For more Notes, Presentations, Project Reports visit a2zmba.blogspot.com hrmba.blogspot.com mbafin.blogspot.com Overview of Paper Industry
The Indian paper industry has been historically divided on a three dimensional matrix identified by size, grades manufactured and raw material utilized. Generally, tariff rates have protected smaller units utilizing “unconventional” raw material. Over the years, the growth of various segments, investments levels in specific segments, technological changes, industry fragmentation and intensity of competition have been significantly influenced by the Government tariff policy. The present Excise duty on Paper is 12 %. The Government of India from time to time has given some benefits to small industries in order to protect them i.e. the first 3500 tones produced by a mill is chargeable only @ 8 % and thereafter it is @ 12 %. The three main grades of paper manufactured in India are :1. Newsprint 2. Writing and printing. 3. Industrial Variety ( Craft paper and Duplex Board ) Over 550 players currently populate the industry and the estimated capacity is about 7.00 million Metric Tones Per Annum (MTPA). Fragmentation is severe in the “industrial” (packaging) grades, which rely on “unconventional” raw material such as waste paper and partly agro residues. This division generally comprises of units with an average size of about 10000 MTPA and contributes to 45% of the output of paper and paper boards in the country. Although the other divisions in the Indian paper industry are also fragmented by international standards, the degree of fragmentation is less severe. “Newsprint” till about 1995, was the sole preserve of large public sector units and was well protected by high import tariff barriers. Nevertheless, imports contributed to about 50% of the domestic consumption. Since then, new domestic capacity with private investment has been allowed to be created. This
growth has relied namely on De-inked waste paper as a source of raw material. Currently import duty on newsprint is about 5% and domestic manufacture of newsprint is exempted from excise duty. This tariff structure for newsprint has seen Indian newsprint price closely mapping international prices. Imports still constitute about 30% of consumption and newsprint contributes about 10% of the total production of paper and paperboards. The number of players in the newsprint segment is relatively limited and manufacturing capacities are larger than in the packaging grades segment. Historically, the bulk of the output of “Cultural” grades – comprising of writing, printing, office stationery paper and specialty paper has been the preserve of “large” producers, who use forest based raw material in integrated pulping facilities augmented by imported pulp. This segment has been consistently taxed at higher rates due to its size and use of “conventional” forest based raw material. Investment in plant has also been higher. With relatively smaller number of players and high import tariff protection, prices of end products, generally perceived to be higher quality, have been high. Import tariff levels, although much lower now, still continues a significant barrier to imports. The high investment levels required and limited “conventional” fiber resources are the major deterrents to growth in this segment for both existing players as well as new entrants. “Lower end cultural grades” manufactured by smaller players using unconventional raw materials in low investment, low tech plants cater to consumers in the price sensitive sub segment of this market. This sub segment depends significantly on the tariff differential based on size and raw material for its viability. The Indian Paper industry is going through substantial changes. Global demand for paper is expected to grow by about 4% p.a. over the next 5 years. The domestic demand is expected to grow at about 8% which will result in increase of demand by 30 Lakh tones approximately over the...