The paper industry plays a crucial role in projecting the nation’s socio-economic strength. This is largely because usage of paper is considered a yardstick for measuring cultural growth, especially in the pursuit of information and knowledge. Improved supply chains for produce and goods also imply a better improved logistics of which effective and efficient paper packaging generally go hand in hand with increased prosperity. As one of the world’s fastest growing economies with functional literacy around 80% according to government and growing, India is well set to absorb huge quantities of paper in the years ahead. And yet, our country consumes just about 3% of the global production of paper, which means that the average Indian consumes only about 10 kg of paper every year against a global average of over 58 kg. Indonesia consumes 33 kg of paper per capita while Japan consumes more than 220 kg per capita.
Demand for paper cuts across industry segments
Today, India is said to be the fastest-growing market for paper in the world whereby growth of just 1 kg in per capita paper consumption creates demand for over a million tons of paper every year. The demand for paper is particularly high in the fast-growing eCommerce sector and the newspaper industry, which faces a different kind of challenge because India cannot produce newsprint economically due to of lack of good fibre resources and forestry practices. Considering that the newsprint segment accounts for only 19% of the total paper production in the country, the import bill is already quite high. Imported newsprint also work better for color printing which makes our newspapers viable when they are going bankrupt in the rest of the world.
The eCommerce sector in India is way behind those of China and the US in terms of market penetration but still among the largest in the world and expected to rise to US$ 228 billion (Rs. 1.5 lac crore) by 2030; this means robust demand for the paper packaging industry in India. An indication of growth and newfound optimism in the Indian paper and pulp industry is seen in the increase in the FDI in the sector during October and December 2015, which was Rs. 305.70 crore against Rs. 83.81 crore in the corresponding period in 2014. This growth is nearly four times over a period of a year and a pointer to the emerging trend of growth in the paper and pulp industries sector.
Major paper producers in India
Paper production in India began with the establishment of the Royal Bengal Paper Mills at Ballygunge in Kolkata, in 1870. Over the last century and a half, although the pulp and paper industry has grown in India, it has been unable to keep pace with international competition largely because of shortage of long fibre. The largest producer in India is ITC Paperboards and Specialty Papers with four advanced production units spread across Andhra Pradesh, West Bengal and Tamil Nadu producing a total of nearly 9 lakh TPA of paper and pulp. Tamil Nadu Newsprint and Papers is one of the larger producers with over 4 lakh TPA capacity, of which it exports 20% to over 50 countries.
JK Paper is among the largest producers in India with two huge plants in Odisha and Gujarat producing a total of 4.55 lakh TPA. The company recently made a bid to buy two units of the Avantha Group owned Ballarpur Industries in Chandrapur and Gadricholi in Maharashtra; these units have a total capacity of 3.5 lakh TPA and their acquisition by JK Paper would have made it the largest paper company in the country. The acquisition however seems to be stuck and printers inlcuding book exporters have experienced considerable shortages in the past several months. For now, Ballarpur Industries is the closest competitor of ITC Paperboards and Specialty Papers with a total production capacity of around 8 lakh TPA; it is another matter that a large part of this capacity is underutilized.
Formerly known as Andhra Pradesh Paper Mills with a capacity of 2.4 lakh TPA, IP APPM was acquired by US-based International Paper, the largest pulp and paper company in the world. This itself is a significant development in the Indian pulp and paper market as it is an indication of the potential of this market. Ahmedabad-based Rainbow Papers, producing over 3 lakh tons annually, is another major producer of paper with a large overseas market. Tamil Nadu based Seshasayee Paper and Boards recently went for capacity expansion exceeding 2 lakh TPA, which includes exports to as many as 20 countries.
The key support to the paper industry from the government should come in the better management of the country’s forest and fibre resources. It is not well understood that forests need to be farmed and harvested in a conscious and continuous manner in order to produce useful fibre and lumber and for the forest to function as an efficient carbon sink. Forests are also key to the establishment of watersheds and river resources.
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