India is deficient in overall fiber availability, not to say wood-based fiber; the way forward is to layout carefully a long-term wood-fiber strategy with a serious focus on indigenous social-farm-forestry, cutting down the need of importing fiber permanently.
The Indian pulp and paper industry has long been grappling with raw material problems leading to inadequate feed to its paper machines. A lot of permutations and combinations of raw material mix have been tried upon by the industry from time to time to beat the insufficiency of fiber lurking almost perpetually over paper manufacturers. When the wood became scarce, a myriad of agro-residues were assessed for its probable use and recycled fiber and its greater recovery rate became a concern for the industry. However, nothing can replace wood as the most viable and lasting source of fiber; but then, where are the trees?
The industry today is experimenting with all kinds of forestry practices in order to build a sustainable reservoir of wood without letting eyebrows to be raised over environmental concerns. A combination of farm forestry, agro-forestry, and social forestry is being considered and applied to not only consolidate the wood fiber base, but to dispense desirable socio-economic benefits to communities. ‘Fiber sourcing is key to overall cost effectiveness’ is axiomatically true for the paper industry.
Paper Mart recently interviewed Mr. Suneel Pandey, Vice President-Procurement & Supply Chain (Raw Material), ITC-PSPD to ponder upon issues and solutions pertinent to procurement and supply-chain of raw material wherein he tried explaining what it takes to carve out a cost-competitive way of fiber sourcing. He is heading farm level procurement and logistics for nationwide aggregation of wood supply chain and ferrying it to mills using multi-modal transportation system. He is also instrumental, with other forestry experts, in raising highly productive, disease resistant and quality plantations to ensure availability of wood at competitive price.
To start with us, tell us something about your background and the experience you have acquired in procurement and supply chain.
I am an engineer from IIT Delhi as well as a forester (Indian Forest Service – IFS 1990 batch) by profession. I have served in IFS for about 18 years, and my last assignment was to lead National Mission on Bamboo Application (NMBA), a mission mode programme of Government of India under Ministry of Science and Technology, to develop, validate and commercialize technologies for value added products and applications of bamboo. I left IFS in 2008, and have been handling procurement and supply chain for last 8 years. It (procurement and supply chain) has mainly been based on farm level as well as aggregator level wood procurement, in the country as well as in different tropical countries such as South Africa, Australia, Thailand, Vietnam, and Malaysia.
Having served in highly prestigious IFS in past, you must have formed a substantial knowledge base as regards to forestry. How does the knowledge base help you in your present role (as the primary raw material here is wood only)?
We are taught critical com-mercials and supply chain elements in engineering as well as in our forestry training. IFS gives a huge experience to understand how different development models work or do not work in our country’s rural settings. In a span of 18 years, you move and get insights of design and delivery systems, right from village to sub-division to district to State Government and to the Government of India level.
It (IFS) also provides immense learning in terms of management of forests and plantations of different eco-zones, species, growth parameters, quality of wood, settings under which these plantations are grown, as well as how best designed plantation models coupled with aggregation and supply chain elements can bring in benefits to the industry, farmers, and other stakeholders. Certainly, all those learning are being immensely utilized in my current role in ITC, as head of plantations and wood procurement.
As is known, improving raw material sourcing is an important way to save costs. Share with us some of the standard practices that you follow in this direction.
I believe that not only raw material sourcing and procurement systems, but even elements starting from how plantations are raised, which species are most suitable for a particular site, which clone of the specie could give maximum productivity to the farmers are also the factors that bring in cost saving, as a farmer would always like to have maximum profit from his available land. So, if I can maximize wood productivity from farmer’s land and grow it near the mill site, I can save cost in procurement as well as in logistics, by creating a win-win situation for industry as well as for the farmer. That has been strategic strength of ITC, which we have been able to build over the years in our catchment areas.
Have you done some innovations in the past years as far as sourcing of the raw material is concerned and which have resulted in some substantial cost benefits?
We have done lot of innovations in last few years to bring in cost advantage, as well as to bring in socio-economic and environmental benefits through our focused farm forestry and social forestry initiative. We were the first company in India to get FSC (Forest Stewardship Council) certification for our farm forestry and social forestry plantation, which benchmarks our management practices with the best practices available in the world. This gives a niche value to the wood being grown by the farmers under FSC certified management systems, as well to our products being manufactured out of FSC certified wood.
We have also focused on agro-forestry models, which combine agriculture crops with tree growing, to bring in wood and food security, as well as to enhance the profitability of the farmer. This reduces the burden of competitive profit realization entirely on tree crops/wood produced, thereby making plantations profitable even at reduced price realization.
Tell us the implicit and explicit bottlenecks in the supply chain of raw material resulting in major financial losses. How do you suggest these can be remedied?
The Indian pulp and paper/ paperboard industry competes with industries located in South East Asia, which are sourcing wood from leased forest plantations, which is proving to be a very low cost and stable cost model for wood procurement. Though those models of wood production and sourcing do not create much positive socio-economic impacts as we have been able to create through our farm forestry plantations, it certainly hurts Indian industry and wood supply systems in terms of cost-competitiveness.
The Government has realized this bottleneck and has recently taken an initiative to involve industry in restocking degraded forests as well in creating end use based plantations. Aspects of natural species diversity, their conservation as well as meeting fuel-wood and fodder requirements of local communities have been taken care of in proposed initiative and the guidelines proposed for the same.
This initiative will also enable us to partner in restocking degraded forests, which is a hugely daunting task that the present Government has undertaken. But, we expect that only small part of our growth requirements of wood would come from this initiative, and our main focus on farm forestry and social forestry would still continue in future. We strongly believe that increased farm level productivity in our core catchment would bring in immense cost-competitiveness to us in future.
Share with us the break-up of total fiber requirements among all the mills of ITC. Also, tell us how do you ensure the consistent fiber supply to the respective requirements?
Presently, 70 percent of our fiber requirement is met through domestic sources. In future, we intend to meet our entire fiber requirement through domestic sources, except part of softwood fiber sources which cannot be met through domestic sources.
What are you in favor of: sourcing fiber from overseas or revamp our domestic supply through farm forestry? What should a paper manufacturing firm do to create a stable procurement strategy?
Sourcing of fiber requirements from overseas would neither help the industry, nor the society in long run. Development of domestic fiber sources through farm forestry and social forestry initiatives has immensely helped the bottom-of-the-pyramid rural communities and farmers, as well as the industry, in terms of improving wood availability and that too in its own catchment. This has proved to be the best way to create stable pulpwood supply systems for the industry.
At last, share with is some short- and long-term outlook of raw-material procurement scenario in India. Also, comment on the present status and future prospects of the Indian paper industry.
India is a wood deficient country and there are huge challenges for getting cost competitive wood supply. But, companies like ITC have adopted right strategy in terms of improving farm level wood productivity through introduction of new technologies, package of practices, highly productive and disease resistant clones and site specific nutrient management systems. These initiatives would bring in long term benefits and cost competiveness to the industry. I see a very bright future for the Indian Paper Industry.