Indian paper industry-1990-2010-


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Indian paper industry-1990-2010-

  1. 1. India’s Pulp & Paper industry-1990-2010PULP IS COMMERCIAL CELLULOSE FIBERS DERIVEDFROM WOOD, BAGASSE ETC, BY MECHANICAL AND / ORCHMICAL TREATMENT TO RELEASE THE FIBERS FROMLIGNIN BINDING MATERIAL AND DECOLORISED BYBLEACHING.PAPER IS MATTED OR FELTED SHEET OF FIBERS,USUALLY CELLULOSIC AND GENERALLY FORMED ON AFINE WIRE SCREEN FROM A WATER SUSPENSION. Year Installed Capacity, Capacity Million tonnes /annum Utilization % 1951 0.137 1955-56 0.214 1978-79 1.538 90 % 1985-86 2.46 1988-89 2.76 1991-92 3.30 62 % 1992-93 4.0 1993-94 4.0 1994-95 4.0 64 % 2001-02 5.0 62% 2005-06 6.5 2009-11 11.2 (projected) 1
  2. 2. Pulp and Paper ProcessThe pulp and paper industry converts fibrous raw materialsinto pulp, paper and paperboard. In a first step, rawmaterials are processed into pulp and in a second step,paper and paper products are produced out of this pulp.Different plant categories exist depending on whether theyonly produce pulp (pulp mills) for further processing oronly paper out of purchased pulp and /or recycled wastepaper (paper mills).The third category, the integrated pulp and paper mills,combines the two processes and is most common in thepaper industry.The five principal steps in pulp and paper production are1) wood preparation,2) pulping,3) bleaching,4) chemical recovery, and5) papermaking In 1995:Total Number of paper mills in India= 380Large/medium size mills (>20000 TPA capacity) =21Small mills = 359 2
  3. 3. KAGAZ.OM is a vertical portal providing completeinformation on the paper and allied industries. It intendsto be a neutral, online business encyclopedia for thepaper industry in India. KAGAZ.COM’s strength liesin its immense data bank. This consequently lays thefoundation for a market place wherein buying andselling paper and related products is conducted. Besidesthis, KAGAZ.COM also aims at providing intrinsicinformation on paper and its allied industries to the endusers.KAGAZ.COM is Indias leading and mostcomprehensive pulp and paper industry portal web site.A pioneer in setting new standards in news andanalysis, KAGAZ.COM is promoted by EcoMediaInfoSystems Pvt. Ltd, Indias leading independent websolution provider. Users of our services have includedthe whos who of business ranging from corporates suchas Charak Pharmaceuticals, Kores India, PorechaGlobal Securities, IMP Power, etc. 3
  4. 4. 1 Wood PreparationWood preparation involves breaking wood down into smallpieces suitable for subsequent pulping operations. Majorwood preparation processes are debarking and chipping.2 PulpingWood is ground and pulped to separate the fibers from eachother and to suspend the fibers in water. Pulping breaksapart the wood fibers and cleans them of unwantedresidues. The ratio of wood to other materials used for pulpdepends on the resources available. The remaining fiber isprovided by recycled materials or by non-wood plantsources. Pulping can be performed using chemical,mechanical, or combined chemical-mechanical techniques.In chemical pulping wood chips are cooked in an aqueoussolution at high temperature and pressure. Chemicalprocesses dissolve most of the glue that holds the fiberstogether (lignin) while leaving the cellulose fibersrelatively undamaged. This process results in high qualitypaper with a yield of only 40%-60% of the weight of thedry wood. The Kraft process, which is the most common, 4
  5. 5. uses a sodium hydroxide and sodium sulfide solution. Thesulfite process uses a mixture of sulfurous acid and bisulfiteiron (typically from sodium sulfite).The most common mechanical pulping technique involvesseparating the cellulose fibers by pressing logs against wetgrindstones or by passing wood chips between counterrevolving grooved metal disks (refiners). Lignins and otherresidues are not removed. This results in a higher yield, butthere is more damage to the fibers. In addition, lignin willdegrade in time. The lower quality fiber limits the use ofthis process to less expensive grades of paper, such asnewsprint.Combined chemical and mechanical pulping can producevarying grades of paper depending on the particular processused. These processes include thermo-mechanical,chemical thermo -mechanical, and semi-chemical.Large Indian mills that are predominantly based on forestraw materials use the Kraft process. Agro-based mills use asoda process while newsprint mills use mechanical,chemical, chemi -mechanical and chemi-thermo-mechanical (CTMP) processes. (Mohanty, 1997) 5
