Demonetization Impact on Indian Paper Industry, Demonetization impact on Paper Making

Demonetization Impact on Indian Paper Industry Demonetization impact on Paper Making

Demonetization Impact on Indian Paper Industry, Demonetization impact on Paper Making

The Indian government's decision to demonetize currency notes of Rs. 500 and Rs. 1,000 was necessitated by the increase in difficult-to-tell counterfeit notes and a desire to curb black income generation as well as eliminating a part of existing unac- counted wealth held in these high-denomination notes.  Consumers have cut back on discretionary spending. The whole business has been hit because it is largely dependent on cash. The traditional trade has been hit hard, especially wholesalers and kirana stores where transactions are largely in cash. Still, things are recovering; sales are now down only 20-25% on a year-on-year basis compared to 50% in the first week after the note ban. Rural sales have been hit more. Third-quarter numbers for packaged consumer goods sellers will be severely hit, despite the wedding and holiday season. In the long term, things should bounce back as the economy is re-monetized, and firms lower in the supply chain to move to non-cash payments. “Demonetization has deeply impacted on paper Industry. We have reduced our production by 40% due to unavailability of Raw material. Petty waste paper buyers are not collecting the recycle fibers from door to door forcing us to shut down our paper mill. Although we are completely paying our payment through digital mode but small 'Kabadiwala' used to deal completely in cash. Demonetization has shrunk the liquidity in the market. On the output side, our finished products have no buyers in the market. We are assum- ing this situation will improve by the end of March 2017. The fresh demand in consumer goods can improve the situation of Paper Industry. We can try to start our machines if we have ample stock of raw material.” Vinod Kumar, Director, Paswara Papers Ltd. The market for white/brown goods still operates 80% on cash, thereby affecting volumes. Makers of durable goods are launching new schemes to tempt consumers to go cashless. Some of them are also extending discount offers and promotions such as waiver of processing fees and installment schemes with a delayed start of payments. Several businesses transact in cash and with demonetization they may become cash-strapped, hurting business—and consequently revenue, employment, consumption, and investment. The informal sector in India employs more than a majority of the workers and most transactions are in cash. Disruption to this system could endanger the employment and livelihood of weaker sections of society.

“Demonetization has closed down 50 percent paper mills in the region. The situation would become more severe when the old currency note of Rs. 500 and 1000 won't be legal tender on petrol pumps from December. The big consumer goods production companies like LG, Whirlpool, and Samsung have closed down their production dropping down the packaging demand. Paper Industry will suffer heavy losses from Input to output point.” Mr. Akshay Jain, Managing Director of Silverton Pulp and Paper. 

Mix Responses:

No Collection of Waste Paper
Transportation Crunches 
Significant Drop In Paper Demand 
Cut Down In Paper Production
Wages Distribution Problems
Inability To Access Digital Mode Of Payments
No Cash For Casual Payments

“Immediately we are suffering a lot, petty suppliers don’t have bank accounts so they have stopped the collection of waste paper. Mill owners are operating the mills on one to three days interval. When they get raw material they are 'ON' otherwise 'OFF'. According to my personal estimation; demonetization will cause Rs. 4 to 5 crore losses per day to Paper Industry in the Uttrakhand region. Overall we welcomed this step as it will put us in more competitive situation, in regard to those operating their mills in ‘black’.” Mr. Pawan Agarwal, Managing Director of Naine Paper Mill      Demonetization has hit the FMCG industry hard. And, its hope for recovery after a good monsoon seems unlikely at present. While FMCG companies had been witnessing cautious consumer spending, the latest data from market researcher Nielsen shows sales of the industry have gone down by 1-1.5% or Rs 3,840 crore in November, compared to October. “While 1–1.5% net impact of demonetization does not look huge, considering the size of the FMCG industry at Rs 2.56 lakh crore, this is a large drop in terms of absolute value,” said Nielsen. And, the industry’s problems can become bigger. Data revealed that retailers are stocking goods lesser than ever before due to cash and supply constraints. Their purchase in November has gone down by 6.4% compared to October. Purchase of personal care items such as toilet soaps, toothpaste and shampoo have seen the steepest decline by retailers. The fall in offtake is driven by urban India (- 3.1% Nov vs Oct), while rural India has managed to stay flat at 0.4% mainly due to smaller packs, smaller region.

Published at : Jul 10, 2022 01:45 PM (IST)

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