Paper supply may trail demand

The domestic paper industry is expected to fall short of demand by 1.5 million tonnes by 2010-11 due to raw material constraints, according to the Indian Pulp and Paper Technical Association (IPPTA). The association represents pulp, paper, newspaper and allied industries in the country with a membership base of 2,500.

Addressing a press conference in connection with a two-day zonal seminar on Mill-Wide Maintenance Strategies recently, Anil Kumar, executive director and CEO of Shreyans Industries, and also the president of the association, said, though the production capacity would rise to 8.5-9 million tonnes from the existing 7.5 million tonnes by 2010-11, the domestic demand would be 10 million tonnes.

According to him, the consumption of paper products is growing at a fast pace of around 6.5 per cent and is expected to further go up in future.

Kumar cited higher costs and supply constraints with regard to raw materials as the single-biggest bottleneck coming in the way of the paper industry.

The industry now uses three sources of raw materials "� recycled paper, wood and agro-based waste. The recycled paper, comparatively cheaper, comprises almost 40 per cent of the total raw materials requirement at present.

Most of the organised sector companies are concerned with the cost of wood pulp besides its availability, which according to Kumar, works out to around $60 a tonne in India compared with $20-25 a tonne in Brazil and Indonesia and $30-35 in the West. "This is one area where almost 20 per cent cost reduction is possible provided the government makes available a vast chunk of degraded forest lands to the industry," he said. Raw materials occupy 40 per cent of the production cost, according to him.

"A greenfield project based on wood pulp with a capacity of 1 lakh tonnes would require about Rs 1,000 crore capital expenditure. Therefore the higher raw material costs are very unlikely to sustain the capital-intensive industry such as this," Pradeep Dhobale, divisional chief executive, ITC paper boards and speciality papers division, said.

Any move to further reduce the import duty on paper from the 10 per cent level would prove counter-productive to the growth of the domestic industry, he added.

The paper industry, which mostly depends on farmers for sourcing raw materials, would require about 2 million hectares from the country's 32 million hectares of degraded forests. This land could be put to productive use with the joint involvement of the local people, the industry and the forest department, he said.

A Parliamentary standing committee is currently looking into the multi-stakeholder partnership policy, specifically drafted by the environment and forest ministry for this purpose.

Indonesia has already made available a huge extent of forest lands to cater to the raw material requirements of its paper manufacturers, which is putting the domestic industry in a further disadvantageous position, according to the association. Another worry is that 70 per cent of the global recycled paper is being shipped in by Chinese companies.

In a bid to broad-base raw materials from the agriculture source, The Andhra Pradesh Paper Mills has recently set up a pilot plant using paddy straw as a raw material in paper-making. "Once our experiment proves successful, we would be able to source a couple of million tonnes of this particular raw material from the nearby districts," R C Mall, executive director, AP Paper Mills, said.

According to the IPPTA, the industry also comprises a huge unorganised sector, which is believed to be contributing 25 per cent of the total production in the country.