncoated paper and copy paper early this year, the Board of Secretaries had not accepted it.

A petition on imposing safeguard duty on uncoated paper imports was turned down on November 5, 2009. Farmers are also skeptical in getting any favourable response to the petition.