1

Globalisation, Energy efficiency and Material Consumption in a

Resource based Industry: A Case of India’s Pulp and Paper

Industry 1980-81 to 2009-10

Sandeep Kumar Kujur*

Abstract- India‟s Pulp and 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. This paper examines in detail about the globalisation

and its impact on the growth performances of major indicators of structure and nature of the industry.

It then identifies the probable causes for changing pattern of growth. The changing policy of

government propelled this sector to integrated international market. Further analysis reveals that,

apart from rising production and consumption, erstwhile import dependent India, has achieved self-

sufficiency and also witnessed tremendous increase in exports since libelralisation. During the same

time, the energy efficiency of the sector has improved while the raw-material consumption has seen

drastic shift from conventional type to energy-efficient carbon-neutral non-conventional one.

Key Words: Pulp and paper industry, Liberalisation, Intensity, and Growth.

*: The author is a PhD Student at Centre for Development Studies, Thiruvananthapuram,

sandeep09d@cds.ac.in.

1. Introduction

Several attributes of paper, including its pedagogic and packaging value makes Pulp and

Paper industry (P&P) uniquely positioned among the manufacturing industries. Paper, is thus,

recognized almost as a touchstone of socio-economic development. This traditional Indian

P&P 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 2010-11). It contributes around Rs. 2500 crores per annum to the national exchequer

(Planning Commission 2008). The sector has witnessed a sea change in the structure during

the last three decades especially after liberalization. It produces 1.19 % of total output

produced by all organized industrial manufacturing industries in 2009-10. The export of

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paper industry to the total manufacturing exports is work out to 0.35 % in 2010 while the

import bill of paper and paperboard to the total imports is about 0.52 %.

During the same time, the nature of India‟s P&P industry has undergone a considerable

change. The technological bias is highly material, and energy intensive by nature which

begets humungous gamut of pollution (IEA 2011; Schumacher and Sathaye 1999). In 2009-

10 it uses 3.17 % of total energy and 1.17 % of total material consumed by all manufacturing

industries.

Against this brief background, the purpose of this paper is to understand the globalization of

India‟s P&P industry and its impact on the growth performances of production, consumption,

import and exports. These dimensions of structure are analysed for the year 1981 to 2010

retrieving the data from Food and Agriculture Organisation (FAO). The second objective is

to assess the nature of the industry analysing energy and material consumption. To evaluate

this, the factory sector characteristics, such as, energy and material used are taken from

National Industrial Classification-2004 based three-digit all India manufacture of paper &

paper products (210) by Annual Survey of Industries (ASI) for 1980-81 to 2009-10. It also

examines the changing pattern of material consumption using the data published from

Department of Industrial Policy and Promotion (DIPP). We have also calculated regression

least-squares Average Annual Compound Growth Rate (AACGR), and intensities.

In keeping with these objectives the paper is organized into following sections. In the first

section, we trace brief history of the industry. The second section maps out the growth

performance during globalisation whilst nature of the industry is analysed in fourth section. It

also highlighted the probable reasons for such changes in India‟s P&P sector. The fifth and

last section summarizes the findings.

2 India’s Pulp and Paper Industry

The genesis of paper and development of P&P industry with its extensive uses ease the

human civilization worldwide1. In India, the testimony of paper manufacturing is borne out

by the antiquities of Indian manuscripts, Islam literatures, visitors‟ accounts and the British

sources.

3

The Indian manuscript reveals that the reference of writing material during the empire of

Alexander indicated the existence of paper manufacturing in Indus valley. The gold letters in

palm leaf during Vikram era of 170 A.D., and Indian or extra Indian scripts retrieved from

Central Asia and Gilgit between 5th

to 8th centuries. And the uses of „talpat‟ type of

manuscripts found from Assam, Bihar and Bengal in 12th

century could be conjectured as

paper being manufactured in India. It is consolidated further by the Islamic literatures. The

paper trade between Middle East and India in 8th

century and the uses of Iranian paper during

13th

century strengthened the evidence of paper manufacturing. An introduction of paper

money by Mohamed bin Tughlak and transfer of papermaking technology from Arab to

Kashmir during the reign of Zain-ul-Abidin are the other indicators of paper being made in

India. Moreover, the travelers to India like: Nicoli Conti, Tavernier and Ovington have

pointed out the uses of paper for writing, wrapping and as an exportable material. On the

other hand, British literature revealed the early establishment of different categories paper

mills in India during 16th to 19

th century (Ramaseshan 1989).

The evidence of paper making in pre-British period and establishments of modern P&P mills

during British period reflects the historical importance of this industry in Indian economy.

However, the low growth posted by P&P industry during pre-planning is addressed with an

introduction of various protectionist public policies by government. Further encouragements

and necessary fillip in the form of fiscal incentives are provided during the planning periods

to reduce the import dependency and improve the self-sufficiency. Later, the sector has made

a departure from protectionist approach to outward policy regime during post-liberalisation

era. The introduction of various major restructuring exercises in an effort to cut the costs and

rationalize the operation has transmuted the growth performance and nature of India‟s P&P

industry. Now, in the following we begin the discussion with the former.

