DPIIT: 526 mills are in operation with 23.64 million tonnes capacity

 

Indian paper industry accounts for about 5% of the world production of paper, paperboard and newsprint. Govt. of India’s policy for discouraging the use of single use plastic has had a positive impact on the fortunes of the paper sector, particularly the packaging industry. Demand for paper also continued to be fuelled by increase in demand of quality packaging for FMCG products, ready to eat food, and various macroeconomic initiatives being taken up by the government such as Pradhan Mantri Kaushal Vikas Yojana (PMKVY), Mahila Samakhya Programme, Sarva Shiksha Abhiyan (SSA), Beti Bachao Beti Padhao, Right to Education, Strengthening for Providing Quality Education in Madrassas (SPQEM), Rashtriya Madhyamik Shiksha Abhiyan (RMSA), Saakshar Bharat (Adult Education) etc. Interestingly, the advent of e-commerce and online trade has actually added to the demand of paper and packaging segments.

 

Indian paper industry is a de-licensed sector and 100% FDI inflow is allowed on the automatic route. The sector attracted 54.93 Million US dollar FDI investment1 in FY 2019 (Calendar Year). The Industry structure comprises of more than 861 paper units, with an installed capacity of nearly 27.15 million tonnes out of which 4.72 million tonnes are lying idle. As on date around 526 mills are in operation with a total operating capacity of around 23.64 million tonnes. In the year 2019-20 total capacity utilization stood at around 87% and total consumption of paper, paperboard, and Newsprint stood at 22.05 million tons. Total production for the year of 2019-20 stood at 20.61 exhibiting an increase of 6.4% on YoY basis.

 

In India, per capita consumption of paper is about 15.75 kg, which is far lower than the world average (57 kg. in 2019). This indicates considerable headroom for the growth of the sector in order to reach the world average per capita consumption.

 

There have been few moves of consolidation within the sector, but Indian paper industry remains largely a fragmented sector. It consists of small, medium and large paper mills, having production ranging from 5 to 2000 tonnes per day. The sector uses wood, agro residues and waste paper as input substrates for production. Presently, in the total production, the share of wood, agro and waste paper-based mills stand at 20%, 8% and 72%, respectively.

 

Domestic paper and paperboard segment produces all the main varieties of paper that are in demand in the market viz. writing and printing (35%) packaging grade paper (55%), newsprint (5%) and others/ specialty paper (<5%). However, certain specialty papers such as security papers, currency papers and cheque paper, etc., are being imported into the country. The production of paper and paperboard (excluding newsprint) in 2019- 20 stood at 19.57 million tonnes compared to 18.57 million tonnes in the previous year (2018-19).

During the year 2019-20, a total of 2.192 million tons of paper and paperboard was imported under ITC chapter 48, whereas in the previous year (2018-19) this figure stood at 1.89 million tonnes. This translates to an increase in imports of about 16%. On the other hand, in the year of 2019-20, 2.081 million tons of paper and paperboard was exported, which is significantly higher (10%) that the figure of exports in 2018-19.

 

The newsprint sector in India has a prime role as information carrier in cities as well as village hinterlands. Looking into its importance, the government has put in place a Newsprint Control Order (NCO) 2004 in place which ensures fair trade and equitable availability of Newsprint to all printers and publishers. In view to remove certain anomalies from the newsprint paper sector, in FY 2018-19, Govt. of India had abrogated Actual User condition on import of Newsprint paper and placed a 10% BCD for all importers of Newsprint. However, in 2019- 20, the BCD was reduced to 5% but the actual user condition was reimposed.

 

At present, there are 125 mills registered under the Schedule to the NCO with a total installed capacity of 3.30 million tons. However, due to prevalent market conditions, only 79 mills are under production with an operating capacity of 2.22 million tons, which accounts for 67% of the total capacity registered under the schedule. Further, 46 mills have shut down their operation due to various reasons. The domestic production of newsprint in 2019-20 has been reported to be 1.03 million tonnes which is slightly lower as compared the previous year figure. (2018-19, 1.05 Million tons). As per industry sources, this has been due to increase in cheap imports of Newsprint. However, import of Newsprint in 2019-20 stood at 1.35 million tons, which is 1.45% lower than volumes imported in 2018- 19.

 

Initiatives for the paper sector: In the recent times, many initiatives have been put in place by the present government to support the Indian paper industry. Some of the initiatives are placed below:

 

i. A fresh order was promulgated (No. P-20028/19/2018-Paper, dated 13/5/ 2020) under the provisions of Public Procurement (Preference to Make in India), Order 2017 notifying seven items of paper and paperboard laying down that only local suppliers shall be eligible to bid for all these items irrespective on purchase value. 

 

ii. The competent authority (DGTR) has initiated Anti-dumping investigation on Import of Newsprint from specific countries. 

 

iii. A draft cabinet note on Revised Guidelines for Public Participation in Afforestation of Degraded forest was received from MoEF&CC on 9/9/2019. The concurrence to the said Draft Cabinet note was conveyed by DPIIT to MoEf&CC with a request to expedite the scheme.

 

 

The negative effect of the present pandemic can clearly be seen on the Indian Paper Sector and from April 2020 to date, (December 2020) it is estimated that only about 30% of the mills have achieved 70% capacity utilization. Out of the various segments, the packaging papers were the first to recover, and these mills are now operating as per requirement. This means that more than half of the sector can be expected to attain preCOVID levels very soon. The only problem to address there is an assured supply chain of waste paper. 

None the less industry sources are of the view that pre-COVID demand levels will be reached by Q3 2021-22.