I don't understand the need for liberalisation in the paper industry. In fact, this industry needs protection and not liberalisation," says Vinod Saraf, executive director, B K Paper Mills Ltd, in an interview with Devendra . Excerpts.
Business Standard: What is the present status of the paper industry in the country? How do you see it changing in the coming years?
Vinod Saraf: For the past three years, the paper industry has been passing through a bad phase. I feel the period has stretched a bit too long. Most of the units are in deep trouble.
The worst hit are the smaller units based on waste paper. Out of around 350 such units, around 125 have already closed down. Against the total installed capacity of 22.93 lakh tonne, almost 6.7 lakh tonne capacity is lying closed. In Maharashtra alone, around 20 units out of the existing 53 units are closed.
These figures are itself indicative of the alarming situation. You would be surprised to know that the production capacity built up in the country actually exceeds the needs of the local market.
Various events like reduction of import duty on finished paper in 1996 and an increase in imports of newsprint etc are responsible for this situation.
Although AISPMA has been, time and again, making representations to the Finance Ministry, no concrete steps have been taken so far to save this ailing industry.
To me personally, the future seems to be very promising. The recession is almost over. Internationally, too, the prices of finished paper have already started showing an upward trend.
BS: Please comment on the latest Exim policy vis-a-vis the paper industry?
VS: Liberalisation has literally thrown open the floodgates for overseas paper manufacturers to dump superior varieties of paper in the Indian market in bulk quantities at a very cheap and unbelievable price.
This has definitely been a deterrent for the paper industry.
The recent exim policy has also come as a shock to the industry. Quiet a few items, which were earlier on the restricted list, have now been put under OGL. Consequently, the industry fears that these qualities of paper would also start flowing in, adding to the problems faced by manufacturers.
We were, in fact, hopeful that certain qualities of paper would be put on the restricted list. The exim policy has failed to help the paper manufacturers in any manner.
BS: How is the export scenario of the industry at the moment?
VS: Indian manufacturers have never been too active in the export markets. In fact, India has been a net importer for the past few years.
Though there is a great deal of export potential, the same needs to be exploited in the right manner. Of course, consumption will be rising in the coming years.
The cost of production will be lower as compared to foreign countries in the long term as people have started setting up international size plants in India.
Exports can only go up provided Indian paper manufacturers come up with innovations, and develop new varieties of paper which could be used for packaging.
Packaging is the only industry which, I feel, has been continuously on the rise. However, to cater to this industry, one has to be innovative on a constant and consistent basis.
The quality of paper produced in India has very little overseas market. Our paper is mostly preferred by under-developed countries like Bangladesh, South Africa, Egypt etc. There are some mills which have been exporting just to avoid maintaining high inventories.
I feel there is not much of export potential for existing varieties of paper being produced in the country.
BS: What are the major problems faced by the paper industry now? And what do you suggest to overcome them?
VS: Today, the main problem is the government policy. We have been talking of liberalisation of economy.
How much has liberalisation helped our industry?
Only a handful of units have benefited out of this move. I don't understand the necessity of liberalisation in paper. In fact, this industry needs protection and not liberalisation.
We have the example of Sinar Mas, the Indonesian giant paper group, which has already came up with a gigantic plant in Maharashtra.
Ever since they started production, the local manufacturers, including the larger ones, have felt the impact. The result is that well established local manufacturers have also started facing trouble in selling their products.
Reduction in import duty of finished paper has added insult to injury. Lot of good quality, finished paper has started flowing in.
Lastly, because of the continuous recession for the past three years, most of the mills have had to maintain high inventory levels and extend more credit to wholesalers/consumers.
To improve the situation, the first and foremost step needed is to hike the import duty so that paper imports, if not completely stopped, is reduced to a considerable extent.
BS: How do you see the post -GATT scenario in the paper industry by 2005?
VS: Ever since the GATT agreement was signed, there has been a serious feeling in the industry that there will be terrible competition at the global level.
With the reduction in import duties, imports are continuously going up. International brands have flooded the markets in the country from all over the world but all this is happening at the cost of our home industry.
As far as the local paper industry is concerned, while large manufacturers would be able to sustain the changes, it will be difficult for small manufacturers to survive in the long run since they would not be able to withstand the intense global competition.
Besides, our association, AISPMA, has strongly approached the finance ministry, and we are quite hopeful that in the forthcoming budget, there will be additional duty on the imports of common finished paper. At the moment , we are keeping our fingers crossed.
