Paper Industry in India – an Analytical Study

Dr. Yellaswamy Ambati, International Journal of Research in Management, Economics and Commerce, ISSN 2250-057X, Impact Factor: 6.384, Volume 07 Issue 07, July 2017, Page 13-18 Paper Industry in India – An Analytical Study

Dr. Yellaswamy Ambati (Lecturer in Commerce, TS Model Junior College, Jangaon, Warangal, Telangana, India)

I. INTRODUCTION Indian has the generis of using „Toddy Leave‟ (Tala Patrh) to exchange views in written form since time immemorial. India‟s Paper industry, as one of the old and core industrial manufacturing sector with a bearing on socio-economic development has undergone a significant change during the last three decades, especially after liberalisation. In India this industry plays a vital role in the overall industrial growth and also provides a necessary medium to propel our knowledge based economy forward in the new millennium. The word paper is derived from the “Latin” word “Papyrus” and from French “Papier”, Paper is basically composed of vegetable fibers mattered together to form into sheets. “Payprus” is a kind of grass material. Papyrus is an aquatic plant which grew in abundance in the delta of the Nile in Egypt. In an understandable language it means a sheet formed by the composition of vegetable, mineral, animal or synthetic fibers or mixtures with or without the addition of other substances into liquid vapour, or gas so that the fibers are intermeshed together. Several attributes of paper, including its pedagogic and packaging value makes Paper industry uniquely positioned among the manufacturing industries. Paper, is thus, recognized almost as a touchstone of socio-economic development. This traditional Indian paper sector had leverage and played a pivotal role in laying the foundation for economic growth. It is also one of the 35 high priority industries of Government of India (DIPP-Annual Report 2012-13). The sector has witnessed a sea change in the structure during the last three decades especially after liberalization. Need of the Study In India the paper consumption is predominantly domestic and the demand is driven by GDP growth. The main growth drivers for paper demand includes enhancement in government spending on education (6% of GDP), increase in literacy rate, improvement in standard of living, booming retail sector, construction boom, unprecedented growth in industries like food, pharmaceuticals and apparels, increase in packaging and advertising expenditure etc. The printing and packaging industry is growing at 14% CAGR. The population of 1.2 billion and the changing demographic profile, which will put over 65% of the population in the working class and half of that is less than 30 years old, following western consumerism, will further fuel the demand for paper and paperboards. In this background, there is need to study the paper Industry in India. Objectives of the Study The following are the main objectives of the study. 1. To study the origin and growth of paper industry in India, 2. To analyse the raw material consumption pattern of paper industry in India, 3. To study the prospects of Indian paper industry consumption & production, 4. To evaluate the scenario of Exports and Import of Indian paper industry 5. To analyse the Indian paper Industry through SWOT analysis.

II. RESEARCH METHODOLOGY The study is entirely based on secondary sources with an objective of full text of information on one industry at one place, and accordingly the author made his efforts to collect the necessary data from text books, journal articles, web sources and various reports with respect to paper industry in India. The data so generated is thoroughly modified to suit to the requirements of various readers and researchers for further research in the field. The data collected for the study is authentic and valid as the data is secured from authentic sources. Data is majorly secured from INTECOS (Industrial and Technical Economic Services Pvt. Ltd., India Stat. com and CIER (Centre for Industrial and Economic Research). Origin of Paper Industry in India Paper consumption is used as basic measure of civilization. Initially writings and carvings were made on stones, clay, copper, brass and palm trees, etc. The art of paper making was first developed in China where it was made from the bark and leaves of the mulberry tree. In 751 A.D. the Arabs took the Chinese as prisoners and from them the art of paper making reached to the Middle East and Europe. http://indusedu.org Page 13

This work is licensed under a Creative Commons Attribution 4.0 International License Dr. Yellaswamy Ambati, International Journal of Research in Management, Economics and Commerce, ISSN 2250-057X, Impact Factor: 6.384, Volume 07 Issue 07, July 2017, Page 13-18

