Industry Scenario
While India accounts for nearly 15 percent of the world population, it consumes only 1 per cent of the global paper production. The country's per capita consumption of paper at about 6-7 kgs is very low as compared to the world average of over 50 kgs.

Domestic paper and paperboard demand expects to grow at a CAGR of 6.8 per cent from 7.7 million tons to 10.7 million tons over 2008-09 to 2013-14, while global demand is likely to grow at a CAGR of 2 percent. With the revival in demand and shortage of capacity, raw material prices are expected to rise over the next 2 years, which will lead to the increase in paperboard and newsprint prices.

Consumption of paper is closely linked to the economic development of a country. In India, though the per capita consumption of paper is low, it is gradually improving with the buoyant economic growth. Industrial production, expenditure incurred on the print media, government spending on education, population growth and literacy levels are the other contributing factors.

In 2008-09, the paper industry's market size (including newsprint) has been estimated at Rs.321 billion. It has grown at a CAGR of 10.5 per cent over the last 5 years from around Rs.195 billion in 2003-04. Writing & printing (W&P) paper is the highest value segment. It accounts for nearly 39 per cent of the total market size. This is followed by paperboard, which accounts for about 37 per cent. Newsprint and specialty segment account for 19 percent and 5 per cent, respectively.

Considering that an increasing proportion of the raw material requirement is met through imports, the domestic paper industry is affected by fluctuations in global raw material prices. Additionally, domestic wastepaper prices tend to move in line with international wastepaper prices.

Printing & Writing Paper
Demand for Writing & Printing paper expects to increase from 2.9 million tons in 2008-09 to 4 million tons in 2013-14, a CAGR of 6.5 per cent. This is higher than the increase of 6 per cent CAGR witnessed between 2003-04 and 2008-09.

The factors that affect demand for writing & printing (W&P) paper include printing of books and stationery material for education; usage of office printing and stationery; and printing of company published statutory documents such as annual reports, share issue forms, and other documents. Educational books and materials account for the highest share of demand. As growth in education is fairly insulated from variations in the economic cycle, demand for paper from this segment is, to a large extent, unaffected by slowdown in the economy.

Around 200,000 new schools are expected to be established in the country by 2015, as an outcome of the Indian Government's Right to Education Act (RTE) initiative. In 2009, government had passed the RTE to stimulate growth and development of education in the country. The expected growth in education would translate into a steady growth of 4-5 per cent from cream wove paper, the variety that is mostly used in school textbooks in India. Demand for office stationery and printing will increase as the performance of the Indian economy improves. As a result, demand for maplitho would increase by 5-6 percent and that for copier paper by 15 per cent.

Newsprint Industry
Demand for newsprint estimates to increase by 8.6 per cent CAGR, from 1.8 million tons in 2008-09 to 2.7 million tons in 2013-14. The increase will be in line with the expected growth in circulation of print media, particularly vernacular newspapers. The increasing level of literacy in the country along with low penetration of online media is driving circulation growth for print media. Demand for newsprint had increased by about 6 per cent CAGR, from 1.3 million tons in 2003-04 to 1.8 million tons in 2008-09.

Circulation of vernacular print media expects to increase by 5.5 percent CAGR over 2008 to 2013, and reach around 68.2 million copies. The circulation of English print media will increase by 2 percent CAGR, to around 11.2 million copies. The growth in circulation of vernacular newspapers has been providing an impetus to the domestic newsprint industry. Vernacular newspapers meet 70 per cent of their requirement using domestic newsprint, and the balance through imports. For English newspapers, the mix of domestic and imported newsprint is 30:70.

On an average, imports have been accounting for 50-55 per cent of total newsprint consumption, as domestic newsprint is considered to be lower in quality on account of the raw material mix and level of technology in domestic newsprint capacities. Moreover, import duties on newsprint have historically been low (5 percent, reduced to 0 per cent since July 2009) on account of strong bargaining power of large media companies.