From low to high technology input and environment -conscious process development is the theme of India's pulp-paper-products industry.

1. India’s Pulp & Paper industry-1990-2002
PULP IS COMMERCIAL CELLULOSE FIBERS
DERIVED FROM WOOD, BAGASSE ETC, BY
MECHANICAL AND / OR CHMICAL TREATMENT TO
RELEASE THE FIBERS FROM LIGNIN BINDING
MATERIAL AND DECOLORISED BY BLEACHING.
PAPER IS MATTED OR FELTED SHEET OF FIBERS,
USUALLY CELLULOSIC AND GENERALLY
FORMED ON A FINE WIRE SCREEN FROM A
WATER SUSPENSION.
Year Installed Capacity, Capacity
Million tonnes /annum Utilization %
1951 0.137
1955-56 0.214
1978-79 1.538 90 %
1985-86 2.46
1988-89 2.76
1991-92 3.30 62 %
1992-93 4.0
1993-94 4.0
1994-95 4.0 64 %
2001-02 5.0 62%
2005-06 6.5
2009-10 11.2
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2. Pulp and Paper Process
The pulp and paper industry converts fibrous raw materials
into pulp, paper and paperboard. In a first step, raw
materials are processed into pulp and in a second step,
paper and paper products are produced out of this pulp.
Different plant categories exist depending on whether they
only produce pulp (pulp mills) for further processing or
only paper out of purchased pulp and /or recycled waste
paper (paper mills).
The third category, the integrated pulp and paper mills,
combines the two processes and is most common in the
paper industry.
The five principal steps in pulp and paper production are
1) wood preparation,
2) pulping,
3) bleaching,
4) chemical recovery, and
5) papermaking
In 1995:
Total Number of paper mills in India= 380
Large/medium size mills (>20000 TPA capacity) =21
Small mills = 359
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KAGAZ.COM is India's leading and most
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4. 1 Wood Preparation
Wood preparation involves breaking wood down into small
pieces suitable for subsequent pulping operations. Major
wood preparation processes are debarking and chipping.
This process requires little energy.
2 Pulping
Wood is ground and pulped to separate the fibers from each
other and to suspend the fibers in water. Pulping breaks
apart the wood fibers and cleans them of unwanted
residues. The ratio of wood to other materials used for pulp
depends on the resources available. The remaining fiber is
provided by recycled materials or by non-wood plant
sources.
Pulping can be performed using chemical,
mechanical, or combined chemical-mechanical techniques.
In chemical pulping wood chips are cooked in an aqueous
solution at high temperature and pressure. Chemical
processes dissolve most of the glue that holds the fibers
together (lignin) while leaving the cellulose fibers
relatively undamaged. This process results in high quality
paper with a yield of only 40%-60% of the weight of the
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5. dry wood. The Kraft process, which is the most common,
uses a sodium hydroxide and sodium sulfide solution. The
sulfite process uses a mixture of sulfurous acid and bisulfite
iron (typically from sodium sulfite).
The most common mechanical pulping technique involves
separating the cellulose fibers by pressing logs against wet
grindstones or by passing wood chips between counter
revolving grooved metal disks (refiners). Lignins and other
residues are not removed. This results in a higher yield, but
there is more damage to the fibers. In addition, lignin will
degrade in time. The lower quality fiber limits the use of
this process to less expensive grades of paper, such as
newsprint.
Combined chemical and mechanical pulping can produce
varying grades of paper depending on the particular process
used. These processes include thermo-mechanical,
chemical thermo -mechanical, and semi-chemical.
Large Indian mills that are predominantly based on forest
raw materials use the Kraft process. Agro-based mills use a
soda process while newsprint mills use mechanical,
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6. chemical, chemi -mechanical and chemi-thermo-
mechanical (CTMP) processes. (Mohanty, 1997)
3 Bleaching
Bleaching whitens pulps for the manufacture of writing,
printing, and decorative papers. The process alters or
removes the lignin attached to the wood fiber. Chemical
pulps are bleached through the use of alternating treatments
of oxidizing agents and alkali solutions.
The Kraft process produces a darker pulp that requires
more bleaching. Mechanical pulps are treated with
hydrogen peroxide or sodium hydrosulfite to reduce the
light absorption of the lignin rather than remove it.
4 Chemical Recovery
Chemical recovery regenerates the spent chemicals used in
Kraft chemical pulping. Chemical pulping produces a waste
stream of inorganic chemicals and wood residues known as
black liquor. The black liquor is concentrated in
evaporators and then incinerated in recovery furnaces,
many of which are connected to steam turbine
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7. cogeneration systems. The wood residues provide the fuel
and the chemicals are separated as smelt which is then
treated to produce sodium hydroxide. Sodium sulfide is
also recovered.
