THIRD ASSIGNMENT

Course Title: BUSINESS ENVIORMENT TOPIC- PESTLE AND SWOT ANALYSIS OF PAPER INDUSTRY

Submitted to:

Mr. Hitesh Submitted by:

Amritansh: A14

Sonika: A18

Rahul Targotra: A17

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Introduction of Paper Industry

The Indian paper industry has been historically divided on a three dimensional matrix

identified by size, grades manufactured and raw material utilized. Generally, tariff rates

have protected smaller units utilizing “unconventional” raw material. Over the years, the

growth of various segments, investments levels in specific segments, technological

changes, industry fragmentation and intensity of competition have been significantly

influenced by the Government tariff policy. The present Excise duty on Paper is 12 %.

The Government of India from time to time has given some benefits to small industries in

order to protect them i.e. the first 3500 tons produced by a mill is chargeable only @ 8 %

and thereafter it is @ 12 %.

The three main grades of paper manufactured in India are:-

1. Newsprint

2. Writing and printing.

3. Industrial Variety (Craft paper and Duplex Board)

Over 550 players currently populate the industry and the estimated capacity is about 7.00

million Metric Tons Per Annum (MTPA). Fragmentation is severe in the “industrial”

(packaging) grades, which rely on “unconventional” raw material such as waste paper

and partly agro residues. This division generally comprises of units with an average size

of about 10000 MTPA and contributes to 45% of the output of paper and paper boards in

the country. Although the other divisions in the Indian paper industry are also fragmented

by international standards, the degree of fragmentation is less severe. “Newsprint” till

about 1995, was the sole preserve of large public sector units and was well protected by

high import tariff barriers. Nevertheless, imports contributed to about 50% of the

domestic consumption. Since then, new domestic capacity with private investment has

been allowed to be created. This growth has relied namely on De-inked waste paper as a

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source of raw material. Currently import duty on newsprint is about 5% and domestic

manufacture of newsprint is exempted from excise duty. This tariff structure for

newsprint has seen Indian newsprint price closely mapping international prices. Imports

still constitute about 30% of consumption and newsprint contributes about 10% of the

total production of paper and paperboards. The number of players in the newsprint

segment is relatively limited and manufacturing capacities are larger than in the

packaging grades segment. Historically, the bulk of the output of “Cultural” grades –

comprising of writing, printing, office stationery paper and specialty paper has been the

preserve of “large” producers, who use forest based raw material in integrated pulping

facilities augmented by imported pulp. This segment has been consistently taxed at

higher rates due to its size and use of “conventional” forest based raw material.

Investment in plant has also been higher. With relatively smaller number of players and

high import tariff protection, prices of end products, generally perceived to be higher

quality, have been high.

Import tariff levels, although much lower now, still continues a significant barrier to

imports. The high investment levels required and limited “conventional” fiber resources

are the major deterrents to growth in this segment for both existing players as well as new

entrants. “Lower end cultural grades” manufactured by smaller players using

unconventional raw materials in low investment, low tech plants cater to consumers in

the price sensitive sub segment of this market. This sub segment depends significantly on

the tariff differential based on size and raw material for its viability.

The Indian Paper industry is going through substantial changes. Global demand for paper

is expected to grow by about 4% p.a. over the next 5 years. The domestic demand is

expected to grow at about 8% which will result in increase of demand by 30 Lakh tones

approximately over the next 5 years. It is expected that customs duty on import of paper

will decrease from the current level to the level of 10% over a period of time due to WTO

compulsions.

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The import of raw material for paper including pulp, waste paper and news print is likely

to increase by at least 15% to 20% in 2005-06 to keep up with growing demand for paper

in the domestic market. Despite to the constraints like over crowded market and

limitation in procuring the desired quality of waste paper, there are indicators of a revival

in the Indian Paper Industry. In the current year, selling price has marginally increased

and enabled the industry to partially offset the rise in cost of inputs, fuel & labour.

The paper industry has an important social role to play for the country. Use of paper is

considered as an index of cultural growth. Key social objectives of the Government like

eradicating illiteracy, making primary education compulsory etc. are very much related to

the paper industry. The paper industry is also contributing towards fulfillment of various

requirements of the industry as a whole like information dissemination, publicity etc.

which in turn stimulate industrial growth of the country. The paper industry has, thus, a

catalytic role to play not only for the overall growth of the industry but also for the living

standards of the people. The new millennium is going to be the millennium of the

knowledge. So demand for paper would go on increasing in times to come. Because of

paper industry’s strategic role for the society and also for overall industrial growth, it is

necessary that the paper industry performs well.

FUTURE PROSPECTS

The globalisation of Indian economy has lead to a healthy growth of 6 to 7% industry and

that is growth happening in all the sectors. Moreover the Per Capita consumption of

paper in India is going up with the advent of packaging in the food industry. Due to

environmental concerns, the use of plastics is likely to be banned by the Government of

India within a short span of time. Hence within 2 to 3 years we will be witnessing an

explosive growth of packaging in India mainly in food, textile and export segments.

