From The Editor’s Desk:

It gives me immense pleasure to present the 12th edition of IPMA Newsletter as we ring in the New Year.

The year 2011 will rank as an eventful year for the paper industry in India when new landmarks were achieved and yet new challenges cropped up as the year drew to a close.

Paper industry’s fortunes are intricately intertwined with that of economic growth in India. The year began on an optimistic note with the Indian economy posting a healthy growth of 8.3 % in the first quarter of the calendar. However in successive quarters, the growth momentum has slackened. Hardening of interest rates, unabated inflation and threat of double dip recession in the developed world have all impacted India growth story which is likely to close the current financial year at around 7% growth. Paper industry cannot remain immune to such vicissitudes in the economic growth.

Nevertheless, displaying a never-say-die attitude, the industry has successfully added capacity of two million tonnes over the last two years with an investment of Rs 8000 crore. Substantial investments are on anvil.

Notwithstanding the current economic turbulence, the India growth story remains intact and the paper demand and consumption is poised to grow as India assumes a much larger role in the World Economy in the years to come. Investments in additional capacities and upgradtion of technology will therefore stand in good stead.

Here is wishing a happy, healthy and prosperous New Year to all the readers.              

R. Narayan Moorthy

Paper industry expresses concern over FTA with European Union

Paper industry has asked the Govt to exercise caution over FTA with European Union as the EU countries enjoy huge comparative advantage over India and thus stand to gain substantially under the FTA at the expense of the domestic paper industry.

In a representation to the Commerce Secretary, Govt of India, IPMA has stated that the sector should be thrown open to European countries only when a level playing field has been achieved. If tariffs on certain varieties of paper/paperboard are indiscriminately allowed to be slashed, it will sound a death knell to many domestic manufacturers.

Referring to the competitive advantages enjoyed by EU, IPMA has stated that the European paper producers enjoy the privilege of captive plantation policy supported by their governments and also their raw material base is well secured to scale-up production capacity. In contrast the domestic players suffer due to lack of cost- competitiveness. Non-availability of quality raw material, power, coal and cost of finance continue to hamper the desired scale of growth and size of the paper industry in India.

The fragmented Indian Paper Industry suffers from technological obsolescence when compared with technologically far advanced paper industry of the EU block. Their technological edge overshadows the Indian competence in paper making, states the representation.

Current paper production of EU countries stands at 96.52 Million tons in comparison to India’s 10.1 Million tons which includes newsprint as well. Since The EU countries enjoy comparative advantage over India and thus stand to gain substantially under the FTA at the expense of the domestic paper industry, the trade negotiations need to be handled with utmost care and caution.

According to IPMA, Asian market has grown exponentially in the last decade and is still growing. Asia commands 42.4% share of the global production (157.17 Million Tons). China is supposedly over-heated therefore, in the eyes of the global majors India is the best bet today.
Growth drivers in India are in place and thus, domestic Demand which usually dove-tails country’s GDP growth and also, Consumption present healthy and encouraging scenario. Per capita consumption of paper which historically, has been abysmally low is now breaking barrier of single digit and rising. 

However to be competitive it is of paramount importance that the Government Of India actively supports a level playing field to the indigenous industry in a global market, namely by bringing solutions to securing competitive access to raw materials, increasing project costs and energy prices and high costs related to environmental policies, etc. 

IPMA asks for retention of Customs Duties as import threat imminent

IPMA has asked for retention of Custom Duty on paper in the forthcoming budget as major players from Indonesia and China are all set to push large quantities of paper into Indian market.

According to the pre-budget submissions by the Indian paper body, the Indian paper market has become vulnerable for imports as the developed economies, the traditional importers, face another signs of economic recession.

“Indonesia and China enjoy huge export incentives. While the USA and EU have taken timely measures to face the onslaught of unbridled export by these countries, India has failed to impose the Safeguard Duty. Consequently, these export led economies in Asia continue to target the fragile Indian market”, the industry body has said in its pre-budget submission.

IPMA has therefore asked for retaining the peak rate of basic customs duty at 10% at the current level on paper/ paperboards and also to re-introduce the component of SAD.

In its submission, IPMA has asked for increasing competitiveness of Indian paper industry through certain policy enablers so that the industry comes to have a level playing field in comparison to its counterparts. 

India being a fibre deficient country, IPMA has asked for nil duty on import of fibre viz wood logs/ wood chips and all types of wood pulp and waste paper.

Also according to IPMA, in the absence of Core Sector Status, paper industry suffers on account of erratic supply of quality coal from local collieries forcing most of the paper mills to use imported coal for their energy needs. The effective customs duty on coal works out to nearly 10%. IPMA has asked for consideration of duty free import of coal to overcome the current crisis.

IPMA has reiterated its demand for Technology Modernisation Assistance Programme (T-map). According to IPMA, paper industry suffers from technological obsolescence. However all indigenous mills are now focusing on clean technologies which are cost effective and are bracing up to assimilate global trends which favour high-speed machines with new configurations for large scale production. It is essential for the paper industry to have access to timely and adequate capital at internationally comparable rates of interest to upgrade the facilities.

IPMA has therefore proposed that the difference between Libor linked rates and Indian bank lending rates be provided as interest subsidy for adoption of the identified technologies in wood, agro & RCF based mills.

IPMA has also asked for assistance in agro-forestry initiatives as enabling policies for captive plantations are non-existent in India. In that regard, the industry body has asked for low rates of interest to farmers for raising pulpwood plantations, insurance for pulpwood plantations and trade of plantations’ produce free from taxes.  

Sweden- India partnership for clean technologies in pulp & paper sector
 
Two key Swedish institutes involved in Environmental and Pulp and Paper research, industry body CII and paper industry body IPMA have formed a consortium for Facilitation of Clean Technologies in India in Pulp & Paper Sector. The two year facilitator project will have fund backing by Swedish International Development Agency (SIDA).

A letter of intent has recently been signed by IVL Swedish Environmental Research Institute, Innventia - the Swedish pulp and paper research institute, CII – Sohrabji Godrej Green Business Centre and Indian Paper Manufacturers Association (IPMA).

To initiate the project, a panel discussion participated by Swedish and Indian experts was held recently to identify the needs of the Indian pulp and paper sector and develop a road map for facilitating implementation of clean technologies.

The key objectives of the project are:

• Transfer and exchange of know-how and experiences, increase awareness and capacity to protect the environment and manage climate change; thus contribute towards socially, economically and environmentally sustainable development in India.

• Broaden and deepen bilateral collaboration between Sweden and India for improving the environment performance by introduction of cleaner technologies in Indian pulp and paper sector

The expected outcomes of the project are knowledge sharing/ transfer in pulp and paper sector and introduction of new technologies best suited for Indian context.