5 Papermaking
Papermaking consists of preparation, forming, pressing and
drying; preparation and drying are the most energy
intensive processes. During preparation, the pulp is made
more flexible through beating, a mechanical pounding and
squeezing process. Pigments, dyes, filler materials, and
sizing materials are added at this stage. Forming involves
spreading the pulp on a screen. The water is removed by
pressing and the paper is left to dry. In one of the most
common papermaking processes, the paper is pressed,
drained and dried in a continuous process. In another, a
pulp matt is formed in layers with water removal and
treating occurring between deposits.
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8. Paper- in years - 2000-02
The production of paper and paper board during
the year 2001-02 was 3.162 million tonnes. About 60.8
per cent of the total production was based on non-
wood raw material and 39.2 per cent based on wood.
India’s per capita consumption of paper in 2002 was
around 4.00 kg, which was one of the lowest in the
world. With the expected increase in literacy rate and
growth of the economy, an increase in the per capita
consumption of paper is expected. The demand for
upstream market of paper products like tissue paper,
tea bags, filter paper, light weight online coated
paper, medical grade coated paper, etc. , is growing
up. These developments are expected to give fillip to
the industry.
There were (in 2002), about 515 units engaged in
the manufacture of paper and paperboards and
newsprint in India. The capacity utilization of the
industry is low at 62% as about 194 paper mills,
particularly small mills, are sick and/or lying closed.
Till 1970, the major raw material was wood, based on
forests. Since then, agro-residues and waste paper being
recycled were used as raw materials for small mills.
Newsprint is paper made at a lower cost than white writing
paper, as it is not elaborately bleached and finished as
writing paper. In 1990-91, newsprint produced in India was
0.3 MT and imported was 0.25MT
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9. India’s per capita consumption of paper in 2002
was around 4.00 kg, which was one of the lowest in
the world. In 1990, per capita consumption of paper in
India was 3. 0 kg
1990: China = 12 kg
USA = 330 kg
Japan = 134 kg
Australia = 150 kg
The Indian paper and paperboards industry is on
the growth path. The Indian paper and paperboards
industry grew by nearly 7.8 percent during the period
2000-2006. This is substantially higher than the Asian
average of 5.1 percent. India’s paper manufacturing
capacity is expected to grow at a Compounded
Annual Growth Rate (CAGR) of 7.4 percent from 8.4
million MT per annum to 11.2 million MT per annum
between 2008 and 2010.
The Indian per capita paper consumption is among
the lowest at 7.0 kg, while Asian and global averages
are 11.0 kg and 49.0 kg respectively. But the demand
for paper is increasing given the rising disposable
incomes particularly of the expanding middle income
group.
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10. The literacy level in India which is on the increase is
further set to improve the demand for paper in the
future. The Government of India’s increased budget
allocation for education sector is expected to further
improve the literacy rates in both urban and rural
areas, resulting in increased demand for writing
paper. The Indian Pulp and paper industry is
expected to grow at 7.4 % CAGR over the period
2008 – 10. With Indian economy in one of its best
ever growth mode, the Indian paper industry
continues to be a major beneficiary.
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11. Paper Industry Policy - in years – 1991-2002
International Paper Prices
Recently, the international prices of pulp have
increased from around US$443 per tonne in May
1999 to US$550 per tonne in November 1999. The up
trend is expected to continue for another two years
and the cycle is currently expected to peak by the end
of 2001/ early 2002. The domestic prices of PWP
have shown improvement since June 1999 and they
are expected to remain firm with demand growth of 6-
7% in next two years without commensurate increase
in supply.
Growth In Industrial Production / Usage Industries
The demand for paperboards is dependent upon
growth in usage industries like FMCG,
pharmaceuticals, cigarettes etc. Therefore the
demand for the fastest growing segment,
paperboards can be traced by tracking the growth in
these industries.
Changes In Import Duty Of Paper
With the opening of the economy in 1991, the basic
import duty paper and paperboards has come down
from a peak of 140% in 1991 to 30% in 1999. This
has exposed Indian paper mills to the threat of
imports. Any increase in import duty on paper will help
the industry in countering the threat from imports
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12. along with increases in price realizations and capacity
utilization.
Power Tariff
Paper manufacturing is an energy intensive process.
10 million kilo calorie of energy are required to
produce one ton of paper. The power tariffs, which
differ from state to state, have a major impact on the
cost of production of paper. Also, the power supply
situation in a particular state may become a cause of
concern as it will have bearing on production activity
of a company, unless the mill has sufficient captive
power generation facility.
