The Hindu Business Line : Packaging sector still in infancy: Survey

The domestic paper industry is still in its early stages and unless the country develops a low-cost finished goods exporting capability or the retail sector takes off, there is little possibility of explosive growth in the domestic packaging demand, said Mr Gautam Thapar, Chairman, Ballarpur Industries Ltd, as part of a CEO survey done by PricewaterhouseCoopers on the forest, paper and packaging industry.

Mr Thapar said that the evidence of the Indian paper industry still being at its early stages was that packaging, printing and writing paper, each captured 40 per cent of the demand, with 18 per cent comprising that of newsprint in comparison to the global market where it was 60 per cent in packaging, 30 per cent in writing and printing. According to him, this was because India had never been an exporter of finished goods and therefore the need for high-quality packaging never arose.

Mr Thapar said though the underlying growth trends of the industry were good and consumer demands were going up, the underdevelopment of organised retailing was an obstacle. He added, "I think other challenges on the packaging side are the absence of a readily available supply of virgin fibre and the lack of available scale economics in production."

Mr Thapar also emphasised the importance of an integrated fibre supply. He said the main problem here was government policies that did not allow private sector participation in the country's natural forests. Though he cited plantation forestry as an alternative, he added that arranging finance for plantations and building major production capacities based on such models would be very difficult. On global competition and restructuring, and its implications and opportunities for growth in domestic capacity, he said, "I think in India the challenge is that while there is growth, the baseline is low. At one end there is the volume grades and on the other the sophisticated writing paper market that is smaller in size. It is this writing paper market that mirrors what is happening elsewhere around the world." On international companies acquiring domestic entities here, Mr Thapar said, "There isn't a lot to acquire and now valuations seem very rich."

Meanwhile, four main focus areas for growth were identified as part of the CEOs' perspective in the survey on the global paper industry. First, the unprecedented rise in raw material costs that were having a negative effect on the industry globally. Second, there was a need to optimise the supply chain of the industry. Third, emphasis was laid on recognising one's customer as well as understanding the nature of markets both established and emerging. And fourth, sustainability was cited as a critical factor to ensure long-term success in the industry.

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