The art of paper making reached India through Arabs who initially learnt from Chinese prisoners. Earlier Aryans used “copper plates” (Tammrapatra), Loha Patra (Iron sheets), Tadapatra (Palm leaves), Bhuajpatra (Beech palm) and like material, in order to memorize the huge amount of information. The usage of metals for information sharing and storing has eroded with certain problems, and resulted in invention of paper to ease the human‟s everlasting endeavour of information sharing and storing. The usage of lead, copper and bronze as means of communication drastically reduced with the introduction of fiber sheets. In olden days, from Kashmir to Kanyakumari, there were evidences of existence of handmade paper industries. The paper industry gained its momentum during Moghal Empire. It was observed as the most common use material throughout India at the close of Akbar‟s reign. As per history, the efforts to mechanize the Indian paper industry were first made by William Carey. He started a paper mill in 1812 at Serampore, West Bengal. He himself set up a steam engine in 1820 and he added first four-drinier type machine in 1832 and paving to the development of mechanized paper mills. The Upper India Couper Paper Mills, Lucknow (1882) and Punalur Paper Mills, Kerala (1883), Titaghur Paper Mills, West Bengal (1884), Deccan Paper Mills, Maharastra (1887), Bengal Paper Mills, West Bengal (1891) and Imperial Paper Mills Corporation, West Bengal (1894) were pioneering units in the early Indian Paper Industry. The then British Government in India had given a preferential treatment to the indigenous paper production in 1880 to encourage and establishment paper mills. During the course of time the paper industry had been transformed into one of the major and key industry for independent India.

III. GROWTH OF PAPER INDUSTRY IN INDIA India began its program of economic reform in 1991. One by one, the industrial sectors were freed from an administered license regimen. In July, 1991, the Government of India (GoI) decided to delicense the paper industry. This acted as an incentive for the growth of the paper industry. Figure – 01 shows the growth of paper industry in India since of its inception.

Figure1: Growth of Paper Industry in India Source: CMIE/ Industry/CPPRI Above figure1 shows that the Indian paper industry recorded a unique growth in production with 0.11 million tons in 1950-51 to 10.1 million tons in 2010-11. It is 2.6% of the total world production of 394 million tons/annum of paper, paper board and newsprint. As compared to international capacities, we lag far behind. Scandinavian countries, USA, the Russian Federation, China, Indonesia and Japan are the major players in the field of pulp and paper. These countries have some of the best available raw materials for paper production, cutting edge technologies and control the global trade. Only few mills in India employ the State of Art technologies. In India, there are 759 Pulp & Paper mills with an installed capacity of 12.7 million tons producing around 10.11 million tons/annum of paper/paper board and newsprint out of an annual consumption of around 11.15 million tons. The Indian paper industry accounted for less than 3% of global paper demand. The per capita consumption of paper amounts to around 10 kilogram (Kg), which is significantly lower than world average of around 58 Kg and even the consumption levels of some of the other developing nations.

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Raw Material Consumption Pattern The industry is typically divided into three major sectors based on the raw materials used. The raw material consumption pattern has changed over the last few decades. In early seventies the share of wood based raw material was 84% whereas the agro based and waste paper based contributed only 7% & 9% respectively. Subsequently, due to scarce availability of wood based raw material, the share of recycled waste paper and agro based raw material has increased remarkably. Presently the share in production of paper from wood based raw materials, agro residues and recycled/waste paper is 31%, 22% and 47% respectively as shown in table1. Table1: Production of Paper from different Raw Materials (Million tons) Variety of Wood Agro RCF/Waste Total Paper Based Based Paper Based

