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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 tons 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 next 5 years. It is expected that customs duty on import of paper will decrease from the current level to the level of 10% over a
period of time due to WTO compulsions. The import of raw material for paper including pulp, waste paper and news print is likely to increase by at least 15% to 20% in 2005-06 to keep up with growing demand for paper in the domestic market. Despite to the constraints like over crowded market and limitation in procuring the desired quality of waste paper, there are indicators of a revival in the Indian Paper Industry. In the current year, selling price has marginally increased and enabled the industry to partially offset the rise in cost of inputs, fuel & labour. The paper industry has an important social role to play for the country. Use of paper is considered as an index of cultural growth. Key social objectives of the Government like eradicating illiteracy, making primary education compulsory etc. are very much related to the paper industry. The paper industry is also contributing towards fulfillment of various requirements of the industry as a whole like information dissemination, publicity etc. which in turn stimulate industrial growth of the country. The paper industry has, thus, a catalytic role to play not only for the overall growth of the industry but also for the living standards of the people. The new millennium is going to be the millennium of the knowledge. So demand for paper would go on increasing in times to come. Because of paper industry’s strategic role for the society and also for overall industrial growth, it is necessary that the paper industry performs well.
The globalization of Indian economy has lead to a healthy growth of 6 to 7% industry and that is growth happening in all the sectors. Moreover the Per Capita consumption of paper in India is going up with the advent of packaging in the food industry. Due to environmental concerns, the use of plastics is likely to be banned by the Government of India within a short span of time. Hence within 2 to 3 years we will be witnessing an explosive growth of packaging in India mainly in food, textile and export segments. The exposure to foreign packaging technology and the need to satisfy the export customers has led to a drastic change in the industrial packing sector. The corrugators have started using high BF, high GSM paper instead of the regular grades and shifting from 7 ply and 9 ply boxes to 5 ply and 3 ply boxes. The above change has resulted in more aesthetic and cost effective packing solutions. There is a very good potential market developing for such grades of paper in India. The market of high quality Kraft paper is now catered only by few manufactures from western and northern parts of the country. With the above changes in the industry it would be in the best interest of our company to put up a Kraft paper plant of 100 MT per day producing high B.F., higher GSM paper and exploit the emerging market situations better. The company envisages the following advantages by going for such a plant as follows: (l) Most of the existing paper mills in South India operate with single wire machine, which can produce up to 24 BF only, whereas the new plant intended to be set up by SSPML is a twin wire machine which can produce high quality Kraft paper of 24 BF to 40 BF which is sold in the market at a premium. l By making high end paper in south India the company stands to gain a lot in terms of logistics costs when compared to the competition. l SJPML got the advantage of cost benefit while importing raw materials and exporting finished product. l The possibility of exporting substantial quantity of the production to near by countries like, Sri Lanka and eastern African countries is also bright. This may also be substantiated from the fact that paper exports
have risen at a CAGR of 14 % pa from 105000 tonnes in the year 2000 to 179000 tons in the year 2004. As a strategic measure to expand the international operations of the company, the company has already started a new business division – International Business Unit to handle the international marketing operations of the Company. (2) The company intends to manufacture the paper by using Twin Wire Technology and also plans to incorporate all latest equipments to have a cost effective production. The twin wire technology employs two wires drawing pulp stock from two separate head boxes. The arrangement is in such a way that the wet webs come into contact before going to the press. (3) At present the Company is employing single wire technology wherein the pulp stock flows from the head box and gets distributed uniformly for further dewatering, pressing and drying to form a sheet of paper. The twin wire technology is superior than the single wire technology due to the following factors: 1. Improves formation of paper. 2. Improves strength properties of paper namely, Burst factor, Tear factor, Tensile strength and Ring crush test values. 3. Reduces Cost of Production. The company will be able to derive the synergies of the existing plants and position itself as a largest Kraft paper manufacturer in south India by the installation of the plant. The market expectation for the increased production
