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A Review of Indian paper industry


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The global pulp and paper industry consists ofabout 5000 industrial pulp and paper mills,and an equal number of very small companies.

Broadly, the industry can be classified into two

segments: - Paper and paperboard (writing, printing,

packaging and tissue). The writing and printingpaper market can be further divided into coatedand uncoated segments.

- Newsprint mainly uses for newspapers, flyers,and other printed material intended for massdistribution

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The US is the largest market for paper productand commands high per capita consumption.

Asias main markets are China, Japan, India,Malaysia, Singapore and Thailand.

In 2005, Japan had the highest per capitaconsumption (247 kg), followed by Singapore(228 kg), Malaysia (106 kg), Taiwan (51 kg) China(42 kg), Indonesia (22 kg) and Philippines (16kg).

Indias per capita consumption isestimated to be 7.0 kg in 2006.

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312.0

247.0228.0

106.0

51.0 42.022.0 16.0 14.0 6.57.0

324.0

US A J apan S ingapor e Mal ay si a Thai land Chi na I ndonesi a Phi li ppi nes V iet nam I ndi a

Consumption per capita,

2005 vs. 2006(figures in Kgs)

Category Capacity Range Number of units Capacity (TPA)

Small Up to 10000 299 12,90,382

20000 70 38,93,048

Category-wise paper mills in India(figures in number)

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Indian Pulp and Paper has

shown significant

improvements.

There are still many

challenges & a long way

to go.

Capacity utilization of the

industry is just 79%, due

to old technology.

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India is the 15th largest paper producer in theworld. It provides employment to nearly 1.5million people and contributes INR25.0 billion

to the government's exchequer. In last 55years, the number of paper mills has increasedfrom just 17 mills in 1951 to more than 666units engaged in the manufacture of paper andpaperboard, out of which nearly 568 are inoperation by 2006.- 194 mills under purview of Board of

Industrial and Financial Reconstruction (BIFR);nearly 60 mills with acapacity of 1.3 million tonnes is closed.

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Indian paper mills are categorised

based on the raw materials -

wood/forest based mills, agro-residue

based mills and wastepaper-based

mills.

- Due to the increasing regulation and

raw material prices, the companies

are increasingly using more non-

wood based raw material over the

years. In 2006, around 70 % of the

total production is based on non-

- wood raw material.

RecycledPaper38%

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Due to high growth rate, Indian paper industry is very attractive

for the foreign players

6.26.4

7.47.7

8.1

5.25.6

5.9 5.9

6.5

2 00 2-03 2 00 3-04 2 00 4-05 2 00 5-06 2 00 6-07

Paper and Paperboard - Production in India, 2002-06(figures in million tonnes)

India is self-sufficient in manufacture

of most varieties of paper and

paperboards.

- Import is mainly related to certain

speciality papers such as light

weight coated variety of paper,

cheque paper, etc.

- Due to the scarcity of raw material,the companies also need to rely on

imported wood pulp and waste

paper.

In last 5 years, capacity was

increased mainly through expansionand modernisation of the existing

facilities rather than setting up

greenfield projects.

Installed Capacity

Production

0.2

0.3

0.2

0.3

0.4

0.2

0.2

0.30.3

0.3

2002-03 2003-04 2004-05 2005-06 2006-07

Import

Export

Paper and Paperboard - Import-Export, 2002-06(figures in million tonnes)

*


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The per capita consumption of paper in India isvery low i.e. 7 Kgs in 2006, as compared to anaverage consumption of 28 Kgs and 58 Kgs inAsia and world respectively. The per capita

consumption is expected to increase to 12 Kgsby 2020.

The domestic paper market is dominated bylarge players owing to their size, brand value

and financial strength. In 2006-07, the top 10players control around 60% of the market interm of capacity.

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Various macro-economic factors like national economic growth, industrial production,

promotional expenditure, population growth and the governments allocations

for the educational sector influence the demand forpaper

- The growth in paper consumption is directly relatedto GDP growth in the country. In the past, it has shownthe 1:1 relationship with the GDP growth rate.- With expected GDP growth of 9-9.5%, the demandfor Newsprint and Writing & Printing Paper is expected

to grow at the same rate.Continued availability of raw materials would be a bigchallenge for the industry in the next 5-10 years.