3. Growth under Globalisation

The changing policy focus of government has changed the growth performance of India‟s

P&P industry during the last three decades. The liberalization and policy initiatives later lay

emphasis on improving overall performance which led to increasing integration of the sector

with rest of the world. Therefore, in this section we have measure the extent of globalisation.

It also analyses the subsequent impact of globalisation on the growth performance of

production, consumption, import and exports.

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3.1 Globalisation of India’s pulp and paper industry

The steady liberalisation process of Indian economy that began in 1991 did not exempt P&P

industry from industrial licensing bowing to the security and strategic concerns, social and

environmental reasons (Schumacher and Sathaye, 1999). Finally, P&P sector is de-licensed in

July, 1997 that allows 100 % Foreign Direct Investment (FDI) to lure the prospective

investors through automatic route except of those required product based industrial license

(manufacture of excise books and registers) (DIPP 2010-11). Although it did not receive

much FDI2, the liberalisation championed the cause of prolonged financial shortages of the

sector. Various financial agencies like: The Industrial Development Bank of India (IDBI),

Industrial Credit and Investment Corporation of India (ICICI), and Indian Renewable Energy

Development Agency (IREDA) etc. are now willing to advance the long term soft loans to

modernise the industry (Narayana and Sahu, 2010; Mathur, Thapliyal and Singh, 2009). As a

result, the deployment of gross bank credit to India‟s P&P industry has increased from Rs.

2366 crores in 1996 to Rs. 3741 crores in 2002 (Indiastat, 2011). The opening up of the sector

also had an evolutionary effect on the traditional way of management. It transformed the

industry‟s image from being a subsistence producer to international competitor. It has also led

to a serious redesign the way of management and is now taking an integrated account of

energy security, sustainable raw-material supply and environmental norms to survive and

compete in the international market. India ranked among the top 15 global paper industry

(Mathur et al 2009). Here, the extent of globalisation is captured using following index:

GP = Iq + Eq / Pq * 100

Where, GP stands for Gobalisation of Paper Industry, Iq represents import quantity, Eq refers

export quantity and Pq stands for total quantity of domestic production. The various inward

looking policy approach of government towards P&P sector to reduce the import dependency

and improve the self-sufficiency thwarted the globalisation rate till 1995 (Figure 1). These

policies include the levy of custom duty on all types of paper and paperboard till 1980s, and

then ban on the export of writing and printing paper until 1983. It also restricted the export

(up to 10,000 tones per year) of paper and paperboard after 1983. However, a major

breakthrough came in 1992 as far as globalization of P&P industry is concerned when centre

allowed the users to import one tone of newsprint against purchases of 200 tones of local

newsprint. Import licenses at moderate rate of custom duty of 10 % were allowed on pulp and

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waste paper (Schumacher and Sathaye 1999). Further, with the de-licensing, the globalisation

rate has increased until recent fall during global financial crisis of 2008 and later.

Figure 1. Globalisation rate of India’s Pulp and Paper Industry

The increasing integration of India‟s P&P sector with rest of the world is influenced by many

factors. Therefore, in the following section we discussion about the major influencing

variable of globalisation, such as, production, consumption, imports and exports.

3.2 Production of Paper and Paper Products

The paper production has witnessed a drastic change worldwide. The percentage shares of

production in America and Europe to the worlds‟ total have seen a marked decline which has

been is increasingly offsets by Asia3 (Table 1). The rising production in Asia is driven

largely by increasing demand for paper and paper products attributed to the jump of Asian

countries into the middle and high-income income league.

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Table 1. Worldwide production of paper and paper products (Quantity-Lakhs Tones)

Regions 1981 1990 2000 2010 AACGR

(%)

Africa 30.84

(1.19)

45.31

(1.20)

66.71

(1.12)

69.23

(0.95) 3.38

Americas 1245.51

(47.94)

1562.90

(41.52)

2162.69

(36.41)

2018.22

(27.59) 2.11

Asia 438.49

(16.87)

915.25

(24.31)

1838.65

(30.96)

3187.37

(43.58) 6.97

Europe 848.74

(32.67)

1196.78

(31.79)

1804.71

(30.38)

1956.06

(26.74) 3.72

Oceania 34.57

(1.33)

44.26

(1.18)

67.30

(1.13)

83.44

(1.14) 3.54

World 2598.15

(100)

3764.50

(100)

5940.06

(100)

7314.33

(100) 3.90

Note: Figure in parenthesis indicates the % shares to the World‟s total

Source: FAOSTAT 2012

An analysis of aforementioned table illustrates that the share of Asia has been consistently

rising to the world‟s total. Similarly, the share of India to the world‟s total production of

paper and paper products have been rising from 0.68 % in 1981 to 0.84 % in 1990. This has

increased further to 1.00 % in 2000. In 2010, it accounts for about 2.25 % of world‟s

production contributed by the impressive growth of all varieties of paper and paperboard

driven by multiple policy initiatives undertaken by the government.