Capacity, Production, Raw Material and Import
Government has completely de-licensed the paper industry w.e.f. 17th July, 1997. The entrepreneurs are now required to file an Industrial Entrepreneur Memorandum with the Secretariat for Industrial Assistance for setting up a new paper mill or substantial expansion of the existing mill in permissible locations. The industry is a priority industry for foreign collaboration and foreign equity participation up to 51% receives automatic approval by Reserve Bank of India. Foreign investment even up to 100% is approved by FIPB on case to case basis. Several fiscal incentives have also been provided to the paper industry, particularly to those mills which are based on non-conventional raw material. There are, at present, about 515 units engaged in the manufacture of paper and paperboards and newsprint in India. The country is almost self-sufficient in manufacture of most varieties of paper and paperboards. Import, however, is confined only to certain specialty papers. To meet part of its raw material needs, the industry has to rely on imported wood pulp and waste paper. The production of paper and paper board during the year 2001-02 is 31.62 lakh tonnes. The proportion of non-wood raw material based paper is increasing over the years. At present about 60.8 per cent of the total production is based on non-wood raw material and 39.2 per cent based on wood. The performance of the industry has been constrained due to high cost of production caused by inadequate availability and high cost of raw materials, power cost and concentration of mills in one particular area. Several policy measures have been initiated in recent years to remove the bottlenecks of availability of raw materials and infrastructure development. To bridge the gap due to short supply of raw materials, duty on pulp and waste paper and wood logs/chips have been reduced. The capacity utilization of the industry is low at 62% as about 194 paper mills, particularly small mills, are sick and/or lying closed. Several policy measures have been initiated in recent years. Imports of paper and paper products were growing over the years. However, it has decreased during 2000-2001.
Demand and Supply gap in Paper Industry
Indian paper industry is the 15th largest in the world and provides employment to 1.3mn people in the country contributing Rs.25bn to the Government. The industry has recorded a volume growth of CAGR of 5.47% over the last 3 years. In 2003-04, it recorded a volume growth of 6%, in line with the GDP growth. Indian paper industry has a 1:1 correlation with the economy. The demand for paper is linked to the GDP Growth. The government is planning to target a GDP Growth of about 10% in 2-3 years. With this increase in the GDP growth the paper sector is expected to record a similar growth rate. The Indian paper industry has an installed capacity of 6.7mn tons while, the effective capacity is estimated to be lower at 6.15mn tons. The industry produced 5.26mn tons of paper in 2003-04. Newsprint capacity in India is estimated at 1.12mn tons however, domestic production is only 0.59mn tons, while consumption of newsprint is 1.1mn tons. Favorable demand - supply scenario to keep prices firm The demand for paper is influenced by various macro-economic factors like national economic growth, industrial production, promotional expenditure, population growth and the Government’s allocation for the educational sector. Domestic demand for paper is expected to grow at a CAGR of 6-7%. India’s paper demand is expected to touch 8mn t.p.a by 2010. A leading global paper industry consultant projects a shortage of about 0.7mn tpa by 2010.
Proposed capacity expansions:
Capacity expansions (which cost 50% less than new capacities) have been announced by most players, but would take 1-2 years to be operational. Capacity expansions of over 600,000 tons have been announced by the 7 large players in the sector
WTO as discussed the implication of Indian Paper and Newsprint Industry as part of its negotiations and implications. The Indian Paper Industry has important place in the industrial landscape. The paper industry has a strong backward linkage with forests and environment on one hand and consumers of a variety of products on the other hand. The manufacture of paper through pulp of wood or of other fibrous cellulosic material has been discussed at length. However, recovery of waste or scrap for paper and paperboard manufacture has been looked at from different angle in the classification of products of Indian Paper Industry. In fact the paper industry which are eco friendly imports lot of waste paper into the country in the manufacturing of paper and paper board. Generally WTO implication is applicable to all the industries. How ever, in respect of paper industry where waste paper is the raw material and which is eco friendly, the impact is not harsh. SSPML is into manufacturing of paper out of the waste paper and is an eco friendly project.
GOVERNMENT REGULATIONS, PERMISSIONS & TAXES
1. Central Excise: Central Excise is levied @8% for the first 3500 MT production and thereafter @12% on the value of the invoice. The Company is availing permitted Modvat benefits as per Central Excise regulations. For import duty paid on waste paper procured from overseas the Company is entitled to adjust the entire duty paid component as that of Modvat credits.
