MANAGEMENT OF PAPER INDUSTRIES IN INDIA: MATERIAL AVAILABILITY

Posted by Kathryn Schwartz on November 17, 2013
Paper industry

MATERIAL AVAILABILITY

The paper industry is facing one of the most challenging times with sharp increase in import of coated paper and substantial jump in prices of key raw materials such as pulp, coal and chemicals.

Companies have been forced to drop prices to meet cheap imports. The overall demand was dented by the ‘save tree’ campaign and big corporate houses shifting to electronic mode for disseminating information to investors.

The impending economic slowdown has also taken its toll. Mr Harsh Pati Singhania, Managing Director, JK Paper, feels that the troubles being faced by the industry are just a passing cloud. Mr Singhania, who is also the Vice-President of the International Chambers of Commerce India, analyses the future prospects in an interview with the Business Line. Excerpts:

The current economic slowdown in India is starting to affect demand-growth for certain varieties of paper. It is therefore imperative that economic growth has to be revived. However, we believe this is a short term phenomena and long-term outlook for paper continues to be strong. The fundamental factors such as rising literacy levels, increase in business and commerce, expansion of retail and packaged consumer goods remain intact. The per capita consumption of paper and boards in India is also the lowest among the major developing countries. With these factors, we feel that, the paper market development in India will remain strong.

Of late, domestic companies were forced to cut coated paper prices to take on imports. Has the prices stabilised?

Coated paper imports have been growing significantly. The US and the EU have imposed duties of roughly 47 per cent – anti-dumping and/or anti-subsidies duty – on Chinese coated paper. This has led to a sharp rise in exports from China to India and to some extent from Indonesia as well, depressing the domestic prices in India in this segment. High-end packaging boards have been affected because of price differential between domestic and imported prices. Branded copier paper has been slightly impacted due to increase in domestic capacity, but will correct itself in due course of time.

Companies are shifting to electronic mode for Annual Reports and disseminating information. Do you see this impacting demand?

The Government’s thrust on education, rising level of literacy and several other factors like consumerism etc, have all led to increasing demand for printing and writing paper in recent years. While Annual Reports are now permitted to be sent in electronic form, this will not impact the demand in this sector substantially. They constitute a small part of the total consumption in the printing and writing paper category. In fact, overall demand for printing and writing papers continue to increase.

What would be the impact of Government’s new national manufacturing policy on the paper industry?

India’s paper industry’s expansion and growth is constrained more by lack of raw material availability than any other factor. This is an issue that needs to be resolved or addressed urgently. NMP is more of manufacturing and investment zone. While this will boost FDI and even some large-scale Indian investment, it is too early to assess whether new paper units will be sited in these zones due to their requirements for raw material and coal linkages, water and other resource availability. Of course, the increase in share of manufacturing in India’s GDP as targeted by National Manufacturing Policy will have a positive impact on the consumption of paper and boards.

Should Government take up labour reforms along with the new NMP?

Labour reforms are important because they do affect investment as also growth. Rigidities in labour usage come in the way of optimum allocation of resources and also hinder job creation rather than helping it. This is one of the reasons why manufacturing is not growing as much as desired in India. The State Governments have an important role to play in this matter as the implementation of labour laws lies in the hands of State Governments.

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