Sardhana Paper Mill’s Expansion Reflects a Long-Term Vision Amid the Realities of India’s Kraft Paper Market

Sardhana Paper Mill’s Expansion Reflects a Long-Term Vision Amid the Realities of India’s Kraft Paper Market

- Company has invested approximately Rs. 100–125 crore in the new project (PM2)
- Paper mills are increasing production mainly as a means of reducing costs rather than responding to growth in demand
- it is difficult to predict when the market will recover, as new units continue to enter the sector while existing mills are simultaneously increasing capacities

The Pulp and Paper Times

Mr. Sanjay Rastogi, Managing Director of Sardhana Paper Mill, shared his views on the company’s latest expansion, the kraft paper market, and the challenges confronting the industry. Taking to The Pulp and Paper Times, he informed that Sardhana Paper Mill currently has PM-1 with a capacity of 150 TPD, which is a 30-year-old machine. Currently, we have expanded our production by setting up a new machine (PM-2) with a capacity of around 250 TPD, which is already in operation. The total production capacity of the mill is 400 TPD.

Both machines are engaged in the production of kraft paper. The company manufactures kraft paper in a GSM range of 60 GSM to 250 GSM, catering primarily to packaging applications. At present, the mill is producing 18 BF grade paper, while higher BF grades are planned for the future.

Discussing the machinery, Mr. Rastogi stated that most of the equipment has been sourced domestically, although critical components such as the headbox and dryer have been imported. The machine has been supplied by CAD Machinery. The company is currently serving domestic markets including Delhi, Gurugram, Himachal Pradesh, and Punjab, with its products mainly used for corrugated box manufacturing.

Explaining the rationale behind the expansion, he said that the existing machine has been operating for nearly three decades, and the new 250 TPD machine has been added as part of the company's growth strategy. The production is largely focused on supplying paper for corrugated box applications.

Commenting on the current market environment, Mr. Rastogi observed that conditions are not very encouraging at present and described the market as challenging. He emphasized that such projects are conceived much earlier, noting that the planning for the new machine began almost one and a half to two years ago, while installation itself required around eighteen months. The company has targeted light grammage paper production, and with the new high-capacity machine, it intends to manufacture higher BF grades in the coming years. The company intends to manufacture 60 to 80 GSM paper with 28 BF suitable for paper bags.

According to him, demand for kraft paper has weakened considerably in Western Uttar Pradesh, and several paper mills in the region are facing difficulties. He pointed out that the industry is grappling with excess production capacity. In his opinion, it is difficult to predict when the market will recover, as new units continue to enter the sector while existing mills are simultaneously increasing capacities in an effort to reduce operating costs and remain competitive.

Mr. Rastogi noted that many mills have significantly expanded their capacities, just as Sardhana Paper Mill has increased its own production capabilities on PM1 that were earlier producing around 70 TPD. Existing mills are adding capacity primarily to lower costs and ensure survival in an increasingly competitive market.

He further explained that advancements in technology are enabling mills to increase output from existing machines, thereby adding more capacity to the industry. However, he acknowledged concerns about whether the market is capable of absorbing such additional volumes. According to him, mills are increasing production mainly as a means of reducing costs rather than responding to growth in demand.

Addressing operating practices in the paper industry, Mr. Rastogi stated that paper manufacturing is a continuous process industry, making it difficult to shut down machines frequently. Mills equipped with turbines cannot stop operations intermittently, as maximum production helps in reducing fixed costs such as labour, energy, and overhead expenses.

At the same time, he admitted that margins remain under severe pressure. He estimated the prevailing fixed cost at around Rs. 2.5–3 per kilogram. He observed that if production levels are reduced, profitability declines further, making survival increasingly difficult. Therefore, mills continue operating despite lower margins and, in some cases, even losses, because shutting down operations completely may threaten their long-term existence.

Talking about excess capacity, he highlighted that regional advantages play a crucial role in determining competitiveness. He informed that in Assam and Rajasthan, waste paper prices are Rs. 3 per kg lower compared to other areas, so paper mills in Assam are benefiting from lower raw material costs. Certain areas benefit from lower power tariffs, better logistics, and easier access to raw materials. Government policies and GST-related benefits, including a 100% refund of GST on waste paper, are making paper mills viable. He mentioned that mills in Muzaffarnagar, Uttar Pradesh, that have installed turbines on RDF are saving Rs. 2–2.5 per kg, and those enjoying lower electricity costs and operational advantages are better positioned to withstand adverse market conditions.

Another major concern identified by Mr. Rastogi is the limited availability of waste paper in Western Uttar Pradesh. He stated that waste paper supplies remain constrained, despite material arriving from various regions like Assam and Rajasthan, and availability continues to be insufficient to meet industry demand.

Discussing prices, he said waste paper is currently trading at around Rs. 20 per kilogram, while finished kraft paper prices are in the range of Rs. 28–28.5 per kilogram. Conversion costs are estimated at approximately Rs.10 per kilogram, but paper mills are bearing losses as the realization is only around Rs. 8, indicating that several mills are operating under considerable financial stress and some are even incurring losses.

As a result, the industry is increasingly discussing production cuts. According to Mr. Rastogi, many stakeholders are advocating temporary shutdowns of six to eight days every month to balance supply and demand. Such a measure could reduce production by nearly 25 percent. However, mills continue to bear fixed costs even during shutdown periods, making such decisions difficult to implement.

He remarked that survival remains the immediate priority for paper manufacturers and believes that weaker units may gradually exit the market, eventually helping to restore equilibrium between demand and supply.

On the subject of imports, Mr. Rastogi stated that imported kraft paper continues to remain expensive due to the war situation, with prices currently around Rs. 22–23 per kilogram. He believes that either domestic waste paper prices will increase further by Rs. 1 per kg or imported prices may soften, leading to market stabilization. 

However, he cautioned that international developments and geopolitical conflicts continue to influence market dynamics. Although imported paper prices had earlier led to an increase of Rs. 2–3 per kilogram in domestic kraft paper prices, those gains subsequently moderated.

Mr. Rastogi clarified that the grades manufactured by Sardhana Paper Mill do not face significant import competition because the company specializes in lighter grammage and 18 BF kraft paper. Imported products are generally concentrated in higher BF grades and premium-quality segments.

Speaking about the tissue paper sector, he acknowledged that the segment has witnessed substantial investments over the last three years, with nearly fifteen new units being established. Producers manufacturing high-quality tissue products using advanced imported machinery are performing well, while local manufacturers are also entering the segment.

According to him, demand remains healthy for premium tissue grades, particularly in the 16–18 GSM category. However, recycled tissue paper products are experiencing weaker demand. He observed that premium tissue products are largely based on virgin fibre, whereas recycled tissue grades have yet to gain comparable market acceptance.

Sharing details of the recent investment at Sardhana Paper Mill, Mr. Rastogi revealed that the company has invested approximately Rs. 100–125 crore in the new project. The investment includes modern infrastructure such as an IBL boiler, turbine, and associated facilities. At present, the company is not considering backward integration into corrugation operations.

Concluding his observations, Mr. Rastogi stated that the kraft paper industry is currently navigating a phase characterized by excess capacity, subdued demand, tight margins, and raw material constraints. Despite these challenges, paper mills continue to operate with the objective of sustaining their businesses and positioning themselves for improved opportunities when market conditions eventually recover.
 

Published at : Jul 03, 2026 03:44 AM (IST)

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