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Globalisation, Energy efficiency and Material Consumption in a Resource based Industry: A Case of Indias Pulp and Paper Industry

1980-81 to 2009-10
Sandeep Kumar Kujur*

Abstract- Indias Pulp and Paper industry, as one of the old and core industrial manufacturing sector with a bearing on socio-economic development has undergone a significant change during the last three decades, especially after liberalisation. This paper examines in detail about the globalisation and its impact on the growth performances of major indicators of structure and nature of the industry. It then identifies the probable causes for changing pattern of growth. The changing policy of

government propelled this sector to integrated international market. Further analysis reveals that, apart from rising production and consumption, erstwhile import dependent India, has achieved selfsufficiency and also witnessed tremendous increase in exports since libelralisation. During the same time, the energy efficiency of the sector has improved while the raw-material consumption has seen drastic shift from conventional type to energy-efficient carbon-neutral non-conventional one.

Key Words: Pulp and paper industry, Liberalisation, Intensity, and Growth. *: The author is a PhD Student at Centre for Development Studies, Thiruvananthapuram, sandeep09d@cds.ac.in.

1. Introduction Several attributes of paper, including its pedagogic and packaging value makes Pulp and Paper industry (P&P) uniquely positioned among the manufacturing industries. Paper, is thus, recognized almost as a touchstone of socio-economic development. This traditional Indian P&P sector had leverage and played a pivotal role in laying the foundation for economic growth. It is also one of the 35 high priority industries of Government of India (DIPP-Annual Report 2010-11). It contributes around Rs. 2500 crores per annum to the national exchequer (Planning Commission 2008). The sector has witnessed a sea change in the structure during the last three decades especially after liberalization. It produces 1.19 % of total output produced by all organized industrial manufacturing industries in 2009-10. The export of

paper industry to the total manufacturing exports is work out to 0.35 % in 2010 while the import bill of paper and paperboard to the total imports is about 0.52 %. During the same time, the nature of Indias P&P industry has undergone a considerable change. The technological bias is highly material, and energy intensive by nature which begets humungous gamut of pollution (IEA 2011; Schumacher and Sathaye 1999). In 200910 it uses 3.17 % of total energy and 1.17 % of total material consumed by all manufacturing industries. Against this brief background, the purpose of this paper is to understand the globalization of Indias P&P industry and its impact on the growth performances of production, consumption, import and exports. These dimensions of structure are analysed for the year 1981 to 2010 retrieving the data from Food and Agriculture Organisation (FAO). The second objective is to assess the nature of the industry analysing energy and material consumption. To evaluate this, the factory sector characteristics, such as, energy and material used are taken from National Industrial Classification-2004 based three-digit all India manufacture of paper & paper products (210) by Annual Survey of Industries (ASI) for 1980-81 to 2009-10. It also examines the changing pattern of material consumption using the data published from Department of Industrial Policy and Promotion (DIPP). We have also calculated regression least-squares Average Annual Compound Growth Rate (AACGR), and intensities. In keeping with these objectives the paper is organized into following sections. In the first section, we trace brief history of the industry. The second section maps out the growth performance during globalisation whilst nature of the industry is analysed in fourth section. It also highlighted the probable reasons for such changes in Indias P&P sector. The fifth and last section summarizes the findings. 2 Indias Pulp and Paper Industry The genesis of paper and development of P&P industry with its extensive uses ease the human civilization worldwide1. In India, the testimony of paper manufacturing is borne out by the antiquities of Indian manuscripts, Islam literatures, visitors accounts and the British sources.

The Indian manuscript reveals that the reference of writing material during the empire of Alexander indicated the existence of paper manufacturing in Indus valley. The gold letters in palm leaf during Vikram era of 170 A.D., and Indian or extra Indian scripts retrieved from Central Asia and Gilgit between 5th to 8th centuries. And the uses of talpat type of manuscripts found from Assam, Bihar and Bengal in 12th century could be conjectured as paper being manufactured in India. It is consolidated further by the Islamic literatures. The paper trade between Middle East and India in 8th century and the uses of Iranian paper during 13th century strengthened the evidence of paper manufacturing. An introduction of paper money by Mohamed bin Tughlak and transfer of papermaking technology from Arab to Kashmir during the reign of Zain-ul-Abidin are the other indicators of paper being made in India. Moreover, the travelers to India like: Nicoli Conti, Tavernier and Ovington have pointed out the uses of paper for writing, wrapping and as an exportable material. On the other hand, British literature revealed the early establishment of different categories paper mills in India during 16th to 19th century (Ramaseshan 1989). The evidence of paper making in pre-British period and establishments of modern P&P mills during British period reflects the historical importance of this industry in Indian economy. However, the low growth posted by P&P industry during pre-planning is addressed with an introduction of various protectionist public policies by government. Further encouragements and necessary fillip in the form of fiscal incentives are provided during the planning periods to reduce the import dependency and improve the self-sufficiency. Later, the sector has made a departure from protectionist approach to outward policy regime during post-liberalisation era. The introduction of various major restructuring exercises in an effort to cut the costs and rationalize the operation has transmuted the growth performance and nature of Indias P&P industry. Now, in the following we begin the discussion with the former. 3. Growth under Globalisation The changing policy focus of government has changed the growth performance of Indias P&P industry during the last three decades. The liberalization and policy initiatives later lay emphasis on improving overall performance which led to increasing integration of the sector with rest of the world. Therefore, in this section we have measure the extent of globalisation. It also analyses the subsequent impact of globalisation on the growth performance of production, consumption, import and exports.

