How the paper industry can be internationally competitive?

PR Ray (PRR): You have been associated with the paper industry for about 40 years. What are the changes you have seen?
Dr Ashok Kumar (AK): The Indian paper industry has undergone a sea change during this period and is no longer the same as it used to be four decades ago. The industry has progressed in every sphere of the paper manufacturing process and related areas. The individual mills have increased manufacturing capacity significantly. Earlier, even a mill producing 250 MT/day paper was considered to be large, but today the size of some large mills in India is more than 1,000 MT/day. There are few state-of-the-art single paper machines, which have been installed recently producing more than 500 MT/day paper on a single machine. There have been technological advancements in each and every area of the pulp and paper industry.

PRR: Your view on raw materials?
AK: The raw material for wood-based mills has changed from predominantly bamboo to hardwoods. The mills based on agri-residues now make use of bagasse and wheat straws to produce some paper products almost similar to wood-based mills in terms of quality. There used to be many small paper mills manufacturing poor quality kraft paper using mainly domestically-sourced waste paper. Today, more than 65% of the total paper produced in India uses waste paper, which is sourced domestically as well as from abroad. Some of the paper grades produced are quite close to the quality produced from any other raw material.

PRR: What sort of technological advancements has the Indian paper industry seen?
AK: Few important ones are: pulp is bleached to about 90-degree brightness level with good strength properties, ECF bleaching, alkaline papermaking, writing and printing papers having close to 25% ash, most bleached paper grades are comparable to international quality, and energy-efficient processes; significant reduction in steam, power and water consumption; significant advancements in the level of automation, adoption of clean and green technologies, and tremendous improvement in the environmental management of the mill.

PRR: With a better understanding of the importance of qualified manpower, the paper industry now puts a lot of emphasis on the training and development of its workforce. Is that true?
AK: Over a period of time, the industry has employed more qualified manpower while reducing the overall number significantly which happened due to the increased capacity of the mill and of individual equipment, productivity improvement, with a lot of process optimisation, control and automation.

PRR: Have all the above changes proved beneficial to the industry?
AK: Yes. It has helped in improving the product quality and its consistency, making the paper industry more efficient, clean and productive. All these changes have ensured that the paper industry has grown and its sustainability improved. The industry contributes significantly to the exchequer and saves lot of foreign exchange as it is self-sufficient in most paper grades, except few grades, which are sourced for specialty applications particularly those which need better quality fibrous raw material.

PRR: According to you, what is the current status of the paper industry in India?
AK: The paper industry with a turnover of about Rs 70,000-crore is a key segment of manufacturing in India. Contrary to the belief of many, this is the most sustainable industry and supports national objectives of education for all, making the country green, supplementing farm incomes through social forestry programmes and generating rural employment.

PRR: Rate its performance in terms of its overall health and also consider the future growth prospect?
AK: The overall health of the industry has been good and improved consistently over a period of time. Due to the Covid pandemic, like any other industry, the paper industry has been adversely impacted with poor financial results in the first half of FY 2020-21. However, it started recovering after the easing of lockdown restrictions and the revival of the economy. The improvement started from Q3 of FY 2020-21 onwards and with better results in Q4 of FY 2020-21 and Q1 of 2021-22. With the revival of overall economy, the paper industry will also recover further, but lot depends on how the future Covid waves will impact the people and business. The long-term prospects of the paper industry is normal growth with some segments growing more than the others as universal literacy is unthinkable without paper.

PRR: What more should the industry do to catch up with, if not the international level of this industry, at least with some of the Asian countries such as Thailand and Indonesia?
AK: Though we always like to compare domestic industry with international companies, let us face the reality, as in my view, the comparison is not fair as there is no level-playing field due to many reasons. However, it is understood that we live in a global world and such comparisons are inevitable. There has always been a scarcity of fibrous raw materials such as wood in India in terms of quality, prices and availability from sources closer to the mill. Due to this reason, the Indian paper mills can’t have manufacturing capacity similar to the international level when compared to Indonesia, China or many South American and European mills.

PRR: What about the quality of the products?
AK: The quality of products manufactured by many mills in India for most grades is almost similar to the international level. The Indian paper industry is fragmented and diverse in nature. The products manufactured range from poor quality such as low strength corrugating media to the quality almost similar to the international products manufactured by several medium and large mills in India, as there is demand for all kinds of papers and price is the most important factor. The capacity of mills in Indonesia is large, almost five times more than the largest mill in India at a single location mainly due to the advantage of the availability of wood at reasonable prices within the vicinity of the mill. There are some paper products that are imported for speciality applications and such products can’t be economically produced in the country mainly due to the inferior quality of fibrous raw material and economically unviable size of the machine/ mill for setting up in India unless there is a possibility of exporting such products at competitive prices.