The major policy initiatives include the incorporation of broad banding4 in 1985-86. It

exempted the excise duty to the units using 75 % or more non-conventional raw-material for

production in 1987. During the same time it also removed the price and distribution control

initially for white printing paper and later for other paper products to encourage the industry

to produce varieties of good quality products. The sector is further rewarded by multiple

fiscal incentives during post liberalization era. For instance, in 1992, the infrastructural

support was provided by increasing allocation of coal and wagons to the sector. It removed

the statutory control over production, price and distribution of white printing paper to

facilitate the higher production and higher profits (Schumacher and Sathaye 1999). In an

endeavour to raise the quality of paper products, the Newsprint Control Order of 2004 avails

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the exemption of excise duty to the mills which produce the newsprint conforming to Bureau

of Indian Standard (BIS) and supplies paper to newspaper publishers (DIPP, 2010-11).

The proactive measures initiated by government enabled India achieving self-sufficiency in

most varieties of paper and paperboard over the past three decades (Planning Commission

2008; Mohanty 1997). Thus, the share of production to total domestic consumption has

increased from 82.80 % in 1981 to 96.02 % in 1990. This has declined to 88.61 % in 2000

but surged again to 93.40 % in 2010.

There has also been a sustained increase in the production of all major paper products with

more than 5 % AACGR. The production share of all paper products have been gradually

increasing except for those of paper plus paperboard n.e.s., and printing plus writing paper

which have been declining due to low demand. The newsprint production also registered the

higher growth because of „increasing realisation by way of hardening prices‟ (Central Pulp

and Paper Research Institute „Undated‟ pp 40). The production of different paper varieties is

furnished below.

Table 2. India's Production of different Paper and Paper Products (Quantity- Thousand Tones)

Products 1981 1990 2000 2010 AACGR

(%)

Coated papers - - 215

(3.63)

720

(4.37) 9.14

Household + sanitary paper 20

(1.13)

19

(0.60)

40

(0.67)

50

(0.30) 5.11

Newsprint 50

(2.82)

310

(9.81)

400

(6.74)

740

(4.49) 6.77

Other paper + paperboard 506

(28.55)

975

(30.86)

1864

(31.42)

5380

(32.67) 7.08

Paper +paperboard NES 205

(11.57)

38

(1.20)

130

(2.19)

600

(3.64) 6.55

Printing + writing paper 710

(40.07)

900

(28.48)

1530

(25.79)

4170

(25.32) 4.87

Wrapping + packaging paper +

board

281

(15.86)

918

(29.05)

1694

(28.55)

4730

(28.72) 7.97

Wrapping paper - - 60 80 1.69

8

(1.01) (0.49)

TOTAL 1772

(100)

3160

(100)

5933

(100)

16470

(100) 6.6

Note: Figure in parenthesis indicates the % share of paper and paper products to total

Source: FAOSTAT 2012

The aggregate rise in the production of paper and paper products worldwide and in India is

largely driven by increasing market demand.

3.3 Demand Factor

The profuse production painted quite a rosy scenario for rising aggregate demand. However,

as we observed in production, the consumption5 pattern of paper and paper products

presented in below table also shows that the shares of Americas and Europe have been

declining while Asia have emerged as the major growth poles in the world.

Table 3. Worldwide Total Consumption of Paper and Paper Products (Quantity-Lakhs Tones)

Regions 1981 1990 2000 2010 AACGR (%)

Africa 46.50

(1.81)

62.52

(1.67)

85.09

(1.46)

125.40

(1.75) 3.92

Americas 1171.84

(45.71)

1473.46

(39.44)

2065.51

(35.43)

1893.85

(26.48) 2.13

Asia 481.91

(18.80)

985.11

(26.37)

1982.36

(34.01)

3303.03

(46.19) 6.81

Europe 825.61

(32.20)

1165.43

(31.19)

1616.46

(27.73)

1735.95

(24.27) 3.03

Oceania 37.94

(1.48)

49.45

(1.32)

79.94

(1.37)

93.16

(1.30) 3.92

World 2563.79

(100)

3735.97

(100)

5829.37

(100)

7151.39

(100) 3.87

Note: Figure in parenthesis indicates the % share of regions to the world‟s total

Source: FAOSTAT 2012

As paper and paper products consumption in Asia is increasing, the share of India to the

world‟s total has also been rising. Due strong domestic consumer base, India‟s share to the

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world‟s total has increased from mere 0.83 % in 1981 to 0.88 % in 1990. This has increased

further to 1.15 % in 2000 and 2.47 % in 2010. India‟s robust paper demand is contributed by

many factors. According to Indian Paper Manufacturers Association (IPMA), the economic

growth; increasing literacy rate; changing demographics with higher urbanisation; increasing

living standards , aspirations for changing lifestyles and media growth; demand for high

quality paper and paper products (e.g., magazines, multi-colour printings, advertising and

direct mailers for promotional materials) are among the major growth drivers of India‟s paper

market6.

Among all types of paper and paper products the share of other paper plus paperboard, and

wrapping plus packaging paper plus board have been increasing during the last 30 years

might be because of concomitant rise in packaging sector7. On the other, the share of graphic

papers defined as newsprint, and printing plus writing paper have been declining because of

rapid adoption of electronic technology8. The details of demand for paper and paper products

are given below.