3.1 Globalisation of Indias pulp and paper industry

The steady liberalisation process of Indian economy that began in 1991 did not exempt P&P industry from industrial licensing bowing to the security and strategic concerns, social and environmental reasons (Schumacher and Sathaye, 1999). Finally, P&P sector is de-licensed in July, 1997 that allows 100 % Foreign Direct Investment (FDI) to lure the prospective investors through automatic route except of those required product based industrial license (manufacture of excise books and registers) (DIPP 2010-11). Although it did not receive much FDI2, the liberalisation championed the cause of prolonged financial shortages of the sector. Various financial agencies like: The Industrial Development Bank of India (IDBI), Industrial Credit and Investment Corporation of India (ICICI), and Indian Renewable Energy Development Agency (IREDA) etc. are now willing to advance the long term soft loans to modernise the industry (Narayana and Sahu, 2010; Mathur, Thapliyal and Singh, 2009). As a result, the deployment of gross bank credit to Indias P&P industry has increased from Rs. 2366 crores in 1996 to Rs. 3741 crores in 2002 (Indiastat, 2011). The opening up of the sector also had an evolutionary effect on the traditional way of management. It transformed the industrys image from being a subsistence producer to international competitor. It has also led to a serious redesign the way of management and is now taking an integrated account of energy security, sustainable raw-material supply and environmental norms to survive and compete in the international market. India ranked among the top 15 global paper industry (Mathur et al 2009). Here, the extent of globalisation is captured using following index:

GP = Iq + Eq / Pq * 100

Where, GP stands for Gobalisation of Paper Industry, Iq represents import quantity, Eq refers export quantity and Pq stands for total quantity of domestic production. The various inward looking policy approach of government towards P&P sector to reduce the import dependency and improve the self-sufficiency thwarted the globalisation rate till 1995 (Figure 1). These policies include the levy of custom duty on all types of paper and paperboard till 1980s, and then ban on the export of writing and printing paper until 1983. It also restricted the export (up to 10,000 tones per year) of paper and paperboard after 1983. However, a major breakthrough came in 1992 as far as globalization of P&P industry is concerned when centre allowed the users to import one tone of newsprint against purchases of 200 tones of local newsprint. Import licenses at moderate rate of custom duty of 10 % were allowed on pulp and
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waste paper (Schumacher and Sathaye 1999). Further, with the de-licensing, the globalisation rate has increased until recent fall during global financial crisis of 2008 and later. Figure 1. Globalisation rate of Indias Pulp and Paper Industry

The increasing integration of Indias P&P sector with rest of the world is influenced by many factors. Therefore, in the following section we discussion about the major influencing variable of globalisation, such as, production, consumption, imports and exports.

3.2 Production of Paper and Paper Products

The paper production has witnessed a drastic change worldwide. The percentage shares of production in America and Europe to the worlds total have seen a marked decline which has been is increasingly offsets by Asia3 (Table 1). The rising production in Asia is driven largely by increasing demand for paper and paper products attributed to the jump of Asian countries into the middle and high-income income league.

Table 1. Worldwide production of paper and paper products (Quantity-Lakhs Tones) Regions 1981 30.84 (1.19) 1245.51 (47.94) 438.49 (16.87) 848.74 (32.67) 34.57 (1.33) 2598.15 (100) 1990 45.31 (1.20) 1562.90 (41.52) 915.25 (24.31) 1196.78 (31.79) 44.26 (1.18) 3764.50 (100) 2000 66.71 (1.12) 2162.69 (36.41) 1838.65 (30.96) 1804.71 (30.38) 67.30 (1.13) 5940.06 (100) 2010 69.23 (0.95) 2018.22 (27.59) 3187.37 (43.58) 1956.06 (26.74) 83.44 (1.14) 7314.33 (100) AACGR (%) 3.38

Africa

Americas

2.11

Asia

6.97

Europe

3.72

Oceania

3.54

World

3.90

Note: Figure in parenthesis indicates the % shares to the Worlds total Source: FAOSTAT 2012

An analysis of aforementioned table illustrates that the share of Asia has been consistently rising to the worlds total. Similarly, the share of India to the worlds total production of paper and paper products have been rising from 0.68 % in 1981 to 0.84 % in 1990. This has increased further to 1.00 % in 2000. In 2010, it accounts for about 2.25 % of worlds production contributed by the impressive growth of all varieties of paper and paperboard driven by multiple policy initiatives undertaken by the government. The major policy initiatives include the incorporation of broad banding4 in 1985-86. It exempted the excise duty to the units using 75 % or more non-conventional raw-material for production in 1987. During the same time it also removed the price and distribution control initially for white printing paper and later for other paper products to encourage the industry to produce varieties of good quality products. The sector is further rewarded by multiple fiscal incentives during post liberalization era. For instance, in 1992, the infrastructural support was provided by increasing allocation of coal and wagons to the sector. It removed the statutory control over production, price and distribution of white printing paper to facilitate the higher production and higher profits (Schumacher and Sathaye 1999). In an endeavour to raise the quality of paper products, the Newsprint Control Order of 2004 avails
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the exemption of excise duty to the mills which produce the newsprint conforming to Bureau of Indian Standard (BIS) and supplies paper to newspaper publishers (DIPP, 2010-11).

The proactive measures initiated by government enabled India achieving self-sufficiency in most varieties of paper and paperboard over the past three decades (Planning Commission 2008; Mohanty 1997). Thus, the share of production to total domestic consumption has increased from 82.80 % in 1981 to 96.02 % in 1990. This has declined to 88.61 % in 2000 but surged again to 93.40 % in 2010.

