Firms eye paper for profit

Low profitability in newsprint and firmness in the writing and printing (W&P) paper segment are prompting the domestic newsprint manufacturers to shift from newsprint to W&P production.

Rama Newsprint and Papers (RNPL), a leading newsprint manufacturer, has decided to shift half of its production capacity from newsprint to uncoated paper.

"We have decided to shift half of our 1.44 lakh tonnes capacity from newsprint to uncoated paper in another month. The W&P segment is doing better than newsprint, owing to the government's focus on education and the gross domestic product growth rate," said V D Bajaj, executive director of the company. The shift to W&P will add Rs 12-15 crore annually to the company's bottom line, he added.

Since January, uncoated paper prices have jumped from Rs 37,000 to Rs 42,000 a tonne, while newsprint prices have slumped from Rs 28,000 to Rs 26,000 a tonne. The W&P business is so lucrative that Bilt, the country's largest paper producer, has completely stayed away from newsprint business.

The landed price of imported newsprint (Canadian origin) has come down from $670 to $600 a tonne since January due to a surplus. Dozens of companies in Canada, the US and the other European countries had shut down so that the demand-supply imbalance got corrected, added Bajaj.

Tamil Nadu Newsprint and Papers (TNPL) is another company that has shifted from newsprint to the W&P segment. The trend is catching up fast, with the domestic newsprint companies adding new capacities that have a swing facility, enabling the companies to switch from newsprint to W&P and vice versa depending on the market. RNPL, for example, is doubling its capacity with a swing facility.

"It is not profitable to make newsprint from virgin pulp. World newsprint prices have dropped drastically and we have to compete with cheaper imports. The rupee appreciation has made newsprint imports more cheaper," A Velliangiri, director, finance, TNPL.

In 2005-06, TNPL produced 5,468 tonnes of newsprint, which came down to 2,957 tonnes in 2006-07. In the first quarter of the current year, the company did not produce any newsprint. Domestic newsprint producers are more exposed to international competition than those in the W&P industry because newsprint imports attract a duty of 5 per cent, which is half of the 10 per cent duty on W&P.