2. VAT (Value Added Tax): VAT replaces the existing multipoint taxes levied by various states with effect from April ‘05. As that of other industries, the paper trade is also covered under VAT for domestic sales done in
the state of Kerala. However for interstate sales CST is continued to be levied as per existing Government regulations. 3. Service Tax: Being classified as a manufacturing industry, the industry even for Job Work on conversion basis will not be subjected to Service Tax requirements. A recent notification from Central Government also confirms such a stand. 4. Factory Licenses: All the licenses required under Municipality Act, Factories Act are obtained and duly renewed. 5. Pollution Control: Necessary permission under effluent discharge Act is obtained and the facilities required to maintain the permission are in place.
AVAILABILITY OF DOMESTIC WASTE PAPER Waste paper recovery system in India is very unorganized and unplanned . As a result, large quantities of waste paper get diverted for cheaper packaging and other uses or get destroyed as rubbish. Bulk of waste paper collected by street collectors in metropolitan cities goes to household paper bag manufacturers. Due to lack of any grading/ classification system in context of waste paper, no sorting or segregation is done at source and so most of the waste paper varieties are collected in commingled form. The probable sources of waste paper collection are as under: •
Waste Paper Domestic refuse Newspaper, magazines, board cartons. Industrial refuse Corrugated boards, duplex & other packaging board, paper sacks etc.
Office refuse Ledger files and papers from Govt. offices, Universities & large business organizations.
Trade refuse Boards trimmings from converters & packaging manufactures, paper savings from printers
Road Sweeping Newspapers and magazines are usually recycled directly as wrapping and packaging papers by the grocers and pretty traders and therefore they are not available for mills in their first rejection. Other fibrous domestic refuse probably find their way as road sweepings.
In India, collection of office refuse has not been very high mainly due to unavailability of a viable collection system. In practice, more than 80% of the paper consumed in India is being collected, of which only 20% is being made available to paper industry and the rest 60% is usually diverted for other diversified / secondary uses such as wrapping, packing etc. The developed countries, which are the major players in paper recycling business, have a well defined and planned waste paper grading system in place, which facilitates the collection of recovered paper sorted in grades with a limited mixture of fiber types. Due to limited capacities of landfill sites and (municipal) incineration plants, increasing waste disposal costs and environmental awareness a wide range of legislation / directives in various countries have been imposed which has promoted material recycling and reduced further , the generation of waste that requires disposal in appropriate facilities. These regulations set responsibilities for taking back used paper products and packaging material independent of the public disposal system and recycling them. In India, however, no such regulations / law / directives are in force to promote use of recyclable resources, as a result of which the recovery of used paper is also low. As per
the statistics available ,the Indian paper industry is using more than 70% of imported waste paper in its total waste paper consumption . The general issues related with use of importedwaste paper in Indian Paper Industry are: Ø Inconsistency in quality and varieties of waste paper grades. Ø High level of contamination i.e. prohibitive & out throws. Ø Price fluctuation in the international market. Ø High price for good quality waste paper i.e. low to negligible contamination level. Ø High ash content in paper leading to low fiber yield / tpaper and generation of inorganic sludge. ISSUES RELATED TO WASTE PAPER BASED MILLS In spite of the fact that waste paper processing for paper making is considered to be an eco friendly process , there are certain technological & environmental issues still associated with waste paper based mills which needs to be addressed to improve its environmental compatibility. • Technological Issues :
The main objective of recycled fiber processing is the removal of contaminants and elimination of their effects as much as necessary to meet quality requirements. Removal of contaminants makes recycled fiber processing systems significantly more complex than systems for virgin fibers. There are several unit operations / stages viz. slushing, screening, cleaning, flotation, disperger etc. to remove the contaminants from recycled fiber stock. The technology is well established to produce newsprint, packaging grades and fine papers and most of the mills in USA, Europe have state-of-art technology for processing of recycled fiber. In India, however, most of the recycled fiber based mills do not have appropriate system configuration for efficient processing, as a result the quality of finished paper is low. The level of technology in majority of
mills is obsolete. The operational efficiency of equipments and machines are also considerably below the optimum level . Due to lack of appropriate configurations, the amount of rejects generated are also high and is a major source of solid waste generated in such mills . • Environmental Issues :
Among the environmentalissues associated with recycled fiber mills , solid waste disposal and management is the subject of main concern. Deinkined sludgegenerated from deinking plants in mills using printed waste paper for producing writing & printing grade of paper , consists of mainly fillers and coating pigments, fibers, fiber fines, printing inks and adhesive components. A characteristic featureof the deinking sludge is its high ash content in the range of 40% - 70%. Traces of heavymetals may also be present in some cases. In most of the cases the heavy metal content is insignificant and sometimes even below the detection limit. The another important issue reported recently is the clandestine importof other waste like plastics, metal and cloth / rags etc (technically defined as prohibitive and out throws) along with waste paper.