The exposure to foreign packaging technology and the need to satisfy the export

customers has led to a drastic change in the industrial packing sector. The corrugators

have started using high BF, high GSM paper instead of the regular grades and shifting

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from 7 ply and 9 ply boxes to 5 ply and 3 ply boxes. The above change has resulted in

more aesthetic and cost effective packing solutions. There is a very good potential market

developing for such grades of paper in India. The market of high quality Kraft paper is

now catered only by few manufactures from western and northern parts of the country.

With the above changes in the industry it would be in the best interest of our company to

put up a Kraft paper plant of 100 MT per day producing high B.F., higher GSM paper

and exploit the emerging market situations better. The company envisages the following

advantages by going for such a plant as follows:

l) Most of the existing paper mills in South India operate with single wire machine, which

can produce up to 24 BF only, whereas the new plant intended to be set up by SSPML is

a twin wire machine which can produce high quality Kraft paper of 24 BF to 40 BF

which is sold in the market at a premium. l By making high end paper in south India the

company stands to gain a lot in terms of logistics costs when compared to the

competition. l SJPML got the advantage of cost benefit while importing raw materials

and exporting finished product. l The possibility of exporting substantial quantity of the

production to near by countries like, Sri Lanka and eastern African countries is also

bright. This may also be substantiated from the fact that paper exports have risen at a

CAGR of 14 % pa from 105000 tonnes in the year 2000 to 179000 tons in the year 2004.

As a strategic measure to expand the international operations of the company, the

company has already started a new business division – International Business Unit to

handle the international marketing operations of the Company.

2) The company intends to manufacture the paper by using Twin Wire Technology and

also plans to incorporate all latest equipments to have a cost effective production. The

twin wire technology employs two wires drawing pulp stock from two separate head

boxes. The arrangement is in such a way that the wet webs come into contact before

going to the press.

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3) At present the Company is employing single wire technology wherein the pulp stock

flows from the head box and gets distributed uniformly for further dewatering, pressing

and drying to form a sheet of paper.

The twin wire technology is superior to the single wire technology due to the following

factors:

1. Improves formation of paper.

2. Improves strength properties of paper namely Burst factor, Tear

Factor, Tensile strength and Ring crush test values.

3. Reduces Cost of Production.

The company will be able to derive the synergies of the existing plants and position itself

as a largest Kraft paper manufacturer in south India by the installation of the plant. The

market expectation for the increased production

Capacity, Production, Raw Material and Import

Government has completely de-licensed the paper industry w.e.f. 17th July, 1997. The

entrepreneurs are now required to file an Industrial Entrepreneur Memorandum with the

Secretariat for Industrial Assistance for setting up a new paper mill or substantial

expansion of the existing mill in permissible locations.

The industry is a priority industry for foreign collaboration and foreign equity

participation up to 51% receives automatic approval by Reserve Bank of India. Foreign

investment even up to 100% is approved by FIPB on case to case basis. Several fiscal

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incentives have also been provided to the paper industry, particularly to those mills which

are based on non-conventional raw material.

There are, at present, about 515 units engaged in the manufacture of paper and

paperboards and newsprint in India. The country is almost self-sufficient in manufacture

of most varieties of paper and paperboards. Import, however, is confined only to certain

specialty papers. To meet part of its raw material needs, the industry has to rely on

imported wood pulp and waste paper. The production of paper and paper board during

the year 2001-02 is 31.62 lakhs tones.

The proportion of non-wood raw material based paper is increasing over the years. At

present about 60.8 per cent of the total production is based on non-wood raw material and

39.2 per cent based on wood.

The performance of the industry has been constrained due to high cost of production

caused by inadequate availability and high cost of raw materials, power cost and

concentration of mills in one particular area. Several policy measures have been initiated

in recent years to remove the bottlenecks of availability of raw materials and

infrastructure development. To bridge the gap due to short supply of raw materials, duty

on pulp and waste paper and wood logs/chips have been reduced. The capacity utilization

of the industry is low at 62% as about 194 paper mills, particularly small mills, are sick

and/or lying closed. Several policy measures have been initiated in recent years.

Imports of paper and paper products were growing over the years. However, it has

decreased during 2000-2001.

Demand and Supply gap in Paper Industry

Indian paper industry is the 15th largest in the world and provides employment to 1.3mn

people in the country contributing Rs.25bn to the Government. The industry has recorded

a volume growth of CAGR of 5.47% over the last 3 years. In 2003-04, it recorded a

volume growth of 6%, in line with the GDP growth. Indian paper industry has a 1:1

correlation with the economy. The demand for paper is linked to the GDP Growth. The

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government is planning to target a GDP Growth of about 10% in 2-3 years. With this

increase in the GDP growth the paper sector is expected to record a similar growth rate.

The Indian paper industry has an installed capacity of 6.7mn tons while, the effective

capacity is estimated to be lower at 6.15mn tons. The industry produced 5.26mn tons of

paper in 2003-04. Newsprint capacity in India is estimated at 1.12mn tons however,

domestic production is only 0.59mn tons, while consumption of newsprint is 1.1mn tons.

