1 For more Notes, Presentations, Project Reports visit a2zmba.blogspot.com hrmba.blogspot.com mbafin.blogspot.com Overview of Paper Industry The Indian paper industry has been historically divided on a three dimensional matrix identified by size, grades manufactured and raw material utilized. Generally, tariff rates have protected smaller units utilizing “unconventional” raw material. Over the years, the growth of various segments, investments levels in specific segments, technological changes, industry fragmentation and intensity of competition have been significantly influenced by the Government tariff policy. The present Excise duty on Paper is 12 %. The Government of India from time to time has given some benefits to small industries in order to protect them i.e. the first 3500 tones produced by a mill is chargeable only @ 8 % and thereafter it is @ 12 %. The three main grades of paper manufactured in India are :- 1. Newsprint 2. Writing and printing. 3. Industrial Variety ( Craft paper and Duplex Board )
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For more Notes, Presentations, Project Reports visit a2zmba.blogspot.comhrmba.blogspot.commbafin.blogspot.com
Overview of Paper Industry
The Indian paper industry has been historically divided on a three dimensional matrix
identified by size, grades manufactured and raw material utilized. Generally, tariff
rates have protected smaller units utilizing “unconventional” raw material. Over the
years, the growth of various segments, investments levels in specific segments,
technological changes, industry fragmentation and intensity of competition have
been significantly influenced by the Government tariff policy. The present Excise
duty on Paper is 12 %. The Government of India from time to time has given some
benefits to small industries in order to protect them i.e. the first 3500 tones produced
by a mill is chargeable only @ 8 % and thereafter it is @ 12 %.
The three main grades of paper manufactured in India are :-
1. Newsprint
2. Writing and printing.
3. Industrial Variety ( Craft paper and Duplex Board )
Over 550 players currently populate the industry and the estimated capacity is about
7.00 million Metric Tones Per Annum (MTPA). Fragmentation is severe in the
“industrial” (packaging) grades, which rely on “unconventional” raw material such as
waste paper and partly agro residues. This division generally comprises of units with
an average size of about 10000 MTPA and contributes to 45% of the output of paper
and paper boards in the country. Although the other divisions in the Indian paper
industry are also fragmented by international standards, the degree of fragmentation
is less severe. “Newsprint” till about 1995, was the sole preserve of large public
sector units and was well protected by high import tariff barriers. Nevertheless,
imports contributed to about 50% of the domestic consumption. Since then, new
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domestic capacity with private investment has been allowed to be created. This
growth has relied namely on De-inked waste paper as a source of raw material.
Currently import duty on newsprint is about 5% and domestic manufacture of
newsprint is exempted from excise duty. This tariff structure for newsprint has seen
Indian newsprint price closely mapping international prices. Imports still constitute
about 30% of consumption and newsprint contributes about 10% of the total
production of paper and paperboards. The number of players in the newsprint
segment is relatively limited and manufacturing capacities are larger than in the
packaging grades segment. Historically, the bulk of the output of “Cultural” grades –
comprising of writing, printing, office stationery paper and specialty paper has been
the preserve of “large” producers, who use forest based raw material in integrated
pulping facilities augmented by imported pulp. This segment has been consistently
taxed at higher rates due to its size and use of “conventional” forest based raw
material. Investment in plant has also been higher. With relatively smaller number of
players and high import tariff protection, prices of end products, generally perceived
to be higher quality, have been high.
Import tariff levels, although much lower now, still continues a significant barrier to
imports. The high investment levels required and limited “conventional” fiber
resources are the major deterrents to growth in this segment for both existing players
as well as new entrants. “Lower end cultural grades” manufactured by smaller
players using unconventional raw materials in low investment, low tech plants cater
to consumers in the price sensitive sub segment of this market. This sub segment
depends significantly on the tariff differential based on size and raw material for its
viability.
The Indian Paper industry is going through substantial changes. Global demand for
paper is expected to grow by about 4% p.a. over the next 5 years. The domestic
demand is expected to grow at about 8% which will result in increase of demand by
30 Lakh tones approximately over the next 5 years. It is expected that customs duty
on import of paper will decrease from the current level to the level of 10% over a
period of time due to WTO compulsions.
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The import of raw material for paper including pulp, waste paper and news print is
likely to increase by at least 15% to 20% in 2005-06 to keep up with growing demand
for paper in the domestic market. Despite to the constraints like over crowded market
and limitation in procuring the desired quality of waste paper, there are indicators of
a revival in the Indian Paper Industry. In the current year, selling price has marginally
increased and enabled the industry to partially offset the rise in cost of inputs, fuel &
labour.
