A tale of two paper mills

Rouhin Deb | Updated on October 05, 2021

Assam CM Sarma has sparked hopes of more industries in the region

Amidst Assam charting its way to a new and renewed path of economic growth, a seemingly old but pertinent issue concerning the closure of two of India’s largest paper mills might find a solution. The Nagaon and Cachar paper mills which come under the Union Ministry of Heavy Industries and Public Enterprises, had stopped production in 2017 without any formal notice due to successive years of annual losses for years.

The reason that led to the mills which once were profitable incurring successive losses was primarily attributed to acute shortage of bamboo (raw-material) due to the occurrence bamboo flowering phenomenon in the region which makes the bamboos unsuitable for use in the industry. The ban on bamboo extraction from Mizoram further added to the crisis.

The sub-optimal and irregular operation due to unavailability of raw material affected the machineries, product cost and quality. This scarcity of bamboo had also led to spiralling of prices from ₹1,020 in 2005-06 to ₹4,231 in 2008-09 tonne per year increasing the fixed and variable costs of the finished product. The Modernization and Technological Upgradation Plan was initiated in 2007-08 but had to take a back seat due to raw material crisis.

Further, the salary of employees stopped since 2016 and they are facing serious hardship. Cachar Paper Mill had to go through financial crisis due to non-availability of coal owing to blanket ban imposed by National Green Tribunal on mining and transportation of coal in Meghalaya. Cachar Paper Mill used to rely on Meghalaya for its entire coal requirement. The railway gauge conversion from October 2014 to March 26, 2014 also had a big impact on the mill operations.

Revival efforts

Though there have been several rounds of discussion in the past with the workers who suggested measures ranging from submitting a revival plan to the NCLT and seeking their approval, which required infusion of huge funds on part of the government, to liquidating of the firm which was only possible if the asset value is less than the liabilities. The asset value as per books was ₹1,100 crore but the market value of the firm was almost ₹10,000 crore and the liabilities coming around ₹2,100 crore.

But till recently, despite concerted efforts by the government to auction the mills, there were neither significant takers nor were the existing employees happy with the way the matter was dealt with. A Corporate Insolvency Resolution Process was initiated as per directions of the National Company Law Tribunal. HPC has submitted ₹1,995-crore revival proposal to the government. The Tribunal ordered Assam Paper Mills’ liquidation on May 3, 2019 but not much has happened since then.

The pendulum-like situation regarding a final settlement around the mills finally seems to have come to an end with Himanta Biswa Sarma taking the reins of the Assam government. Five successive meetings, since he took charge, with the mill associations have led to an amicable solution that was long desired for the economic growth and well being of Assam in general and the Barak Valley in particular.

The solution comprises of a relief package of ₹570 crore within two months of NCLT approval to the mill workers, assets of HPC shall remain with the Assam government, 100 workers from the mill shall get government employment and pending legal cases and claims shall continue. The solution agreed upon by both the government and the mill workers’ association is welcome and will have an impact that will go beyond the mills. The Panchgram mill in Barak Valley was the sole big industry in the region giving direct and indirect livelihood to thousands of people in the area.

The way forward

If at all the mill goes for liquidation, according to the company laws, the first dues that need to be cleared should be towards the workers who are eligible to receive 24 months’ salary and the management officers who are liable to receive 12 months’ salary.

But the government should not just stop here but think of the larger interests of the people because this temporary meagre payment would not suffice the needs to hundreds of unemployed youths in the region who will be left in the lurch once the mill is liquidated. The government should intervene and infuse funds to revive the mill as the reasons that ultimately led to the mill going into losses are no longer existent. Bamboo flowering occurs once in 50 years, so the worst is over at least for the next 45 years. Rail connectivity has reached the mill premises that cuts down the logistic costs drastically.

Operationalising the mill will contribute to the survival of thousands of families that are directly or indirectly dependent on its functioning. The people are confident that the government under the able leadership of Himanta Biswa Sarma will industrialise the region again and look forward to a new growth story from the same land that was once home to one of Asia’s largest paper mills.

The writer is an empirical economist

Published on October 05, 2021

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