Indian paper mills put expansion on hold

Posted on 13 Sep , 2017

The industry has not seen an expansion in capacity for the last year or so due to many factors with the availability of cheaper import from ASEAN countries being on top of the list.

In an interview to a business journal Saurabh Bangur, president, Indian Paper Manufacturers Association (IPMA) and vice chairman of West Coast Paper said, “Domestic paper manufacturers find it difficult to be globally competitive due to non-availability of raw materials like wood, agro residue or recycled fibre which significantly impacts the cost of paper production. Due to lack of competitiveness, cheap imports are growing. Imports of paper and paperboard at zero duty under the free trade agreements (FTAs) have compounded the problem.”

As per Directorate General of Commercial Intelligence and Statistics (DGCIS) data, imports from ASEAN region have risen at a CAGR of more than 40 per cent during the past three years.

In the last round of investments between 2006 and 2015, paper mills had added over 3 million tonnes of annual production capacity in printing and writing paper at an investment of about $5 billion (Rs 3000 crore approximately).

The total annual domestic demand for paper, including newsprint, is about 15 mt, according to industry estimates with the total domestic production capacity of 12 mt, has already been absorbed by the market.

According to Bangur, the paper industry is ready for the next round of capacity expansion but for raw material security. Pulp wood shortage is said to impact competitiveness.

“The government should consider making available some part of the country’s degraded forest land for pulpwood (+ fuel wood/fodder) plantations under a collaborative arrangement, so that the Indian paper industry can access raw material at competitive rates and become globally competitive. Even providing 10% of degraded forest land for raising pulpwood plantation in collaboration with paper industry would make available approximately 2.5 million hectares of productive plantation,” Bangur explained.

According to him, the industry has immediate expansion potential in tissue paper and packaging boards with packaging board demand is estimated at 7.5 mt and growing at 9.4 per cent.

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