  6. 6. 3 BleachingBleaching whitens pulps for the manufacture of writing,printing, and decorative papers. The process alters orremoves the lignin attached to the wood fiber. Chemicalpulps are bleached through the use of alternating treatmentsof oxidizing agents and alkali solutions.The Kraft process produces a darker pulp that requiresmore bleaching. Mechanical pulps are treated withhydrogen peroxide or sodium hydrosulfite to reduce thelight absorption of the lignin rather than remove it.4 Chemical RecoveryChemical recovery regenerates the spent chemicals used inKraft chemical pulping. Chemical pulping produces a wastestream of inorganic chemicals and wood residues known asblack liquor. The black liquor is concentrated inevaporators and then incinerated in recovery furnaces,many of which are connected to steam turbinecogeneration systems. The wood residues provide the fueland the chemicals are separated as smelt which is then 6
  7. 7. treated to produce sodium hydroxide. Sodium sulfide isalso recovered.5 PapermakingPapermaking consists of preparation, forming, pressing anddrying; preparation and drying are the most energyintensive processes. During preparation, the pulp is mademore flexible through beating, a mechanical pounding andsqueezing process. Pigments, dyes, filler materials, andsizing materials are added at this stage. Forming involvesspreading the pulp on a screen. The water is removed bypressing and the paper is left to dry. In one of the mostcommon papermaking processes, the paper is pressed,drained and dried in a continuous process. In another, apulp matt is formed in layers with water removal andtreating occurring between deposits. 7
  8. 8. Paper- in years - 2000-02 The production of paper and paper board duringthe year 2001-02 was 3.162 million tonnes. About 60.8per cent of the total production was based on non-wood raw material and 39.2 per cent based on wood.India’s per capita consumption of paper in 2002 wasaround 4.00 kg, which was one of the lowest in theworld. With the expected increase in literacy rate andgrowth of the economy, an increase in the per capitaconsumption of paper is expected. The demand forupstream market of paper products like tissue paper,tea bags, filter paper, light weight online coatedpaper, medical grade coated paper, etc. , is growingup. These developments are expected to give fillip tothe industry. There were (in 2002), about 515 units engaged inthe manufacture of paper and paperboards andnewsprint in India. The capacity utilization of theindustry is low at 62% as about 194 paper mills,particularly small mills, are sick and/or lying closed. Till 1970, the major raw material was wood, based onforests. Since then, agro-residues and waste paper beingrecycled were used as raw materials for small mills.Newsprint is paper made at a lower cost than white writingpaper, as it is not elaborately bleached and finished aswriting paper. In 1990-91, newsprint produced in India was0.3 MT and imported was 0.25MT 8
  9. 9. India’s per capita consumption of paper in 2002was around 4.00 kg, which was one of the lowest inthe world. In 1990, per capita consumption of paper inIndia was 3. 0 kg1990: China = 12 kg USA = 330 kg Japan = 134 kg Australia = 150 kg Paper Industry Policy - in years – 1991-2002International Paper Prices The international prices of pulp increased fromaround US$443 per tonne in May 1999 to US$550 pertonne in November 1999. The up trend is expected tocontinue for another two years and the cycle iscurrently expected to peak by the end of 2001/ early2002. The domestic prices of PWP have shownimprovement since June 1999 and they are expectedto remain firm with demand growth of 6-7% in nexttwo years without commensurate increase in supply.Growth In Industrial Production / Usage IndustriesThe demand for paperboards is dependent upongrowth in usage industries like FMCG,pharmaceuticals, cigarettes etc. Therefore thedemand for the fastest growing segment, 9
