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Three paper mills in Vapi cluster shut down permanently due to poor demand and financial losses

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Read the exclusive situation review from GPMA's president in context of the paper demand crisis due to market uncertainty.


3 paper mills in Vapi cluster shut down permanently due to poor demand and financial losses

 

Vapi | 12th March 2022 | The Pulp and Paper Times: 

The crisis in the paper industry, which is facing raw material shortage and rising input costs, has affected the core activity of a paper mill i.e. manufacturing. Three paper mills in Vapi cluster have shut down permanently due to poor demand and financial losses leading to a direct loss of 300 jobs and 200 indirect job losses.

Talking to The Pulp and Paper Times, Mr. Sunil Agarwal, President- Gujarat Paper Mills Association (GPMA) says that “we anticipate further mill shutdowns and extended job losses in the paper recycling sector to escalate in the current crisis. It is estimated that over 1 million direct and indirect jobs maybe affected in this fight for survival.”

The Paper manufacturing industry making TL & FM grades in India is predominantly composed of MSME's and is highly fragmented in nature. 

 As per IPPTA data (2019) , paper mills are working at below 80% capacity due to lack of domestic demand. The capacity utilization has fallen further and there remains an oversupply.

Mr. Agrwal informed that coal prices have risen from Rs.5000 per ton to Rs.18,000 per ton. Energy costs have risen significantly causing a major cost challenge in a low margin & high capital intensive industry.

“Waste Paper costs have spiked from Rs.20,000 per ton to Rs.30,000 per ton. Working capital has been eroded putting paper recyclers are under heavy financial strain” he said.

Export incentive has been reduced from 3 % under MEIS to 1.1% under RODTEP. Export Freight has increased significantly and that has resulted in a significant spike in costs. 

Mr. Agarwal says, “Exports of TL & FM grades have dropped by more than 50% in the last 6 months.”

Share of Indian paper mills in export markets is estimated to be below 1% of global sales. Domestic market per capita consumption is one of the lowest in the world.

Mr. Agarwal requests the Government to kindly consider incentives like PLI or increase in Export incentives under RODTEP to ensure survival of the eco-friendly & labour intensive paper recycling industry.

According to The Hind Business Line, Prices of waste paper and cuttings were quoted below $100 a tonne before the Covid pandemic set in. They are currently ruling at $400.

Besides increasing costs, sources for wastepaper imports are drying up. While Europe is not allowing exports of waste paper, importers have stopped looking at regions such as Australia since freight charges cost an unviable $8,000 per 40 feet container. 

                     

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