A push for paper

Though the digital revolution has popularised the concept of paperless office, replacing paper with e-documents, it would be hasty to conclude that it is the beginning of the end of the paper industry. On the contrary, digitisation will play a supportive role in helping to increase the use of paper in various fields. The growth in household incomes, increase in literacy rates, ambitious literacy and educational programmes, environmental awareness, and the campaign against plastics have all contributed immensely to the increased consumption of pulp and paper-based products. The future of the pulp and paper industry in India is promising since the per capita consumption of paper in India is only around 15 kg, while in advanced nations, it is around 200 kg, and the world average is 57 kg. The growth in organised retail, e-commerce, FMCG, pharma and healthcare, and ready-to-eat foods has generated huge demand for paper-based products, with an annual growth in demand of 6-7 per cent. However, in spite of the vast potential for growth, presently the pulp and paper industry is struggling hard to sustain due to various problems that call for proper support from the government.

Paper plays a pivotal role in the education sector, and as such, the social cause served is invaluable. In the functioning of all three organs of the State, i.e., the Legislature, Executive, and the Judiciary, paper is indispensable. Even the fourth estate — the media, despite the availability of digital platforms, is still dependent on paper to reach out to millions of readers. Though 43 per cent of the population has Internet connectivity, the user base is not correlative of productive usage, as most of it today is in live streaming, music, and entertainment. A survey in 2021, according to Statista, says that 80 per cent of users are above 50 years of age. Besides, the affordability factor for smartphones and devices, PCs or laptops, at least for now, reinforces the indispensability of paper. Most importantly, pulp and paper products play a crucial role in the fight against climate change since paper is environmentally sustainable, biodegradable, recyclable, and produced from renewable sources. In view of these substantial contributions to the public good, it is all the more necessary to support the industry to sustain itself and compete globally.

According to a study by Kanvic Consulting, less than half of the paper companies in India are classified as 'outperformers' with above-industry median revenues, while 31 per cent are categorised as 'squeezers' with below-industry median revenues but maintaining profitability. 17 per cent of companies are struggling to grow below the industry, and the remaining 6 per cent are laggards with falling profits. It was suggested that Indian companies must transform in four key areas to outperform their peers: strategic thinking, manufacturing excellence, marketing orientation, and digitalisation. In other words, companies must identify areas to compete in order to maximise their profitability by transforming operations with quality benchmarks and innovations. Besides, effective consumer targeting in place of a commodity mindset and digitalisation in production, procurement, marketing, and logistics are necessary to acquire the capacity to compete globally.

However, the basic problems currently plaguing the industry need lasting solutions before embarking on the route to expansion and excellence. Firstly, there is uncertainty regarding the availability of raw material — the wood fibre from agroforestry (bamboo fibre, recycled fibre, wheat straw, bagasse, etc.). In 2022, the value of pulp and waste paper imports was around Rs 11,900 crore compared to Rs 6,300 crore in 2021. The schemes under the agroforestry policy of 2014 couldn't yield desired results as farmers were apprehensive that integrating trees, crops, and livestock, as intended by the schemes, would result in a productivity drop of 40-50 per cent. Moreover, the gestation period of 4-5 years for harvesting pulp and wood is a disincentive for small and marginal farmers — the majority.

Secondly, Indian markets have become a dumping ground for major global giants of the industry to dispose of their excess stocks. Imports of paper and paperboard jumped by 47 per cent — from Rs 7,839 crore in 2021-22 to Rs 11,513 crore in 2022-23 (data from DGCI&S). This has a demotivating effect on domestic industries in terms of new investments, technological upgrades, and innovation. Production in small and medium industries has become unviable, endangering the livelihoods of around 5 lakh farmers engaged in industry-sponsored agroforestry. Even as freight charges continuously increase, shipments are often interrupted, forcing mills to lay off workers for weeks. Thirdly, high prices of coal, chemicals, power, and other inputs reduce profitability and stymie the scale of production, especially for the 47 per cent 'squeezers' and 'laggards' class of companies, resulting in underutilisation of installed capacity.

Fixing these problems is important to save the industry. The solution to the raw material issue doesn't necessarily lie in the allocation of government wastelands to private paper companies, a long-standing demand from the industry though. Rather, revisiting the agroforestry policies can help make a difference. Attractive packages through subsidised loans with input support and a buy-back arrangement with the companies can rejuvenate agroforestry. With more than 70 per cent of arable land being rainfed and dedicated to single crops, motivating farmers for agroforestry will not be an impossible mission, provided we guarantee supplementary sources of income in allied sectors and alleviate their fears through localised IEC strategies in targeted agro-climatic zones. Perhaps we can learn a thing or two from the success of the Millets mission in the country. Cooperative farming in agroforestry, similar to the sugar cane cultivation, is another possibility by educating farmers on the relative gains between normal crops and agroforestry. India has a number of suitable agroclimatic zones for agroforestry, and in fact, the mission can transform India from an importing country to an exporting country in wood pulp, on par with countries of ASEAN, Latin America, North America, Japan, South Korea, etc. The creation of employment opportunities, an increase in green cover, and opportunities to earn Carbon Credits are additional advantages in the deal.

Dependence on imports doesn't augur well for the future of the industry. However, caution is required since any drastic measures to check imports may push industries currently relying on imports into a crisis. Reviewing Free Trade Agreements (FTAs) with exporting countries and revamping import duties and countervailing duties in due course and on a case-by-case basis can be a prudent approach to address the 'dumping' syndrome. The measures to support domestic industries can be exhaustive, including selectively imposing fair restrictions and qualifications on importing firms. Positive incentives, such as subsidies and differential rates in energy and water for industries in backward areas, are also necessary to help reduce costs. The paper industry needs to be one of the focus areas for the 'Make in India' campaign.

The writer is a former Addl. Chief Secretary of Chhattisgarh. Views expressed are personal