PRR: What do you think are major constraints facing the paper industry in India (specific operational area wise)?
AK: The major constraint has been, and still is, the scarcity of fibrous raw material – both quality, quantity and higher prices. The industry is capital intensive with a large gestation period.
The plant and equipment, particularly for large capacity mills, have to be imported and thus the capital investment is always on the higher side.
There are few good machinery manufacturers for small- and medium-sized mills, but in the last few years, it has been seen that these mills prefer to import most of their machinery from China. The cost of capital is more in India when compared to many other countries. The support from the government bodies in many areas is not up to the desired level in spite of a lot of emphasis on – Ease of Doing Business –which largely remain on paper and the time taken for any decision-making is long.

PRR: How do you want them to be tackled, specific-area wise?
AK: In order to address the problem of the fibrous raw material shortage, the paper industry has been bringing to the attention of all relevant decision making government bodies the issue of degraded forest land for industrial plantations to ensure an adequate supply of quality wood at a reasonable price, but no concrete decision/action has been taken so far.

PRR: The availability of waste paper of various types has become a major issue. What is your view?
AK: Presently, there is uncertainty about the quality, quantity and price of almost all grades of waste paper. The domestic waste paper recovery rate is also very poor at about 30%. Just for comparison, it is about 73% in European Union countries. There is a lack of co-ordination among various agencies including industry and industry associations. The backbone of waste paper recovery in India is poor rag pickers and similar less privileged people in the society who work under unhygienic and unsafe conditions for their livelihood. All stakeholders must come together at a common platform with common agenda and take necessary initiatives like in European Union to improve the waste paper recovery rate. We don’t need advisors, but those who walk the talk and contribute on the ground.

PRR: Is the paper industry in India capable of generating its own funds to finance the changes that are essential for the future growth of the industry?
AK: The cost of capital in India is higher than in China, Indonesia and other European and South American countries. Since the paper industry is capital intensive with a long gestation period, it affects the competitiveness of the Indian paper industry when compared with the international pulp and paper industry. As the paper industry does not compete well with the foreign companies in this field, it is not easy to attract substantial foreign investment. Some initiatives taken by large international companies known all over the world in the last two decades have not been encouraging.

PRR: If not, from where do you think, the investments should come from – the government, private investors, foreign investors – and the reason for your preference?
AK: The paper industry has been requesting the government for many years to set up ‘Technology Upgradation Fund’ to make the funds available easily at lower interest rates to remove technological obsolescence, make industry efficient, competitive, better environmentally managed and sustainable, but very little has happened, and that too, indirectly. This area needs serious consideration at the highest level.

PRR: Coming to the aspect of market segment for the end product, what do you think Indian paper mills should aim at, the volume market or the speciality market, given the constraints that the paper industry in India suffers from?
AK: It has to be a mixed strategy as all mills are different from each other in the product offerings and have strength in their own area of operations with regard to production level, quality and prices. India by any standard is not a low-cost paper producer.

PRR: What about self-sufficiency?
AK: The country is self-sufficient in uncoated wood-free segments such as maplitho papers, copier papers, MG poster papers, kraft papers except high strength papers for special applications. There is still some moderate growth in the uncoated wood-free segment due to the focus of the government in the field of education and thus this area will continue to see investment for domestic consumption and scope for some export volumes as and when the environment is conducive. Growth in the packaging segment is higher than W&P grades and more so after the pandemic. A number of mills have taken advantage and exported packaging papers of various types mainly coated grades during this period. There is always a scope for high strength kraft papers for many applications but as India does not have good quality long fibre, it is difficult to manufacture it economically and compete in this area.

PRR: Can some capacity be built?
AK: Yes, some capacity can be built with good quality waste paper, but recently, the waste paper market is very uncertain and the large capacities are difficult to build and the apprehension is that it will not be cost/price competitive. One large paper mill in India is building some capacity in this segment in Punjab to start with manufacturing paper from domestically collected waste paper and later converting the same into good quality corrugated boxes.

PRR: The growth in segments such as tissue paper?
AK: The growth in the tissue paper segment has been highest due to the pandemic and focus of people towards hygiene, but price remains a sensitive factor and the base is relatively small. In the initial phase of the pandemic, some mills have survived in this segment due to export opportunities, but India is not in a position to be a serious contender in tissue export. It is always up and down. Recently, it is better to sell tissue paper in the domestic market as compared to exports a few months ago. Though every mill talks about speciality paper in reality there is very little production of speciality papers in India, which will not be export-oriented in the near future.