Table 4. India's Total Consumption of Paper and Paper Products (Quantity-Thousand

Tones)

Products 1981 1990 2000 2010 AACGR

(%)

Coated paper - - 269

(4.20)

769.758

(4.37) 8.91

Household + sanitary paper 20.9

(0.98)

19.8

(0.60)

41.5

(0.62)

47.319

(0.27) 4.96

Newsprint 319.8

(14.94)

395

(12.00)

749.6

(11.20)

1651.566

(9.37) 6.24

Other paper + paperboard 515.8

(24.10)

990.6

(30.10)

1989.6

(29.72)

5493.414

(31.16) 7.08

Paper + paperboard NES 2117

(9.89)

48.6

(1.48)

196.3

(2.94)

610.516

(3.47) 6.23

Printing + writing paper 788.7

(36.89)

914.8

(27.80)

1631.39

(24.37)

4114.981

(23.34) 4.88

Wrapping + packaging paper + Board 283.2

(13.23)

922.2

(28.02)

1751.8

(26.17

4835.579

(27.43) 7.98

Wrapping papers - - 64.6

(0.96)

104.497

(0.59) -3.14

Total 2140.1 3291 6695.59 17634.052 6.65

10

(100) (100) (100) (100)

Note: Figure in parenthesis indicates the % share of different paper and paper products

Source: FAOSTAT, 2012

Though 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. The per capita paper consumption in India is 9.18 kg. in 2009-10

compared to 42 kg. in China and 350 kg. developed countries9. This indicates that India

holds an enormous growth potential of the sector. However, the burgeoning consumption of

paper is also supplemented by imports.

3.4 Long-standing Paper Imports

Historically, the gap between production and consumption signifies that Indian paper market

is remained characterized by its increased reliance on imports as industry has groomed with

the short-term goals instead of organized long-term planning (Table 5).

Table 5. India’s Import trend of Paper and Paperboard

Time Period AACGR (%)

1981-1990 -7.46

1991-2000 16.77

2001-2010 12.26

1981-2010 8.42

Source: FAOSTAT 2012

The above table shows that the imports of paper and paperboard have been growing at more

than 8 % during 1981 to 2010. However, to understand the magnitude of imports we have

measured the import intensity as follows:

II = Iq / Cq * 100

Where, II stands for Import intensity, Iq refers to import quantity and Cq represents total

quantity of domestic consumption. The II of paper have witnessed a fluctuation during the

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past three decades. It has seen a worst slippage from 17.28 % in 1981 to 4.28 % in 1990

because of rise in the non-conventional raw-material based domestic production.

Nevertheless, it increased again to 12.25 % in 2000 which has declined in 2010 to 9.55 %

mainly on account of substantial increase in the domestic production after liberalisation.

The import is composed of different varieties of paper and paper products. However, as it

found in the case of demand, the import of industrial and cultural grades paper, such as, other

paper plus paperboard, wrapping plus packaging paper plus board have been ballooning. The

import growth of newsprint, and printing plus writing paper, in contrast slummed

substantially (Table 6).

Table 6. India's Imports of Paper and Paper Products (Quantity-Tones)

Products 1981 1990 2000 2010 AACGR

(%)

Coated papers - - 65000

(7.92)

124597

(7.40) 8.09

Household + sanitary paper 900

(0.24)

800

(0.57)

1500

(0.18)

1426

(0.08) 3.98

Newsprint 269800

(72.94)

85000

(60.37)

350000

(42.66)

923981

(54.86) 6.54

Other paper + paperboard 10300

(2.79)

16700

(11.86)

136600

(16.65)

207748

(12.34) 11.44

Other papers packaging - - 2400

(0.29)

7292

(0.43) 10.3

Paper + paperboard NES 7000

(1.89)

11200

(7.95)

68100

(8.30)

32780

(1.95) 7.14

Printing + writing paper 79500

(21.49)

22400

(15.91)

118600

(14.46)

151808

(9.01) 9.59

Wrapping + packaging

paper + Board

2400

(0.65)

4700

(3.34)

67000

(8.17)

173542

(10.30) 16.69

Wrapping papers - - 11200

(1.37)

61060

(3.63) 28.61

Total 369900

(100)

140800

(100)

820400

(100)

1684234

(100) 8.42

Note: Figure in parenthesis indicates the % share in imports of paper products to the total

Source: FAOSTAT 2012

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The large chunk of India‟s import of paper and paperboard are originated from Australia,

Belgium, China, France, Italy, Malaysia, Korea, Sweden, Thailand and UK during 1997 to

2008. On the other hand the import of newsprint is rising precipitously notably from

Belgium, China, Japan, Poland, UK, and United States of America.

Although, India is a net importer of paper and paper products its exports have also been

swelling since liberalisation.

3.5 Expansion of Exports

The tiny and changeable export quantity in later part of 1990‟s was transient type rather than

sustained (Bhati and Jha 2006). However, there has been a significant upturn in the exports

of paper and paperboard after opening up of the sector as mapped out in the following table.

Table 7. India’s Exports of Paper and Paperboard

Time Period AACGR (%)

1981-1990 13.40

1991-2000 22.05

2001-2010 22.78

1981-2010 22.13

Source: FAOSTAT 2012

The pronounced increase in AACGR of paper export is examined with export intensity to

understand the export growth.