The paper industry has an important social role to play for the country. Use of paper
is considered as an index of cultural growth. Key social objectives of the Government
like eradicating illiteracy, making primary education compulsory etc. are very much
related to the paper industry. The paper industry is also contributing towards
fulfillment of various requirements of the industry as a whole like information
dissemination, publicity etc. which in turn stimulate industrial growth of the country.
The paper industry has, thus, a catalytic role to play not only for the overall growth of
the industry but also for the living standards of the people. The new millennium is
going to be the millennium of the knowledge. So demand for paper would go on
increasing in times to come. Because of paper industry’s strategic role for the society
and also for overall industrial growth, it is necessary that the paper industry performs
well.
FUTURE PROSPECTS
The globalisation of Indian economy has lead to a healthy growth of 6 to 7% industry
and that is growth happening in all the sectors. Moreover the Per Capita
consumption of paper in India is going up with the advent of packaging in the food
industry. Due to environmental concerns, the use of plastics is likely to be banned by
the Government of India within a short span of time. Hence within 2 to 3 years we
will be witnessing an explosive growth of packaging in India mainly in food, textile
and export segments.
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The exposure to foreign packaging technology and the need to satisfy the export
customers has led to a drastic change in the industrial packing sector. The
corrugators have started using high BF, high GSM paper instead of the regular
grades and shifting from 7 ply and 9 ply boxes to 5 ply and 3 ply boxes. The above
change has resulted in more aesthetic and cost effective packing solutions. There is
a very good potential market developing for such grades of paper in India. The
market of high quality Kraft paper is now catered only by few manufactures from
western and northern parts of the country. With the above changes in the industry it
would be in the best interest of our company to put up a Kraft paper plant of 100 MT
per day producing high B.F., higher GSM paper and exploit the emerging market
situations better. The company envisages the following advantages by going for
such a plant as follows:
l) Most of the existing paper mills in South India operate with single wire machine,
which can produce up to 24 BF only, whereas the new plant intended to be set up by
SSPML is a twin wire machine which can produce high quality Kraft paper of 24 BF
to 40 BF which is sold in the market at a premium. l By making high end paper in
south India the company stands to gain a lot in terms of logistics costs when
compared to the competition. l SJPML got the advantage of cost benefit while
importing raw materials and exporting finished product. l The possibility of exporting
substantial quantity of the production to near by countries like, Sri Lanka and eastern
African countries is also bright. This may also be substantiated from the fact that
paper exports have risen at a CAGR of 14 % pa from 105000 tonnes in the year
2000 to 179000 tons in the year 2004. As a strategic measure to expand the
international operations of the company, the company has already started a new
business division – International Business Unit to handle the international marketing
operations of the Company.
2) The company intends to manufacture the paper by using Twin Wire Technology
and also plans to incorporate all latest equipments to have a cost effective
production. The twin wire technology employs two wires drawing pulp stock from two
separate head boxes. The arrangement is in such a way that the wet webs come into
contact before going to the press.
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3) At present the Company is employing single wire technology wherein the pulp
stock flows from the head box and gets distributed uniformly for further dewatering,
pressing and drying to form a sheet of paper.
The twin wire technology is superior than the single wire technology due to the
following factors:
1. Improves formation of paper.
2. Improves strength properties of paper namely, Burst factor, Tear
factor, Tensile strength and Ring crush test values.
3. Reduces Cost of Production.
The company will be able to derive the synergies of the existing plants and position
itself as a largest Kraft paper manufacturer in south India by the installation of the
plant. The market expectation for the increased production
Capacity, Production, Raw Material and Import
Government has completely de-licensed the paper industry w.e.f. 17th July, 1997.
The entrepreneurs are now required to file an Industrial Entrepreneur Memorandum
with the Secretariat for Industrial Assistance for setting up a new paper mill or
substantial expansion of the existing mill in permissible locations.
The industry is a priority industry for foreign collaboration and foreign equity
participation up to 51% receives automatic approval by Reserve Bank of India.
Foreign investment even up to 100% is approved by FIPB on case to case basis.
Several fiscal incentives have also been provided to the paper industry, particularly
to those mills which are based on non-conventional raw material.
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There are, at present, about 515 units engaged in the manufacture of paper and
paperboards and newsprint in India. The country is almost self-sufficient in
manufacture of most varieties of paper and paperboards. Import, however, is
confined only to certain specialty papers. To meet part of its raw material needs, the
industry has to rely on imported wood pulp and waste paper. The production of
paper and paper board during the year 2001-02 is 31.62 lakh tonnes.
The proportion of non-wood raw material based paper is increasing over the years.
At present about 60.8 per cent of the total production is based on non-wood raw
material and 39.2 per cent based on wood.