Favorable demand - supply scenario to keep prices firm

The demand for paper is influenced by various macro-economic factors like national

economic growth, industrial production, promotional expenditure, population growth and

the Government’s allocation for the educational sector. Domestic demand for paper is

expected to grow at a CAGR of 6-7%. India’s paper demand is expected to touch 8mn tpa

by 2010. A leading global paper industry consultant projects a shortage of about 0.7mn

TPA by 2010.

Proposed capacity expansions:

Capacity expansions (which cost 50% less than new capacities) have been announced by

most players, but would take 1-2 years to be operational. Capacity expansions of over

600,000 tons have been announced by the 7 large players in the sector

WTO Impact

WTO as discussed the implication of Indian Paper and Newsprint Industry as part of its

negotiations and implications. The Indian Paper Industry has important place in the

industrial landscape. The paper industry has a strong backward linkage with forests and

environment on one hand and consumers of a variety of products on the other hand. The

manufacture of paper through pulp of wood or of other fibrous cellulosic material has

been discussed at length. However, recovery of waste or scrap for paper and paperboard

manufacture has been looked at from different angle in the classification of products of

Indian Paper Industry. In fact the paper industry which are eco friendly imports lot of

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waste paper into the country in the manufacturing of paper and paper board. Generally

WTO implication is applicable to all the industries. However, in respect of paper industry

where waste paper is the raw material and which is eco friendly, the impact is not harsh.

SSPML is into manufacturing of paper out of the waste paper and is an eco friendly

project.

GOVERNMENT REGULATIONS, PERMISSIONS & TAXES

1. Central Excise:

Central Excise is levied @8% for the first 3500 MT production and thereafter @12% on

the value of the invoice. The Company is availing permitted Modvat benefits as per

Central Excise regulations. For import duty paid on waste paper procured from overseas

the Company is entitled to adjust the entire duty paid component as that of Modvat

credits.

2. VAT (Value Added Tax):

VAT replaces the existing multipoint taxes levied by various states with effect from April

‘05. As that of other industries, the paper trade is also covered under VAT for domestic

sales done in the state of Kerala. However for interstate sales CST is continued to be

levied as per existing Government regulations.

3. Service Tax:

Being classified as a manufacturing industry, the industry even for Job Work on

conversion basis will not be subjected to Service Tax requirements. A recent notification

from Central Government also confirms such a stand.

4. Factory Licenses: All the licenses required under Municipality Act, Factories Act are

obtained and duly renewed.

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5. Pollution Control:

Necessary permission under effluent discharge Act is obtained and the facilities required

to maintain the permission are in place.

AVAILABILITY OF DOMESTIC WASTE PAPER  

Waste paper recovery system in India is very unorganized and unplanned. As a result,

large quantities of waste paper get diverted for cheaper packaging and other uses or get

destroyed as rubbish. Bulk of waste paper collected by street collectors in metropolitan

cities goes to household paper bag manufacturers. Due to lack of any grading/

classification system in context of waste paper, no sorting or segregation is done at

source and so most of the waste paper varieties are collected in commingled form. The

probable sources of waste paper collection are as under:

Waste Paper

Source

Examples

Domestic refuse Newspaper, magazines, board cartons.

 

Industrial refuse Corrugated boards, duplex & other packaging board, paper

sacks etc.

Office refuse Ledger files and papers from Govt. offices,

Universities & large business organizations.

Trade refuse Boards trimmings from converters & packaging manufactures,

paper savings from printers

Road Sweeping Newspapers and magazines are usually recycled directly as

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wrapping and packaging papers by the grocers and pretty

traders and therefore they are not available for mills in their

first rejection. Other fibrous domestic refuse probably find

their way as road sweepings.

 In India, collection of office refuse has not been very high mainly due to unavailability

of a viable collection system. In practice, more than 80% of the paper consumed in India

is being collected, of which only 20% is being made available to paper industry and the

rest 60% is usually diverted for other diversified / secondary uses such as wrapping,

packing etc.  

The developed countries, which are the major players in paper recycling business, have a

well defined and planned waste paper grading system in place, which facilitates the

collection of recovered paper sorted in grades with a limited mixture of fiber types. Due

to limited capacities of landfill sites and (municipal) incineration plants, increasing waste

disposal costs and environmental awareness a wide range of legislation / directives in

various countries have been imposed which has promoted material recycling and reduced

further , the generation of waste that requires disposal in appropriate facilities. These

regulations set responsibilities for taking back used paper products and packaging

material independent of the public disposal system and recycling them. 

In India, however, no such regulations / law / directives are in force to promote use of

recyclable resources, as a result of which the recovery of used paper is also low. As per

the statistics available, the Indian paper industry is using more than 70% of imported

waste paper in its total waste paper consumption. The general issues related with use of

imported waste paper in Indian Paper Industry are:

Ø     Inconsistency in quality and varieties of waste paper grades.

Ø       High level of contamination i.e. prohibitive & out throws.

Ø       Price fluctuation in the international market.

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Ø      High price for good quality waste paper i.e. low to negligible contamination

level.

Ø       High ash content in paper leading to low fiber yield / tpaper and generation of

inorganic sludge. 