There has also been a sustained increase in the production of all major paper products with more than 5 % AACGR. The production share of all paper products have been gradually increasing except for those of paper plus paperboard n.e.s., and printing plus writing paper which have been declining due to low demand. The newsprint production also registered the higher growth because of increasing realisation by way of hardening prices (C entral Pulp and Paper Research Institute Undated pp 40). The production of different paper varieties is furnished below.

Table 2. India's Production of different Paper and Paper Products (Quantity- Thousand Tones) AACGR Products 1981 1990 2000 2010 (%) Coated papers 20 (1.13) 50 (2.82) 506 (28.55) 205 (11.57) 710 (40.07) 281 (15.86) 7 19 (0.60) 310 (9.81) 975 (30.86) 38 (1.20) 900 (28.48) 918 (29.05) 215 (3.63) 40 (0.67) 400 (6.74) 1864 (31.42) 130 (2.19) 1530 (25.79) 1694 (28.55) 60 720 (4.37) 50 (0.30) 740 (4.49) 5380 (32.67) 600 (3.64) 4170 (25.32) 4730 (28.72) 80 9.14

Household + sanitary paper

5.11

Newsprint

6.77

Other paper + paperboard

7.08

Paper +paperboard NES

6.55

Printing + writing paper Wrapping + packaging paper + board Wrapping paper

4.87

7.97 1.69

(1.01) TOTAL 1772 (100) 3160 (100) 5933 (100)

(0.49) 16470 (100) 6.6

Note: Figure in parenthesis indicates the % share of paper and paper products to total Source: FAOSTAT 2012

The aggregate rise in the production of paper and paper products worldwide and in India is largely driven by increasing market demand.

3.3 Demand Factor The profuse production painted quite a rosy scenario for rising aggregate demand. However, as we observed in production, the consumption5 pattern of paper and paper products presented in below table also shows that the shares of Americas and Europe have been declining while Asia have emerged as the major growth poles in the world.
Table 3. Worldwide Total Consumption of Paper and Paper Products (Quantity-Lakhs Tones) Regions Africa 1981 46.50 (1.81) 1171.84 (45.71) 481.91 (18.80) 825.61 (32.20) 37.94 (1.48) 2563.79 (100) 1990 62.52 (1.67) 1473.46 (39.44) 985.11 (26.37) 1165.43 (31.19) 49.45 (1.32) 3735.97 (100) 2000 85.09 (1.46) 2065.51 (35.43) 1982.36 (34.01) 1616.46 (27.73) 79.94 (1.37) 5829.37 (100) 2010 125.40 (1.75) 1893.85 (26.48) 3303.03 (46.19) 1735.95 (24.27) 93.16 (1.30) 7151.39 (100) AACGR (%) 3.92

Americas

2.13

Asia

6.81

Europe

3.03

Oceania

3.92

World

3.87

Note: Figure in parenthesis indicates the % share of regions to the worlds total Source: FAOSTAT 2012

As paper and paper products consumption in Asia is increasing, the share of India to the worlds total has also been rising. Due strong domestic consumer base, Indias share to the
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worlds total has increased from mere 0.83 % in 1981 to 0.88 % in 1990. This has increased further to 1.15 % in 2000 and 2.47 % in 2010. Indias robust paper demand is contributed by many factors. According to Indian Paper Manufacturers Association (IPMA), the economic growth; increasing literacy rate; changing demographics with higher urbanisation; increasing living standards , aspirations for changing lifestyles and media growth; demand for high quality paper and paper products (e.g., magazines, multi-colour printings, advertising and direct mailers for promotional materials) are among the major growth drivers of Indias paper market6.

Among all types of paper and paper products the share of other paper plus paperboard, and wrapping plus packaging paper plus board have been increasing during the last 30 years might be because of concomitant rise in packaging sector7. On the other, the share of graphic papers defined as newsprint, and printing plus writing paper have been declining because of rapid adoption of electronic technology8. The details of demand for paper and paper products are given below.
Table 4. India's Total Consumption of Paper and Paper Products (Quantity-Thousand Tones) AACGR Products 1981 1990 2000 2010 (%) 269 769.758 Coated paper 8.91 (4.20) (4.37) Household + sanitary paper 20.9 (0.98) 319.8 (14.94) 515.8 (24.10) 2117 (9.89) 788.7 (36.89) 283.2 (13.23) 2140.1 9 19.8 (0.60) 395 (12.00) 990.6 (30.10) 48.6 (1.48) 914.8 (27.80) 922.2 (28.02) 3291 41.5 (0.62) 749.6 (11.20) 1989.6 (29.72) 196.3 (2.94) 1631.39 (24.37) 1751.8 (26.17 64.6 (0.96) 6695.59 47.319 (0.27) 1651.566 (9.37) 5493.414 (31.16) 610.516 (3.47) 4114.981 (23.34) 4835.579 (27.43) 104.497 (0.59) 17634.052 4.96

Newsprint

6.24

Other paper + paperboard

7.08

Paper + paperboard NES

6.23

Printing + writing paper

4.88

Wrapping + packaging paper + Board

7.98

Wrapping papers Total

-3.14 6.65

(100)

(100)

(100)

(100)

Note: Figure in parenthesis indicates the % share of different paper and paper products Source: FAOSTAT, 2012

Though India have emerged as fastest growing paper market in the world the per capita paper consumption is still remain low which is often regarded as barometer of socio-economic progress of a country. The per capita paper consumption in India is 9.18 kg. in 2009-10 compared to 42 kg. in China and 350 kg. developed countries 9. This indicates that India holds an enormous growth potential of the sector. However, the burgeoning consumption of paper is also supplemented by imports.