XI = Eq / Pq * 100

Where, XI represents export intensity, Eq stands for quantity of export and Pq refers to total

quantity of production. The XI has displayed an increasing trend as it grew up marginally

from 0.10 % in 1981 to 0. 31 % in 1990. The increase in production coupled with liberalised

trade policy facilitated sharp rise in XI to 0.97 % in 2000 and to 3.16 % in 2010.

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The liberalization of the sector also opened the new avenues to export of those products

indicated in asterisk mark (Table 8). The export share of wrapping plus packaging paper plus

board, and newsprint have witnessed a steady increase while the products like other paper

plus paperboard, paper plus paperboard, n.e.s., and printing plus writing paper have seen a

marked decline over the same years.

There has been a phenomenal increase in export to the high, middle, and the low-income

countries. The china, Denmark, Indonesia, Jordan, Kenya, Mexico, Korea, Russia and

Table 8. India Exports of Paper and Paper Products (Quantity-Tones)

Products 1981 1990 2000 2010 AACGR

(%)

Coated paper* - - 11000

(19.03)

74839

(14.38) 11.00

Household + sanitary paper** - - - 4107

(0.79) 75.33

Newsprint - - 400

(0.69)

12415

(2.39) 18.31

Other paper + paperboard 500

(27.28)

1100

(11.23)

11000

(19.03)

94334

(18.13) 22.85

Other papers packaging - - 600

(1.04)

870

(0.17) 3.96

Paper + paperboard NES 300

(16.67)

600

(6.12)

1800

(3.11)

22264

(4.28) 15.06

Printing + writing paper 800

(44.44)

7600

(77.55)

17210

(29.77)

206827

(39.76) 26.74

Wrapping + packaging paper +

Board

200

(11.11)

500

(5.10)

9200

(15.91)

67963

(13.07) 26.9#

Wrapping papers* - - 6600

(11.42)

36563

(7.03) 33.09

Total 1800

(100)

9800

(100)

57810

(100)

520182

(100) 22.13

Note: Figure in parenthesis indicates the % share in exports of paper and paper products to the total

*: Indicates the data reported from 1998

**: Indicates the data reported from 2008 #: The figure for 1993-1999 are missing.

Source: FAOSTAT 2012

14

Turkey are among the fovourite paper and paperboard destinations during 1997 to 2008 while

the outbound shipment of newsprint is rising to Kenya and Nigeria.

The rise in export intensity during post liberalisation era indicates an increasing integration of

India‟s P&P sector with rest of the world underpinned by the transformation of government‟s

inward looking policy approach to outward oriented one. The changing orientation has

however, also had the significant impact on its nature and characteristics discussed in the

following section.

4 Changing Nature and Characteristics of Pulp and Paper Industry

The nature of India‟s P&P industry has considerably influenced by changing policies of

government during the last three decades. The huge amounts of energy and material

consumption in the sector have drawn a lot of attention from the energy security and

environmental pollution point of view. However, changing policy focus of government over

the past decades has improved the energy efficiency and encouraged the sector moving

towards the use of energy efficient and environmentally sustainable raw-material. In this

milieu, we have analysed the two important features of this industry, such as, energy and

material use. We then discuss the probable reasons for such changes in the industry.

4.1 Energy Use

The P&P is the fourth‐largest energy user, consuming 164 millions of tones of oil equivalent

(Mtoe) of energy in 2007, which is about 5 % of total global industrial energy consumption

(IEA 2011). In India, the P&P industry is positioned seventh10

among the highest energy

consumers using stubbornly high amount energy compared to mills in the developed

countries (Panda and Keswani 2008). The energy is second largest cost component

influencing the manufacturing cost of P&P industry in India. In 2007-08, it used about 5.49

% of total coal and 2.50 % of total electrical energy. It also consumed 2.33 % of total

petroleum products and about 3.22 % of other types of fuels utilized by whole manufacturing

sector. The intensity of energy consumption is measured as:

EI = F / O * 100

15

Where EI represents energy intensity and F refers to fuel consumed and O refers total value

of output. As depicted in the figure below (Figure.2), EI rose from 13.28 % in 1980-81 to

14.83 % in 1989-90. In 1999-00, it has moved up to 16.91 %. The continuous rise in energy

intensity in the P&P industry is because of slow progress in the diffusion of energy-efficient

technologies due to government policies on energy prices for Indian industry (Bhattacharya

and Cropper 2010)11

. The EI of the sector has, however tapered off to 11.56 % in 2009-10.

Figure 2. Energy Intensity of India’s P&P Industry

This decline in EI of the sector is explained by the studies on Indian manufacturing industries

conducted for the year 1992-93 to 2007-08 by Ray and Reddy (2007); they found that the

reduction in EI is largely driven by structural changes. However, analysing data for the same

time period Goldar (2010) finds that rise in the real price of energy prompts for its judicious

use; thereby, technological improvements in the industry which led to decline in energy

intensity. Panda (2005) also finds that due to rising energy prices most of the large and

medium sized P&P mills also started installing captive cogeneration of power plant to

generate the power from waste water. This reduces the demand for power from external

sources like, state power grid and also helps the industry to lower the environmental impact.

