Impose safeguard duties to protect paper mills: Yogesh Agarwal

Interview with MD, Ballarpur Industries Ltd

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The Indian paper industry, worth Rs 50,000 crore, is struggling to maintain profit margins due to sharp increase in cheaper imports from Asean countries. Rising raw material cost is affecting mills’ profitability, Yogesh Agarwal, managing director, Ballarpur Industries Ltd, tells Dilip Kumar Jha. Edited excerpts:

India’s paper import has doubled in four years to over one million tonnes. How has that impacted BILT?

Rising import of finished products has hit the domestic industry badly, especially at a time when local paper mills have made huge investments in capacity expansions. Last year, the capacity utilisation of the domestic mills in writing and printing grades was around 89 per cent. We have urged the government to impose safeguard duties to protect the domestic mills.

What is your strategy to tackle rising raw material cost?

There is over two million tonnes of wood deficit in India of its total estimated demand of 11 million tonnes. Wood prices have doubled in three years. The delivered cost of domestic wood in India stands between $175-200 per tonne as against $100 per tonne in other Asian countries, which makes our paper industry non-competitive. BILT is working with farmers under the farm forestry scheme and making representations to the government to allow plantations on degraded land.

Where is the paper price heading, in the wake of an economic slowdown in China and a sluggish Western world?

China recorded poor pulp & paper take-off in FY 2014-15. Demand in Asian economies in 2014, including India and China, grew 2.2 per cent, not sufficient to offset the eight per cent drop in demand in North America and Europe. Sluggish paper demand in the Western world and slowdown in China would continue the pressure and in the near future, the market is expected to remain depressed.

To what factors would you attribute the loss incurred by BILT?

Indian operations have continued to do well generating positive Ebitda (earnings before interest, tax, depreciation and amortisation), BILT has been negatively impacted by operation in SFI (Sabah Forest Industries), Malaysia. Lower production and selling prices coupled with high raw material prices have negatively impacted the Malaysian operations. Also, BILT being a net importer, the depreciating Indian currency has not helped. Shipping rates have fallen over 50 per cent in certain sectors due to fall in commodity and crude prices. So, BILT is taking advantage of this through its exports division to actualise high margins.

What is the rationale of selling Malaysian subsidiary Sabah Forest Industries Sdn. Bhd?

The decision to sell Sabah Forest Industries in Malaysia is predominantly to bring down the debt. The company hopes to bring down its debt by about Rs 2,000-2,500 crore from proceedings of this sale. Also, BILT has taken a strategic decision to focus on the writing and printing segment and strengthen its presence in domestic paper market.

You started selling paper online through P3 stores. Where have you reached now?

P3 is a unique offering that successfully combines world class stationery merchandise and convenience of buying. BILT continues to rapidly scale up this relatively new business and it has been well supported with a wide portfolio of office products like copier, specialty paper, office stationery, corporate gifting and print services. In the present times, P3 is catering to business in B2B space supplying an array of office products to over 475 corporate customers. P3 is also selling through online.

The paper industry is not considered environment-friendly. What is happening on the technology upgradation front?

BILT has installed advanced energy and resource efficient equipment in the new pulp mill unit at Ballarpur as part of its technology upgradation. The company has adopted three ‘Rs’ — reduce, reuse, recycle — for conserving water, which has helped in reduction of water consumption per tonne of paper. The effluent treatment plant in Ballarpur has been upgraded.