3.4 Long-standing Paper Imports Historically, the gap between production and consumption signifies that Indian paper market is remained characterized by its increased reliance on imports as industry has groomed with the short-term goals instead of organized long-term planning (Table 5).
Table 5. Indias Import trend of Paper and Paperboard
Time Period 1981-1990 1991-2000 2001-2010 1981-2010 AACGR (%) -7.46 16.77 12.26 8.42

Source: FAOSTAT 2012

The above table shows that the imports of paper and paperboard have been growing at more than 8 % during 1981 to 2010. However, to understand the magnitude of imports we have measured the import intensity as follows:

II = Iq / Cq * 100

Where, II stands for Import intensity, I q refers to import quantity and C q represents total quantity of domestic consumption. The II of paper have witnessed a fluctuation during the
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past three decades. It has seen a worst slippage from 17.28 % in 1981 to 4.28 % in 1990 because of rise in the non-conventional raw-material based domestic production. Nevertheless, it increased again to 12.25 % in 2000 which has declined in 2010 to 9.55 % mainly on account of substantial increase in the domestic production after liberalisation.

The import is composed of different varieties of paper and paper products. However, as it found in the case of demand, the import of industrial and cultural grades paper, such as, other paper plus paperboard, wrapping plus packaging paper plus board have been ballooning. The import growth of newsprint, and printing plus writing paper, in contrast slummed substantially (Table 6).
Table 6. India's Imports of Paper and Paper Products (Quantity-Tones) Products 1981 1990 2000 65000 (7.92) 1500 (0.18) 350000 (42.66) 136600 (16.65) 2400 (0.29) 68100 (8.30) 118600 (14.46) 67000 (8.17) 11200 (1.37) 820400 (100) 2010 124597 (7.40) 1426 (0.08) 923981 (54.86) 207748 (12.34) 7292 (0.43) 32780 (1.95) 151808 (9.01) 173542 (10.30) 61060 (3.63) 1684234 (100) AACGR (%) 8.09

Coated papers

900 (0.24) 269800 (72.94) 10300 (2.79) 7000 (1.89) 79500 (21.49) 2400 (0.65) 369900 (100)

800 (0.57) 85000 (60.37) 16700 (11.86) 11200 (7.95) 22400 (15.91) 4700 (3.34) 140800 (100)

Household + sanitary paper

3.98

Newsprint

6.54

Other paper + paperboard

11.44

Other papers packaging

10.3

Paper + paperboard NES

7.14

Printing + writing paper Wrapping + packaging paper + Board Wrapping papers

9.59

16.69

28.61

Total

8.42

Note: Figure in parenthesis indicates the % share in imports of paper products to the total Source: FAOSTAT 2012 11

The large chunk of Indias import of paper and paperboard are originated from Australia, Belgium, China, France, Italy, Malaysia, Korea, Sweden, Thailand and UK during 1997 to 2008. On the other hand the import of newsprint is rising precipitously notably from

Belgium, China, Japan, Poland, UK, and United States of America.

Although, India is a net importer of paper and paper products its exports have also been swelling since liberalisation. 3.5 Expansion of Exports The tiny and changeable export quantity in later part of 1990s was transient type rather than sustained (Bhati and Jha 2006). However, there has been a significant upturn in the exports of paper and paperboard after opening up of the sector as mapped out in the following table.

Table 7. Indias Exports of Paper and Paperboard


Time Period 1981-1990 1991-2000 2001-2010 1981-2010 AACGR (%) 13.40 22.05 22.78 22.13

Source: FAOSTAT 2012

The pronounced increase in AACGR of paper export is examined with export intensity to understand the export growth. XI = Eq / Pq * 100

Where, XI represents export intensity, Eq stands for quantity of export and Pq refers to total quantity of production. The XI has displayed an increasing trend as it grew up marginally from 0.10 % in 1981 to 0. 31 % in 1990. The increase in production coupled with liberalised trade policy facilitated sharp rise in XI to 0.97 % in 2000 and to 3.16 % in 2010.

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The liberalization of the sector also opened the new avenues to export of those products indicated in asterisk mark (Table 8). The export share of wrapping plus packaging paper plus board, and newsprint have witnessed a steady increase while the products like other paper plus paperboard, paper plus paperboard, n.e.s., and printing plus writing paper have seen a marked decline over the same years.
Table 8. India Exports of Paper and Paper Products (Quantity-Tones) Products 1981 1990 2000 11000 (19.03) 400 (0.69) 11000 (19.03) 600 (1.04) 1800 (3.11) 17210 (29.77) 9200 (15.91) 6600 (11.42) 57810 (100) 2010 74839 (14.38) 4107 (0.79) 12415 (2.39) 94334 (18.13) 870 (0.17) 22264 (4.28) 206827 (39.76) 67963 (13.07) 36563 (7.03) 520182 (100) AACGR (%) 11.00

Coated paper*

Household + sanitary paper**

75.33

Newsprint

500 (27.28) 300 (16.67) 800 (44.44) 200 (11.11) 1800 (100)

1100 (11.23) 600 (6.12) 7600 (77.55) 500 (5.10) 9800 (100)

18.31

Other paper + paperboard

22.85

Other papers packaging

3.96

Paper + paperboard NES

15.06

Printing + writing paper Wrapping + packaging paper + Board Wrapping papers*

26.74

26.9#

33.09

Total

22.13

Note: Figure in parenthesis indicates the % share in exports of paper and paper products to the total *: Indicates the data reported from 1998 **: Indicates the data reported from 2008 #: The figure for 1993-1999 are missing. Source: FAOSTAT 2012

There has been a phenomenal increase in export to the high, middle, and the low-income countries. The china, Denmark, Indonesia, Jordan, Kenya, Mexico, Korea, Russia and
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Turkey are among the fovourite paper and paperboard destinations during 1997 to 2008 while the outbound shipment of newsprint is rising to Kenya and Nigeria.

