“My Domestic Industry is on first Priority”: Suresh Prabhu

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Find the exclusive event coverage of Indian Papers Manufacturers Association's 19th AGM held in New Delhi on 11 Jan 2019.

“My Domestic Industry is on first Priority”:  Suresh Prabhu

The Government has promised to protect the domestic manufacturing industry in its new Industrial Policy. Addressing at the Indian Paper Manufacturing Association (IPMA)'s 19th Annual Session & Awards Function, Union Minister for Commerce and Industry, Mr. Suresh Prabhu said “We can't sacrifice and compromise on the most important significant issue which is manufacturing in India. We will keep trying that our Trade Policy should encourage our domestic manufacturing”  

Mr. Prabhu further said that “Other important issue which has affected the Industry because of trade policy. We have signed some 'Free Trade Agreement (FTA) with some countries. I have already directed my ministry that if any future free trade agreement will be signed, will be consulted with Industry first. I have appointed three independent agencies who will consult the industry. Only after integrating industries' concern into the FTS, we will sign the agreement. Our priority is to benefit our domestic industry,” 

“I will very briefly assure you that this is one (paper) of key industry of India, which has grown over the period of time with several difficulties. The big challenge for the industry within the country, you need pulp to make the paper. Therefore you need forest for procuring the plup out of wood. We have been addressing this since 20 years ago when I was the minster of Environment, may be the land which is not degraded land, areas which can be grown.” said Mr. Prabhu 

“I would request that Regional Cooperation Economic Partnership (RCEP) which is going to be significant agreement and had been agreed on the political level in November 2018. We urge you to make us a representation concerning your issues. Our Policy will not be as a consumer but to protect and promote the Industry in better way,” said Mr. Prabhu          

RCEP bloc comprises 10 ASEAN members (Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Singapore, Thailand, the Philippines, Laos and Vietnam) and their six FTA partners - India, China, Japan, South Korea, Australia and New Zealand. 

The main issues that need resolution include a number of goods on which import duties should be completely eliminated and norms to relax services trade. RCEP members want India to eliminate or significantly reduce customs duties on the maximum number of goods it traded globally. India's huge domestic market provides an immense opportunity of exports for the member countries. 

Trade experts have warned that India should negotiate the agreement carefully, as it has trade deficit with as many as 10 RCEP members, including China, South Korea and Australia, among others. India already has a free trade pact with the Association of South East Asian Nations (ASEAN), Japan and South Korea. It is also negotiating a similar agreement with Australia and New Zealand but has no such plans for China. 

It's time to introspects on Raw Material 

While addressing the paper mills' owner and senior executive gathering, the new elected president of IPMA, Mr. A. S. Mehta emphasises more on raw material issue with in the paper Industry. He said “we need to introspect our own approach -- to what extent we are spending time in the raw material area? We need to heed towards raw material availability, creation and research. In fact, the resources, we spend on the research is not adequate enough and we must do our job first rather than pleading to the Government. I request to my industry friends that we must start focusing on raw material area and also the research part to improve our competitiveness,”

Mr. Andreas Endters, President & CEO of Voith Paper Gmbh

Invest carefully…it will long last for 30 to 50 years

“When investment in new paper machine, you invest into a product which should live for 30 to 50 years. If you think of something that you have to live with over 30 to 50 years – the operating cost is much more important,” said Mr. Andreas Endters, President & CEO of Voith Paper Gmbh, Germany during the function as the keynote speaker. 

Mr. Endters insisted on the importance of investment while outlining the global trends in Pulp & Paper Industry. He said that “we really should think when we make such a decision that we buy right quality equipment which will last for 5 to 10 years, but will still be good in 30 years. We must purchase equipments which have potential into the future,”

“If we talk about scale, the bigger you paper machine, the lower your cost per tonnes and that can be a differentiating factor. Indian paper industry should face constraints like Fibre scarcity and Infrastructure, and opt for a bigger paper unit. If you are aware of Asia Pulp & Paper's large scale investment in India; you have to be ready to face the competition,” Mr. Endters outlined.

Data is Important

Mr. Andreas advised Indian paper maker to use the digital data for improving internal processes. In his power point presentation, he explained “On the paper machine, you have thousands of data's signals per minute and we are doing nothing with this data. But we provide you a data platform to use it efficiently. With Artificial Intelligence, we are able to analyze this data and to find algorithms which can improve your process. We have very nice solution at this point, in the stock preparation, in the forming section where you can really use it for energy consumption, chemical consumption or your fibre losses by using artificial intelligence,”

Asia Paper Market Overview 

Mr. Endters research papers say that “in Asia, paper production has doubled in last 20 years. Of course, out of 213 Million Tonnes of paper production, 120 million tonnes comes from China which is a very dominating market. China has grown over last few years by 5 percent in paper production side. But in last three years, from 2017 to 19, 16 million tonnes new capacity has come into the China's market,”

“China needs approximately 80 million tonnes recycle paper per year. They collect 50 million tonnes domestically and rest 30 million tonnes is being imported mainly from North America and Europe. Now in 2017, The Chinese Government decided to stop the import of the waste which includes plastic and waste paper of various grade. They got so much mixed waste from North America with rubbish inside. China imposed ban on import. The import of waste paper came down to 15 to 12 million tonnes from 30 million tonnes in 2018.

Ban on Import created the scarcity of Fibre in China, the shortage of raw material was so severe that customers stopped the execution of orders of new paper machine. They are shutting down the paper machine in a sizable scale. The new investment in the paper sector is flowing to Laos, Vietnam, Malaysia and Indonesia instead of China,” Mr. Andreas explained. 

“We see a very weird situation in China. Voith has only one or two new paper machine projects for the next 12 months to come, which is the situation we have not had in last 20 years,” said Mr. Endters 

Pulp Prices – Correlated to Indian paper mills' profitability 

In an interview to ET NOW, Mr. Harsh Pati Singhania, MD, JK Paper throw lights on global pulp prices. He said “There has been a reduction in pulp prices in the last few months and it has come down by almost $120. The profitability of the industry is partly related to the pulp prices because when international pulp prices are high and people have to import pulp, then their cost becomes high and that also happens if the rupee weakens a lot,”

“The cheap imports that were being dumped into India have significantly reduced and because prices were higher globally, producers internationally were also selling to other markets. A combination of these factors along with our own efficiencies as we expanded one of our facilities in Orissa about four, five years ago with completely modern technology, as we have put in a brand new pulp mill, a brand new paper machine and invested in that technology, it is now giving us benefits because that has brought down our cost of production in energy, in usage of all other sources or material, in quality and in terms of scale. So all costs have come down and we are getting the benefit of that. 

The last point I want to make is that we have also been doing intensive work on plantation with farm forestry and therefore we have done a large amount of plantation with farmers in the vicinity of our mills which has helped bring down the cost of raw materials and we have been able to do clonal propagation which has increased yields and productivity. It is a combination of all these factors and I would not just put it on pulp prices or paper prices which have been responsible for this,” said Mr. Singhania.

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