  10. 10. paperboards can be traced by tracking the growth inthese industries.Changes In Import Duty Of PaperWith the opening of the economy in 1991, the basicimport duty paper and paperboards has come downfrom a peak of 140% in 1991 to 30% in 1999. Thishas exposed Indian paper mills to the threat ofimports. Any increase in import duty on paper will helpthe industry in countering the threat from importsalong with increases in price realizations and capacityutilization.Power TariffPaper manufacturing is an energy intensive process.10 million kilo calorie of energy are required toproduce one ton of paper. The power tariffs, whichdiffer from state to state, have a major impact on thecost of production of paper. Also, the power supplysituation in a particular state may become a cause ofconcern as it will have bearing on production activityof a company, unless the mill has sufficient captivepower generation facility.Changes In Import Duty On Wood Pulp And WastePaperThe increase in import duty on wood pulp and wastepaper has increased the input cost for many largeplayers as they depend on imports. This has anegative impact on the profitability of the Indian 10
  11. 11. companies as their raw material cost goes up. Anychanges in import duty on raw material inputs in thefuture are bound to have a pronounced impact onoperating margins of Indian paper manufacturers.Forest PolicyThe request by industry to allow use of degraded landfor commercial plantation is long pending before thegovernment. Similar schemes in countries likeIndonesia, Malaysia, Brazil have been carried outsuccessively and have helped the paper industry togrow to global levels. Therefore, proper policy on thisfront by GOI will help in boosting the growth of paperindustry in the country.Run-up to the Budget 2000-01Status of the Indian Paper IndustryThe Indian Paper industry has been passing througha difficult period in recent times. The period from FY1995 till mid 1999 was particularly tough as importsincreased, input costs rose, and the pricerealization declined.The import duty on paper and paperboard wasreduced from 140 per cent in 1990-91 to 20 per centin 1995-96 leading to sharp increase in imports. Thenewsprint was put under Open General License in1994 and since then a large number of independentretailers have been importing newsprint and supplyingit to end-users. Currently, the customs duty on 11
  12. 12. Newsprint is 5.5%, and paper manufacturerscomplain large-scale imports of Light Weight Coatedand Kraft paper under the guise of Newsprint. Theaverage capacity utilization of the paper andpaperboard industry during 1995-1999 declined toaround 67%. But, since mid 1999 some signs ofrecovery in both the domestic and internationalmarkets of paper industry are apparent. Theinternational prices of pulp have increased fromaround US$443 per tonne in May 1999 to US$550 pertonne in November 1999. The up trend is expected tocontinue for another two years and the cycle iscurrently expected to peak by the end of 2001/ early2002. The printing and writing paper (PWP) andpaperboard prices have been lagging pulp prices butthey are expected to move up backed byimprovement in fundamentals of Asian region. Asianregion accounts for 30 per cent of the global pulp,paper and paperboard consumption. The domesticprices of PWP have shown improvement since June1999 and they are expected to remain firm withdemand growth of 6-7% in next two years withoutcommensurate increase in supply. The demand ofindustrial paper has also picked but the prices of kraftpaper and paperboards have been unable to move upsignificantly due to increase in supply.Proposals in Union Budget, 1999-2000, affectingthe Indian Paper Industry 12
  13. 13.  Basic import duty on Paper and Paperboard increased from 30% to 35%.  Basic Customs Duty on newsprint rationalized at uniform level of 5%. Basic Customs Duty with ash content exceeding 8% increased from NIL to 5%.  No change in concessional Basic Customs Duty of 5% on Light weight coated paper upto 70 gsm imported for printing of magazines by actual users.  Excise duty on Paper and Paperboards reduced from 18% to 16%.  Excise duty on cartons and boxes (but not of Corrugated Paper and Paperboards) raised from 13% to 16%.  Additional specific duty of Rs. 1/litre on HSD.  Restoration of 100 per cent MODVAT credit.Expectations from Union Budget, 2000-01  Increase in total budgetary allocation to education sector.  Clarity in definition of newsprint, glazed newsprint and Light weight coated paper to check the clandestine imports of paper.  Maintenance of the status quo of customs and excise duty on paper and paperboard and increase in customs duty on newsprint. 13