Energy Intensity (%)

Fuels Used (Rs. Lakhs)

16

Again, Panda (2007) finds that the Electricity Conservation Act 2001 adheres to mandatory

report and monitors the use of energy in all 15 energy intensive industries including P&P to

curtail the energy crisis in the country. This led to reduction in energy consumption in P&P

mills through production process improvements by imparting energy efficient technologies.

The improvements in the energy efficiency is significantly influenced by the basic mill

configuration, like, the raw-material use, products to be manufactured, and basic mill design

and selection of technology in the production process (Panda 2005). In view of this, the

quantity and types of raw-material consumption plays a crucial role determining the overall

efficiency of the industry.

4.2 Material Consumption

The resource-based India‟s P&P industry has seen an increase in total raw-material

consumption, at the same time; it has also witnessed a drastic change in the composition of

material use. The quantity and type of raw-material consumption is an important element

primarily for three reasons. Firstly, it has a direct bearing on the amount of other types of

basic inputs use in the production process, notably, energy and chemicals. Secondly, the

material consumption is a single largest component influencing the manufacturing cost of

paper production, and finally, the material consumption also significantly influences the

effluent discharge to the environment. In India, the short supply of conventional raw-

material and huge environmental compliances threatened the economic sustainability of this

material intensive sector (Confederation of Indian Industry 2009; FAO 2008; Roy, Sanstad,

Mongia and Schumacher 1999; Schumacher and Sathaye 1999). The material consumption of

this industry is measured as:

MI = M / O * 100

Where MI stands for material intensity, M represents value of material used. As shown in

figure below, the MI grew from 50.97 % in 1980-81 to 52.72 % in 1989-90. It increased to

53.61 % in 1999-00 and rose further to 63.56 % in 2009-10.

The MI has been steadily increasing partly because of substantial increase in the number

factories from 1301 in 1980-81 to 4599 in 2009-10. It is also party because since

liberalization the sector has been encouraging large scale factories that would obviously

17

require huge quantity of raw-material. The liberalisation of the sector and stricter

environmental regulations promotes the large size and efficient P&P mills which would

impart energy efficient carbon-neutral technology in the production process. These mills are

also expected to produce good quality of products with higher economies of scale to compete

in the international market (Schumacher and Sathaye 1999)12

.

Figure 3. Material Intensity of India’s P&P Industry

Though, material intensity is on rise, the composition raw-material use has seen a tremendous

shift from conventional-based to non-conventional ones (Figure 4).

Material Intensity (%)

Material Used (Rs. Lakhs)

18

Figure 4. Share of Different types of Raw-materials use in India’s P&P Industry

Source: Paper Industry as cited in DIPP, 2012, pp 3

As can be seen from the above figure, despite have the advantage of good qualities wood-

based raw-materials; its share to the total raw-material consumption is drastically declining

primarily because of wood prices in India are prohibitively high like in other competing

countries such as: China and Korea (Jakko Poyry 2002). The higher wood costs is triggered

by shortages in the supply13

.

On the other hand, the share of agro-based raw-material usage has grown up because of

establishment of large numbers of ago-based P&P mills during 1970s and 1980s to meet the

burgeoning domestic demand. The government encouraged medium and small scaled14

agro-

based P&P mills because of its convenience set up in any part of the country in a short

gestation period. These units were also expected to play a crucial role in backward area

generating employment. The quick establishments of factories facilitated by readily available

second hand machinery and equipments imported from foreign countries (Datt and Mahajan

2012).

Forest-based fibre

Agro-based fibre

Recovered paper

19

The mills are also backed by sufficient supply of fibers rated average quality (Mathur et al

2009). The uses of this material have increased also because of dwindling in the supply of

conventional raw-material. However, the share of this has declined in 2011 might be because

its constraints of seasonal availability, high transportation costs, and investment in pollution

control equipments (Jakko Poyry, 2002). Apart from these, most of these firms are owned

and managed by local business groups and uses obsolete second hand technology which is

basically designed for large-scaled wood-based mills (CPPRI 2000). These mills also lack

modern technologies, such as chemical recovery plant and pollution control system, thereby

uneconomic operation and high production costs. It resulted in huge pollution load and

producing the low quality paper such as: Kraft paper and paperboards (CPPRI, 2004).

Moreover, the liberalisation of the sector and increasing pressure of environmental pollution

in a competitive paper sector squeezed these mills.

The share of recovered paper use has seen a meteoric rise from mere 7 % in 1970 to 47 % in

2011. Such rise in the use of this raw-material is resulted due to establishments of large

number of small sized recycled-fibre based P&P mills to meet the rising demand during same

time periods when agro-based mills were set up. The uses of recycled-fibre have increased

partly also because of unavailability of wood-based raw-material in the country. Further,

increasing integration of the sector and stringent environmental norms promotes the large

scale mills to increase the economies of scale with less environmental impact (Schumacher

and Sathaye 1999). As a result of this, most of these mills have undergone a major expansion

especially after 1990s and now categorized as large scale mills and producing produce good

quality of white paper and newsprint (CPPRI, 2004). The development from a small to large

scale mill adds an advantage of being able to use modern technology in the production

process, hence reduction in the energy intensity and environmental pollution.

