India is the world's 12th largest paper producer. Although its annual production is rising - currently at about nine million tonnes a year -it is modest by world standards. Per capita paper consumption stands at seven kilograms per year, one-fifth the level economists consider necessary for a literate and advancing society. Yet India is defying expectations, boasting more billionaires than Canada, and is making some headway with its most pressing need: bettering the lives of the economically poor.
India stands as the world's largest democracy. With an estimated 1.1 billion people, it is the second most populous nation in the world (after China). Its economy has been humming, growing at an annual average rate of 8% the last three years and an astounding 9.1% in 2007-2008, hitting the $1 trillion mark. That makes India one of only 12 nations -alongside Canada, the United States, France and Germany -to join this prestigious club.
The country boasts an estimated 36 billionaires, 13 more than Canada. Industrialists like Lakshmi Mittal (steel-making), Mukesh Ambani (petrochemicals) and Kushal Pal Singh (real-estate) are well known worldwide for their astute deal making, and top the lists of the world's wealthiest annually.
For many, India represents an economic success story. Some of that wealth has trickled down, creating a viable middle class. An educated workforce combined with a capitalistic entrepreneurial spirit, notably in high technology, has enabled India to progress and create wealth and prosperity.
"[India] graduates more Englishspeaking engineers and scientists than the whole world put together," said Marvin J. Cetron, a futurist and founder of U. S.- based Forecasting International. "They're the second-largest number of engineers and scientists in the world, and they're world class."
Yet, because of its untapped human potential, per capita income is low at $2,659. Common to many emerging nations, a wide disparity between rich and poor remains the norm. This is plainly evident in India, where the wealth of its billionaires exceeds that of the estimated 300 million poor peasants, landless rural workers and urban slum dwellers. Despite significant economic progress in the last decade, an estimated one in four Indians still lives below the government-specified poverty line of $0.40 a day.
Those facts show the paradox of India. "There is a lot of hype about India," said Milind Kandlikar, a professor at University of British Columbia's Institute of Asian Research in Vancouver.
"If 100 million people are middle-class in India today, I would be elated," said Kandlikar, who was born in India. "The latest World Bank figures say that 75.6% of the country, or more than 800 million people, live on less than $2 a day."
Such figures would greatly explain why India's per capita paper consumption stands at a meagre seven kilograms. This is in sharp contrast to the world average of 53 kilograms and the Canadian average of 280 kilograms. As has been widely reported, the minimum per capita level to meet basic needs for communication and literacy is between 30 and 40 kilograms per year.
Analysts and economists generally agree that economic growth is linked to paper consumption. For example, a modest increase of one kilogram per capita translates into 1.15 million tonnes of additional paper demand.
"It is projected that domestic demand for paper would rise to around 20 million tonnes by 2020," the Hindi Business Line recently reported.
The chief challenges
As it currently stands, India's paper industry has an installed capacity of 9.18 million tonnes, generating 286 billion rupees, or about $6.5 billion in 2007. The paper industry employs 1.5 million people and contributes $625 million to the government's coffers. The government regards the paper industry as one of the nation's 35 high-priority economic sectors. A case in point: newsprint production is government-owned.
Although many analysts say paper production will double in the next 10 years, there are a number of challenges India's paper industry faces, including technology upgrades, fibre sources and industry fragmentation.
"The Indian paper industry is highly fragmented," said Rajan Wadhawan, executive director of PricewaterhouseCoopers' forestry and paper practice in New Delhi, India. "The top five producers account for 15% of the total paper capacity in the country."
Yet, no one in India is talking about industry consolidation. Estimates place the number of operating mills between 500 and 1,000, "[but] not even 10% of these are big or dynamic enough to turn out quality paper products at competitive prices," Radhakrishna Rao of sarkaritel.com,an Indian news-site, pointed out. The small paper mills, many old, are using obsolete technologies, resulting in a number of inefficiencies, including use of energy, fibre, chemicals and water.
In effect, a dozen mills control most of the production, including the following:
Ballapur Industries Ltd. (BILT): Part of the $3 billion Avantha Group, BILT is India's largest manufacturer and exporter of paper, including writing and printing paper, industrial paper and specialty paper. BILT accounts for over 50% of the coated wood-free paper market, 85% of the bond paper market and nearly 45% of the hi-bright Maplitho market in India. BILT's six manufacturing plants across four states of India produce 500,000 tonnes of paper and 100,000 tonnes of pulp. Most of its plant sites are located in remote areas. BILT employs 10,000 people.
Hindustan Newsprint Ltd.: Government-owned Hindustan Newsprint Limited is based in Kerala of the Kottayam district. It produces about 100,000 tonnes per year of newsprint in two grades, 45 g/m2 and 48.8 g/m2.