Changes In Import Duty On Wood Pulp And Waste
Paper
The increase in import duty on wood pulp and waste
paper has increased the input cost for many large
players as they depend on imports. This has a
negative impact on the profitability of the Indian
companies as their raw material cost goes up. Any
changes in import duty on raw material inputs in the
future are bound to have a pronounced impact on
operating margins of Indian paper manufacturers.
Forest Policy
The request by industry to allow use of degraded land
for commercial plantation is long pending before the
government. Similar schemes in countries like
Indonesia, Malaysia, Brazil have been carried out
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13. successively and have helped the paper industry to
grow to global levels. Therefore, proper policy on this
front by GOI will help in boosting the growth of paper
industry in the country.
Run-up to the Budget 2000-01
Status of the Indian Paper Industry
The Indian Paper industry has been passing through
a difficult period in recent times. The period from FY
1995 till mid 1999 was particularly tough as imports
increased, input costs rose, and the price
realization declined.
The import duty on paper and paperboard was
reduced from 140 per cent in 1990-91 to 20 per cent
in 1995-96 leading to sharp increase in imports. The
newsprint was put under Open General License in
1994 and since then a large number of independent
retailers have been importing newsprint and supplying
it to end-users. Currently, the customs duty on
Newsprint is 5.5%, and paper manufacturers
complain large-scale imports of Light Weight Coated
and Kraft paper under the guise of Newsprint. The
average capacity utilization of the paper and
paperboard industry during 1995-1999 declined to
around 67%. But, since mid 1999 some signs of
recovery in both the domestic and international
markets of paper industry are apparent. The
international prices of pulp have increased from
around US$443 per tonne in May 1999 to US$550 per
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14. tonne in November 1999. The up trend is expected to
continue for another two years and the cycle is
currently expected to peak by the end of 2001/ early
2002. The printing and writing paper (PWP) and
paperboard prices have been lagging pulp prices but
they are expected to move up backed by
improvement in fundamentals of Asian region. Asian
region accounts for 30 per cent of the global pulp,
paper and paperboard consumption. The domestic
prices of PWP have shown improvement since June
1999 and they are expected to remain firm with
demand growth of 6-7% in next two years without
commensurate increase in supply. The demand of
industrial paper has also picked but the prices of kraft
paper and paperboards have been unable to move up
significantly due to increase in supply.
Proposals in Union Budget, 1999-2000, affecting
the Indian Paper Industry
 Basic import duty on Paper and Paperboard
increased from 30% to 35%.
 Basic Customs Duty on newsprint rationalized at
uniform level of 5%. Basic Customs Duty with
ash content exceeding 8% increased from NIL to
5%.
 No change in concessional Basic Customs Duty
of 5% on Light weight coated paper upto 70 gsm
imported for printing of magazines by actual
users.
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15.  Excise duty on Paper and Paperboards reduced
from 18% to 16%.
 Excise duty on cartons and boxes (but not of
Corrugated Paper and Paperboards) raised from
13% to 16%.
 Additional specific duty of Rs. 1/litre on HSD.
 Restoration of 100 per cent MODVAT credit.
Expectations from Union Budget, 2000-01
 Increase in total budgetary allocation to
education sector.
 Clarity in definition of newsprint, glazed newsprint
and Light weight coated paper to check the
clandestine imports of paper.
 Maintenance of the status quo of customs and
excise duty on paper and paperboard and
increase in customs duty on newsprint.
PAPER INDUSTRY_2000-01:
Improved prices augur well for paper units - HBL
MUMBAI, JUNE 2. 2001.
The paper industry recovered last year[2000-01] after
a poor run of about four years and is now back on
track. The recovery came more than 18 months ago
with improved demand from the government as also
for industrial paper from other consumers.
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16. Paper companies had earlier been hit by poor
capacity utilisation and poor prices. Prices had
reacted significantly while administered input prices
had increased leading to pressure on margins.
However, with improved realisations and cost cutting
measures in place the overall health of the industry
improved. There has been some softening of prices
by around 20 per cent in the last few months, but still
the industry is in good financial shape.
As the demand for paper is related to gross domestic
product (GDP) growth the industry's growth was
hampered by recessionary conditions over the last
few years. Consequently, additional capacity created
over the last couple of years could not be utilised
effectively. Now, it is expected that the increase in
demand will lead to a healthy growth in revenues and
the rising prices will have a salutary effect on margins.
