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Industry reviewed, analyzed & discussed

On December 9th, 2011, RISI organized its third annual Indian Seminar for pulp and paper producers, suppliers and end-users to meet, greet & discuss. The idea was to provide the opportunity to gain insights into the latest trends in this increasingly important market called INDIA. The seminar was coupled with presentations and concluded with CEO Panel discussion where various topics were discussed, which was moderated by Mr. Madhukar Mishra, Managing Director, Star Paper Mills Ltd & President, IPMA.

(From L to R) Mr. Yogesh Agarwal – COO, BILT, Mr. Sanjay Singh – CEO, ITC - PSPD, Mr. Madhukar Mishra – MD, Star Paper Mills Ltd & President, IPMA, Mr. Paul Brown – Executive Chairman & CEO, Andhra Pradesh Paper Mills Ltd., Mr P.S. Patwari – Executive  Director, Emami Paper Mills Ltd., Mr. Anil Kumar – Executive Director & CEO, Shreyans Industries Ltd.
(From L to R) Mr. Yogesh Agarwal – COO, BILT, Mr. Sanjay Singh – CEO, ITC – PSPD, Mr. Madhukar Mishra – MD, Star Paper Mills Ltd & President, IPMA, Mr. Paul Brown – Executive Chairman & CEO, Andhra Pradesh Paper Mills Ltd., Mr P.S. Patwari – Executive Director, Emami Paper Mills Ltd., Mr. Anil Kumar – Executive Director & CEO, Shreyans Industries Ltd.
On the topic of capacity expansions that are conceded out in the respective product produced by each one of the panelist

Mr. Yogesh Agarwal: Talking of the capacity expansion in both coated & uncoated paper the country has doubled itself in the recent 3 years. With these expansions there is some overhang in uncoated segment in the country but overall most of the companies did well during the expansion phase. Around half a million ton per annum of uncoated paper, which was added during expansion phase is something extra than the demand which used to be exported out. But the good thing is that the markets like Middle East, Africa and Eastern Europe, which come naturally to us as the export option has helped us in handling the overhang. These markets offer us to service another billion people. So, I think India can be home or the source of supply to the 2 billion people out of 7 billion people in the world. So we are well located form this point of view.

BILT has expanded by installing coated paper machine, which is bigger than the previous one and we are completely sold out because we believe that supply creates its own demand. So, this is a part and parcel of the growth trajectory because the capacity always comes in the blocks and demand comes up in the ramped up manner which create a temporary disconnect but over a period gets absorbed.

Coming on to the tissue industry we did an acquisition of Premier Tissues couple of months back imagining that tissue would be the growth driver for the company. And in future this country also needs to be on the similar track as china was 15 years back. But right now the tissue market size is so small that even any exponential growth will result into a small number. Having said that the tissue in India has to go through many challenges like how the tissue should be marketed. Right now the tissue being the hygiene marketed by individual suppliers rather then by the companies like HUL, Godrej, P&G etc. In the next 10 years you will see that a good growth in this segment too.

Mr. Sanjay Singh: ITC have the ambitious plan to double its capacity in next 5 years. But before that we need to focus on 3 issues i.e. first the raw material which everyone is talking about, second is the energy cost which has gone up in the last couple of years so we need to invest in the better technology. Third is the shortage of good trained manpower. Though we are a country of billion people but finding people to work in the paper industry is quite a herculean task. It’s hard for someone wants to join paper industry for example if a young boy comes and work at a remote place and after 2-3 years he wants to get married and the girl would not like to come in that remote place so that’s a challenge.

Mr. Paul Brown: We are very comfortable with the recent acquisition of APPM. As we all know that demand goes in a smooth manner and capacity increases in a stepwise manner so disconnect happens. But we would not like to fall in this attitude of doom and gloom of short term disconnect and forgo the chunk of demand which this country has. From the IP perspective we have the experience of different markets and will make sure the capacity that we add in India serves the demand, we foresee from our customers.

In containerboard segment IP has a good experience. We produce 10 million tons of kraft linerboard in USA primarily and we are in the process of acquiring Temple Inland which will add 4 million tons to our network and majority of which is virgin kraft. In containerboard we are a big collector of the recycle fibre. In India this is something we are looking at and trying to understand the market as we feel that there is a good opportunity for good quality containerboard and recovered fiberboard in this country. But there are some challenges like supply of good quality OCC, infrastructure & logistics to supply the big rolls of containerboard to fragmented corrugators, different sizes for the different markets etc. And the bigger question is will the customer pay for the high-end sheet.

Mr. P.S. Patwari: On every platform we advise our members to concentrate on the quality of newsprint. At Emami we are producing quality product, as per our customer needs, which they are importing and it also fetch us a good price. So, replacing imported newsprint offers a readymade market of more than 1 million ton and the growth of more than 10%. In Emami paper we are further expanding our wings to wood based writing & printing paper and also adding 1 more machine for newsprint in the coming years.

Mr. Anil Kumar: Being a small market half a million tons will really affect the market. And I believe the demand which education sector represents will surprise many. For example the program like education for all by the government highlights the tremendous growth opportunities. Further the state boards are shifting towards the higher grammages for their text books like earlier 60 GSM paper was the standard but now boards have shifted towards 70 GSM or even 80 GSM which creates 20-25% additional demand. In the times to come this uncoated normal paper will grow phenomenally. Moreover I disagree that writing & printing (W&P) capacity will close down due to environmental issues. Nowadays mills employ good technology due to the pressure from NGO’s and government to look into their environmental footprints. Further agro-based mills expansion will be limited with accord to the fibre availability.