The rise in export intensity during post liberalisation era indicates an increasing integration of Indias P&P sector with rest of the world underpinned by the transformation of governments inward looking policy approach to outward oriented one. The changing orientation has however, also had the significant impact on its nature and characteristics discussed in the following section. 4 Changing Nature and Characteristics of Pulp and Paper Industry The nature of Indias P&P industry has considerably influenced by changing policies of government during the last three decades. The huge amounts of energy and material

consumption in the sector have drawn a lot of attention from the energy security and environmental pollution point of view. However, changing policy focus of government over the past decades has improved the energy efficiency and encouraged the sector moving towards the use of energy efficient and environmentally sustainable raw-material. In this milieu, we have analysed the two important features of this industry, such as, energy and material use. We then discuss the probable reasons for such changes in the industry.

4.1 Energy Use

The P&P is the fourthlargest energy user, consuming 164 millions of tones of oil equivalent (Mtoe) of energy in 2007, which is about 5 % of total global industrial energy consumption (IEA 2011). In India, the P&P industry is positioned seventh10 among the highest energy consumers using stubbornly high amount energy compared to mills in the developed countries (Panda and Keswani 2008). The energy is second largest cost component influencing the manufacturing cost of P&P industry in India. In 2007-08, it used about 5.49 % of total coal and 2.50 % of total electrical energy. It also consumed 2.33 % of total petroleum products and about 3.22 % of other types of fuels utilized by whole manufacturing sector. The intensity of energy consumption is measured as:

EI = F / O * 100

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Where EI represents energy intensity and F refers to fuel consumed and O refers total value of output. As depicted in the figure below (Figure.2), EI rose from 13.28 % in 1980-81 to 14.83 % in 1989-90. In 1999-00, it has moved up to 16.91 %. The continuous rise in energy intensity in the P&P industry is because of slow progress in the diffusion of energy-efficient technologies due to government policies on energy prices for Indian industry (Bhattacharya and Cropper 2010)11. The EI of the sector has, however tapered off to 11.56 % in 2009-10.
Figure 2. Energy Intensity of Indias P&P Industry

Energy Intensity (%)

Fuels Used (Rs. Lakhs)

This decline in EI of the sector is explained by the studies on Indian manufacturing industries conducted for the year 1992-93 to 2007-08 by Ray and Reddy (2007); they found that the reduction in EI is largely driven by structural changes. However, analysing data for the same time period Goldar (2010) finds that rise in the real price of energy prompts for its judicious use; thereby, technological improvements in the industry which led to decline in energy intensity. Panda (2005) also finds that due to rising energy prices most of the large and medium sized P&P mills also started installing captive cogeneration of power plant to generate the power from waste water. This reduces the demand for power from external sources like, state power grid and also helps the industry to lower the environmental impact.
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Again, Panda (2007) finds that the Electricity Conservation Act 2001 adheres to mandatory report and monitors the use of energy in all 15 energy intensive industries including P&P to curtail the energy crisis in the country. This led to reduction in energy consumption in P&P mills through production process improvements by imparting energy efficient technologies.

The improvements in the energy efficiency is significantly influenced by the basic mill configuration, like, the raw-material use, products to be manufactured, and basic mill design and selection of technology in the production process (Panda 2005). In view of this, the quantity and types of raw-material consumption plays a crucial role determining the overall efficiency of the industry.

4.2 Material Consumption The resource-based Indias P&P industry has seen an increase in total raw-material consumption, at the same time; it has also witnessed a drastic change in the composition of material use. The quantity and type of raw-material consumption is an important element primarily for three reasons. Firstly, it has a direct bearing on the amount of other types of basic inputs use in the production process, notably, energy and chemicals. Secondly, the material consumption is a single largest component influencing the manufacturing cost of paper production, and finally, the material consumption also significantly influences the effluent discharge to the environment. In India, the short supply of conventional raw-

material and huge environmental compliances threatened the economic sustainability of this material intensive sector (Confederation of Indian Industry 2009; FAO 2008; Roy, Sanstad, Mongia and Schumacher 1999; Schumacher and Sathaye 1999). The material consumption of this industry is measured as:

MI = M / O * 100

Where MI stands for material intensity, M represents value of material used. As shown in figure below, the MI grew from 50.97 % in 1980-81 to 52.72 % in 1989-90. It increased to 53.61 % in 1999-00 and rose further to 63.56 % in 2009-10. The MI has been steadily increasing partly because of substantial increase in the number factories from 1301 in 1980-81 to 4599 in 2009-10. It is also party because since liberalization the sector has been encouraging large scale factories that would obviously
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require huge quantity of raw-material. The liberalisation of the sector and stricter environmental regulations promotes the large size and efficient P&P mills which would impart energy efficient carbon-neutral technology in the production process. These mills are also expected to produce good quality of products with higher economies of scale to compete in the international market (Schumacher and Sathaye 1999)12.
Figure 3. Material Intensity of Indias P&P Industry

Material Intensity (%)

Material Used (Rs. Lakhs)

Though, material intensity is on rise, the composition raw-material use has seen a tremendous shift from conventional-based to non-conventional ones (Figure 4).