  14. 14. PAPER INDUSTRY_2000-01:Improved prices augur well for paper units - HBLMUMBAI, JUNE 2. 2001. The paper industry recovered last year[2000-01] aftera poor run of about four years and is now back ontrack. The recovery came more than 18 months agowith improved demand from the government as alsofor industrial paper from other consumers.Paper companies had earlier been hit by poorcapacity utilisation and poor prices. Prices hadreacted significantly while administered input priceshad increased leading to pressure on margins.However, with improved realisations and cost cuttingmeasures in place the overall health of the industryimproved. There has been some softening of pricesby around 20 per cent in the last few months, but stillthe industry is in good financial shape.As the demand for paper is related to gross domesticproduct (GDP) growth the industrys growth washampered by recessionary conditions over the lastfew years. Consequently, additional capacity createdover the last couple of years could not be utilisedeffectively. Now, it is expected that the increase indemand will lead to a healthy growth in revenues andthe rising prices will have a salutary effect on margins. 14
  15. 15. Last year, the mills had done well with prices movingup by 15-16 per cent. At present, prices range fromRs. 35,000 to Rs. 60,000 a tonne with writing paperand map litho occupying the lower end of thespectrum and coated art paper the top end.Packaging paper prices - duplex board and kraft -have not gone up and are hovering around Rs.15,000-20,000 a tonne.Last year was also good for newsprint andinternationally, the U.S. saw a jump in demand. Evenin newsprint, there are varieties, ordinary and glazed,the latter being imported. ``In India too, newsprintprices shot up from around Rs. 16,000 to Rs. 30,000a tonne before receding to rule around Rs. 27,000 atonne, said Mr. Chandak, executive director, WestCoast Paper.Mr. Chandak felt that prices would stay high for thenext two years, first because of the cyclical nature ofthe industry and second, ``there is no import threatand there is no consolidation either. As such,consolidation in the industry is unlikely to take placeunlike in the global industry where mergers andacquisitions have been common. This is largely dueto the fragmented nature of capacity with only ahandful of manufacturers having capacity exceedingsix lakh tonnes a year.The problems afflicting the industry are mostly pricerelated. Raw material sourcing is one problem andnon-pulp inputs are covered by administered pricing. 15
  16. 16. There are entry barriers in the industry - largeinvestments are required and as such no newgreenfield projects are planned. Whatever investmentis coming in is for upgradation or expansion ofexisting paper mills. Though there is still someovercapacity it has come down due to risingproduction and stagnant capacity.The industry size is five million tonnes annually. Ofthis, 50 per cent constitutes mills using conventionalraw materials such as wood and bamboo and theother half use non-conventional raw materials such aswaste paper and agricultural residues. Theseconstitute around 300 mills and they manufacturepaper and board.While adequate pulp is not produced in India,international rates had shot up last year from $500 to$850 a tonne. However, they have dropped to around$550 now. The import duty on newsprint and pulp is 5per cent against the WTO bound rate of 25 per cent.Imports rose steadily from 80,000 tonnes in 1995-96to 2.70 lakh tonnes in 1998-99 and have remainedsteady in recent years. Import tariff for various gradesof paper is at present 35 per cent against the WTO-bound rate of 40 per cent. Some leading players in the industry: 1. BallarpurIndustries acquisition of Sinar Mas India for Rs. 530crores is the latest and a major development in theindustry. Sinar Mas is an Indonesian company andentered India about five years ago. The Indian unit 16