Last year, the mills had done well with prices moving
up by 15-16 per cent. At present, prices range from
Rs. 35,000 to Rs. 60,000 a tonne with writing paper
and map litho occupying the lower end of the
spectrum and coated art paper the top end.
Packaging paper prices - duplex board and kraft -
have not gone up and are hovering around Rs.
15,000-20,000 a tonne.
Last year was also good for newsprint and
internationally, the U.S. saw a jump in demand. Even
in newsprint, there are varieties, ordinary and glazed,
the latter being imported. ``In India too, newsprint
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17. prices shot up from around Rs. 16,000 to Rs. 30,000
a tonne before receding to rule around Rs. 27,000 a
tonne,'' said Mr. Chandak, executive director, West
Coast Paper.
Mr. Chandak felt that prices would stay high for the
next two years, first because of the cyclical nature of
the industry and second, ``there is no import threat
and there is no consolidation either.'' As such,
consolidation in the industry is unlikely to take place
unlike in the global industry where mergers and
acquisitions have been common. This is largely due
to the fragmented nature of capacity with only a
handful of manufacturers having capacity exceeding
six lakh tonnes a year.
The problems afflicting the industry are mostly price
related. Raw material sourcing is one problem and
non-pulp inputs are covered by administered pricing.
There are entry barriers in the industry - large
investments are required and as such no new
greenfield projects are planned. Whatever investment
is coming in is for upgradation or expansion of
existing paper mills. Though there is still some
overcapacity it has come down due to rising
production and stagnant capacity.
The industry size is five million tonnes annually. Of
this, 50 per cent constitutes mills using conventional
raw materials such as wood and bamboo and the
other half use non-conventional raw materials such as
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18. waste paper and agricultural residues. These
constitute around 300 mills and they manufacture
paper and board.
While adequate pulp is not produced in India,
international rates had shot up last year from $500 to
$850 a tonne. However, they have dropped to around
$550 now. The import duty on newsprint and pulp is 5
per cent against the WTO bound rate of 25 per cent.
Imports rose steadily from 80,000 tonnes in 1995-96
to 2.70 lakh tonnes in 1998-99 and have remained
steady in recent years. Import tariff for various grades
of paper is at present 35 per cent against the WTO-
bound rate of 40 per cent.
Some leading players in the industry: 1. Ballarpur
Industries' acquisition of Sinar Mas India for Rs. 530
crores is the latest and a major development in the
industry. Sinar Mas is an Indonesian company and
entered India about five years ago. The Indian unit
has a capacity of 1.15 lakh tonnes and market share
in the paper and paper-board segment. After the
buyout, the combined capacity will go up to five lakh
tonnes and Sinar Mas India has been renamed BILT
Graphic Papers.
However, the question of sourcing pulp could come
up for the company. Earlier, Sinar Mas India could
source from its parent in Indonesia.
2. ITC Bhadrachalam Paperboards had expanded
capacity from 62,500 tpa to 1.82 lakh tpa. Following
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19. the infusion of around Rs. 150 crores from ITC, the
company has carved a niche for itself in the export
market for coated paperboards and specialty paper.
3. Tamil Nadu Newsprint (TNPL) boasts of being
among the most efficient players in the newsprint
industry. In 2000-01, the company reported sales of
Rs. 596.40 crores and a net profit of Rs. 76.40 crores.
Promoted jointly by the Tamil Nadu Government and
IDBI, TNPL manufactures newsprint and
printing/writing paper with a capacity of 1.8 lakh
tonnes annually. TNPL uses bagasse as the main
input. It is now going in for de-bottlenecking to enable
capacity increase by around 25 per cent.
4. West Coast Paper Mills (WCPM) has recorded a
88 per cent rise in its net profit at Rs. 28.52 crores in
2000-01 (Rs. 15.20 crores). Sales and income from
operations rose 7 per cent to Rs. 351.33 crores (Rs.
328.68 crores). Profits jumped on better realisations
coupled with an increase in demand for paper and
paper board.
``The industry has emerged from difficult times,''
according to Mr. Chandak ``and there are no
foreseeable problems. For the established players,
the next two years promise to be good.''
2010: In the present scenario, apart from capacity
augmentation, there is an immense need to improve
the Energy Efficiency of the individual units. Many of
the Indian Paper mills are also working actively in the
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20. areas of water and environmental management not
only to better the statutory norms but also in a
proactively move closer to cleaner production. With
the liberalization of the Indian economy leading to
global competition as well as the growing emphasis
on the environment, it is imperative for the Indian Pulp
and Paper industry to become World class in
operations, energy consumption and environmental
impact.
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