OBESRVATION & REMARKS: Generally the waste paper being imported in the country are recovered in segregated form as per the request of the importer. However, some cases have been reported wherein municipal solid waste constituting of plastics, metal cans and cloth / rags etc (technically defined as prohibitive and out throws) have been illegally imported in grab of imported waste paper This has led to the need of defining / formulating the permissible limits for the contaminants like plastics, metal cans and cloth / rags etc. inthe imported paper . At present, no data /guideline is available on this issue
Therefore; it is recommended to undertake an in-depth study on this issue so as to evolve permissible limits for prohibitive and out throws in the imported waste paper consignments entering into the country. LEADING PLAYERS IN PAPER INDUSTRY: The major players in this sector with their respective production capacity are given below: LOCATION OF MANUFACTURING PLANT AND ITS BRANCHES OUR CUSTOME R CUSTOMER SERVICE PROCUREMENT OF RAW MATERIALS Main raw material for the company is corrugated boxes/waste paper which is purchased through local suppliers. Company has adopted inventory control system for purchase Raw material. Decision for making purchase is taken by the Executive Director (Purchase) after considering the indents for requirement of raw materials, received from the production department. Director (Purchase) is assisted by team of purchasers, who calls quotations from different suppliers of raw materials. RAW MATERIAL MANAGEMENT Director (Purchase) after considering lowest quotations along with sample of raw material, place order for supply of raw material. TESTING/CHECKING OF RAW MATERIAL After receipt, consignment of raw material is weighted at company’s own weighing bridge. Weight as per company’s weighing bridge is tallied with the weighing slip as produced by the supplier of raw material. Bill of the material is also collected by the gate office for their necessary inward material entries. Weight of the raw material is tallied with the weighing
slip/bill of the supplier. If the weight is not tallied with the weighing slip/bill due to shortage, it is immediately informed to supplier/driver. A written consent on the back side of bill is taken for information of shortage to supplier. Vehicle is then allowed to go to raw material godown for unloading with prior intimation to quality checking supervisors. Raw Material Quality Supervisor got unloaded the material in his presence. Sample from different bundles of raw material is taken for checking of quality/moisture etc. If, moisture is found in any bundle, sample of same is handed over to laboratory technician, who tested the percentage of moisture in the material. A report is being prepared by Lab. Technician for moisture and other prohibited contents like plastic strips, kaccha material, reel core material etc. present in the lot of raw material. Report is also signed by Lab. In charge as well as supplier of material. Weight of moisture/other prohibited contents present in the material is deducted from the total weight of material. Lab. Report so prepared, is forwarded to Director (Purchase) for his information and Signature purpose. Copy of the report is then given to supplier of raw material. If, supplier does not accept weight of moisture/prohibited contents he is allowed to take his material back.
MANUFACTURING PROCESS; Paper is manufactured using corrugated cartoons/waste paper, Chemicals and water. The manufacturing process can be bifurcated in to four stages. A) PULPING: Corrugated Boxes/Waste Paper after cutting and dusting feed in to the pulpers for pulping. The waste paper can directly be beaten and washed in the beaters for pulping.
B) PREPARATORY TREATMENT OF STOCK : Pulp, as it, is not fit for being converted in to paper and mustundergo some preparatory treatment depending on the end product. Before going to the paper machine, the stock must be prepaid uniformly with a fixed thickness and be screened and refined by crushing so that it may be reduce in to fixed thickness with uniform properties in a uniform speed. The treatment is carried out in appratuscalled refiner and sizing agents like alum, dyes, loading materials are added in the process to develop its strength. The main flow of pulp which is freed from tailings inthe vibrating screen and fine pulp sieved out from the tailings are put together and sent to the centricleanerswhich work quite efficiently in removing fine dust.
