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 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 industrys strategic role for the
society and also for overall industrial growth, it is necessary that the paper industry performs
well.

FUTURE PROSPECTS

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 Governments allocation for the
educational sector. Domestic demand for paper is expected to grow at a CAGR of 6-7%. Indias
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 Impact

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:
Inconsistency in quality and varieties of waste paper grades.
High level of contamination i.e. prohibitive & out throws.
Price fluctuation in the international market.
High price for good quality waste paper i.e. low to negligible contamination level.
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 companys own weighing bridge.
Weight as per companys 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.

CLIENTS

EMPLOYEES CAPACITY

Details of employees are as under:1. Repair & Maintenance Staff

15

2. Engineering & Manufacturing Staff

18

3. Clerk

10

4. Supervisors Connected with Process

5. Supervisors Connected with Production

6. Supervisor Connected with Dispatches

7. Supervisor Quality Checking

8. Officer Staff

9. Security

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

VISION:
To be a world-class enterprise offering paper, sugar and allied products and services,
Enhancing stake holders value.

MISSION:

Customer satisfaction.

 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)