A Publication on World Pulp, Paper & Allied Industry

April-June'2001 - Vol. 5 Issue 3

COUNTRY PROFILE

   

Fibre scarcity - a big concern
 Mr. Pradeep Dhobale, M.D., I.T.C Bhadrachalam Paperboards Ltd.

Q What are the changes that are taking place now in the Indian Pulp and Paper Industry ?
 

Ans. At the first signs of revival in second half of 1999, Indian Pulp and Paper Industry has started implementation of their modernisation programmes. The focus this time round is more on quality improvement, cost reduction, and environmental compliance, rather than creating extra capacity. This is a positive development, as by and large Indian Paper Industry is far from international competitiveness in the above mentioned areas.

Another emerging trend is that of consolidation similar to what is happening in the developed economies.

 
Q Do you subscribe to the view that consolidation of Indian mills will help in effective composition with the multi-national companies in the globalized area ?
 

Ans. I do not think that by mere consolidation mills can compete with the large multinational paper companies. In the developed world, the consolidation is helping down research and development costs and overhaeds which account for a significant percentage of their costs. In India, the real R&D is virtually non-existent, and overheads are not a high percentage of costs. In the developed world, the consolidated entity extinguishes relatively inefficient capacities which helps the entire industry to maintain the supply demand balance. This is not the case in India.
However, consolidation does help in gaining dominant market share and the attendant benefits.

 

Q Do you think the merger of smaller mills with healthy large paper mills will help in consolidation of brand images and improving market share ?

 
Ans.. Here again my answer is in the negative. Paper Industry is very small and information flow is very good. The customers are knowledgeable and demand a product not only from a particular company but also from a particular paper machine. Under the circumstances, if a large establishment paper company acquires a small mill it will not necessarily be able to service their existing customers from the capacity from the small mills . I am not even sure whether the large paper mills have the expertise to run a small mill. Yes, it does help in improving market share, but the real issue is whether the large mill can bring in their expertise to make the small mills as efficient in terms of quality and costs.
 
Q What according to you should be norms or code for mergers and acquisitions & do you think there are any problems in taking over/mergers between two units in India? If yes, suggestions for improving the procedure of taking over .
 
Ans. Personally I do not have enough knowledge on the subject of norms or codes for mergers and acquisitions. At a macro level, I can see that the norms or codes should be such that the management rests with the most efficient value creators for the consumers, shareholders and society at large
 
Q What are your views on the present scenario of India Paper Industry and what steps do you suggest for the India Paper Industry to become globally competitive
 

Ans. The biggest concern in the Indian Paper Industry has been and continues to be the scarcity of fiber, whether it is pulp wood or waste paper. Both in terms of availability and costs, it makes the Indian Paper Industry uncompetitive. Therefore, the Industry and the Government need to work together in converting the wastelands and the degraded forest lands into high productivity plantations. Similarly steps need to be taken to increase the recovery of waste paper and divert the same for paper making. The Industry also needs to work forthwith on cost reduction measures to become competitive even with the falling custom duties, This will be possible only for those who have the minimum economic size.

 

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