Impacted by the first and second waves of the Covid pandemic, the country’s paper sector expects a revival of demand from the current half of the calendar year.
Due to the Covid pandemic since March 2020, the paper industry’s both inward and outward supply chains have been disrupted, and are yet to recover fully. There has also been a severe demand compression due to the lockdown, closing down of educational institutes, commercial establishments and downstream printers, publishers, converters, stationery services, according to Indian Paper Manufacturers Association.
“The consumption has gone down drastically, not only due to closure of educational institutes but also offices, IT companies and service industries. This has adversely impacted writing and printing grades and also grades like tissue. All segments of paper were adversely impacted, and it is only a matter of degree amongst different grades, with writing and printing and newsprint segments the worst impacted,” the Association states.
AS Mehta, President, IPMA, told Business Line , “The first and second pandemic wave adversely affected the sector with paper consumption coming down. We hope to see demand recovery from the third quarter and pick up in the fourth quarter. However, there has been an all-round increase in input costs, across raw materials and in energy costs, as also of all sizing chemicals leading to pressure on costs.”
“From January 2021 onwards, some signs of recovery were witnessed, especially in packaging and paperboard and tissue segments. After the second wave of the pandemic, the scenario dampened again for the industry from mid-April onwards with orders drying up for some segments. Sentiments likely to revive after June 2021 when the impact of the second wave declines,” he said, sharing the sector outlook.
However, the writing and printing paper is facing a bleak scenario and demand would improve only when schools and colleges reopen. As the other sectors of the economy have started recovering, the need for packaging and paperboard is improving. Exports are providing some relief, even though realisations have gone down, as other countries have not been so severely impacted compared to India.
The sector can grow as the per capita paper consumption in India is at 15 kg against the global average of 57 kg. While the demand for paper is growing at 6-7 per cent per annum, India’s share in world production of paper is at about five per cent, with an estimated output of 19 million tonnes per annum (TPA) and an annual turnover of about ₹70,000 crore wherein the domestic market size of ₹80,000 crore.
According to CPPRI data (2019-20), India has 861 paper mills with 526 operational and with total installed capacity of 27.15 million tonnes.
The emphasis on education and literacy coupled with growth in organised retail and demand for better quality paper are the major drivers for writing and printing paper. There has been continued demand for quality packaging of FMCG products, organised retail, booming e-commerce, and other segments.
According to Rohit Pandit, IPMA, Secretary-General, “The paper Industry has made substantial investments in the last 5-7 years and it is becoming very difficult to meet its financial obligation in view of significant drop in margins. In recent years, several paper mills have closed down due to commercial unviability.”
The growing cost of raw materials and significant cost increase of fuels and other inputs has resulted in a substantial increase in the domestic manufacture of paper and paperboard, making India’s Paper Industry non-competitive. The paper and paperboard (not including newsprint import data) imports into India have been steadily increasing. In the last nine years, imports have risen at a CAGR of 11.34% in value terms (from ₹3,411 crore in 2010-11 to ₹8,972 crores in 2019-20).
Imports are growing against the increase in domestic production rate with underutilisation of domestic installed capacity. Therefore, while the domestic industry operates under challenging conditions, substantial quantities of paper and paperboard are imported at significantly lower costs under the FTAs.
The IPMA believes that the Government needs to support the industry, which has developed strong backward linkages with the farming community. India is fibre deficient with inadequate raw material. This has been a major constraint for the paper industry. Of the total demand for wood, over 90 per cent is sourced from industry-driven agro/farm forestry, with the rest from government and other sources.
About 5,00,000 farmers are engaged in growing plantations of eucalyptus, subabul, casuarina, acacia, poplar to meet the sector demand. About 125,000 hectares are being brought under agro/farm forestry annually on an average, with around 1.2 million hectares on a cumulative basis across the country.
Significantly, India’s paper industry is wood-positive. It plants more trees than it harvests.