ISSUES RELATED TO WASTE PAPER BASED MILLS 

In spite of the fact that waste paper processing for paper making is considered to be an

eco friendly process , there are certain technological & environmental issues still

associated with waste paper based mills which needs to be addressed to improve its

environmental compatibility. 

Technological Issues : 

The main objective of recycled fiber processing is the removal of contaminants and

elimination of their effects as much as necessary to meet quality requirements. Removal

of contaminants makes recycled fiber processing systems significantly more complex

than systems for virgin fibers. There are several unit operations / stages viz. slushing,

screening, cleaning, flotation, disperger etc. to remove the contaminants from recycled

fiber stock. The technology is well established to produce newsprint, packaging grades

and fine papers and most of the mills in USA, Europe have state-of-art technology for

processing of recycled fiber. In India, however, most of the recycled fiber based mills do

not have appropriate system configuration for efficient processing, as a result the quality

of finished paper is low. The level of technology in majority of mills is obsolete. The

operational efficiency of equipments and machines are also considerably below the

optimum level . Due to lack of appropriate configurations, the amount of rejects

generated are also high and is a major source of solid waste generated in such mills . 

Environmental Issues :

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Among the environmental issues associated with recycled fiber mills, solid waste

disposal and management is the subject of main concern .Deinkined sludge generated

from deinking plants in mills using printed waste paper for producing writing & printing

grade of paper, consists of mainly fillers and coating pigments, fibers, fiber fines, printing

inks and adhesive components. A characteristic feature of the deinking sludge is its high

ash content in the range of 40% - 70%. Traces of heavy metals may also be present in

some cases. In most of the cases the heavy metal content is insignificant and sometimes

even below the detection limit. The another important issue reported recently is the

clandestine import of other waste like plastics, metal and cloth / rags etc (technically

defined as prohibitive and out throws) along with waste paper.  

OBESRVATION & REMARKS:  

Generally the waste paper being imported in the country are recovered in segregated form

as per the request of the importer. However, some cases have been reported wherein

municipal solid waste constituting of plastics, metal cans and cloth / rags etc

(technically defined as prohibitive and out throws) have been illegally imported in grab

of imported waste paper This has led to the need of defining / formulating the

permissible limits for the contaminants like plastics, metal cans and cloth / rags etc. in

the imported paper . At present, no data /guideline is available on this issue Therefore; it

is recommended to undertake an in depth study on this issue so as to evolve permissible

limits for prohibitive and out throws in the imported waste paper consignments

entering into the country.

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PESTLE ANALYSIS

PESTLE analysis is a useful tool for understanding the industry situation as a whole, and

is often used in conjunction with a SWOT analysis to assess the situation of an individual

business.

 

PESTLE stands for “Political, Economic, Sociological, Technological, Legal and

Environmental” factors. The questions to ask are:

 

What are the key political factors likely to affect the industry?

What are the important economic factors?

What cultural aspects are most important?

What technological innovations are likely to occur?

What current and impending legislation may affect the industry?

What are the environmental considerations?

Political Factors

The Political factor refers to the governmental policies which are much influenced

by the economic situation in a country. It is a macro aspect of analyse which deal with

major changes to the government policies of a country. It has great influence to the

business outlook and confidence. Political factors often comprises of

- Current taxation policy

- Future taxation policy

- The current and future political support

- Grants, funding and initiatives

- Trade bodies

- Effect of wars or worsening relations with particular countries

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Economic factors

The Economic factor is an area where macro economic environment can affect the

outlook and competitiveness of any business sectors in the country. Economic factors

comprises of

- Overall economic situation

- Strength of consumer spending

- Current and future levels of government spending

- Ease of access to loans

- Current and future level of interest rates, inflation and unemployment

- Specific taxation policies and trends

- Exchange rates

Social factors

The Social factors refers to the cultural aspects of the country. Social factors

comprises of

- Demographics

- Lifestyle patterns and changes

- Attitudes towards issues such as education, corporate responsibility and the

environment

- Social mobility

- Media views and perceptions

- Ethnic and religious differences

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Technological factors

Technological factor is more tangible and easy to validate. It includes ecological

and environmental aspects, technology incentives such as Research & Development

incentives, automation reinvestment, high capital setup and rate of technological change

in certain business. The technological factors include:

- Relevant current and future technology innovations

- The level of research funding

- The ways in which consumers make purchases

- Intellectual property rights and copyright infringements

- Global communication technological advances

Legal factors

Legal factors often comprised of

- Legislation in areas such as employment, competition and health & safety

- Future legislation changes

- Changes in European law

- Trading policies

- Regulatory bodies

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Environmental factors

Environmental factors includes

- The level of pollution created by the product or service

- Recycling considerations

- Attitudes to the environment from the government, media and consumers

- Current and future environmental legislative changes.

 

Paper Industry in India

Paper industry in India is the 15th largest paper industry in the world. It provides

employment to nearly 1.5 million people and contributes Rs 25 billion to the

government's kitty. The government regards the paper industry as one of the 35 high

priority industries of the country.

