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Indian Paper Mills Wood requirement and Generation

Indian Paper Mills Wood requirement and Generation. Dr. H D Kulkarni Vice President, ITC Ltd, Paperboards and Specialty Papers Division. Unit: Bhadrachalam, Sarapaka-507128, Andhra Pradesh, India IPX INDIA Mumbai 14-12-2012. Indian Paper Industry - Scenario.

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Indian Paper Mills Wood requirement and Generation

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  1. Indian Paper Mills Wood requirement and Generation Dr. H D Kulkarni Vice President, ITC Ltd, Paperboards and Specialty Papers Division. Unit: Bhadrachalam, Sarapaka-507128, Andhra Pradesh, India IPX INDIA Mumbai 14-12-2012

  2. Indian Paper Industry - Scenario • To day, there are nearly 759 paper mills in India • With installed capacity of 12.7 m tpa of P&B • The production is 10.11 m tpa and it constitutes 2.52% of the total world production (402 m tpa) • Nearly,1.04 m tpa is imported annually • Thus, the present consumption of P&B including News print is at 11.15 m tpa • The per capita consumption of paper in India is 9.3 kg

  3. Indian paper Industry - Scenario • With the GDP expected to average around 8%, growth in consumption of paper • and paperboard is expected to be about 7.8% (Indian paper industry growth 8% CAGR) • This translates in to consumption of about 24 m tpa and production of 22 m tpa • by 2025 resulting in per capita consumption of 17 kg • All this means rapid growth of pulp and paper industry in India that ultimately requires • wood as raw material Raw Material based classification of paper mills ---------------------------------------------------------- Segment No of Mills Production M tpa per cent ---------------------------------------------------------- Wood 26 3.19 31 Agro 150 2.20 22 Recycled 538 4.72 47 ----------------------------------------------------------

  4. Indian paper Industry - Sourcing of Fiber • Paper mills in India continue to face challenges with forest-based • raw material • Earlier paper industry was forest dependent. It is no longer the scene • Agro Residues • Sustainable availability of Agro residues is a challenge • - quality and environmental issues associated in mfg • - availability of bagasse from sugar mills • - increasing coal prices • Hence, if choice given, agro mills may wish to shift to wood fiber • Waste paper • - 1 million ton/year of waste paper is recovered • - Majorly it is imported • Farm / Agro-forestry • - Fiber sourcing through partnership between farmers & Industry

  5. ITC Plantations Sourcing of Fiber – Paper industry Action • Started plantation R&D : Clonal technology for productivity improvement (Productivity improvement = clonal plantations - Av. 25 tons/ha/yr compared to 6 tons/ha/yr from seedling plantations) • Farm Forestry: to promote scientific Silvicultural practices • Social Forestry: financial & technical assistance to the resource-poor tribal farmers with surplus private wasteland • Promote Plantations: on private lands in partnership with Farmers

  6. ITC’s Plantation Progress - 125,000 ha

  7. Plantation on Degraded area

  8. Agro-Forestry – Developing Sustainable Model for Wood & Food security Pulpwood Tree Plantation • Agro-Forestry is a collective name for land-use systems involving • trees combined with crops on the same unit of land • Under Agro-Forestry, Agri-silvicultural and Silvi-pastoral systems • are known for the • - Productive functions of Food, Fodder, Fuel, Fibre, Shelter, NTFPs • - Protective functions as Wind breaks, Shelterbelts, Soil • Conservation & Improvement Agric Crop Area Agric Crop Area 8.5M 8.5M Land 75% - Agriculture & 25% - Forestry • Covered :1600 ha. • Target :3000 ha/yr 1m 1.5m

  9. Conventional Farm Forestry vs. Agro forestry Wood and food security Spacing = 3 X 1.5 m Plants / ha = 2222 Spacing = 1 x 1.5 x 8.5 m Plants / ha = 2000 Farm Forestry Agro Forestry

  10. Paper Industry Plantation – FSC Certified FSC considered as a trade barrier! • Indian paper companies now have FSC C-0-Custody certification for ethical and legal sourcing of fiber • FSC-FM certification is issued to 2 mills and 2 farmers societies and nearly 37,500 ha of plantations are certified so far in India FSC-FM certificate is issued to ITC PSPD for 8028 ha of plantations as a Group Manager of more than 9000+ farmers

  11. Carbon Sequestration through plantations

  12. Plantations and Triple bottom line The 125,000 ha plantations over a period of 20 years have • Economic value • Created an estimated wood asset value of INR 30 billion (for 3 cycles INR 90 billion) over a period of 12 years • Social value Provided 56 million person days of employment mostly to tribals and marginal farmers • Environment value • Carbon sequester potential of 15 million tonnes reducing 54.9 million tonnes of CO2 in a period of 12 years

  13. Indian paper Industry – Wood Scenario • Wood based mills produce 3.30 M tpa of pulp using 9.83 M tpa of wood • The bamboo and wood requirement is 0.82 and 9.01 M tpa respectively • Nearly 20% of wood is procured from government sources while, 80% is from agro farm forestry sources