Raw Material Scenario

Mr. Anil Kumar: I believe no mill has been shutdown for 4-5 months or any mill has kept their expansion plans on hold with regard to the availability of fibre. Today, expansion plans are based on the demand forecast rather than fibre availability.

Mr. Sanjay Singh: At ITC we are engaged in the wealth from waste (WOW) programme from the last 3 years. We are collecting waste paper from schools, colleges and households, but the cost of collection, transportation and managing is very huge. Today we are not making any money instead we are losing money on this. But we believe that in due course of time we’ll catch up and bring out our cost. Lot of efforts has been done but we have to be supported by the government legislation too. Today we are collecting 30,000 tons of waste paper and in another 1 or 2 years we have plans to step up the collection to 50,000-60,000 tons, which will become a viable alternative.

Mr. Anil Kumar: As far as the government is concerned we feel that they are not very keen to pass any legislation on waste paper collection or household collection. For example in the state of Punjab the government gave contract to a company to collect waste from the house at a nominal cost. Suddenly the entire class four employees of MCD went on strike and for 4 days the whole Ludhiana was stinking. So the government had to take back the contract from that company.

Mr. Paul Brown: The reason why we see more collection rate in the developing economies like Europe and America is because the fibre is coming out of the big box retailers. This is a current issue in India instead of a legislation we need an economic solution like FDI in retail. As once you have those big box retailers with this growing middle class in the country it will create a huge amount of benefits in the supply chain for generation, collection and reuse of fibre. Collecting fibre from the back of carrefour, Walmart or Metro like retailers is much more efficient rather collecting it from millions of households.

Mr. P.S. Patwari: We are very good with our collection system and are able to procure 80% of the old newspaper. And that 80% goes industry mainly to newsprint & packaging grade manufacturers. Collection rate in the particular segment like newsprint is very good and will further go up to 85-90%.

On the image makeover of the Paper Industry

Mr. Yogesh Agarwal: If you have to do something for the industry as a whole then you have to do something big. Creating a little noise here or there will come on the radar screen for little while but that can prove to be damage rather than generate any positives. You need to go full throttle for which plans have to be laid down for the next three years and a reasonable amount of money has to be involved. There are many facts about the paper industry, which could appeal to the conscious of the layman and it can be done but the point is that it has to be presented very thoughtfully.

Mr. Sanjay Singh: It is a very complex issue. I share an experience with you, when we started this WOW program in schools we told students that collect the waste papers and give it to us and for every 2 kg of waste paper you will save one tree and our target was to save 1 lac trees. Then an internal debate in the organization was going that on one side we are telling children that collect waste paper so that trees can be saved and on the other side we are cutting trees though we are planting more trees than that. So we were in bit of dilemma and we thought that the younger generation should know about it that there are two aspects of this, one growing more trees than you cut and collecting waste paper so that you can work on that channel. We as industry are more technology oriented rather than marketers and we need to market the good image of the pulp and paper industry.

Mr. Paul Brown: I would say it’s not easy for us to do image makeover of IP overnight. We have poured lot of money in this and have worked a lot in the company vis-a-vis other companies in our sector in other countries too. On our online portal we have a section called grow paper grow trees where we say that paper actually stimulate the growing of trees. But the thing with which we are fighting is the tide of negative popularism about the paper industry. One thing that we observe in India and other countries is that there are companies which do not comply with the regulation on books and this should not happen at any given point.

Mr. Anil Kumar: We must try to integrate ourselves with the local communities to promote the positivity about paper industry. On one side if you have smoke from the chimneys, bad smell from the waste, black liquor etc. coming out of the mill and on other side you talk of paper to establish as a green product it will not work. In India environmental compliance means different to different people one I have actually comply with the regulations and another that I have complied in the books of local pollution control board. That may work with the governments but might not work with the communities.

Human Resource Management

Mr. Sanjay Singh: The problem is on 2 fronts first on the engineer’s level, there are plenty of engineers in the country but wanting them to join paper industry is quite a difficult task so we need to find the mechanism to do that. But the bigger problem that stands out is to find the good quality talent, which can fit into the place. Secondly, we have lot of ITI’s but the quality that comes out from there is a suspect. If a company wants to do an expansion you cannot afford to recruit sub standard people and compromise on your workflow and product quality. One step that we can take is to adopt the nearby ITI’s and skill those people, since the factory can be used as training ground so lot of these things can be integrated with one another. And any delay on this front will impact our competitiveness in the long run.

Mr. Yogesh Agarwal: I actually come from different industry and can see the difference in both the industries. In our industry there is a big vacuum in the middle management because top management has to grow through the middle management. The issue is that the industry is managed by the domain expertise rather than general management so the guy who is in middle management or above has to know everything by domain. Like FMCG companies we don’t like to work with new people so most of the time people hop down from one company to another. It’s like standing water where people are comfortable to work with the people they know and at times it acts as discouragement for others to come in. Today, paper industry pays quiet well and recently we have broken all kinds of records with the kind of money that is being offered but still we don’t want to spend money on offices, manpower, IT, warehouse, distribution etc. but only on machines. So it’s a mindset that needs to be changed.

Mr. Paul Brown: In my short time in India I have analyzed that there is movement of people from company to company and from my perspective it’s not a healthy thing. As a global company we have lot of disadvantages of being here as we are new to this market and are not abreast about the cultural practice. One advantage that IP has is its very strong people sophistication system. And we want IP in India to be a great place for people to work and develop. We focus on people, their development, putting right people on right job and draw their carrier path in the organization. It’s all about the sense that you can create among your people and actually grow with that.

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