Global Competitiveness of the Indian Paper Industry

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52A00087

Global Competitiveness of the Indian Paper Industry

Prepared for Central Pulp & Paper Research Institute Final Report Draft September 9, 2002

All rights reserved. No part of this report may be reproduced in any form or by any means without permission in writing from Jaakko Pöyry Consulting.

Preface
Vantaa September 9, 2002

Project Number 52A0087

Global Competitiveness of Indian Paper Industry
India has undergone a large process of economic reforms aiming at liberalization and attracting investments. That process, which began already in the early 1990s, continues to have an important impact on the whole economy, including the pulp and paper industry. India will also join World Trade Organisation, which will increase international competition in the Indian market. For this reason the Ministry of Industry and CPPRI (Central Pulp and Paper Research Institute) commissioned Jaakko Pöyry Consulting to carry out a survey on the global competitiveness of the Indian pulp and paper industry. We trust that this report will give a good base for planning the future operations of Indian pulp and paper industry. We thank Ministry of Commerce and Industry, CPPRI and representatives of the Indian pulp and paper industry for the valuable help and good cooperation in this survey. JP Management Consulting (Europe) Oy JP Development Oy

Pekka Niku

Pekka Komulainen

Harri Ahveninen

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Contents

Project Number 52A0087

Page Introduction Executive Summary 1 2 3 4 5 6 Demand Forecast Potential Export Market Fibre Raw Materials Industry Structure Cost Position Information Technology 61 105 116 148 188 224

Annex I Demand Forecasting Methodology Cost Estimation 345 354

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Introduction

Project Number 52A0087

India has undergone a large process of economic reforms aiming at liberalization and attracting investments. That process, which began already in the early 1990s, continues to have an important impact on the whole economy, including the pulp and paper industry. The country has experienced important GDP growth during the last years and the perspectives are positive for the future as well. Home to a billion inhabitants, the growing needs for job creation and increased living standards will require even faster development. The paper industry has an important role to play on the Indian economy. The overall paper consumption in India reached 4.2 million tons in 2000, making India a large market from any perspective. The potential for per capita consumption increase, originated on economic growth, increasing purchasing power and emerging export-led industries, attracts companies to invest and modernise.The increasing demand for paper puts pressure into supply of papermaking fibres, including efficient recovery of recycled paper, use of non-wood raw materials and the need to develop and expand sustainable use of wood. At the same time competition in global pulp and paper markets is intensifying. This is likely to have an increasing impact on the Indian market. Indian pulp and paper industry consists of some 400 paper mills, mainly of small and medium size companies. There is a growing need to invest - capital is needed for mill modernization, productivity improvements and building of new capacity. If adequate measures are taken, India’s competitiveness could substantially be improved and the industry be prepared for global competition Looking at the future, the Indian Pulp and Paper Research Institute is carrying out a survey of the global competitiveness of the Indian pulp and paper industry. The key objective is to analyse and give recommendations for the Government and the paper companies on how to improve international competitiveness. 4

Key drivers affecting
The Indian Paper Industry

Project Number 52A0087

External driving forces

Change in industry structure

Change in competitive conduct

Change in industry performance

• GDP growth and increased standard of living •...
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