The performance of the industry has been constrained due to high cost of production
caused by inadequate availability and high cost of raw materials, power cost and
concentration of mills in one particular area. Several policy measures have been
initiated in recent years to remove the bottlenecks of availability of raw materials and
infrastructure development. To bridge the gap due to short supply of raw materials,
duty on pulp and waste paper and wood logs/chips have been reduced. The capacity
utilization of the industry is low at 62% as about 194 paper mills, particularly small
mills, are sick and/or lying closed. Several policy measures have been initiated in
recent years.
Imports of paper and paper products were growing over the years. However, it has
decreased during 2000-2001.
Demand and Supply gap in Paper Industry
Indian paper industry is the 15th largest in the world and provides employment to
1.3mn people in the country contributing Rs.25bn to the Government. The industry
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has recorded a volume growth of CAGR of 5.47% over the last 3 years. In 2003-04,
it recorded a volume growth of 6%, in line with the GDP growth. Indian paper
industry has a 1:1 correlation with the economy. The demand for paper is linked to
the GDP Growth. The government is planning to target a GDP Growth of about 10%
in 2-3 years. With this increase in the GDP growth the paper sector is expected to
record a similar growth rate.
The Indian paper industry has an installed capacity of 6.7mn tons while, the effective
capacity is estimated to be lower at 6.15mn tons. The industry produced 5.26mn
tons of paper in 2003-04. Newsprint capacity in India is estimated at 1.12mn tons
however, domestic production is only 0.59mn tons, while consumption of newsprint
is 1.1mn tons. Favorable demand - supply scenario to keep prices firm
The demand for paper is influenced by various macro-economic factors like national
economic growth, industrial production, promotional expenditure, population growth
and the Government’s allocation for the educational sector. Domestic demand for
paper is expected to grow at a CAGR of 6-7%. India’s paper demand is expected to
touch 8mn t.p.a by 2010. A leading global paper industry consultant projects a
shortage of about 0.7mn tpa by 2010.
Proposed capacity expansions:
Capacity expansions (which cost 50% less than new capacities) have been
announced by most players, but would take 1-2 years to be operational. Capacity
expansions of over 600,000 tons have been announced by the 7 large players in the
sector
WTO Impact
WTO as discussed the implication of Indian Paper and Newsprint Industry as part of
its negotiations and implications. The Indian Paper Industry has important place in
the industrial landscape. The paper industry has a strong backward linkage with
forests and environment on one hand and consumers of a variety of products on the
other hand. The manufacture of paper through pulp of wood or of other fibrous
cellulosic material has been discussed at length. However, recovery of waste or
scrap for paper and paperboard manufacture has been looked at from different angle
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in the classification of products of Indian Paper Industry. In fact the paper industry
which are eco friendly imports lot of waste paper into the country in the
manufacturing of paper and paper board. Generally WTO implication is applicable to
all the industries. How ever, in respect of paper industry where waste paper is the
raw material and which is eco friendly, the impact is not harsh. SSPML is into
manufacturing of paper out of the waste paper and is an eco friendly project.
GOVERNMENT REGULATIONS, PERMISSIONS & TAXES
1. Central Excise:
Central Excise is levied @8% for the first 3500 MT production and thereafter @12%
on the value of the invoice. The Company is availing permitted Modvat benefits as
per Central Excise regulations. For import duty paid on waste paper procured from
overseas the Company is entitled to adjust the entire duty paid component as that of
Modvat credits.
2. VAT (Value Added Tax):
VAT replaces the existing multipoint taxes levied by various states with effect from
April ‘05. As that of other industries, the paper trade is also covered under VAT for
domestic sales done in the state of Kerala. However for interstate sales CST is
continued to be levied as per existing Government regulations.
3. Service Tax:
Being classified as a manufacturing industry, the industry even for Job Work on
conversion basis will not be subjected to Service Tax requirements. A recent
notification from Central Government also confirms such a stand.
4. Factory Licenses:
All the licenses required under Municipality Act, Factories Act are obtained and duly
renewed.
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5. Pollution Control:
Necessary permission under effluent discharge Act is obtained and the facilities
required to maintain the permission are in place.
AVAILABILITY OF DOMESTIC WASTE PAPER
Waste paper recovery system in India is very unorganized and unplanned . As a
result, large quantities of waste paper get diverted for cheaper packaging and other
uses or get destroyed as rubbish. Bulk of waste paper collected by street collectors
in metropolitan cities goes to household paper bag manufacturers. Due to lack of any
grading/ classification system in context of waste paper, no sorting or segregation is
done at source and so most of the waste paper varieties are collected in commingled
form. The probable sources of waste paper collection are as under:
Industrial refuse Corrugated boards, duplex & other packaging board, paper
sacks etc.Office refuse Ledger files and papers from Govt. offices,
Universities & large business organizations.Trade refuse Boards trimmings from converters & packaging
manufactures, paper savings from printersRoad Sweeping Newspapers and magazines are usually recycled directly as
wrapping and packaging papers by the grocers and pretty traders and therefore they are not available for mills in their first rejection. Other fibrous domestic refuse probably find their way as road sweepings.
