Dependence on paper imports set to rise
Lack of captive plantations pushes input costs few plans for fresh capacity addition
With eight per cent annual consumption growth amid almost no fresh capacity additions, the country’s supply deficit in paper is likely to widen in the coming years.
Of the Rs 35,000-crore paper industry’s annual operating capacity of 12.75 million tonnes (mt), output in 2011-12 was 11 mt against the consumption (including newsprint) of 11.23 mt, a deficit of 0.23 mt. “The deficit would widen to hit 1.25 mt in 2013-14 and around two mt by 2015-16,” said Madhukar Mishra, managing director of Star Paper Mills and outgoing president of the Indian Paper Manufacturers Association (Ipma).
He forecast India’s paper consumption to hit 14 mt by 2015-16 and 20 mt by 2020. The estimated yearly rise is a million tonnes. However, manufacturers have failed to announce any significant capacity additions. A major reason is rising cost of production due to the lack of a captive plantation policy, unlike in North and Latin America, Scandinavia, Australia, Japan, Indonesia and China. Mills in India have to depend on small and scattered plantations or government-controlled forests for pulpwood.
In the process, at times the cost of collection and transportation works out to be greater than that of the pulpwood. The total input cost has made the industry most uncompetitive in comparison to the major producers of the world.
“The subdued global economic scenario, particularly in the US and Euro zone is currently impacting the world paper market. In this backdrop, India presents an exciting destination. Economists say paper consumption is poised for a big leap forward, in sync with economic growth, and would overtake the gross domestic product growth rate as had happened in other economies at a similar point,” says Mishra.
Consequently, paper import is set to increase. We import only certain speciality papers and paper board, mainly coated varieties and art paper. From 0.3 mt of paper and paper board imports in 2005-06, inward supply rose to 0.5 mt in 2010-11, around five per cent of the total consumption of paper and paper board. Almost similar quantities of paper/paper board are exported.
In newsprint, the country imports more than half its demand; it also exports a very small quantity. During 2010-11, nearly 1.22 mt was imported against total consumption of around two mt. About 9,000 tonnes was exported.
Companies here fear that major competitors from Indonesia and China are set to push large quantities into the lucrative Indian market. The developed economies, traditional importers, face renewed signs of economic recession. And, while the US and European Union have punitive import duties, India does not. Gautam Thapar, chairman, Avantha Group, said, “The paper industry is both energy-intensive and resource-intensive. Innovation to overcome these challenges will drive the future of the industry.