Tougher times are ahead for printers as leading paper manufacturers have raised prices by two to five per cent in anticipation of rising demand for printing of books and notebooks for the next academic year (2016-17).
According to media reports, BILT has raised prices of some grades while JK Paper has increased its coated paper prices by Rs 500 to Rs 47,000-48,000 a tonne.
Interesting times for the Indian print firms. It means less choice, and less choice means paper mills can dictate more and ultimately control the market price on the terms of the paper mills. This is adversely affecting the printers, since the supply and demand balance is changing.
However, the domestic paper industry is struggling to cope with high input costs and chronic shortage of wood pulp. It is also facing a challenge of duty-free import of paper from Southeast Asian countries. Since 2014, the import from these countries has upped, thanks to the free trade agreements signed by India.
Yogesh Agarwal, managing director and chief executive of BILT said, "Domestic demand seems to be picking up. To cover the increasing input costs and reducing margins, and also taking in factors like stable market and a healthy order book, BILT has increased the price of some grades."
India’s 2.5% duty on paper imports has come down to zero as on 1 January 2014, as per the terms of the free trade agreement signed with the Association of Southeast Asian Nations (ASEAN).
For example, import duty from ASEAN countries on paper sheet is zero per cent and coated paper reels at five per cent. Under FTA, duty works out to 1.5 per cent with South Korea and 5.5 per cent with Japan. The duty stands at 10 per cent for other countries.
This has put the profit margins of most paper producers under pressure in the current financial year.
In an interview with a business daily, Agarwal stressed upon the need to impose safeguard duties to protect paper mills. Agarwal said, “Rising import of finished products has hit the domestic industry badly, especially at a time when local paper mills have made huge investments in capacity expansions. Last year, the capacity utilisation of the domestic mills in writing and printing grades was around 89 per cent. We have urged the government to impose safeguard duties to protect the domestic mills.”
According to a report published by the business daily, Indian Paper Mills Association data showed India's paper and paper board import (excluding newsprint) has risen to Rs 7,223 crore for 2014-15, compared to Rs 5,987 crore in the previous year.
India's paper and paperboard exports, however, have increased, albeit marginally, to Rs 2,926 crore in FY15 against Rs 2,739 crore in the previous year.
According to industry experts, paper import into India is likely to rise significantly in the coming months as China devalues its currency.
Imports have hit the domestic sector at a time when it has made huge investment in capacity expansion.
"We have not taken any decision to raise prices of mainline copier or paper board effective January. But, we adjusted coated paper price a few weeks ago, which was raised by Rs 500 to Rs 47,000-48,000 a tonne," said a senior official from J K Paper. Coated paper contributes nearly 10% of J K Paper's overall production.
Demand of grades such as coated and printing paper has increased significantly in the past few weeks as educational institutes have started preparations for the ensuing academic year in June 2016. Looking at the same, Kumaraswamy did not rule out some upward adjustment in paper prices in the coming weeks.