Presented by Dr. T. K. Roy Director, CPPRI Central Pulp & Paper Research Institute

1. Overview of Indian Paper Industry Presented by Dr. T. K. Roy Director, CPPRI Central Pulp & Paper Research Institute Saharanpur, U.P., INDIA February 5, 2007

2. PAPER INDUSTRY AT A GLANCE The industry is fragmented with capacities ranging from 2 to 800 tonnes per day • Total number of Pulp & Paper Mills 666 Wood Based 34 Agro Based 165 Recycled Fiber Based Mills 467 • Pulp & Paper Mills in Operation 568 • Pulp & Paper Mills Closed 98 • Installed Capacity of Mills 6.9 million tonnes • Per-capita consumption 6.0 kg (Paper & Paperboard) • Production 5.6 million tonnes – P&B 0.7 million tonnes - Newsprint • Turnover Rs. 16000 Crores • Exchequer Rs. 2500 Crores • Employment Direct-3 Lacs / Indirect-10 Lacs

3. GROWTH OF PAPER INDUSTRY • First mill in the country was commissioned in 1812 in Serampur (W. Bengal). • The initial development & growth of industry in the 19th century was affected by shortage of wood (soft wood) in the country. • In 1914 the development of pulp making processes based on bamboo lead to rapid growth of the industry and by the end of the 1950’s installed capacity increased to 137000 tonnes. • In the 1970s excise concessions were given to small agro based mills, which resulted in a rapid increase of small mills and capacity. • In the late 1980s the industry was in a severe oversupply situation, capacity utilisation rates being around 60 %. • In early 1990s the government reversed the policy, making large units more competitive (e.g. by removing excise concessions for agro based mills).

4. GROWTH OF PAPER INDUSTRY ….. Contd… Paper capacity and production in India 1950-2005 Million tonnes

5. Nearly 1.25 million tones of capacity is closed Reasons for Closed Capacities • Technological obsolescence • Environmental issues

6. Total Paper and Paperboard demand in India CAGR of nearly 5.5% in the past 3 years.

7. Paper, Paperboard & Newsprint All figures in Million Tonnes

8. STRUCTURE OF PAPER INDUSTRY Number of Mills

9. PER CAPITA CONSUMPTION The per capita paper consumption in India is 6 kg compared to 324 kg in USA, 25 kg in Indonesia, 250 kg in Japan and 37 kg in China

10. 34% 38% 28% Forest based Agro based Recycled fiber FIBRE RESOURCES India is a fibre deficient country. Due to lack of wood resources, the paper industry is utilizing a wide verities of raw material for paper making ranging from forest based raw material to annual plant and recovered paper. 1970 2000 2005

11. TECHNOLOGICAL STATUS • Obsolescence of technology in most cases. • Lack of eco friendly state of the art processing technologies. • Uneconomic scale of operation. • In an international comparison, even the largest machines are medium-size • − The average capacity of paper machines is about 14000 t/a • − Most of Indian paper machines have a trim width from 1.5 to 3.5 m • − There are only 9 paper machines with trim width of 5 m or more • − Only 14 machines have capacities 50000 t/a or more • It is not possible to have very high speed paper machine, i.e. >1500 mpm for type of raw material available in India • Similarly for adoption of new papermaking technology quality of raw material and mill size are the major limitations. • Except the wood based integrated mills and few agro/RCF mills the level of automation and process control is very low in most of the mills

12. ENVIRONMENTAL COMPLIANCE - ISSUES • The major environmental issues : • Control of color and AOX discharge • Control of release of Non Condensable Gases (NCG’s). • Disposal of Solid waste viz. Lime Sludge/Fly ash • (CREP) for Paper Industry was introduced in the year 2003 by MoEF • (CREP) to be complied by entire industry between 2005 to 2008.