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Figure 4. Share of Different types of Raw-materials use in Indias P&P Industry

Forest-based fibre Recovered paper

Agro-based fibre

Source: Paper Industry as cited in DIPP, 2012, pp 3

As can be seen from the above figure, despite have the advantage of good qualities woodbased raw-materials; its share to the total raw-material consumption is drastically declining primarily because of wood prices in India are prohibitively high like in other competing countries such as: China and Korea (Jakko Poyry 2002). The higher wood costs is triggered by shortages in the supply13. On the other hand, the share of agro-based raw-material usage has grown up because of establishment of large numbers of ago-based P&P mills during 1970s and 1980s to meet the burgeoning domestic demand. The government encouraged medium and small scaled 14 agrobased P&P mills because of its convenience set up in any part of the country in a short gestation period. These units were also expected to play a crucial role in backward area generating employment. The quick establishments of factories facilitated by readily available second hand machinery and equipments imported from foreign countries (Datt and Mahajan 2012).

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The mills are also backed by sufficient supply of fibers rated average quality (Mathur et al 2009). The uses of this material have increased also because of dwindling in the supply of conventional raw-material. However, the share of this has declined in 2011 might be because its constraints of seasonal availability, high transportation costs, and investment in pollution control equipments (Jakko Poyry, 2002). Apart from these, most of these firms are owned and managed by local business groups and uses obsolete second hand technology which is basically designed for large-scaled wood-based mills (CPPRI 2000). These mills also lack modern technologies, such as chemical recovery plant and pollution control system, thereby uneconomic operation and high production costs. It resulted in huge pollution load and producing the low quality paper such as: Kraft paper and paperboards (CPPRI, 2004). Moreover, the liberalisation of the sector and increasing pressure of environmental pollution in a competitive paper sector squeezed these mills.

The share of recovered paper use has seen a meteoric rise from mere 7 % in 1970 to 47 % in 2011. Such rise in the use of this raw-material is resulted due to establishments of large number of small sized recycled-fibre based P&P mills to meet the rising demand during same time periods when agro-based mills were set up. The uses of recycled-fibre have increased partly also because of unavailability of wood-based raw-material in the country. Further, increasing integration of the sector and stringent environmental norms promotes the large scale mills to increase the economies of scale with less environmental impact (Schumacher and Sathaye 1999). As a result of this, most of these mills have undergone a major expansion especially after 1990s and now categorized as large scale mills and producing produce good quality of white paper and newsprint (CPPRI, 2004). The development from a small to large scale mill adds an advantage of being able to use modern technology in the production process, hence reduction in the energy intensity and environmental pollution.

The increasing popularity of waste paper is facilitated by increase in domestic collection. The waste paper recovery rate in India was as low as 20 % in 2000 (Jakko Poyry, 2002). Although this has increased to 27 % in 2011, it is still very insignificant compared to developed countries such as Germanys 73 %, Swedens 69 % and Japans 60 % (DIPP 2012)15. This increase in domestic collection over the past few years reflects efforts made by national and local governments, and large paper companies to develop more efficient collection systems (IEA 2011). The rising demand for recovered paper has also been met through import which
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has been growing at an AACGR of 14.54 % during 1981 to 2010. However, due to rise in the domestic collection rate the growth rate of recovered paper import has drastically declined from 39.37 % during 1981 to 1990 to 14.97 % in 1991 to 2000. This has further declined to 8.16 % during 2001 to 2010.

The increasing use of renewable raw-material helps the sector in number of ways as it lowers the burden of scared wood-based material and reduces the import bill of wood pulp. It saves energy, chemicals and water used in the production process, thereby less environmental impact of the industry and considerable cost reduction. Moreover, it provided employment opportunities in recycling sector (DIPP, 2012).

5 Findings and Conclusion

The century old Pulp and Paper industry occupies an important position in the Indian economy for its extended role of early industrialisation and social sector development. The emphasis on making India a knowledge-based economy after globalisation perpetuated the importance of P&P sector. The liberalization of the sector seems to have had the desired effect on its growth performance and nature in a competitive paper sector.

Analysing the globalisation of the sector suggests that the inward looking policy framework vigorously advanced by Government in the past has reduced the import dependency and improve the self-sufficiency. However, the necessary fillip and encouragement provided since 1992 and more so since the onset of liberalisation have remarkably transformed the structure leading to the sector becoming more globalised.

The liberalization of the sector has also attracted few financial agencies to advance the longterm soft loans enabling the sector to curb the prolonged financial crisis to some extent. Although this sector could not attract much FDI the liberalization has morphed the traditional ways of management. It helps transforming the industry from tiny producer to an international competitor. It enabled achieving self-sufficiency in most varieties of paper and paperboard with higher quality. In fact, there has been sustained increase in production of all varieties of products. The production of newsprint also registered high growth because of realization of higher prices and increasing exports.

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The aggregate demand of paper is akin to that of trends observed in production. Owing to strong domestic consumer base the share of Indias paper consumption to the worlds total has been rising. The consumption shares of paper plus paperboard, and wrapping plus packaging paper have been rapidly rising due to simultaneous growth in packaging industry. Moreover, the low per capita paper consumption in India compared to Worlds average promises high growth of the sector in future. Moreover, the long-standing paper imports have been declining due to tremendous rise in the domestic production, which reflects that India has achieved self-sufficiency in paper and paper products over the years. At the same time, the sector also witnessed an upward trend in export growth after liberalisation. The rising exports to high, middle, and low-income countries reflect the sector increasingly becoming self-independent and integrated with the world.