  14. Wood Requirement and Generation by Paper Mills through Farm Forestry * Mills using Agro residues and waste paper for Pulp Production apart from Wood and Bamboo

  15. Actions by Indian paper Industry Demand -Supply gap • Over 22 years the paper industry has promoted nearly 642,208 ha plantations estimated to produce 38.53 M tons of wood at 60 tons/ha yield • Last 5 years plantations of Eucalyptus, Casuarina, Leucaena and Acacia considered as standing crop, • 300,000 ha produce18 M tons of wood • At felling cycle of 4 years, the wood production is 4.5 M tpa (18/4) • Wood from other sources (private / Govt. etc plantations) is estimated at 4.51 M tons • And with bamboo of 0.82 M tpa • The paper industries demand of 9.83 M tpa is some how met (4.5+4.51+0.82) • Due to latest expansion of BILT, JK and other mills, the wood demand now is on higher side and currently there is shortage by 10 % approximately • Import of chips / wood - landed cost at Mill more than Rs. 11000 per ton at current prices and is prohibitive

  16. Demand – Supply and Price movement • Competition for farm grown wood for small timber such as mine props, biomass, scaffolding, plywood, particle board, etc creating further supply gap • Drastic increase in farm gate pulpwood prices alone from Rs.1450 to Rs. 3300 per ton in a span of 6 years is indicative of demand and supply gap • Prices of hardwood increased at a CAGR of 8% to around Rs. 4400 per ton in 2012-13 from about Rs. 2,450 per ton in 2004-05 at Mill delivered price

  17. RM costs • Due to competition and high demand, the wood is transported from faraway places • Presently, the cost of wood-based raw material to Indian mills is US $ 70/t compared to US$17/t in Indonesia and US$25/t in Brazil • As one tonne of paper requires 4 tonnes of wood, there is a straight disadvantage of about US$ 180 to 212 /t of paper produced • If this trend continues, India will have to import pulp and paper instead of making it domestically • Paper companies are aggressively looking at farm forestry to cut down on the landed cost of wood • With transportation cost accounting for nearly 30 to 50% of the wood cost, developing farm forestry plantations near the manufacturing units are being pursued vigorously by the mills

  18. Wood generation – Requirement of Land for plantation • Considering the future demand of paper by 2025, an additional 12 M tpa of wood is required from 0.24 M ha/yr (@50t/ha yield) • With 5 years felling cycle, 1.2 M ha plantations is required only for pulpwood (60 M tons wood for 5 yrs) • Nearly, 0.36 M ha (30%) more land is required to be planted for fuel, fodder, local usage etc (18 M tons of wood for 5 yrs) • Hence, the total land mass required to raise pulpwood plantation will be around 1.56 M ha (say 2 M ha) to generate the required wood (78 to 100 M tons of wood)

  19. Global vs. Indian scenario on Sourcing of Wood • Forests are owned by companies in Western and some Asian countries (captive forest plantations) • In those countries, conducive land use/forestry policies exists which encourage large-scale production plantations • However, in India land use policies are not friendly to Paper Industry as • Forests are managed by Government and industries have no role to play • India, historically, does not have a vibrant Private Market for Timber Source: All about paper; Green Rating project - CSE

  20. Sourcing of Wood Fiber issues • No government policy in place for future wood supply • No private forest plantations for sustainable wood supply • No allocation of waste land to paper industry to develop sustainable wood source • Not enough certified forest/plantation and difficulty for industry to get the private lands certified

  21. World-over the common practice for growing tree plantation on large scale is to plant with a single species Mixed and commercial agro-forestry plantations are very rare in occurrence world-over Except for Coffee, Tea, Coconut, Areca nut, Palm oil plantation crops In India – Agro Farm Forestry is quite common (Risk: competition from agri crops and reliability of supply) Sourcing of Wood - Types

  22. Scenario in Andhra Pradesh • State with the maximum pulp wood plantation area producing 4 M tpa wood • Large concentration of paper mills (4 mega pulp plants) with huge pulp wood demand • Competition from Rayon, Veneer, Construction industry (pole) etc industries • 2 M tpa of wood is taken away by mills outside Andhra Pradesh • Creating short supply of wood to Andhra Pradesh Paper Industry

  23. Key strategies – For increasing share of the wood • To meet the Gap • New plantations • Develop plantations in core area • Raise plantations with SPV with FDC’s • Multi stakeholder partnership plantations (Govt + Industry + People - Afforestation of Forest degraded lands) • Use Latest Technology • Sustain the interest of the farming community to continue with pulp wood plantations

  24. Key strategies – For increasing share of the wood • Create alternate sources of income • Agro-forestry • Improve yield (Av100 t/ha) • Crop insurance to marginal farmers • Promote FSC FM • GHG reduction – Carbon positive image through afforestation / reforestation • Biodiversity • Negative Image (Manage environment and create better image) - Paper industry cuts / destroys trees / forests - Active campaign required through various forums as paper produced is derived from the wood sourced is from renewal plantations • Action on above points will increase share of wood availability to Indian Paper industry at large

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