In India, collection of office refuse has not been very high mainly due to
unavailability of a viable collection system. In practice, more than 80% of the paper
consumed in India is being collected, of which only 20% is being made available
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to paper industry and the rest 60% is usually diverted for other diversified /
secondary uses such as wrapping, packing etc.
The developed countries, which are the major players in paper recycling business,
have a well defined and planned waste paper grading system in place, which
facilitates the collection of recovered paper sorted in grades with a limited mixture of
fiber types. Due to limited capacities of landfill sites and (municipal) incineration
plants, increasing waste disposal costs and environmental awareness a wide range
of legislation / directives in various countries have been imposed which has
promoted material recycling and reduced further , the generation of waste that
requires disposal in appropriate facilities. These regulations set responsibilities for
taking back used paper products and packaging material independent of the public
disposal system and recycling them.
In India, however, no such regulations / law / directives are in force to promote use of
recyclable resources, as a result of which the recovery of used paper is also low. As
per the statistics available , the Indian paper industry is using more than 70% of
imported waste paper in its total waste paper consumption . The general issues
related with use of imported waste paper in Indian Paper Industry are:
Ø Inconsistency in quality and varieties of waste paper grades.
Ø High level of contamination i.e. prohibitive & out throws.
Ø Price fluctuation in the international market.
Ø High price for good quality waste paper i.e. low to negligible contamination
level.
Ø High ash content in paper leading to low fiber yield / tpaper and generation of
inorganic sludge.
ISSUES RELATED TO WASTE PAPER BASED MILLS
In spite of the fact that waste paper processing for paper making is considered to
be an eco friendly process , there are certain technological & environmental issues
still associated with waste paper based mills which needs to be addressed to
improve its environmental compatibility.
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Technological Issues :
The main objective of recycled fiber processing is the removal of contaminants and
elimination of their effects as much as necessary to meet quality requirements.
Removal of contaminants makes recycled fiber processing systems significantly
more complex than systems for virgin fibers. There are several unit operations /
stages viz. slushing, screening, cleaning, flotation, disperger etc. to remove the
contaminants from recycled fiber stock. The technology is well established to
produce newsprint, packaging grades and fine papers and most of the mills in USA,
Europe have state-of-art technology for processing of recycled fiber. In India,
however, most of the recycled fiber based mills do not have appropriate system
configuration for efficient processing, as a result the quality of finished paper is low.
The level of technology in majority of mills is obsolete. The operational efficiency of
equipments and machines are also considerably below the optimum level . Due to
lack of appropriate configurations, the amount of rejects generated are also high
and is a major source of solid waste generated in such mills .
Environmental Issues :
Among the environmental issues associated with recycled fiber mills , solid waste
disposal and management is the subject of main concern. Deinkined sludge
generated from deinking plants in mills using printed waste paper for producing
writing & printing grade of paper , consists of mainly fillers and coating pigments,
fibers, fiber fines, printing inks and adhesive components. A characteristic feature of
the deinking sludge is its high ash content in the range of 40% - 70%. Traces of
heavy metals may also be present in some cases. In most of the cases the heavy
metal content is insignificant and sometimes even below the detection limit. The
another important issue reported recently is the clandestine import of other
waste like plastics, metal and cloth / rags etc (technically defined as prohibitive and
out throws) along with waste paper.
OBESRVATION & REMARKS :
Generally the waste paper being imported in the country are recovered in
segregated form as per the request of the importer. However, some cases have
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been reported wherein municipal solid waste constituting of plastics, metal cans
and cloth / rags etc (technically defined as prohibitive and out throws) have been
illegally imported in grab of imported waste paper This has led to the need of
defining / formulating the permissible limits for the contaminants like plastics, metal
cans and cloth / rags etc. in the imported paper . At present, no data /guideline is
available on this issue Therefore; it is recommended to undertake an indepth
study on this issue so as to evolve permissible limits for prohibitive and
outthrows in the imported waste paper consignments entering into the
country.
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CORPORATE PROFILE
M/s Shree Jagdambe Paper Mills Limited(SJPML), incorporated in July, 1980 as
a private limited Company, commenced its commercial production of Semi Kraft
Paper on single production line in March, 1982 with an installed capacity of 1950
M.T. per annum based on agro residue. In the year 1985-86 the capacity was
increased to 3000 M.T. per annum & later in 1987-88 to 5000 M.T. per annum by
adding certain balancing equipments. In 1990, SJPML added another production
Line and increased the capacity to 10000 M.T. per annum. In 1993-94 the plant has
been operated at 95% capacity utilization to give a production of 9587 M.T.
SJPML has been promoted by Shri Man Mohan Kumar Goyal, Shri Ramesh