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According to the Indian Pulp and PaperTechnical Association (IPPTA), the paperindustry is expected to fall short of demand by1.1 million tonnes by 2010-11 due to rawmaterial constraints.According to ITCs estimates, the total demand

for paper is around 8.0 million tonnes and isexpected to grow to 10.0 million tonnes by2012 and 21.0 million tonnes by 2020.According to Indian Paper Manufacturers

Association (IPMA), consumption of paper inIndia is set to double from the current 7.0million tonnes per annum by 2015.

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Demand driven P&P industry will be

stressed by pressures of quality, availability &

environmental considerations.Society, CREP & sustainability issueswill demand a change in the manner

in which industry conducts itselftoday

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Chip size control

Dust & sound management

Raw material cleaning

Raw material Storage

Segregation of waste paper

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Pulp quality variation: H- Factor Control

Adoption of modern pulping digesters

Adoption of Single/two stage oxygen de-

lignification

Control of odour in conventional batch

digester

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Elimination of elemental chlorine &

hypochlorite from bleaching sequence

Introduction of ECF bleaching

Introduction of oxygen extraction stage inbleaching (several mills dont have

this)

Adoption of enzyme pre-bleaching

Look at closing bleach filtrate cycles.

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Eliminate DCE for Kraft liquor evaporation (63

per cent Indian mills have DCEs).

Introduce concentrators for black liquor

concentration above 72 per cent

Look at BL viscosity reduction opportunity Put efforts on NPE, silica and scales

management

Introduce lime reburning systems

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Indian mills are weak in instrumentation &

process control. This results in wide

variations in quality of sectional outputs. Variation in quality of inputs,

poor/inefficient/outdated multiple

equipments multiplies the challenges.

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On an average, recovered energy in

Indian mills meets only 45 per cent of

energy meets of pulp and recovery

section (in good global mills there is

energy excess)

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During the previous year, pulp prices went up but

companies were unable to pass on the full increase to

buyers. However, most companies raised prices thricethis year, to pass on raw material push. They are

reporting better performance, quarter-on-quarter.

The fact that companies are able to pass on the price

increase from time to time shows the demand-supply

gap is narrowing. Companies are also looking at

another round of price increase.

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The domestic paper industry is estimated ataround 10 million tonnes yearly. Of this, thewriting and paper segment accounts for 3.8 mt,the packaging grade paper segment is around4.5 mt and the newsprint industry about 1.7 m t.

The domestic yearly per capita consumption ofpaper is only 9.2 kg, much lower than manyother developing economies. The figure in Chinaand Indonesia is estimated at 42 kg and 23 kg,

respectively. However, all segments of theindustry are growing at eight to nine per cent orabove.

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The industry is likely to see supply pressure

by the end of the year. The supply overhang in the paper industry,

caused by the bunching of new capacities byleading companies such as BILT, TNPL andWest Coast in 2010, seems to be gettingover.

After having faced overcapacity last year, the

industry is likely to see supply pressure bythe year end.

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There were many capacity additions last year,but nobody is carrying stocks or operating ata lower capacity. The market is absorbingwhatever is being produced.

Demand is expected to exceed supply in2012 and 2013, said A Velliangiri, deputymanaging director, TNPL, which has writingand printing paper capacity of 400,000tonnes yearly. Others in the industry echoVelliangiri s view.

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Sustained fibre supply-Virgin & Secondary

Sustained water supply

Sustained energy supply & quantumreduction in specific energy use

Colour & chloro - organics in wastewater

Odour & VOCs in emissions

Solid wastes management

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Indian Paper Industry

Strong economic growth Low consumption per capita

Printing IndustryIncreased government focus on

education


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Low consumption per capita

India accounts for 15% of the world

population, it consumes only 1% of the

world paper consumption.

- The paper consumption in India is just 7

Kgs per capital, as compared to global

average of 50 Kgs per capita.