Tamil Nadu Newsprint and Papers Ltd. (TNPL): Government owned TNPL is the largest producer of bagasse-based (sugarcane waste from sugar mills) paper in the world and the second-largest paper producer in India. It has reported revenues of $240 million. The company recently announced plans to invest about $245 million to add a paper machine at its Pugalur plant in Tamil Nadu, thus increasing annual capacity by 155,000 tonnes to 400,000 tonnes. It expects the new line to start-up October 2009. TNPL produces 245,000 tonnes of printing and writing paper and consumes one million tonnes of bagasse every year. It is the largest eco-friendly paper producer in the world. The World Wildlife Fund (WWF) has signed an agreement with TNPL to use the Panda logo in TNPL's branded products. The company employs about 1,725 people.
West Coast Paper Mills Ltd.: The flagship company of SK Bangur Group, West Coast Paper Mills Ltd. is based in Kolkata (Calcutta). The company reported revenues of about $148 million in 2008. The mill, built in 1955 at Dandeli, Karnataka, chiefly produces printing and writing paper and paperboard. It has ordered a paper machine from Voith to double its annual capacity to 320,000 tonnes, part of its $300 million expansion and modernization program to increase capacity and modernize its fibre line to make pulp. The planned start-up date is March 2009. West Coast employs about 2,500 people.
India obtains its fibre from three sources: forestry (wood and bamboo), agri-residue (bagasse, straw and cotton) and recycled paper, in almost equal percentages. In terms of recycled paper, India's domestic collections are insufficient to meet its needs, and therefore it imports almost half of its recycled paper, chiefly from the United States. In total, India imports nearly 400,000 tonnes of pulp, 20,000 tonnes of recycled paper and about 2,500 tonnes of finished paper annually.
India has a small forest area, most of it in the central part of the country. The government owns and manages the forests, which equate to an estimated 20% of the total land area, or 67.8 million hectares. Much of the forests have been degraded, and as a result forestry companies have petitioned the government for access to crown lands, thus far without success. What stands in the way is the Forest Conservation Act of 1988, which ended the practice of private companies using crown lands for commercial use.
"To change that law would take an act of parliament," Wadhawan of PwC pointed out, "and that's not likely in the near future."
Land use is at the heart of the issue. In a nation where the many poor use the land to grow food and derive fuel from sticks and branches to eke out an existence, commercial plantations are a non-starter. India has a large population of almost 85 million indigenous tribal people called the Adivasi, a Sanskrit word meaning "original people."
"These people have traditionally lived off the forests, and they are among the poorest people in the world," Kandlikar of UBC said. "Traditionally there has been a real tension between such local users of forests and governments, who might either want to protect the forests or contract it out to private companies."
That being the case, forestry companies such as BILT and ITC Ltd. tried looking to local farmers in an attempt to secure their fibre needs, in what has been called social-commercial forestry. To some degree, forestry companies supply farmers with seedlings of eucalyptus hybrids in hopes of securing a fibre source.
Yet its practice is limited, and with good reason.
"The farmer is under no obligation to sell the fibre back to these forestry companies," Wadhawan explained. "The farmer can sell it to anyone on the open market. Usually, the farmer sells the trees for lumber, which earns him more money."
Even so, in most cases, farmers don't have the type of patience to wait years for a tree to mature. "The economic benefits of growing food crops are much higher," Kandlikar of UBC pointed out.
For that reason alone, large companies like BILT have begun to look for foreign acquisitions to secure their fibre. In 2007, BILT bought Sabah Forest Industries, Malaysia's largest pulp and paper manufacturer, for $260 million. With the purchase, BILT has access to 2.9 million hectares of forestland for plantation purposes.
Wadhawan foresees more of the same, as the larger companies look to secure their fibre through acquisitions. That scenario will likely make fibre more expensive in Asia.
Technology and environment
Besides sourcing fibre, the India Pulp and Paper Technical Association identified a number of technological and environmental challenges: the high cost of energy and chemicals, installation of odour-control and solid waste-management technologies, and efficient use of water.
This is borne out in a study that the Centre for Science and Environment, an Indian public interest group of scientists and engineers, recently undertook. "Indian mills use, on average, between 250 and 300 cubic metres of water to produce one tonne of paper," a report said. In the same report, the centre said, "On average, Indian mills use 50 gigajoules of energy to make one tonne of paper."
Challenges remain for a nation progressing, and the forestry sector operates with these in mind. Chief among them, at least for the forestry sector, is developing a public-private partnership to develop forest plantations to ease the fibre shortage. But bigger socio-economic issues tend to put such discussions on the bottom of the government's agenda. Poverty has marked India so much since it achieved independence in 1947. However, now it seems as if it can make a breakthrough, and there is a growing push to achieve more equality by the nation's 75th anniversary in 2022. A recent World Bank report by Rachid Benmessaoud and Dipak Dasgupta noted: "What do the people of India want their country to be on its 75th anniversary in 2022? An acknowledged economic powerhouse and a country at peace. A place where all citizens - no matter who they are or where they live - have equal opportunity to fulfill their aspirations and improve the quality of their lives. And a vast subcontinent where mass poverty as we have known it has been finally eradicated."