Paper industry is primarily dependent upon forest-based raw materials. The first paper

mill in India was set up at Sreerampur, West Bengal, in the year 1812. It was based on

grasses and jute as raw material. Large scale mechanized technology of papermaking was

introduced in India in early 1905. Since then the raw material for the paper industry

underwent a number of changes and over a period of time, besides wood and bamboo,

other non-conventional raw materials have been developed for use in the papermaking.

The Indian pulp and paper industry at present is very well developed and established.

Now, the paper industry is categorized as forest-based, agro-based and others (waste

paper, secondary fibre, bast fibers and market pulp).

In 1951, there were 17 paper mills, and today there are about 515 units engaged in the

manufacture of paper and paperboards and newsprint in India. The pulp & paper

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industries in India have been categorized into large-scale and small-scale. Those paper

industries, which have capacity above 24,000 tonnes per annum are designated as large-

scale paper industries. India is self-sufficient in manufacture of most varieties of paper

and paperboards. Import is confined only to certain specialty papers. To meet part of its

raw material needs the industry has to rely on imported wood pulp and waste paper.

Indian paper industry has been de-licensed under the Industries (Development &

Regulation) Act, 1951 with effect from 17th July, 1997. The interested entrepreneurs are

now required to file an Industrial Entrepreneurs' Memorandum (IEM) with the Secretariat

for Industrial Assistance (SIA) for setting up a new paper unit or substantial expansion of

the existing unit in permissible locations. Foreign Direct Investment (FDI) up to 100% is

allowed on automatic route on all activities except those requiring industrial licenses

where prior governmental approval is required.

Growth of paper industry in India has been constrained due to high cost of production

caused by inadequate availability and high cost of raw materials, power cost and

concentration of mills in one particular area. Government has taken several policy

measures to remove the bottlenecks of availability of raw materials and infrastructure

development. For example, to overcome short supply of raw materials, duty on pulp and

waste paper and wood logs/chips has been reduced.

Following measures need to be taken to make Indian paper industry more competitive:

Improvements of key ports, roads and railways and communication facilities.

Revision of forest policy is required for wood based paper industry so that

plantation can be raised by industry, cooperatives of farmers, and state

government. Degraded forest land should be made available to the industry for

raising plantations.

Import duty on waste paper should be reduced.

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Duty free imports of new & second hand machinery/equipment should be allowed

for technology up gradation.

Outlook

Outlook for paper industry in India looks extremely positive as the demand for upstream

market of paper products, like, tissue paper, tea bags, filter paper, light weight online

coated paper, medical grade coated paper, etc., is growing up.

PESTLE ANALYSIS OF THE PAPER INDUSTRY

The pulp and paper sector presents one of the energy intensive and highly polluting

sectors within the Indian economy and is therefore one of the main particular interest in

the context of both local and global environmental discussions. Increases in productivity

through the adoption of more efficient and cleaner technologies in the manufacturing

sector will be most effective in merging economic, environmental, and social

development objectives.

POLITICAL FACTORS AFFECTING THE PAPER INDUSTRY

Policy

India’s pulp and paper sector has been protected by government policy for more

than three decades. Controls on production, distribution and prices impeded the growth of

the industry substantially. During the paper shortage in the 1970s and further on in the

1980s the government actively supported the venture into the paper sector in providing

financial incentives to technocrats and entrepreneurs through financial institutions (Datt

and Sundharam, 1998). To protect the rising small paper mill industry and ensure their

existence along with larger, more economic paper mills the government gave a variety of

excise concessions and reliefs. In 1974, the Government of India enforced paper

manufacturers to produce white paper and supply it at a concessional rate to the

educational sector and to the governmental departments. Fiscal levies accounted to as

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much as 35%-40% of the selling price adding to the already high-cost based prices of

paper. The government additionally established high import duties on imported paper and

paperboard to reduce import dependency. Export of paper was banned during the whole

period. (1998)

The Government of India reacted on the lasting stagnation and financial problems

of the sector in the 1980s in removing price and distribution controls on white printing

paper in 1987. This allowed the paper industry to receive profitable returns on paper

products and thus provided incentives to increase capacity utilization and establish new

capacity. Also, the Government of India exempted paper units from excise duty, provided

they used 75% of non-conventional raw materials for production. However, this

exemption was abolished again in the 1990s. The concept of broad-banding has been

extended to paper products since 1985-86. This implies that firms now experience the

freedom to manufacture any variety of paper within the overall limit of licensed capacity

(1998).

Since 1992, the government has taken further measures to improve the situation of

the paper sector. They include excise rebate to small units, abolition of customs duty on

the import of paper grade pulp and wood chips, removal of statutory control over

production, price and distribution of white printing paper and provision of infrastructural

support by increased allocation of coal and wagons. While import duty on paper in 1991-

92 was as

high as 140% it has since gradually been reduced from 65% to 40% and further to 20% in

May 1995. Yet, customs duty on inputs and intermediates have not been brought down on

11 a similar scale. Import of wood pulp for the production of newsprint and newsprint

products are allowed on a more flexible scale. Moreover, obligations regarding licensing

and excise duty have been alleviated. While the Monopolies and Restrictive Trade

Practices Act (MRTP ACT) from 1991 abolished industrial licensing for almost all

industries, the paper and newsprint industry except the bagasse based units has not been

exempt yet. Reasons for continued licensing of these industries were given as: security

and strategic concerns, social reasons, hazardous chemicals and environmental impacts.