13. CREP – LARGE MILLS

14. CREP – SMALL MILLS

15. High cost of transportation and power Inferior pulp & paper quality Low scale of operation Issues & Challenges State of art equipment & machineries Low capacity utilisation High capital costs High costs of raw materials Only 20% of the total used paper is recycled in India compared to a global recycling average of 40% ISSUES BEFORE INDIAN PAPER INDUSTRY Emerging Environmental issues

16. DEMAND & SUPPLY SCENARIO

17. Projected Demand, Supply and Short fall of Paper & Paperboard 16 14.85 Demand Supply Shortfall 14 Demand Growth @ 6%/annum Supply Growth @ 3.4%/annum 11.1 12 9.46 10 8.33 8.01 6.79 8 6.24 5.75 5.39 Paper Million Tonne Paper Million Tonne Paper Million Tonne 6 3.09 4 1.54 2 0.49 0 1 Year 2005 2010 2015 2020 Year Source – Jaakko Poyry Report 2002 Source - Financial Express,19 Feb 2006

18. Projected Demand & Supply of Various Grades of Paper & Paperboard Paper Million Tonnes Paper Million Tonnes Source – Jaakko Poyry Report 2002 Source - Financial Express, 19 Feb 2006

19. Projected Demand & Supply Shortfall of Newsprint Newsprint Million Tonnes Newsprint Million Tonnes Source – Jaakko Poyry Report 2002 Source - Financial Express, 19 Feb 2006

20. CELLULOSIC RAW MATERIALS - FUTURE TRENDS 28% 38% 34% 28% 40% 84% 32% Wood based 2005 2010 Recycled Fiber Agro based Production – 6.5 Million Tonnes Demand Projected - 8.3 Million Tonnes

21. INDUSTRIAL WOOD DEMAND SCENARIO The paper industry’s wood demand is expected to grow from 5.9 million tonness to 7.9 million tonness by 2010, and to over 10.6 million tonness by 2015. ~0.6 million hectares and 0.8 million hectares of land will be required by 2010 and 2020 respectively to meet paper industries wood demand. Million tonness of wood 10.6 Depends on agro/ waste paper use 7.9 5.9

22. AVAILABILITY OF AGRICULTURAL RESIDUES Availability of agricultural residues is good, but there are many limitations to their use Availability • Since 1970 agricultural residues have emerged as significant alternate raw material with total fiber use share being 29%. • The main agricultural residues utilized by the paper industry include bagasse, straws (wheat and rice) and grasses. Million Tonnes Requirement by Paper Industry

23. RECYCLED FIBRE - RECOVERY & RECYCLING • Import of waste paper is continuously increasing • At present more than 80% of consumption is met through imports. Million tons

24. INDIAN PAPER INDUSTRY IN GLOBAL PERSPECTIVES

25. INDIAN PAPER INDUSTRY IN GLOBAL PERSPECTIVES India is among the top fifteen global producers Paper & Board Capacity (2000) INDIA ‘000 tonnes Source : ICRA report to IPMA : 2000

26. World Paper & Board consumption is dominated by three major regional blocks- North America, Western Europe & Asia. • The Paper & Board production in India is nearly 5.5 million tons as against world paper production of 340 million tons. • India consumes nearly 5% of the Asian and 1.6% of the worlds consumption of paper and paper board. Indian Paper Industry in Global Perspectives… Contd… PERCENTAGE OF WORLD PAPER PRODUCTION

27. Indian Paper Industry in Global Perspectives… Contd… CONSUMPTION OF BASIC INPUTS

28. COMPETITIVENESS OF THE SECTOR • As compared to USA, Europe, the paper industry in India is far below the quality standards of the products. • It is not as competitive as in other Asian countries such as ; Japan, Indonesia, Thailand, Malaysia & China. • The paper industry in India is less competitive as compared to similar sectors such as; cement and capital goods. • The possible reasons which makes paper industry less competitive compared to other similar sectors are – • (i) Availability of good fibrous raw materials; • (ii) Level of technology.

29. INFRASTRUCTURE FACILITIES • Lack of required infrastructure such as; roads transports, railways, communications and sustained power supply. • Main reason for lack of availability of desired infrastructure is Scattered location of paper mills. Criteria for selection of site was raw material instead of infrastructure. • Ministry of Urban Development, Ministry of Transport, Ministry of Shipping & Ministry of Power can create the desired infrastructure.

