Over 125 craft paper mills face threat of closure

Their inability to pass on sharp hike in input costs may also see 40,000 employees lose their jobs

More than 125 craft paper mills in Gujarat and Maharashtra, with a combined annual turnover of Rs 12,000 crore, are on the verge of closure due to a sharp increase in the cost of raw materials (waste paper) and their inability to pass on the hike to consumers due to cheap imports from ASEAN countries under the Free Trade Agreement (FTA).

India and China are dependent on import of waste paper from abroad for recycling purpose. However, due to the increase in the consumption of waste paper in the global market, raw materials prices have gone up by 35 per cent. As a result, paper mills have been losing Rs 6 a kg.

“If this is not addressed and the deficit is not met, more than 125 craft paper mills in Gujarat and Maharashtra, having an annual turnover of Rs 12,000 crore, would be forced to close down. The industry is facing heavy recession for a long time. Gujarat and Maharashtra units have been importing 2 million tonnes of waste paper. However, with the increase in the usage of waste paper in the United States of America for re-cycling in place of virgin fibre, import of waste paper in India and China has gone down. There has been a spurt in the waste paper prices by 35 per cent in the last two months,” said Sunil Agarwal, President, Gujarat Paper Mills Association.

Chinese mills have increased the prices of ready goods by Rs 7,000 per tonne during the past 2-3 months. So China can afford to pay $50-60 more for the import of waste paper from West America, Europe and the Middle East. Local American mills have already increased their prices by Rs 4,000 a tonne for ready goods and may increase them by another Rs 3,500 in near future.

Mills in the US have been buying American waste papers by paying higher rates. This results in an increment of cost by 35 per cent for imported waste paper to Indian mills. Moreover, there is a further increase of 12 per cent in the cost due to higher exchange rate. The exchange rate, which was Rs 61 against the dollar earlier, has now gone up to Rs 68.50 in the past 3-4 years.

“There has been substantial increase of 25–35 per cent in the cost borne by paper mills due to the rise in imported waste paper, local waste, coal, chemicals, wages and power. To make matters worse, during the past three years, Indian paper mills had to reduce prices by 12–15 per cent in spite of increasing input costs. Paper mills are not even realising their cost and have been losing heavily. It has been estimated that these mills will have to increase the price by Rs 6 per kg, otherwise they will not survive and may have to close down. This may result in the closure of around 125 paper mills and unemployment of around 40,000 workers, which will in turn, result in a heavy loss to the government exchequer,” said Prakash Rathi, President, Maharashtra Paper Mills Association.