  17. 17. has a capacity of 1.15 lakh tonnes and market sharein the paper and paper-board segment. After thebuyout, the combined capacity will go up to five lakhtonnes and Sinar Mas India has been renamed BILTGraphic Papers.However, the question of sourcing pulp could comeup for the company. Earlier, Sinar Mas India couldsource from its parent in Indonesia.2. ITC Bhadrachalam Paperboards had expandedcapacity from 62,500 tpa to 1.82 lakh tpa. Followingthe infusion of around Rs. 150 crores from ITC, thecompany has carved a niche for itself in the exportmarket for coated paperboards and specialty paper.3. Tamil Nadu Newsprint (TNPL) boasts of beingamong the most efficient players in the newsprintindustry. In 2000-01, the company reported sales ofRs. 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 lakhtonnes annually. TNPL uses bagasse as the maininput. It is now going in for de-bottlenecking to enablecapacity increase by around 25 per cent.4. West Coast Paper Mills (WCPM) has recorded a88 per cent rise in its net profit at Rs. 28.52 crores in2000-01 (Rs. 15.20 crores). Sales and income fromoperations rose 7 per cent to Rs. 351.33 crores (Rs.328.68 crores). Profits jumped on better realisations 17
  18. 18. coupled with an increase in demand for paper andpaper board.``The industry has emerged from difficult times,according to Mr. Chandak ``and there are noforeseeable problems. For the established players,the next two years promise to be good. Present Scenario (2000-2010): The Indian paper and paperboards industry is onthe growth path. The Indian paper and paperboardsindustry grew by nearly 7.8 percent during the period2000-2006. This is substantially higher than the Asianaverage of 5.1 percent. India’s paper manufacturingcapacity is expected to grow at a CompoundedAnnual Growth Rate (CAGR) of 7.4 percent from 8.4million MT per annum to 11.2 million MT per annumbetween 2008 and 2010.The Indian per capita paper consumption is amongthe lowest at 7.0 kg, while Asian and global averagesare 11.0 kg and 49.0 kg respectively. But the demandfor paper is increasing given the rising disposableincomes particularly of the expanding middle incomegroup. 18
  19. 19. The literacy level in India which is on the increase isfurther set to improve the demand for paper in thefuture. The Government of India’s increased budgetallocation for education sector is expected to furtherimprove the literacy rates in both urban and ruralareas, resulting in increased demand for writingpaper. The Indian Pulp and paper industry isexpected to grow at 7.4 % CAGR over the period2008 – 10. With Indian economy in one of its bestever growth mode, the Indian paper industrycontinues to be a major beneficiary.There are more than 600 paper mills in India in 2010,and installed capacity is about 9 million tonnes /annum. The current per capita consumption of paperin India is about 8 Kg. In the present scenario, apartfrom capacity augmentation, there is an immenseneed to improve the Energy Efficiency of theindividual units. Many of the Indian Paper mills arealso working actively in the areas of water andenvironmental management not only to better the 19
  20. 20. statutory norms but also in a proactively move closerto cleaner production. The Indian Pulp and Paperindustry has to become World class in operations,energy consumption and environmental impact.The Paper Industry is sub divided into three groupsnamely Wood, Agro and Recycled fibre group. Someexamples are given below:2010: In the present scenario, apart from capacityaugmentation, there is an immense need to improvethe Energy Efficiency of the individual units. Many ofthe Indian Paper mills are also working actively in theareas of water and environmental management not 20
  21. 21. only to better the statutory norms but also in aproactively move closer to cleaner production. Withthe liberalization of the Indian economy leading toglobal competition as well as the growing emphasison the environment, it is imperative for the Indian Pulpand Paper industry to become World class inoperations, energy consumption and environmentalimpact. 21