With the increasing literacy rate and strong

economic growth, the per capita

consumption of papers is expected toincrease in the future

- According to Economic Survey, per

capita spending on education, as a

percentage of GDP, has increased from

1.2% in 1983 to 4.4% in 2003, at a

CAGR of 7.1%. The impact of just 1 kg increase in per

capita consumption would lead to increase

in demand by 1.1 million tonnes of paper.

Paper Per Capita Consumption in India, 2003-07(figures in Kgs)

4.44.8 4.6

6.0

7.0

2 00 2-03 2 00 3-04 2 00 4-05 2 00 5-06 2 00 6-07

7.37.8

8.6 8.79.0

7.78.2

8.89.3

9.89.2

9.6

10.511.0

2007 2008E 2009E 2010E 2011E

Paper Demand vs. Supply, 2007-11*(figures in million tonnes)

Capacity Demand(7Kgs per capita)

Demand(8Kgs per capita)


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West Coast Paper Mills (WCPM) has recorded a

88 per cent rise in its net profit at Rs. 28.52crores in 2000-01 (Rs. 15.20 crores). Salesand income from operations rose 7 per centto Rs. 351.33 crores (Rs. 328.68 crores).

Profits jumped on better realisations coupledwith an increase in demand for paper andpaper board.


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ITC Bhadrachalam Paperboards had expandedcapacity from 62,500 tpa to 1.82 lakh tpa. Followingthe infusion of around Rs. 150 crores from ITC, the

company has carved a niche for itself in the exportmarket for coated paperboards and specialty paper.

Tamil Nadu Newsprint (TNPL) boasts of being amongthe most efficient players in the newsprint industry.In 2000-01, the company reported sales of Rs.596.40 crores and a net profit of Rs. 76.40 crores.Promoted jointly by the Tamil Nadu Government andIDBI, TNPL manufactures newsprint andprinting/writing paper with a capacity of 1.8 lakh

tonnes annually. TNPL uses bagasse as the maininput. It is now going in for de-bottlenecking toenable capacity increase by around 25 per cent.


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Ballarpur Industries Limited (BILT) is India'slargest paper company and the only Indian

company to rank amongst the top 100 papercompanies in the world.BILT, part of the $3 billion Avantha Group, isIndia's largest manufacturer and exporter of

paper, with a strong presence in all segmentsof the usage spectrum, including writing andprinting paper, industrial paper and specialtypaper.

The company has a diversified productioninfrastructure with six manufacturing unitsspread across the country.


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The company has 6 units, together with a capacity of 480,000 tonnes and a pulp

mill of capacity 100,000 tonnes manufacturing rayon grade pulp, in the state of

Andhra Pradesh (Kamlapuram Unit).

BILT is expanding its production capacity in both coated and non-coated paper,to take it to around 1.0 million tonnes by 2009-10. With the increase in overall

capacity, the company expects to double its turnover by 2009-10.

In October 2007, the company announced to increase the capacity of its

coated wood free paper unit at Bhigwan in Pune by adding 190,000 tonnes.

After the expansion, the total unit capacity would increase to 315,000 tonnes.

The main plant and machinery and its installation would be supplied by Voith,Germany, while some equipment will be sourced locally from suppliers like

L&T, etc.

In July 2007, the company also initiated a restructuring plan, under which it

would transfer 3 manufacturing units at Bhigwan, Ballarpur and Kamalapuram, to

a separate company called BILT Graphic Paper Products, which would be

transferred to Ballarpur Paper Holdings BV (BPH) after court approval. By thisexercise, the company would transfer its commodity business, which is capital-

intensive and would focus on the speciality and consumer-focused products

business.

Ballarpur Industries Limited (BILT)


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Installed Capacity, 2002-06(Figures in 000 tonnes)

386.0 386.6406.6

480.0 480.0

358.9

457.5

407.3383.4

369.9

2002-03 2003-04 2004-05 2005-06 2006-07

Installed Capacity Paper unit, 2005-06(Figures in 000 tonnes)


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To choose eco-friendly paper:Know

1. The papers fiber source

2. Chemicals processing

3. Ability to be recycled or break down in a

landfill.

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