At the time when there is a change in the policy approach helping the sector becomes global, it also takes an integrated approach considering energy efficiency, sustainable supply of rawmaterial, and environmental impact. Therefore, it analysed two key components of input use, such as, energy and material, which are also considered to be the basic factors underpinning sector becomes efficient and global. Examining the energy intensity, it is found that this sector has made impressive strides in improving energy efficiency after liberlisation driven by structural change of industry and improvements in the production process by imparting energy efficient environmentally-benign technology.

During the same time, the material intensity has also gradually increased because of steady increase in the number of factories. An emphasise given to large scale P&P factories after liberalization in a view to improve the overall efficiency also contributed on increasing material consumption. However, the composition of material consumption has witnessed a significant change from the use of conventional to non-conventional raw-material. The share of wood-based material to the total raw-material consumption has declined over the years due to high cost of wood caused by short supply. On the other hand, the uses of agro-based and recycled fiber-based materials have been rising owing to lack of supply of conventional rawmaterial. It is also because of establishments of large number of medium and small firms encouraged by government during 1970s and 1980s to meet the burgeoning demand. Because of increasing emphasise on making the industry efficient and globally competitive the sector is increasingly moving towards energy efficient and environmentally friendly rawmaterial use.
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References
Annual Survey of Industries, Various years, Central Statistical Organization, MoSPI, Government of India, New Delhi. Bhati, U.N. and R. Jha (2006): Emerging opportunities for Australia in Indias paper and paperboard market, ASARC Working Paper, November. Bhattacharya, S. and M.L. Cropper (2010): Options for energy efficiency in India and barrier to their adoption: A scoping study, RFF-DP, 10-20. Central Pulp and Paper Research Institute (2000): Report on Ecological and environmental factors in paper industry, (Volume III), Technological Overview in Indian Paper Industry with Suggestive Measures for Improved Environment Management, Prepared for Indian Paper Manufacturer Association, April, Saharanpur, Uttar Pradesh. India. Central Pulp and Paper Research Institute (2004): Report on studies on Benchmarking/Input Norms for Pulp and Paper Industry, Submitted to Grant Authority Development Council for Pulp, Paper and Allied Industries, June, Saharanpur, Uttar Pradesh, India. Central Pulp and Paper Research Institute. (Undated). Updating of Statistical Data for the Indian Paper Industry Vol. 1. Saharanpur, India. Confederation of Indian Industry. (2009). National and International Best Practices Manual Pulp and Paper Industry (Vol. 2). (Hyderabad: CII). Datt G. and A. Mahajan (2012): Datt and Sudharam Indian Economy (New Delhi: S. Chand & Company Ltd.). Department of Industrial Policy & Promotion. (2010-11). Annual Report 2010-11. Ministry of Commerce and Industry, Government of India. Department of Industrial Policy and Promotion (2012): Collection and Recycling of Waste paper in India, Discussion Paper, 1-37. Editorial (2012, February 17). Paper Chase. The Hindu, p. 12 Food and Agriculture Organisation, Statistical Database, Various years, http://faostat.fao.org accessed on 30 April, 2011. Food and Agriculture Organizsation (2008): Advisory Committee on Paper and Wood Products. 49th Session, Bakubung, South Africa. Goldar, B.N. (2010): Energy intensity of Indian manufacturing firms: E ffects of energy process, technology and firm characteristics, IEG, Delhi. Indiastat, Statistical database, various years, www.indiastat.com accessed on 2 August 2011. International Energy Agency. (2011). Energy transition for industry: India and the global context, Information paper, Rue de la Federation, Paris, France. Jakko Poyry Consulting. (2002). Global Competitiveness of the Indian Paper Industry, Prepared for CPPRI. Mathur, R.M., B.P. Thapliyal and K. S ingh (2009): Challenges confronting Indian Paper Industry in changing scenario, IPPTA Journal, 21 (3): 95-99. Mohanty, B. (ed.) (1997): Technology, Energy Efficiency and Environmental Externalities in the Pulp and Paper Industry (Pondicherry: All India Press). Narayana, K., and S.K. Sahu (2010): Labor and Energy Intensity: A Study of Pulp and Paper Industries in India. Paper to be presented in the Joint Annual International Conference of IASSI and Knowledge Forum, Mumbai, India, 11-12 November. 22

Panda, A (2005): Technological Development in the Pulp & Paper Industry for Reduction of Energy Consumption, Inpaper International, Jan.-Mar., 15-24. Panda, A., and S.L. Keswani (2008): Energy Conservation in the Indian Pulp and Paper Industry, Urjavaran, Dec.-Jan. Panda, Abanish (2007): Technological Developments in the Indian Pulp and Paper Industry during the last decade, Paperi Ja Puu-Paper and Timber, Vol. 89, No. 7-8. Planning Commission. (2008). Eleventh Five Year Plan 2007-2012. Volume III. Government of India, New Delhi. Ramaseshan, S. (1989): The History of Paper Industry in India up to 1948, Indian Journal of History of Science, 24 (2) 103-121. Ray, B. K. and B. S. Reddy (2007): Decomposition of Energy Consumption and Energy Intensity in Indian Manufacturing Industries, WP. 2007-020, IGIDR, 1-33. Roy, J., J. Sathaye, A. Sanstad, P. Mongia and K. Schumacher (1999): Productivity Trends in Indias Energy Intensive Industries, The Energy Journal, 20 (3), 33-61. Schumacher, K. and J. Sathaye (1999): Indias Pulp and Paper Industry: Productivity and Energy Efficiency, Lawrence Berkeley National Laboratory, Berkeley, 41843, 1-46. UN Comtrade, United Nations Commodity Trade Statistics http://comtrade.un.org/db/ accessed on 24 January 2011. Database, Various years,

