Despite the continued focus on digitisation, India’s
demand for paper is expected to rise 53 per cent in the next six
years, primarily due to a sustained increase in the number of school-going
children in rural areas.
Growing consumerism, modern retailing, rising literacy (continued government
spending on education through the Sarva Shiksha Abhiyan) and the increasing use
of documentation will keep demand for writing and printing paper buoyant.
“Though India’s per capita consumption is quite low compared to global peers,
things are looking up and demand is set to rise from the current 13 million
tonnes (mt) to an estimated 20 mt by 2020,” said Harsh Pati Singhania,
vice-chairman and managing director of JK Paper.
An India Ratings report estimates India’s per capita paper consumption at nine
kg, against 22 kg in Indonesia, 25 kg in Malaysia and 42 kg in China. The
global average stands at 58 kg.
“This indicates there is a lot of headroom for growth in India. From a demand
point of view, every one kg incremental per capita consumption results in
additional demand of more than one mt a year. Besides, policy factors also have
a key role to play in the growth of the domestic paper industry in India. The
government’s sustained focus on literacy, increased consumerism and expansion
in organised retail are expected to positively affect paper consumption and
demand in India,” said Yogesh Agarwal, managing director and chief executive of Ballarpur
Industries.
Digital media has a lot of ground to cover, at least as
far as penetration is concerned, primarily in rural areas. Paper is an
established business and its consumption is being encouraged. What was
heartening was though there were challenges, the packaging side of the segment
continued to grow, Agarwal added. In the last five years, the Indian paper
sector has invested about Rs 20,000 crore on capacity enhancement, technology
upgrade and acquisitions. Now, companies in the sector are seeking to improve
their balance sheets. While the sector is eager to expand capacity further,
decisions in this regard will depend on how soon companies can improve their
financials.
The India Ratings report in 2014-15, said paper companies would achieve higher
profitability and free cash flows due to lower capital expenditure, and this
would help in deleveraging. This is because the debt levels of these companies
have peaked and cost benefits will accrue from backward integration (due to
capital expenditure) and a larger scale of operations.
“The capacity expansion that took place in the industry through the last few
years is now being absorbed due to the rising demand for paper in India. The
sector, which faced challenge from rising input (wood) costs, is now better
placed due to a renewed thrust on agro-forestry and softening of pulp costs,”
Singhania said.
Commissioning of several state-of-the-art pulp and paper machines such as that
seen in the case of JK Paper last year will result in lower operating costs and
improved quality.