The Hindu Business Line : Rising input costs a major concern for paper industry

THE year 2005 has seen intermittent price rises in the paper industry. In an attempt to keep up with rising input costs, the paper majors have had to announce price revisions as many as three times to keep the business running.

And the coming year will be marked with further price rises, with Ballarpur Industries already ready to raise price of uncoated paper by 2.5 to 3 per cent.

There has been a growth rate of 5 to 6 per cent in the paper segment and this is likely to be maintained in 2006. However, a major cause of concern to the industry is lack of raw material.

Mr Rajeev R Vederah, President of Indian Paper Manufacturers Association, observed that the inflationary pressures on raw material, including oil and chemicals, have been the main reason behind rising prices.

The industry has been lobbying with the Government regarding a fund for the paper industry on lines similar to the textile upgradation fund - TUFS.

It has repeatedly pointed out that obsolete and old machinery is limiting the production capacity of companies.

The sector has also asked for reforms on the excise duty side, especially for excise duty of 8 per cent to be made applicable uniformly for all varieties of paper, including newsprint.

Shortage of the much-needed raw material (pulp) has left companies looking for plantations abroad. Ballarpur Industries Ltd (BILT) has been scouting for plantations in Vietnam and Indonesia.

Most companies have expanded the scale of farm forestry and are growing local plantations in the land available, as the laws do not permit private plantations by the industrial sector.

Modernisation and expansion of existing capacities are also being carried out to cater to the copier and coated paper segments, which have been registering almost 15 per cent growth as opposed to the paper industry as a whole.

The trend amongst paper majors, BILT and JK Paper Ltd, has been to expand brownfield units rather than set up greenfield plants.

The demand supply gap is too proving to be a challenge. With limitations on raw material availability, demand is around 6 to 6.5 per cent, while supply is only 3 to 4 per cent.

Much action has been forecasted on the newsprint segment in the coming year.

It has been pointed out that two newsprint companies are eyeing India to set up their plants.

A Finnish company that has plans to set up a 5 million tonne capacity plant along the ports has already got the ball rolling as it has engaged the Central Pulp and Paper Research Institute to study the logistics.

The plant is expected to use recycled paper for production.

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