The increasing popularity of waste paper is facilitated by increase in domestic collection. The

waste paper recovery rate in India was as low as 20 % in 2000 (Jakko Poyry, 2002). Although

this has increased to 27 % in 2011, it is still very insignificant compared to developed

countries such as Germany‟s 73 %, Sweden‟s 69 % and Japan‟s 60 % (DIPP 2012)15

. This

increase in domestic collection over the past few years reflects efforts made by national and

local governments, and large paper companies to develop more efficient collection systems

(IEA 2011). The rising demand for recovered paper has also been met through import which

20

has been growing at an AACGR of 14.54 % during 1981 to 2010. However, due to rise in the

domestic collection rate the growth rate of recovered paper import has drastically declined

from 39.37 % during 1981 to 1990 to 14.97 % in 1991 to 2000. This has further declined to

8.16 % during 2001 to 2010.

The increasing use of renewable raw-material helps the sector in number of ways as it lowers

the burden of scared wood-based material and reduces the import bill of wood pulp. It saves

energy, chemicals and water used in the production process, thereby less environmental

impact of the industry and considerable cost reduction. Moreover, it provided employment

opportunities in recycling sector (DIPP, 2012).

5 Findings and Conclusion

The century old Pulp and Paper industry occupies an important position in the Indian

economy for its extended role of early industrialisation and social sector development. The

emphasis on making India a knowledge-based economy after globalisation perpetuated the

importance of P&P sector. The liberalization of the sector seems to have had the desired

effect on its growth performance and nature in a competitive paper sector.

Analysing the globalisation of the sector suggests that the inward looking policy framework

vigorously advanced by Government in the past has reduced the import dependency and

improve the self-sufficiency. However, the necessary fillip and encouragement provided

since 1992 and more so since the onset of liberalisation have remarkably transformed the

structure leading to the sector becoming more globalised.

The liberalization of the sector has also attracted few financial agencies to advance the long-

term soft loans enabling the sector to curb the prolonged financial crisis to some extent.

Although this sector could not attract much FDI the liberalization has morphed the traditional

ways of management. It helps transforming the industry from tiny producer to an

international competitor. It enabled achieving self-sufficiency in most varieties of paper and

paperboard with higher quality. In fact, there has been sustained increase in production of all

varieties of products. The production of newsprint also registered high growth because of

realization of higher prices and increasing exports.

21

The aggregate demand of paper is akin to that of trends observed in production. Owing to

strong domestic consumer base the share of India‟s paper consumption to the world‟s total

has been rising. The consumption shares of paper plus paperboard, and wrapping plus

packaging paper have been rapidly rising due to simultaneous growth in packaging industry.

Moreover, the low per capita paper consumption in India compared to World‟s average

promises high growth of the sector in future. Moreover, the long-standing paper imports

have been declining due to tremendous rise in the domestic production, which reflects that

India has achieved self-sufficiency in paper and paper products over the years. At the same

time, the sector also witnessed an upward trend in export growth after liberalisation. The

rising exports to high, middle, and low-income countries reflect the sector increasingly

becoming self-independent and integrated with the world.

At the time when there is a change in the policy approach helping the sector becomes global,

it also takes an integrated approach considering energy efficiency, sustainable supply of raw-

material, and environmental impact. Therefore, it analysed two key components of input use,

such as, energy and material, which are also considered to be the basic factors underpinning

sector becomes efficient and global. Examining the energy intensity, it is found that this

sector has made impressive strides in improving energy efficiency after liberlisation driven

by structural change of industry and improvements in the production process by imparting

energy efficient environmentally-benign technology.

During the same time, the material intensity has also gradually increased because of steady

increase in the number of factories. An emphasise given to large scale P&P factories after

liberalization in a view to improve the overall efficiency also contributed on increasing

material consumption. However, the composition of material consumption has witnessed a

significant change from the use of conventional to non-conventional raw-material. The share

of wood-based material to the total raw-material consumption has declined over the years due

to high cost of wood caused by short supply. On the other hand, the uses of agro-based and

recycled fiber-based materials have been rising owing to lack of supply of conventional raw-

material. It is also because of establishments of large number of medium and small firms

encouraged by government during 1970s and 1980s to meet the burgeoning demand.

Because of increasing emphasise on making the industry efficient and globally competitive

the sector is increasingly moving towards energy efficient and environmentally friendly raw-

material use.