30. QUALITY STANDARDS • The quality standards in other countries are maintained as per customer preferences • In India we still go by BIS norms which are much below the international standards. • General perception about the quality of products produced in India is poor. • As far as Printing papers and the Newspaper segment also by & large gives preference to the imported Newsprints. • The Indian paper industry uses 20 – 30% more raw materials; about 30% more energy, 200% more water & 10% more chemicals.

31. STRATEGIES FORIMPROVING COMPETITIVENESS GOVERNMENT IMPROVING RETURN/MARGINS INDUSTRY Policy for Industrial Plantation Raw Material Sourcing Technology Up gradation & Restructuring Technology Up-gradation Scheme Environmental Policy Product Focus Environmental Credentials Rational long term policy on Duties and Taxes Implication of WTO Rational pricing policy for Power & water Capacity Expansion

32. Raw MaterialRequirement for Sustainability of the Industry • Large Wood Based Mills • There are 22 mills producing 1.9 million tons of paper. • At 6% growth rate additional fiber requirement to meet projected demand is 2 million tons of wood. • Current plantations are not sufficient to cover the industry needs. Any shortfall will have to be met through pulp imports. • Major Capacity Expansion – Greenfield

33. Raw MaterialRequirement for Sustainability of the Industry Agro Based Mills • Wheat straw & bagasse will be the mainstay raw material for the sector. • By 2010 , agro based fibre requirement to meet the demand would be 7.0 million tons. • Availability of surplus bagasse for paper industry is only 10 million tons and difficult to be increased under present operational conditions of sugar mills. • Wheat straw availability is sufficient (22 million tons) therefore further expansion should be expected to be based on wheat straw.

34. Raw MaterialRequirement for Sustainability of the Industry • Recycled Fibre • By 2010, the recycled fibre requirement to meet the demand will be 6 million tons. • If the present recovery rate is enhanced from 18% to 25% by 2010, availability from indigenous sources will be 1.5 million tons and 4.5 million tons will have to be met through imports. Challenges before the Recycled Fiber Based mills • The availability of good quality waste paper at competitive price • There is a need to take immediate measure to organize the existing waste paper recovery system to increase the recovery rate from present 18% to 30% to be sustainable.

35. Technology Improvements Needed • Wood Based Mills • Enhancement in productivity through adoption of advanced production techniques such as RDH/Super Batch. • New and efficient pulp washing systems should be adopted. • ECF bleaching with ClO2 followed by peroxide is recommended . • Enzyme bleaching should be adopted to reduce chemical cost and discharge of chloro organics. • Breast roll and blade gap formers improve paper quality and drainage and are important for Indian raw materials. • A good press section is important in India because fibers are short. Extended nip is the only good solution for Indian slow machines. One shoe nip press section would be the best technology.

36. Technology Improvements Needed • Unsupported web run is normal in Indian dryer section when speed is higher than 600 meters/min, there should be single tier dryer groups to avoid web flutter and breaks. • Soft calendar are highly recommended and they could save bulk and improve opacity, strength and smoothness however this requires good CD profiles. • Films coaters and on-line calendars are recommended with good CD profiles. • Soft roll rewinders might be a low cost alternative to improve roll quality of this paper or coated papers. • Process automation level must be improved.

37. Technology Improvements Needed • Agro Based Mills • Technology improvement is needed for upgradation of quality of baggase and adoption of efficient washers for straws & bagasse. • Installation of chemical recovery to meet environmental compliance. Recycled Fiber Based Mills • Inclusion of high density pulpers • For efficient contaminant removal, introduction of high density cleaners , turboseparators, fine slot screens and reverse cleaners in the fiber line. • Incorporation of modern deinking cells for production of deinked pulp • Screw press and dispersion system to reduce dirt and specks in DIP • Bleach towers for post bleaching of DIP Improvements in paper machine area are same as in wood based mills.

38. Requirements for Environmental Compliance Wood Based Mills • Modified Technology for Pulping & Bleaching • Improved Pulp washing • Efficient use of water , reuse & recycling • Installation of odour control technology • Solid waste management & Disposal of hazardous waste • Up-gradation of ETP & optimal use Agro Based Mills • Installation of chemical recvcery or alternate option • Improved pulp washing • Oxidative bleaching • Reduced water consumption • Other waste management practices • Up-gradation of ETP & optimal use.

