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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.
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