22

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1 Etymologically, the word „paper‟ is derived from Latin „papyrus‟. Paper, a versatile material with

many uses made as long as 3000 B.C. However, in 105 A.D. the invention of paper was reported in

China. Gradually the art of paper making was shipped to East and in 3rd

century paper was introduced

in Vietnam (CPPRI 2012). The Korean produced paper in 6th

century A.D.. In 610 A.D., Korean

baptized the wisdom of paper making to Japan. The technique of paper making was eventually percolated to Tibet around 650 A.D. and then to India after 645 A.D. The Arabas acquired the paper

making expertise and built a first paper factory in Baghdad in 793 A.D. Subsequently, Egyptian

learned from Arabs during 10th century. As a result of crusades, the paper arrived in North Africa

around 1100 A.D. In Europe, Spaniards established the first paper mill in 1150 A.D. while the first

paper factory in North America was built at Philadelphia in 1960 (Silkroad Foundation, „The history

of paper‟, Viewed on 09 April, htpp://www.silk-road.com/artl/papermaking.shtml)

2 India has not yielded much from liberalization in terms of the percentage share of inflow to P&P

sector to the total FDI. It has declined from 1.11 % during August 1991 to September 2005 to 0.35 %

during April 2000 to March 2011. Even though this sector has high growth potential it attracted less FDI compared to other sectors like, telecommunications, automobile , power, housing and real sector,

etc. (DIPP-Annual Report 2010-11). This might be because of it nature of being capital, energy and

material intensive polluting industry. The foreign companies are not seems to be enthusiastic investing in India might be because of fear of undergoing process of creative destruction in newsprint

industry in North America and Europe. This is also reflected in declining trends of production and

consumption (Soltas, Evan (2012, May 17). Schumpeter was wrong. Message posted to http://esoltas.blogspot.in/2012/05/schumpeter-was-wrong.html).

3 Among the major producers of American countries, USA as highest producer has been growing at an

AACGR of 2.33 during 1981 to 2010. The European countries, such as, Austria, Germany and

24

Portugal have been growing at 5.18 %, 5.20 % and 3.53 %, respectively. Australia, as only Oceania

country has clocked 4.95 %. Among Asian countries, China as highest producer has been growing at 10.53 % while Korea has been growing at 7.42 %, Malaysia at 13.05 % and Indonesia at 14.24 %.

Among low-income Asian countries such as, Viet Nam and Pakistan have registered 18.86 % and

11.73 %, respectively (FAO, 2012).

4 Firm now experience the new freedom to manufacture any variety of paper within the overall limit

of licensed capacity.

5 Consumption = Production + Import – Export

6 IPMA , htpp://www.ipma.co.in/index.asp, accessed on 11 May 2012.

7 Indian packaging industry is positioned 11

th in the world ranking. The sector is growing at 15 % per

annum and is expected to grow by 18-20 % by 2015. The rapid growth in packaging sector in India is driven by flexible packaging market and increasing use of innovative packaging equipments. Of the

total packaging sector, the retail, food processing, and pharmaceutical segments accounts for about 85

% and 10 %, respectively (Packaging Industry Association of India, „About the packaging sector‟, Viewed on September 18, 2012, http://www.piai.org/About_Packaging_Sector.aspx).

8 Maine John (2011, February 27). “Worldwide graphic paper demand is growing again, but…” RISI.

Viewed on 12 June, 2012 (htpp://www.risiinfo.com/pages.jsp)

9 Assocham, „Indian Paper industry likely to touch 11.5 MT by 2011-12‟ (June 15, 2010),Viewed on

September 11, 2012, http://www.assocham.org/prels/shownews-archive.php?id=2460.

10 Bureau of Energy Efficiency. (2010-11). National Mission for Enhanced Energy Efficiency

(Perform, Achieve and Trade „PAT‟), Ministry of Power, Government of India.

11 To give an example of induced energy inefficiency in the industry, the authors says that high

electricity price charged to industry stimulates self-generation using inefficient diesel power generators led to rise in energy intensity.

12 Most of the large scale P&P mills (100-1100 tonne per day „tpd‟ of production capacity) are wood-

based owned by large business houses and corporate groups. These mills are equipped with advanced technology in the production process, such as, cogeneration power plant and chemical recovery plant

which helps reducing the basic inputs costs and wastes. It also produces good quality of paper and

paper products, such as, writing and printing papers, packaging papers, newsprint, rayon grade pulp, board and specialty papers, etc. these factories are domestically competitive and some of them have

presence in overseas market (CPPRI, 2004).

13 The forests, as one of the important revenue earning resource supplied inputs to wood-based

industries. The forests land also diverted for other non-forest uses, hence suffered a serious depletion.

However, the limitation of National Forest Policy of 1952 is addressed with an introduction of

National Forest Policy in 1988 following the enactment of Forest (Conservation) Act of 1980. It tried to solve the problems of environmental safeguards, and supply of fuel, fodder and timber to the local

community. To achieve this, it also stopped allocating the natural forests for concessional logging and

plantations by paper industry (Jakko Poyry, 2002). The supply of wood gets restricted further followed by the Convention on Biodiversity in 1992 to preserve the gene pool. The changes in the

government policy measures led to a drastic shift in the approach of state from a “producer-centric” to

a “conservation-centered management” of the state forests (Indian Paper Manufacturers Association, Viewed on 11 May 2012, http://www.ipma.co.in/index.asp).

25

14

The medium sized mills are having capacity of 50-100 tpd while mall sized are 5-50 tpd (DIPP-

Annual Report, 2010-11).

15 The low recovery of waste paper in Indian owing to alternative uses of paper in wrapping and

packing, better payment of waste paper in end use than paper industry, and the lack of better business model to facilitate an integrated system of collection (Editorial, 2012).