Paper sector to see first FDI soon

Although the country has seen huge inflows of foreign direct investments (FDI) in various sectors, the booming paper sector is yet to see the first such investment.

Though investors have identified business potential in this sector, they are hesitating to step in because of unsuitable distribution network.

But, the wait, it seems, is now over. "The country is likely to see the first FDI in the Rs 22,000-crore paper sector within a year," said Pradeep Dhobale, president, Indian Paper Manufacturers Association, and divisional chief executive of ITC, a leading name in paper industry.

In the last few years, the paper industry in the country grew by 6 per cent. In the future, it is forecast to grow at 10 per cent because of huge spurt in demand for writing and printing paper.

In sharp contrast to it, the Industry in the US and Europe is growing at a mere 2 per cent, while in other Asian countries, it is growing at 4.5 per cent.

"The paper industry goes hand in hand with the country's GDP. Hence, the industry is set to grow in double digit in the years to come," said Dhobale. He, however, dismissed the claim that computers had hit paper demand in any way.

The country's paper sector, with an existing production capacity of 8.3 million tonnes, requires an additional $2 billion of investment to meet the rising demand. However, projects amounting to $2 billion are under various stages of implementation.

According to Dhobale, global paper giants such as VPAR of Finland, Stora Enso of Sweden and International Paper of the US have already completed feasibility work on potential investment in India.

But distribution remains a major issue with them. "Distribution is the most important business in paper industry which, if not channelised properly, can hamper the entire business sentiment," said Dhobale.

In India, 100 per cent FDI is allowed in paper industry.

Paper prices have increased by 8 per cent in the last two years to $570 a tonne because of rising input costs. But, the industry has woken up to procure raw material through farm forestry, for which it has started growing three types of plants "" eucalyptus, subabul and casurina "" that can be cut and used after every four years.

The sector has also intensified domestic waste collection, which is presently at 20 per cent in India against 60 per cent in the developed countries such as Japan and Germany. "We hope to double the waste paper collection to 4 million tonnes in the next 2-3 years," said an industry analyst.

The country is targeting to source 100 per cent raw material through domestic resources in five years.

---

ON PAPER

The paper industry in the country grew by 6 per cent in the last few years

2 per cent, while in other Asian countries, it is growing at 4.5 per cent

The country's paper sector, with an existing production capacity of 8.3 million tonnes, requires an additional $2 billion of investment to meet the rising demand