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Growth of paper industry in India has been constrained due to high cost of

production caused by inadequate availability and high cost of raw materials, power cost

and concentration of mills in one particular area. Government has taken several policy

measures to remove the bottlenecks of availability of raw materials and infrastructure

development. For example, to overcome short supply of raw materials, duty on pulp and

waste paper and wood logs/chips has been reduced.

ECONOMICAL FACTORS AFFECTING THE PAPER INDUSTRY

Pulp and Paper Production in India

Although per capita paper consumption in India is very low compared to other

countries the paper industry holds a considerable share in manufacturing production.

Today more than 380 small and big paper mills produce a variety of different paper,

paperboard as well as newsprint products. Cultural paper constitutes the biggest share in

production with 41% (in 1991), followed by kraftpaper with a share of 27%, paperboard

with 17%, newsprint with 12% and specialty paper at 3% . Installed production capacity

increased substantially from 0.77 million tonnes2 in 1970-71 to 3.95 million tonnes in

1994-95. Production, however, has not increased accordingly. While in 1970-71

production ran at almost full capacity, in 1994-95, only 2.51 million tonnes of paper and

paper board were produced. Capacity utilization had decreased from 99% in 1970-71 to a

low of 60% in 1992-93 and slightly increased again to 64% in 1994-95.

Size, type and quality of the paper producing units are very diverse. As of 1995,

more than 50% of paper and paper board products were produced in only 38 paper mills.

The average size of a paper mill in India was 10,400 tonnes per year (tpa), compared with

85,000 tpa in Asia and about 300,000 tpa in Europe and North America. About two thirds

of India’s paper mills have a capacity of less than 18,000 tpa (Meadows, 1997). Large

mills are defined as mills with an installed capacity exceeding 20,000 tpa. Medium size

mills have a capacity between 10,000 tpa and 20,000 tpa while small mills are defined as

mills with a capacity of less than 10,000 tpa. According to this definition, only 48 large

mills holding a share of 52% of total capacity were counted in India in 1990. The range

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of size within this category varied considerably, between 20,000 tpa and more than

100,000 tpa. Large mills account for nearly 90% of the cultural paper production.Small

and medium size paper mills became important when due to a severe paper shortage in

the early 1970s the government promoted the immediate establishment of small, readily

available paper units. This following cheap second hand technologies were imported that

could be set up in any part of the country. As a result of the paper shortage and

overallgovernment pricing policy the small and medium sector with more than 300 paper

mills accounted for almost 50% of installed capacity and production in 1992. They

produce primarily low quality paper such as kraftpaper and paperboards from recycled

paper and various agro-fibers. Yet, the small units suffer from high production costs,

uneconomic operation, low quality and negative impacts on the environment. About 150

small mills are currently closed or sitting idle. Already old when imported the units have

further degraded since, which has led to the current situation of low productivity, low

efficiency, excessive resource consumption, obsolete technologies, capacity

underutilization and low scale of operation. International competition and the high quality

and low production costs of imported paper will also force many small mills to close.

Furthermore, most small and medium size pulp and paper mills cannot economically

provide chemical recovery and pollution control systems. Therefore, they are highly

polluting industries contributing substantially to the overall level of emissions and

environmental problems.

Demand for paper and paper products has continuously been increasing over time.

Consumption of paper and paper board equaled 1.2 million tonnes in 1980-81 and

increased to 2.6 million tonnes in 1994-95. This trend is expected to be maintained in the

future. Per capita consumption of paper, in 1995, was one of the lowest in the world.

Nevertheless, production today as in the past could not meet demand. Imports accounted

for about 7% of consumption in 1980-81. With the increase of capacity through small

mostly agro-based paper mills in the early 1980s, imports of paper and paper board

decreased to only 2% of consumption in 1985 and to less than 1% in 1990-91. In 1994-

95, however, they reached up again to over 10%. Shortage of newsprint has been even

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higher both in the past and today. On average, about 0.2 million tonnes of newsprint

(about 40% of consumption) had to be imported in the last few years.

Meeting this rising demand will provide a major challenge to the Indian pulp and

paper sector. The industry will have to undergo significant modernization and expansion

processes. Existing mills will have to renovate and modernize in order to optimize

capacity utilization. During this process small agro-based mills are most likely to not

survive. They will have to close down due to incapability to meet environmental

standards, to operate on economies of scale and to compete against larger agro-based

mills for raw materials. Small recycled fibre-based mills are more likely to sustain market

forces in adopting measures to cut production costs by importing waste paper or pulp.

However, their existence crucially depends on the overall development of the

international market price for these materials.Most likely these prices will increase as

demand for wastepaper increases worldwide, and wastepaper recovery rates are already

very high in many developed countries. Medium agro/recycled fibre-based mills are

expected to possess cost effective potentials for both modernization and expansion.

