The India-EU FTA: A strategic tipping point for India’s paper industry — The Noel D'Cunha Sunday Column

The India-European Union Free Trade Agreement (FTA) is poised to be less of a celebratory moment and more of a strategic confrontation for the Indian paper and pulp sector. The comprehensive tariff exposure will accelerate a pre-existing modernisation imperative, setting the stage for a critical race for technological efficiency and operational agility.

Several industry observers describe the FTA as both a pressure point and a prompt. It exposes structural gaps but also opens access to machinery, services and know how that could support modernisation.

The consensus from industry analysts, including PR Ray, and recent discussions within the IPPTA group, suggests that the FTA creates an immediate win-win scenario for the European Union (EU) paper industry, while acting as a mixed blessing and a profound catalyst for India.

Immediate headwinds for domestic mills
As per industry insiders, the key vulnerabilities for the Indian paper sector stem from four primary areas. The first is raw material disadvantage. As per a paper industry veteran, the FTA provides no material advantage on raw materials. European pulp (Northern and Southern Softwood) and high-quality waste paper are already subject to low duties, but their supply is extremely tight and pricing remains prohibitive for most Indian mills.

Meanwhile Indian paper mills, which primarily produce commodity grades, will find limited usage for their products in the sophisticated European market. “India primarily produces commodity grades, for which Europe will not have any major usage,” Ray says. Crucially, the European Union Deforestation Regulation (EUDR) is a major non-tariff barrier that the Indian industry does not yet comply with. This regulatory hurdle makes the export of finished paper and paperboard a "non-starter." He adds that the capital intensity of papermaking slows response time. “Investments in the paper industry are high value and need a long period. With the present practice of just in time decisions, any major technical input from the EU to deliver early benefit would be doubtful.” In contrast, printing and packaging investments are smaller and faster, which could indirectly benefit EU specialty paper exports.

SN Venky, former ITC PSPD and PPB executive, broadly supports this cautious reading. He notes that “for most paper grades, Europe is a high-cost source for the Indian market,” with capacities there undergoing rationalisation. While imports are relevant in some specialty segments and for stock lots in select commodity grades, he indicates they may not automatically accelerate.

Venky argues that the bigger shift will be structural. “The accent going forward will be on market access and conformance to environmental and sustainability goals like lowering carbon intensity and use of responsibly sourced raw material,” he says. He also cautions that “non-tariff barriers could pose issues,” suggesting that regulatory filters may be as important as tariff changes.

A catalyst for efficiency and alignment
Despite the immediate pressure, the FTA's full scope offers a critical lifeline and a catalyst for structural modernisation, compelling the industry to change or face marginalisation. Industry insiders view the FTA as adding "severe pressure" to reduce the cost of goods manufactured. This is forcing a positive shift in focus toward improving energy efficiency, yield, and capacity utilisation across all functional domains. As one senior member of the paper industry noted, the "first mover may win."

The agreement provides tariff relief on key inputs, most critically capital equipment and engineering services. This reduction in modernisation costs is a strategic opportunity for mills to accelerate technology upgrades, improve yields, and better manage the energy costs that can account for nearly 25% of production.

The consensus is split on pulp. For the bulk of the Indian paper industry, which is recycled-based, the prospect of cheaper and better-quality pulp is seen as a boon. However, integrated virgin pulp mills, which currently produce at costs (USD 450-500/MT) significantly higher than global benchmarks (USD <300/MT), will face severe competitive pressure, forcing them to improve process efficiency.

Venky also flags a strategic possibility beyond trade in goods. “Investments from Europe and acquisitions are possible as the Indian market opens up,” he says, pointing to potential shifts in ownership and technology transfer over time.

Long term test for the sector
Two themes recur in most discussions. The first is technological efficiency. The most forward-looking mills, the "first movers", are already decoupling from the pressure of zero-duty imports by pivoting toward high-growth packaging and specialty grades and adopting Industry 4.0 technologies (such as AI-driven yield monitoring). 

The second is regulatory alignment, especially on sustainability metrics The looming shadow of regulations like the EU Deforestation Regulation (EUDR) and the Carbon Border Adjustment Mechanism (CBAM) means that mills with high-emission profiles will face an effective increase in the cost of goods sold to Europe.

For now, the FTA’s impact will unfold gradually as tariff schedules phase in and rules are clarified. The agreement does not redraw the market overnight, but it makes competitive gaps more visible.

The Sunday Column takeaway: The FTA is not a gentle breeze of opportunity but an accelerant to a necessary, high-stakes transition. It demands that the Indian paper industry shift from a fragmented landscape to a consolidated, green manufacturing hub where survival is predicated on balancing raw material security with the operational agility to meet stringent global sustainability and technological standards.