The paper industry in India has just passed through one of its worst patches. For the last three years, international paper prices dipped to very low levels, and that rendered Indian small and medium paper players uncompetitive. Along with it, import tariffs on paper were brought to levels at par with WTO recommendations, which further deteriorated the condition. The SME sector of paper experienced casualties as they neither had the scales of economy in their favour, not could they fight against cheap imports. Since the last six months, with international prices on the rise again, and a steady demand in the domestic market, things are looking up. We had an intimate tete-a-tete with Mr. Pramod Jain, MD of Shiva Paper Mills, who has shared his experiences during this tough time, and has also spoken on e-commerce potential in the Indian paper industry, and how the paper community can benefit from it.

indiamarkets: Mr. Jain, tell us something about your enterprise, Shiva Paper Mills.
Jain: We started Shiva Paper Mills in 1980-81 at Rampur, UP. The then government gave several sops to start non-wood based paper mills in India, as raw material like jute, bagasse and straw were aplenty, and were burnt down. Also, it was predicted that in 1982, the world would face a famine of paper. So, along with us, a large number of small and medium capacity mills were built. However, 1982 turned to be a year of high surplus. We started with a machine of 45 MTPD of writing/printing paper, and by the years, we have 3 paper machines now, wit an addition of MG Poster making and tissue paper making machines. Our capacity is now 75 TPD, and we use rice straw, wheat straw and bagasse.

indiamarkets: How do you see your business being affected by the cyclical nature of your industry?
Jain: The cyclical downturns are immensely hurting for people like us who cannot rely on scales of operations. Each swing is of 2-3 years, and that makes it more unbearable. However, there are several other factors affecting profitability also. For example, when we started the tissue machine of 15 MTPD in 1995, it was an absolute wrong timing. The downturn had just begun, and prices were extremely low. As was expected, the usage of tissue in India did not take off or grow in a big way, unlike Western countries, due to cultural reasons. Coupled with that, the interest burden for the buying and installation of the new machine made matters worse.

indiamarkets: What about the export situation of Indian paper?
Jain: Indian paper industry is totally linked with international markets now. We do export when global prices are high. Typing and photocopying paper is exported to Bangladesh, Sri Lanka and the Middle-East. Converted paper, like diaries and pads, are even exported to developed markets of Europe and the US.

indiamarkets: Recently, the printing lobby in our country has urged the Finance Minister to reduce the customs duties on paper, and increase the duties of converted paper products like books and periodicals, in order to maintain Indian printers’ competitiveness and survival. Any comments.
Jain: It is well-known that all associations and lobbies are trying to protect their own interests, but things should be justified at certain perspectives. Firstly, duties on imported paper is 35%, which is lower than WTO prescribed levels. Secondly, since 1995, Indian paper prices have actually gone down. In 1995, average price was Rs. 30/kg, and now it is Rs. 28/kg. But book or other converted product prices have, in the meantime, increased by 25-30%. Also, only 30-35% of a converted product is direct paper cost. When paper prices were sliding, there was no reduction in converted product prices. Now that the market is getting stronger, people are making unjustified demands. The demand for raising tariff walls to prevent imports on converted items is also unsupportable.

indiamarkets: Paper industry in India is always plagued with raw material problems. Do you face any such?
Jain: Acute shortage of wood as a raw material made the government promote agro-based mills. We have two-fold problems regarding raw material sourcing: the price of rice and wheat straw which we buy from brokers or farmers are very seasonal in nature. Collection is another problem, and it is coupled with the high volume: weight ratio of the nature of raw material. Our landed price of raw materials is 50% cost of material and 50% freight.

Another acute problem we face is of mis-declared imports for evading customs duties. Tissues are brought into the country as waste-paper or stock-lots and even undervalued.

indiamarkets: Sir, what do you think about the e-commerce potential in the Indian paper industry?
Jain: Personally, I believe, as paper industry is fragmented, a lot can be achieved by embracing e-commerce in a relevant manner. By relevance, I mean information exchange and dissemination so that technical and commercial benefits are accrued collectively. We need to throw away our old mindsets of secrecy and bring out of our closet our experiences and learnings. It can be of a community benefit, and is a win-win for all of us. E-commerce will definitely help the industry to reduce costs like communication and process. It will make us informed and competitive, as we get a new channel to sell, and a whole new set of vendors, that will make us better purchasers. Only bottleneck I see is the infrastructure and the legal issues. Once both are solved, I see no barrier, other than our mind-set.

indiamarkets: How do you think Indian paper industry will grow in the next two to three years?
Jain: We are poised for some better days in the years to come, hopefully, after being battered for the last three years. The cycle is upswing, and demand seems steady in spite of the price hikes.

indiamarkets: Lastly, your message for the readers.
Jain: It is time for the industry to consolidate and amalgamate, and by this we will reduce our overheads and marketing expenses, and will have a better control over raw material purchases. Without the critical scale of production, we will lose out to global competition. We need to embrace the newer technologies appropriately to our benefit, and we should be more open-minded in terms of sharing information and growing in alliance.

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