Etymologically, the word paper is derived from Latin papyrus. Paper, a versatile material with many uses made as long as 3000 B.C. However, in 105 A.D. the invention of paper was reported in China. Gradually the art of paper making was shipped to East and in 3 rd century paper was introduced in Vietnam (CPPRI 2012). The Korean produced paper in 6 th century A.D.. In 610 A.D., Korean baptized the wisdom of paper making to Japan. The technique of paper making was eventually percolated to Tibet around 650 A.D. and then to India after 645 A.D. The Arabas acquired the paper making expertise and built a first paper factory in Baghdad in 793 A.D. Subsequently, Egyptian learned from Arabs during 10th century. As a result of crusades, the paper arrived in North Africa around 1100 A.D. In Europe, Spaniards established the first paper mill in 1150 A.D. while the first paper factory in North America was built at Philadelphia in 1960 (Silkroad Foundation, The histor y of paper, Viewed on 09 April, htpp://www.silk-road.com/artl/papermaking.shtml)
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India has not yielded much from liberalization in terms of the percentage share of inflow to P&P sector to the total FDI. It has declined from 1.11 % during August 1991 to September 2005 to 0.35 % during April 2000 to March 2011. Even though this sector has high growth potential it attracted less FDI compared to other sectors like, telecommunications, automobile , power, housing and real sector, etc. (DIPP-Annual Report 2010-11). This might be because of it nature of being capital, energy and material intensive polluting industry. The foreign companies are not seems to be enthusiastic investing in India might be because of fear of undergoing process of creative destruction in newsprint industry in North America and Europe. This is also reflected in declining trends of production and consumption (Soltas, Evan (2012, May 17). Schumpeter was wrong. Message posted to http://esoltas.blogspot.in/2012/05/schumpeter-was-wrong.html).
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Among the major producers of American countries, USA as highest producer has been growing at an AACGR of 2.33 during 1981 to 2010. The European countries, such as, Austria, Germany and 23

Portugal have been growing at 5.18 %, 5.20 % and 3.53 %, respectively. Australia, as only Oceania country has clocked 4.95 %. Among Asian countries, China as highest producer has been growing at 10.53 % while Korea has been growing at 7.42 %, Malaysia at 13.05 % and Indonesia at 14.24 %. Among low-income Asian countries such as, Viet Nam and Pakistan have registered 18.86 % and 11.73 %, respectively (FAO, 2012).
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Firm now experience the new freedom to manufacture any variety of paper within the overall limit of licensed capacity.
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Consumption = Production + Import Export IPMA , htpp://www.ipma.co.in/index.asp, accessed on 11 May 2012.

Indian packaging industry is positioned 11th in the world ranking. The sector is growing at 15 % per annum and is expected to grow by 18-20 % by 2015. The rapid growth in packaging sector in India is driven by flexible packaging market and increasing use of innovative packaging equipments. Of the total packaging sector, the retail, food processing, and pharmaceutical segments accounts for about 85 % and 10 %, respectively (Packaging Industry Association of India, About the packaging sector, Viewed on September 18, 2012, http://www.piai.org/About_Packaging_Sector.aspx). Maine John (2011, February 27). Worldwide graphic paper demand is growing again, but RISI. Viewed on 12 June, 2012 (htpp://www.risiinfo.com/pages.jsp)
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Assocham, Indian Paper industry likely to touch 11.5 MT by 2011 -12 (June 15, 2010),Viewed on September 11, 2012, http://www.assocham.org/prels/shownews-archive.php?id=2460.
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Bureau of Energy Efficiency. (2010-11). National Mission for Enhanced Energy Efficiency (Perform, Achieve and Trade PAT), Ministry of Power, Government of India.
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To give an example of induced energy inefficiency in the industry, the authors says that high electricity price charged to industry stimulates self-generation using inefficient diesel power generators led to rise in energy intensity. Most of the large scale P&P mills (100-1100 tonne per day tpd of production capacity) are woodbased owned by large business houses and corporate groups. These mills are equipped with advanced technology in the production process, such as, cogeneration power plant and chemical recovery plant which helps reducing the basic inputs costs and wastes. It also produces good quality of paper and paper products, such as, writing and printing papers, packaging papers, newsprint, rayon grade pulp, board and specialty papers, etc. these factories are domestically competitive and some of them have presence in overseas market (CPPRI, 2004).
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The forests, as one of the important revenue earning resource supplied inputs to wood-based industries. The forests land also diverted for other non-forest uses, hence suffered a serious depletion. However, the limitation of National Forest Policy of 1952 is addressed with an introduction of National Forest Policy in 1988 following the enactment of Forest (Conservation) Act of 1980. It tried to solve the problems of environmental safeguards, and supply of fuel, fodder and timber to the local community. To achieve this, it also stopped allocating the natural forests for concessional logging and plantations by paper industry (Jakko Poyry, 2002). The supply of wood gets restricted further followed by the Convention on Biodiversity in 1992 to preserve the gene pool. The changes in the government policy measures led to a drastic shift in the approach of state from a producer-centric to a conservation-centered management of the state forests (Indian Paper Manufacturers Association, Viewed on 11 May 2012, http://www.ipma.co.in/index.asp).

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The medium sized mills are having capacity of 50-100 tpd while mall sized are 5-50 tpd (DIPPAnnual Report, 2010-11).
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The low recovery of waste paper in Indian owing to alternative uses of paper in wrapping and packing, better payment of waste paper in end use than paper industry, and the lack of better business model to facilitate an integrated system of collection (Editorial, 2012).

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