Similarly, large integrated mills have a high potential to undergo the needed

modernization and expansion restructuring. Expansion, however, can only be based on

forest material to the extent of 25% according the guidelines issued by national forest

policy in 1989. They will thus need to mainly be based on recycled fibres, purchased pulp

or dedicated forest management.

SOCIAL FACTORS AFFECTING THE PAPER INDUSTRY

Linked to the economic factors above social changes have significantly impacted

the paper industry in relation to changing demographics in terms of the customers it

targets. As such then changes in customer’s needs and preferences for quality paper

products and changing preference towards the paper rather than fiber or plastic has

increased the pace of the demand in terms of meeting these needs. Increased

globalization arguably has led to customers demanding faster responses to their needs

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creating much more competitive business fields attempting to satisfy these desires. The

industry is not only about technology but about pictures illustrating the industry attempt

to relate to the lifestyles of consumers. This is because customers have become more

environmental sensitive as well as technique and quality orientated as a result of higher

educational levels and income levels creating much more discerning customers in relation

to these.

The sociological context of human resource has been a major influence. Flexibility

in terms of labor in Indian paper industry has been mainly achieved by enlarging the

scope of tasks and a relaxation of organizational boundaries within the business industry.

As a result It provides employment to nearly 1.5 million employees in India to meet the

growing demand for paper. Paper manufacturers are producing white paper and supply it

at a concessional rate to the educational sector and to the governmental departments as

well as per regulation given by the government.

TECHNOLOGICAL FACTORS AFFECTING THE PAPER INDUSTRY

Currently, governmental as well as sector initiatives focus on overcoming the

acute raw material constraints, implementing and adopting better technologies, increasing

production, productivity and efficiency, expanding to economies of scale and decreasing

environmental effluents. Various new technologies are entering the Indian market that

support these movements.

Presently, large paper mills are more efficient, using better and more modern

technologies and appropriating economies of scale. Additionally, they provide chemical

recovery facilities which reduce both emissions and external energy requirements.

However, the large paper mills also face severe basic problems such as high production

costs, raw material constraints and low productivity. Overall performance has been best

in medium size firms with regards to average profitability

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LEGAL FACTORS AFFECTING THE PAPER INDUSTRY

The abolishment of customs duty on imports of paper grade pulp and wood chips

was accompanied by a sharp rise in international prices of wood pulp and waste paper in

1994 that escalated the costs of production considerably. Many, particularly small paper

mills cannot compete in the market any longer and have to either reduce production or go

out of business.

Indian paper industry has been de-licensed under the Industries (Development &

Regulation) Act, 1951 with effect from 17th July, 1997. The interested entrepreneurs are

now required to file an Industrial Entrepreneurs' Memorandum (IEM) with the Secretariat

for Industrial Assistance (SIA) for setting up a new paper unit or substantial expansion of

the existing unit in permissible locations. Foreign Direct Investment (FDI) up to 100% is

allowed on automatic route on all activities except those requiring industrial licenses

where prior governmental approval is required. Environmental regulations have been set

up following increasing environmental impacts in the line with rapid industrialization as

well as greater awareness of environmental protection and ecological balances. The

Environmental Protection Act was implemented and a Central Pollution Control Board

established to set up discharge standards that should be enforced by State Pollution

Boards. The standards have become more stringent over time. Since 1989 even small

paper mills have to follow discharge standards in the form of minimal standards

regulating liquid, air and solid waste discharges.

ENVIRONMENTAL FACTORS AFFECTING THE PAPER INDUSTRY

Raw Material Constraint

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Regarding the use of raw materials in India one can categorize three types of mills:

forest based mills, agro waste/residue based mills and recycled fibre based mills. In 1992,

forest based raw materials account for about 49% of total raw material inputs for paper,

paper board and newsprint production, while the share of agricultural residues and

wastepaper amount to 29% and 22% respectively (Sharma et al., 1998). The consumption

share of forest based materials has been declining over time and is expected to further

decrease to 47% by 2000. The share of agricultural residues shows a steadily increasing

trend from 1980 to today and is expected to further rise in the future. At the same time

wastepaper use which has risen from 13% in 1985 will approximately hold its share. The

small paper mills set up in the early seventies almost exclusively use agro waste/residues

as raw materials for paper production. Large mills, so far, have mainly been based on

forest material for paper production. This includes bamboo, hardwood and eucalyptus.

While agro waste/residues such as rice straw, wheat straw, etc. are relatively short cycled

regenerative and abundant, the availability of forest based raw material is rather limited.

Reduction of forest material consumption:

With the implementation of central and state government policy towards forests

protection and forestation, pulp and paper mills now have to take responsibility for the

reduction of forest material consumption and forestation efforts. The government is

encouraging the industry to create plantations on degraded forest and waste land

(dedicated forest program). The overall constraint of raw materials will force the paper

industry in future to rely more and more on imports of pulp or final paper products. To

overcome the raw material shortage the government has liberalized the import of raw

materials and given excise concessions for the use of non conventional raw materials.

