35 kraft paper mills in Gujarat shut shop as expenses flare up

Faced with a steep hike of raw material and coal prices and high electricity tariff, 35 kraft paper mills in the state, which meet over 35 per cent of the demand for kraft papers in India, have been forced to close down.

At least a dozen more are contemplating stopping operations and have put most of the employees on rest.

To survive the accelerated production cost, the survivors have increased prices of krafts for all the grades by around Rs 1,500 per tonne. Kraft paper is mostly used for cartons and white goods manufacturing companies are major consumers.

Most of these closed mills are located in Vapi, Ahmedabad, and also in Saurashtra region. As many as 16 such mills have shut down in Vapi alone in last few months.

The state houses 111 kraft paper mills. Maharashtra is known as the second important location for production of kraft papers.

Interestingly, the main raw material of the industry is waste paper and the mills are importing this from the US and Gulf countries. Millers blame increase in clearing and forwarding charges as one of the reasons for this crisis.

Vijay Madnaik, president of the Gujarat Paper Mills Association, said, "The cost of power, coal, chemicals, raw material waste, high clearing and forwarding charges, labour charges and maintenance has gone up sharply and the survival itself is at stake."

Even hike in steel prices also has been taking a toll as coal and steel are important components for production of kraft papers.

"For drying the waste paper we need steam and steam is generated through coal. Moreover, all machinery used in kraft paper mills have steel blades and these blades need to be replaced every year for quality production," said Madnaik, who also runs a kraft paper mill based in Vapi.

According to another miller based in Saurashtra, "The effective rise in the prices would be around 10-12 per cent. Moreover, the last revision was made one-and-a-half years ago. At present, 35 mills have already downed their shutters due to high input cost. We are now forced to raise prices which may help us survive. But this also means losing business to other states as, obviously, our customers will try to look for cheaper product."

On importing waste paper, Madnaik said, "It is not that India do not have waste paper. But we have a lack of waste paper that can be recycled. Generally, consumers tend to retain cartons coming with consumer goods such as television, refrigerator, airconditioners and coolers for future use."

Moreover, other small cartons like boxes used for packaging fruits are thrown away, leading to a shortage of waste paper for recycling. Only 45-50 per cent of waste paper are made available for recycling, Madnaik said. Kraft paper mills in the state have a cumulative turnover of around Rs 2,000 crore in the last financial year.