“No Corrugator will let one mill take control and make monopolistic umbrella”: Karan Khanna

“No Corrugator will let one mill take control and make monopolistic umbrella”: Karan Khanna

- Export from India have already decreased and it will decrease more. We have already started seeing effects in UAE
- A shutdown of 5 to 7 days every month is required to stabilise the market and fight the ongoing crunch
- The gap in pricing between a Quality Paper Making Mill vs a Non Quality Paper Making Mill has increased drastically

The overproduction and downfall in exports have been making kraft paper makers out of business. The paper mills are running with cut-off production in a bid to control over production. In the last 8 months, around 20 paper mills in Gujarat (Morbi, Ahmedabad, Surat, Vapi, etc.) have been shut down. 

To address sluggish demand on a long-term basis and resolve the issue of overproduction To alleviate the demand bottleneck and improve efficiency in paper mill operations, The Pulp and Paper Times developed the concept of "ONE Paper Machine, ONE Paper grade in ONE region." This idea may not make sense to us, but with the right knowledge and ongoing adjustments, a successful implementation of this idea is possible. To understand their perspectives, we spoke with Mr Karan Khanna, MD, NVESONS Paper Mill. Here is his opinion.

Q: What main reason do you think is behind this demand crisis? In the comparison of 2022

Demand Crisis due to many reasons,
1. Excess of Supply : As you are well aware every mill has increased its production capacity by adding Dryer Rolls or a new plant. This has affected everyone. Many new plants are erected but yet to start and some stopped erection as everyone is waiting for this crunch to pass.
2. World Recession : Our world today is facing a Financial Recession. Everything requires packaging but export of finish goods are decreasing day by day.
3. New Paper Plants coming in different Countries : Big Paper Production Capacities are coming in countries like Vietnam, Brazil, UAE, etc.

Q: India has become overproduced in the kraft paper segment; new paper capacities have increased by 30 to 40 % in last three to four years. Do you feel that the paper business will no longer be profitable? If ‘NO’ then why?

It is not easy to take out profit, its like you become sandwich between Waste Suppliers and Corrugators but yes margins are getting thinner everyday.

Q: With new massive paper production capacities in South East Asia and Brazil producing packaging paper on a large scale, don’t you think that the Export of paper from India will remain decreased in future?

 Yes, export from India have already decreased and it will decrease more. We have already started seeing effects in UAE.

Q: What Solution do you see of this dilemma? – Shutdown or Quality Manufacturing paper with Branding or correction in prices

There is no doubt that Paper Mills have compromised their Quality and they should make only Quality Paper. The gap in pricing between a Quality Paper Making Mill vs a Non Quality Paper Making Mill has increased drastically. When Non Quality Paper Making Mill does not have sizes for its machine it reduces prices and starts a ripple effect in mind set and changes the market sentiments. Shutdown of 5 to 7 days every month is required to stabilise the market and fight the ongoing crunch.

Q: In the current situation, every paper mill faces many critical operational and marketing issues such as lack of sufficient orders in hand, uncertainty of orders and compromise in finished paper prices. Can paper mills in particular regions collectively develop a mutual consent or schedule/allot their paper machines (PM) product-wise under ‘ONE Paper Machine, ONE Paper grade in ONE region’ planning? So that paper mills can run the plant on 100% capacity without having impact from external demand factors.

The concept of One Machine, One Region is a great concept but this concept will never be fruitful, as there are many grades and many variants that go into corrugating. Second thing that matters is that No Corrugator will let one mill take control and make monopolistic umbrella. Thirdly, payment criteria is the major thought and not all Mills give credit limit of 90 days or more.

Q: Don't you think that time has come to move with this concept and create a central mechanism to distribute the orders among the paper mills across India and get the paper mills out of the uncertainty of the paper market?

Again, this is a good idea but Quality Paper will have Quality Pricing and some mills again wont have orders and some will have many orders. This will never create stability but create unfair ruling with favouritism and corruption as we will have to appoint someone who will transfer orders to the Mill. Also, in another view if all Mills get on this band wagon then also One Paper Machine will not be able to make all variants. To get all variants under one firm will require a lot of Finances.

Q: There are lots of GSM and BF in Kraft, Duplex, Tissue and WPP; if all paper mills established in a region mutually allocate one GSM or BF grade to ONE paper machine of a paper mill, it will minimize the input cost because paper mills run on 100% capacity as well the demand crunch. How do we take this concept?

7. You may find answer in Point No.: 6.

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