Environmental Impact

The pulp and paper industry is a chemical process industry with major impact on

the environment. The potential pollutants from a pulp and paper mill can be classified

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into four categories: (1) liquid effluents, (2) air pollutants, (3) solid wastes and (4) noise

pollution.

The environmental problems faced by large and small paper mills are entirely

different. Pollution control is more difficult for small and medium size agro-based units.

Chemical recovery in these units is not economically viable and therefore black liquor

and lime sludge are not being burned for heat recovery. It is estimated that a 30 tpd small

paper mill 10 can be almost three times as polluting as an integrated paper mill of 200

tpd.

For the same reason as wastepaper production requires substantially less energy than

other processes its environmental impact is also much lower. As shown in Sharma et al.

(1998) water pollution in the form of wastewater is up to 90% lower compared to wood

and agro-based production. Solid waste from wastepaper production is shown to amount

to only a tenth of that from agro-based production. The type and quantities of solid waste

generated differ considerably across mill types.

Stricter environmental regulations added to the constraint on raw materials. As

mentioned above programs such as the dedicated forest program were implemented

implying increasing costs for firms to ensure sufficient availability of raw materials.

Furthermore, environmental regulations regarding air, water as well as solid waste

effluents forced many small paper mills to close down. Small and medium size pulp and

paper mills very often cannot economically provide chemical recovery facilities. They

therefore suffer from higher emissions as well as higher external energy requirements

since recovered chemical and waste products can effectively be used for cogeneration of

steam and electricity. The decomposition analysis allows to gain further insights on the

contribution of both input factors and productivity change to output growth.

Conclusion

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In this paper, we analyzed the India’s pulp and paper sector from various angles.

We developed economic as well as engineering indicators for technological change and

political, social, legal and also the environmental factors. We discussed our findings

within a broader context of structural and policy changes in the sector. The economic

analysis showed that productivity has decreased over time with a bias towards increased

use of material over labor and capital inputs. The decrease was mainly due to the

increased number of small and less productive units that were set up following the acute

paper shortage in the early 1970s. In the sub period of 1982 to 1990 along with the

establishment of larger plants as well as first liberalization measures productivity showed

increasing though fluctuating trend. Yet, since 1990, the sector has suffered a tremendous

downfall in accordance with overall economic recession.

The paper sector has been marked by continuous shortages in supply of various products,

especially white printing paper and newsprint. Meeting future demand, which is expected

to increase considerably, will continue to be a challenge as major expansion and

modernization efforts would have to be undertaken while raw materials scarcity prevails

and price development on international markets is unfavorable to the industry.

Future production has to be economically viable and environmentally sound and

needs to be more efficient in terms of resources use and production. As major policy

changes have been implemented in the 1990s to overcome the acute problems in the

paper sector. We further pointed out low cost potentials for reducing environmental

pollution and improving overall plant productivity. However, the implementation of

initiatives towards energy efficiency is being hampered by barriers both of general and

process specific nature occurring at the macro and micro level of the economy. Lack of

information about potential savings and existing technologies are among the barriers.

Energy and environmental audits could substantially help overcome these barriers. The

analysis reveals that energy policies in general and price-based policies in particular are

efficacious for overcoming these barriers in giving proper incentives and correcting

distorted prices. Through the removal of subsidies energy prices would come to reflect

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their true costs, while environmental taxes could be imposed to internalize the external

costs (including environmental costs).

SWOT ANAYSIS

SWOT ANALYSIS:

SWOT Analysis (also known as TOWS analysis) is a powerful technique for

understanding company's Strengths and Weaknesses, and for looking at the Opportunities

and Threats company face. The technique is credited to Albert Humphrey, who led a

research project at Stanford University in the 1960s and 1970s using data from the

Fortune 500 companies. It involves monitoring the marketing environment internal and

external to the organization or individual.

The SWOT analysis of Cadbury Schweppes are give below:

Strength:

1. The main strength of cadbury is their Brand Name. No matter where people live,

almost every body knows their Name.  

2. They have a huge market share in UK. They captured almost 43% market share of

Confectionary sector in UK.

3. Cadbury Schweppes has a group of effective and efficient employee. Their regional

director Rajib Wahi won the international business man of the year in 2004. Source:

Business Asia Today. 25th April, 2005.  

4. They have varieties of products.

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Weakness:

1. Basically Cadbury is based on two sector. 1. Confectionary sector and 2. Beverage

sector. The market share of the beverage sector of Cadbury is 7% where Confectionary

sector is 43%. It's a main weakness of the company.

2. The wastage of Cadbury is huge. Last year their wastage was almost 8% of their total

cost.     Source: EUROMONITOR 2004.

Opportunities:

1. One of the daily mirror report shows that 30% people of UK are random soft drink

user. So Cadbury has a huge opportunity of increase their market share of beverage

sector.

2. Because of their huge market share they can provide credit card facilities to the

customer.

3. They can launch new varieties of food in market. Like: Bread, various Ice cream etc.

Threats:

1. One of their major threats is their strong competitors. Although they have the biggest

market share but competitor like NESTLE, MARSH can beat them if they do any

mistake.

2. Some of their chocolates contain Alcohol. This is...

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