Writing/printing 2.36 0.73 0.81 3.9 Packaging 0.77 1.5 3.15 5.42 Newsprint 0.03 Nil 0.76 0.79 2.23 4.72 10.11 Grand Total 3.16 (31%) (22%) (47%) (100%) Source: Industry & CPPRI (2010-11) Above data reveals that the wood based mills contribute 31% of the total production which works out to about 3.1 million tons/annum, due to there are 30 large integrated paper mills based on wood/bamboo as major raw materials in India. (Nearly 2.2 tons of wood (Oven Dry (O.D.) basis) is needed to produce 1 ton of paper). Agro based mills are contributing about 22% of the total production which is 2.2 million tons/ annum. There are 150 paper mills based on agro residues in the country using bagasse & straws as major raw materials in proportion of 50% bagasse and 50% wheat/rice straw and other annual grasses & contributing. (Nearly 2.5 tons (O.D) of bagasse or 2.3 tons (O.D) of wheat straw are needed to produce one ton of paper). Recycled fiber/waste paper based contributing about 4.72 million tons per annum or 47% of the country‟s total production of paper/paper board and newsprint. There are total 653 paper mills in operation more than two thirds of the mills use RCF/waste paper as the primary fiber source. (Nearly 1.33 tons of recycled/waste paper is required to produce one ton of paper.) Scenario of Export/Import of paper/paper board and newsprint India have emerged as fastest growing paper market in the world the per capita paper consumption is still remain low which is often regarded as barometer of socio-economic progress of a country. This indicates that India holds an enormous growth potential of the sector. However, the burgeoning consumption of paper is also supplemented by imports. Although, India is a net importer of paper and paper products its exports have also been swelling since liberalisation. The table2 indicates the export & import of paper, paper board & newsprint during the last five years i.e. 2006-07 to 2010-11. Table2: Export & Import of Paper, Paper Board & Newsprint (Million Tons) Paper particulars 2006-07 2007-08 2008-09 2009-10 2010-11 Paper/Paper Board 0.339 0.325 0.334 0.369 0.518 News Print Exports 0.004 0.004 0.006 0.013 0.009 Total Export 0.343 0.329 0.34 0.382 0.527 Paper/Paper Board 0.348 0.451 0.437 0.614 0.632 News Print Imports 0.79 0.89 0.97 0.85 0.95 Total Import 1.138 1.341 1.407 1.464 1.582 Above data indicates that the total volume of the import was around 1.138 million tons (per annum) during the period 2006-07 which increased to around 1.582 million tons during the period 2010-11. India imports only certain speciality paper & paper board, mainly coated varieties and art paper. The volume of the import of paper and paper board was around 0.3 million tons (per annum) during the period 2006-07 which increased to around 0.6 million tons during the period 2010-11, contributing around 5% of the total consumption of paper and paper board and almost similar quantities of paper/paper board and are exported. As far as newsprint is concerned, the country imports more than 50% of its demand of newsprint and exports a very small quantity. During the year 2010-11 nearly 1.22 million tons of newsprint was imported against the total consumption of around 2 million tons and 0.009 million tons was exported. The dependency on import for paper, however, would continue to exist. The total import of paper (mostly the newsprint) would increase from about 1 million tons in 2010-11 to 1.7 million tons in 2016-17 and further to 4.3 million tons in 2026-27. http://indusedu.org Page 15

IV. PROSPECTS OF PAPER INDUSTRY- CONSUMPTION & PRODUCTION The forecast for consumption of paper has been derived considering two alternate scenarios. In scenario 1, trend in growth of consumption in the past has been used as basis to determine the growth trend in the 12th Five year plan (2012-17) and the forecast for the next 15 years has been made. In scenario 2, consumption forecast has been made based on the following assumptions: a) For writing paper, elasticity of consumption has been taken at 0.9. Taking the GDP growth at 9% during 2012-17 and beyond, the growth of demand for writing paper has been assumed at 8.1% per annum. With universalisation of education and increase in the period spend on education; elasticity of consumption of writing paper could be higher than one. However, despite a lower per capita consumption relative to other countries, increasing access to internet and substitution of writing/printing material by the electronic mode, elasticity of consumption has been taken at 0.9. b) For packaging paper, the tracking variable is the likely manufacturing growth. Since the share of the manufacturing sector is proposed to be increased from existing 16% to 25% in next 10 years, manufacturing growth is expected to remain higher than the GDP growth. The approach paper to the 12th Five Year Plan has taken manufacturing growth of 9.8% at the base case scenario; we have assumed a growth of 10% for the growth of the packaging paper. c) For the newsprint, the average annual growth in first two years is taken at 7%. In subsequent years, the growth has been taken assuming an elasticity of consumption at 0.9, or a growth of 8.1% per annum. Based on the above assumptions, the expected pattern of paper consumption emerges as shown in table 3: Table3: Projected Consumption of Paper (Million Tons) Type of Papers Writing Packaging News Total Baseline

