Paper Manufacturers May Cut Output In Face Of Glut

The government decision to reduce import duty on paper has not improved the situation. Import duty was cut from 65 to 45 per cent within a span of three months in 1993-94. Subsequently, it was sliced to 40 per cent in March 1995 and 20 per cent in May 1995.

Paper import has increased to 1.2 lakh tonnes in 1995-96. This trend is expected to continue in the current year.

In May 1995, international prices ruled at Rs 42,000 per tonne.

There was hardly any imports as the domestic prices hovered around Rs 30,000 per tonne.

In the past six months, however, the international prices crashed to half of that to Rs 22,750 per tonne. Against this, domestic prices fell from Rs 30,000 to Rs 26,000 per tonne in the same period.

 

As a result, stocks with the paper units have gone up to 30-45 days of production as against 5-7 days. Paper industry, therefore, are left with no option but slash production, according to a source.

There are 385 paper mills in the country. Its total installed capacity is 43 lakh tonnes a year. Of these, 120 mills are closed, which means about 10 lakh tonnes capacity is out of production.

The capacity of the operating mills is 33 lakh tonnes a year. The existing rate of utilisation stands at 28 lakh tonnes or 85 per cent.

The uniform excise duty of 10 per cent on writing and printing paper has further complicated matters. This has, in fact, raised the duty by five per cent for mills using unconventional raw materials like bagasse, straw, jute and waste paper.

Before the budget proposal, mills using 75 per cent of unconventional raw materials were to pay five per cent duty.

This will hit paper mills that have undertaken expansion programmes hard. Century Paper & Pulp, for instance, raised its capacity three times to 90,000 tonnes a year with an investment of Rs 400 crore to set up new bagasse-based facility.

Tamilnadu Newsprint & Paper invested Rs 650 crore to double the capacity at 1.8 lakh tonnes.

Units using unconventional materials will be hardest hit. They will not be able to undertake full-scale production as the prices of their products will increase with additional duty.

The glut has further increased with newsprint being brought under open general licence.

The international prices of newsprint have slid to Rs 19,000 per tonne against Rs 26,000 per tonne in the domestic market.

Many manufacturers have switched to printing and writing paper making.

Newsprint makers like Hindustan Newsprint (300 tonnes per day capacity), Nepa Mills (150 tpd), TNPL (100 tpd) have already stopped production. Mysore Paper Mills has cut production from 300 to 80 tpd in the face of the stockpile.