C) PAPER MAKING : Prior to going in to the paper making machine the stock which has gone through necessary treatments, is diluted in the mixing box, down to the required consistency with the use of back water generated in the paper making process. Similarly speaking, the paper making machine performs its function in this way :- In thepulp stock which goes over travelling wire the fiber is separated from water & sheets of paper is formed. The wet sheetis pressed dried and smoothened by going through several sets of roll machines. To get M.G.Kraft Paper, the sheet is then passedthrough M.G.Dryer which imparts glaze to the paper. Paper isfinally wound up by means of pop-reel machines. The out put of a paper machineis determined by the trimmed width of paper, the speed of machine and grammage of paper.
D) FINISHING OF PAPER:
Paper and board intended for sale in reels and cut sheets is rewound & cut to certain fixed measurements. Defective paper and board sheetsare removed . The rejected produce is returned to pulping section and mixed into the main flow of pulp stocks. DISPATCHES Reels so prepared, is then wrapped by plastic cloth and clipped with the help of plastic strips. Supervisor on duty mark a serial number, size and grammageon each reel for the purpose of identification. Wrapped reels are then weighted through electronic weighing scale. Weight as shown on the display is written in the reel by the supervisor. Supervisor also maintained a register in which he entered weight of each reel along with serial number of the reel. Reel is then shifted in finished goods godown from where it is dispatched as per orders received. Complete record of reels manufactured and reels dispatched are forwarded to account office. QUALITY CONTROL : SJPML has got a well equipped laboratory with all the latest equipments for test cob value, Tear Factor, Burst Factor, Consistency, Degree SR and Grammage etc. NET WORK OF SALES SJPML has a wide range of net work of dealers spread all over the India, which covers mostly all the states of India.
Details of employees are as under:1. Repair & Maintenance Staff 2. Engineering & Manufacturing Staff 15 18
3. Clerk 4. Supervisors Connected with Process 5. Supervisors Connected with Production 6. Supervisor Connected with Dispatches 7. Supervisor Quality Checking 8. Officer Staff 9. Security
10 5 5 5 5 5
FUTURE PROSPECTS OF PAPER INDUSTRY: Strong demand from packaging segment will drive demand growth for industrial paper.
Establishment of new business area such as telecom and power will lead to increasing literacy levels, thus improving the low per capita consumption of paper (3.2 KGS per annum). Besides rapid growth in population, enhanced literacy levels, growing quality consciousness and changing consumer preferences will drive paper demand. In view of the high capital costs, expansion of existing units and revival of sick units remain the practical option for capacity additions. Also, paper mills in India have to look for ways to cut down costs to compete with imports. International paper prices are not expected to rise substantially over the short-medium term. Domestic paper companies will thus continue to reel under the pressure of reduced margins. However, a app `preciating rupee will marginally protect domestic companies from imports. Due to increased supply, some of the companies have put their expansion plans on hold or have reduced their investment opting for lesser capacity expansions.
The Objectives of the Company
1. To manufacture and deal in all kinds of paper products. 2. To manufacture and deal in all kinds of sugar and sugar products including alcohol and spirit. 3. To cultivate and raise grass, timber, wood eucalyptus, etc. 4. To meet social responsibility. 5. To provide employment opportunities. 6. To meet the national and regional demand of paper and paperboard. 7. Increase sales and profits of the company. 8. Increase market share and reduce cost of production. 9. Reduce the imports of newsprint from the foreign market. 10. To minimize waste 11. Adopt the best practicable technology 12. Better resource management 13. Protect, sustain, and upgrade local environment
To be a world-class enterprise offering paper, sugar and allied products and services, Enhancing stake holders’ value.
Consistent quality Competitive price. PAPER DISTRIBUTION CHANNELS 1. Ex-Mills Main Dealers (All India Basis) Ultimate Consumers 2. Main Dealers (MSIL) Sub Dealers Ultimate Consumer 3. Direct consumers (Like Government Establishment, Universities, Schools, Authorized publishers and banks and institutional customer)
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