39. Requirements for Environmental Compliance Recycled Fibre Based Mills • Reduced water consumption through closure of water loops. • Waste management • Up-gradation of ETP & optimal use.

40. Newsprint Industry - Issues • Indian raw materials i.e. hardwood, reed, bagasse are not suitable for manufacturing TMP pulp. • Raw material and energy costs are high for CMP based newsprint mills. Improvements needed • More use of domestic and imported ONP and OMG for deinking process to minimise cost of production. • Identify better raw materials like Eucalyptus globulus and E. grandis for producing chemi mechanical pulps. • There is a need to raise organised plantation of these species.

41. Implication of WTO • At present the MFN applied rates of Indian pulp & paper products fall with in the range of 0 to 15 percent. With 251 lines having 15 percent tariff (or import duties), 18 by 5 percent and 9 with no protection at all. • If Swiss formula with value of coefficient being 15 gets accepted than all those tariff lines whose applied rate at present is 15 percent needs careful scrutiny. • Policy makers may need to insist that any negotiations on market access are acceptable only on a pre-condition that all NTBs be removed under a fast track approach. This can be a powerful negotiating stand of India in the ongoing trade negotiations

42. ENVIRONMENTAL CREDENTIALS European Union label is used in many products. In paper industry it is used e.g. in copy papers. Criteria are related to pulp and paper industry’s emissions to water and air, bleaching methods, energy consumption, etc. AOX level should be less than 0.3 kg/ton of paper. Fibre raw material for paper should be waste paper or virgin fibre from sustainable managed forests. Many European countries have additionally their own eco-labels. Similar concept could be developed for Indian conditions using overall environmental impact of the mill as criteria. The fibre base could be wood, waste paper or agro, as long as the paper is produced with an environmentally acceptable process.

43. SUGGESTED INITIATIVES

44. Technology Up-gradation/ Modernization • Modernization Required • Wood Based Mills • By and large modernized through its own resources in order to meet CREP requirement, however the paper machine section need major rebuild up-gradation. • Needs restructuring to 1000t/day capacity. • Agro Based Mills • Immediate attention required for • pulp washing • paper machine • black liquor handling and effluent treatment. • Recycled Fibre Based Mills • Need to be modernized by introduction of • deinking cells • pulp cleaning • slots screening equipment • paper machine rebuilds.

45. ACTION PLAN

46. Wood ACTION PLAN….. Contd… • Government • Revision of Forest Policy so that plantation can be increased. • Degraded forest lands should be identified by state govt. and be offered to indutry on long leases of plantations. • FDI in plantation programmes (with no change in land use) • Public –private partnerships • Allow duty free imports of waste paper • Encourage voluntary agreements to increase paper recovery • Equal subsidy be made available to paper industry at par with energy subsidy of bagasse • Funds for technology development • Industry • Cooperation with farmers and State Forest Dept. • Search for foreign partners. • Public –private partnerships • Long term contract with printing/converting waste • Global sourcing, foreign partners • Sorting of imported mixed waste • Fibre fractionation to separate long fibres • Restructuring needed due to quality and environmental reasons • Develop pulping and papermaking technology based on non-wood fibre. Raw Material Recycled Fibre Agro Fibres

47. Research & Development Energy policy Environmental Policy ACTION PLAN….. Contd… • Government • Allow duty free imports of new and second hand machinery/equipment for technology upgradation. • Encourage cooperation & networking inside the forest cluster and other industries to make the sector more competitive. • R&D funding should be increased to 1% of turnover primarily through funding by industry. • Better availability and quality of coal. • More uniform energy policy by states • Uniform policy as regards to non-biodegradable materials. • Eco labeling scheme based on sustainable raw material base (wood/waste paper /agro) and environmental friendly processes. • Industry • Better access to international financing • Seek for foreign partners • Focus on R&D to improve quality and to meet customers requirement. • More closure to international connections • Closure cooperation and interaction between CPPRI & Industry • Cogeneration in pulp & paper mills • Bigger mills and modernization to meet environmental standards. • Actively participate development of Eco label schemes so that industry’s can be taken into consideration. Finance

48. Thank You