Paper Paper Print Consumption Scenario Financial Years 2010-11 4.0 5.4 1.7 11.2 11.2 2011-12 4.3 5.9 1.8 12.0 12.1 2012-13 4.6 6.4 1.9 13.0 13.0 2013-14 5.0 7.1 2.1 14.2 13.8 2014-15 5.4 7.8 2.2 15.4 14.7 2015-16 5.8 8.6 2.4 16.8 15.6 2016-17 6.3 9.4 2.6 18.4 16.5 2021-22 9.3 15.2 3.9 28.4 21.8 2024-25 11.8 20.2 4.9 36.9 23.5 2026-27 13.8 24.5 5.7 43.9 25.3 Above data reveals that the overall paper consumption in the baseline scenario is projected to increase to 16.5 million tons in 2016-17 and reach 25.3 million tons in 2026-27. In the alternative scenario, which appears to be more realistic, the consumption increases to 18.4 million tons in 2016-17 (the terminal year of the 12th Plan) and to 43.9 million tons in 2026-27. The estimates for production during the 12th Five Year Plan (2012-17) and in the next 15 years have also been derived for both the alternate scenarios. Estimates of production of various paper grades based on wood, agro residues & recycled paper have also been projected. In the baseline scenario, it is assumed that growth in availability of raw material will continue to be same as in the past2. In scenario 2, following growth rates are assumed for the three alternate raw materials sources. a) For the wood based sector, the availability is projected to increase at an annual rate of 8%. b) For the agro based sector, the projected growth assumed is also 8%. This growth would, however, be feasible provided technology is developed for the use of rice straw in paper making, particularly for the packaging paper and also assuming that bagasse will be available for the paper industry. c) The growth in availability of recycled paper is assumed at 10%. Initiatives have been proposed for an increased availability of the used paper for recycling. Based on the above assumptions, the paper production at the baseline scenario and the alternative scenario is indicated in the table below: Table4: Projected Production of Paper (Million Tons) Type of Papers Wood Agro Based Recycled Total Baseline

Resources Resources Paper Production Production Financial Years 2010-11 3.2 2.2 4.7 10.1 10.1 2011-12 3.4 2.3 5.1 10.9 10.9 2012-13 3.7 2.5 5.7 11.8 11.7 2013-14 4.0 2.7 6.2 12.9 12.5 2014-15 4.3 2.9 6.8 14.1 13.3 http://indusedu.org Page 16

2015-16 4.6 3.2 7.5 15.3 14.1 2016-17 5.0 3.4 8.3 16.7 14.8 2021-22 8.0 5.4 14.7 28.0 19.6 2024-25 9.3 6.3 17.8 33.4 22.0 2026-27 10.8 7.4 21.5 39.7 23.5 Above data indicates that the production of paper is expected to increase to 16.7 million tons in 2016- 17 and further to 39.7 million tons in 2026-27. SWOT Analysis to Indian Paper Industry SWOT basically refers to Strengths, Weaknesses, Opportunities and Threats analysis. SWOT is an indispensible analysis for any industry. The present research depicted the following results through its analysis.

STRENGHTS WEAKNESSES

 Increased Demand  Low Capacity Utilization  Production of wide variety of Paper  More water requirement  High Employability  Highly pollute  Recyclability of Waste Paper  Decrements in forest lands  Highly Capital Intensive  Industrial sickness

OPPORTUNTIES THREATS

 Huge growth potential  Increased Raw Material Costs  Lead to socio economic development  Competition  Output recyclability  Changing Governmental Policies  Huge product demand  Technological obsolescence  Innovative new product creations  Degradation of Environment  Emergence of ancillary industries ie.  Entry of substitutes like e-paper, plastic and Packaging other products

V. CONCLUSION The paper industry is one of the key industrial sectors contributing to the Indian economy. There are 759 Pulp & Paper mills with an installed capacity of 12.7 million tons producing around 10.11 million tons per annum in the form of paper/paper board and newsprint out of an annual consumption of around 11.15 million tons. The Indian paper industry accounted for less than 3% of global paper demand. The per capita consumption of paper amounts to around 10 kilogram (Kg). Paper mills in India continue to face challenges with forest-based raw material. Out of the annual paper production capacity of nearly 10.11 million tonnes, around 31% is produced by 30 major wood-based mills and the rest 69% by waste paper and agro based mills. The present annual requirement of wood is 9.83 million tonnes. The projected demand for paper by 2025 is 24 million tonnes with indigenous production of 22 million tonnes leading to shortfall of 12 million tonnes of wood. The strategy to be adopted by the paper industry, to meet its ever-growing demand of wood on continuous and sustainable basis is to enlarge social and farm forestry plantation apart from raising plantations by forest development corporations. It is also proposed that proper attention raised to be paid by the R&D wings of various paper mills to identifying or discovering alternative sources of raw materials for replace wood which has become a scare product and more so, there is a threat and furore from among the people against the use of plants as an inputs.

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