Global Paper Market
production is around 430 million MT. USA is the largest producer in the
world, followed by China, Japan and Canada. India holds 15th rank among
paper producing countries. India’s share in World global production is
The average per capita consumption in the world and in Asia are around
56 kg and 40 kg respectively whereas the Indian average is still
hovering between 10-11 kg.
Indian Paper Market
industry is highly fragmented, consisting of large, medium and small
mills totaling over 750, out of which only 50 mills have a capacity of
50K TPA or more.
The installed capacity is approximately 12.75 million MT, however
industry is operating at 89% capacity utilization. The domestic
production is around 11.38 million MT against current demand estimated
at approx 13?3.5 million MT. Country is importing approx. 2.3 million
MT of mainly newsprint and photocopy paper and also exporting
approximately 0.50 million MT.
India is the fastest growing paper market in the world @ 6% per annum
and by 2024-25, Indian demand is projected to increase to 23.50 million
MT. Increase of per capita paper consumption by 1 kg will increase the
demand by 1.1 million MT.
The industry provides employment to 0.50 million people directly and 1.5
million people indirectly.
of large, medium & small mills.
Indian paper market consists of Writing & Printing Paper (38% - 4.8
million MT), Newsprint (20% - 2.5 million MT), Industrial paper segment
(40 % - 5.15 million MT) specialty paper viz. Copier paper etc. (2% -
0.65 million MT).
In the writing and printing segment uncoated varieties constitute around
4.25 million MT and coated varieties constitute around 0.75 million MT.
The industry is concentrated 30% in the south and 30% in the west,
followed by 35% in the north and only 5% in the east. The industry is
controlled by major 50 paper mills. Broadly, on the basis of Size,
Technology, Modernization and Quality produced, the industry can be
classified into A, B and C groups. HPC falls in B+ group and as such,
faces competition from both large and modern Paper mills which fall in
grade ‘A?and also from ‘B?grade paper mills which had started as
medium but have now grown by expansion and modernization and are giving
tough competition to HPC on account of their improved brightness and
One important aspect of this industry is that it is seasonal in nature
and demand moves in line with academic session of schools and colleges,
the segment which consumes the maximum quantity of paper. The Paper
demand starts picking up mainly from October, reaches its peak during
December to March and starts slowing down gradually from April to
September every year. Therefore, meticulous order planning is needed for
maintaining continuous production throughout the year.
Marketing policies / pricing strategies are framed considering all of
the above factors.
at a Glance
HPC is engaged in
manufacturing of Writing & Printing Paper
||HPC has 2 units both located in
||Nagaon Paper Mill (NPM), Jagi Road
||Cachar Paper Mill (CPM) Panchgram
||Annual paper production target of
each mill: 1 lakh MT of Writing & Printing Paper.
||Production available to Market : 2
lacs MT in normal production scenario.
There are 3 basic
Raw Materials for manufacturing of Paper, viz., Forest based virgin Pulp
(Bamboo/ Wood ?30%), Agro based virgin pulp (Bagasse, Rice & Wheat
Straw ?30%) and Recycled fiber (Waste Paper ?40%). HPC uses Bamboo as
its basic Raw Material.
||Bamboo is considered to be the
best raw material for manufacturing of paper due to its
morphological characteristics, which imparts superior qualities to
the paper especially strength and durability. This has been
corroborated by Central Pulp & Paper Research Institute.
||Supreme Court has categorically
recognised vide judgment dated 18.02.2002 that bamboo and cane
belong to grass family.
||Bamboo belongs to grass family and
grows profusely and is naturally regenerated through rhizome & seed
hence it is a naturally fast growing species. Harvesting of bamboo
does not impact environment and due to this reason, it is considered
to be environment friendly.
Surface Sized Maplitho
110 - 130
Structure of Taxes & Duties
100% FDI is allowed
in Paper industry.
India has entered into
Free Trade Agreements (FTA) with ASEAN countries under which import of
paper is allowed at concessional or Zero customs duty.
Excise Duty : 6.125%
VAT : 6% including
CST : 5 % (2% against C form )
Customs Duty : 10%
6.0 Mode of
||There are 2 methodologies for
selling paper :
||Ex-mill sale occurs right
at the mill gate. Title of the goods passes to the buyer the moment
material leaves mill premises. Usually institutional customers and
stockists in the vicinity of the unit prefer to purchase paper on
Ex- Mill basis.
||Ex-depot sale is made from
our Depots. The material is transferred from mill to HPC’s own depot
and the buyer lifts it from there. This mode is mainly preferred by
the stockists and in a few cases small institutions or govt.
departments in the vicinity of that depot.
The option lies with
the customer whether to procure material Ex-Mill or Ex-Depot
HPC has a wide
network of depots which are under regional offices:
Delhi, Lucknow, Chandigarh, Jaipur, Ghaziabad
Cuttack (C&F Agent)
Chennai, Bangalore, Kochi
Indian Paper Market
comprises of two major segments
a) Institutional sale
b) Market sale
In a normal production
scenario, HPC has a large production capacity of 2 lacs MT at its
disposal to market, therefore HPC focuses on both the segments.
Institutional buyers procure paper in two ways
Purchase of paper
In this mode the buyer
floats two separate tenders. One tender is for purchase of paper and
another is for printing of books. The buyer purchases the paper directly
and then allocates the same to Printers. The purchase takes place
normally under SSA (Sarva Siksha Abhiyan)
||Tenders are floated by
institutional buyers (Text Book Boards, Govt. Depts. and Autonomous
bodies) for purchase of Water Mark paper.
||Nowadays in most cases, e-tender
has been introduced and both technical and price bids are submitted
electronically. Only samples and payments like EMD, etc. are
submitted physically. Still, physical tenders continue in some
||The technical bid is first opened
and evaluated by the buyer for compliance. If the bid is accepted,
the samples are sent to laboratory for testing.
||Price bids of only those bidders
whose samples pass testing are opened.
||Purchase order is issued to the
bidder quoting minimum price (L1). However, the tendering authority
reserves the right to split the order among multiple bidders and
accordingly it is done likewise in most cases.
||80-90% payment is released after
supply of paper
||Balance 10-20 % payment is
released after successful testing of samples and completion of other
||Some institutions enter into MoU
with HPC with mutually agreed rates, terms and conditions.
Paper so procured is
delivered to their authorized printers for printing of Text books.
This segment is
catered directly by the corporation without involvement of any
In very few cases viz.
local Municipalities, Colleges & Private Educational Institutions,
quantity is small and requirement is spread over a longer period and
delivery is to be made in tranches for which material is required to be
stored. Collection of payment is also an issue. HPC finds it difficult
and unviable to cater to such buyers directly and local stockists are
authorized to quote and grab the order.
Salient features of
Institutional segment where paper is directly purchased:
High level of
uncertainty: There is high level of uncertainty. Receiving order is
subject to successful sample testing at Government laboratories and
achieving L1 position in tender. In a single stroke the order may be
“got or lost? Consequently, production planning becomes difficult
unless the order is assured through MoU.
Sizes and watermark:
Every institution has its own separate fixed sizes alongwith watermark.
As such, the generation of deckle mismatch paper hovers around 6-15% of
production, which has to be either repulped or sold at a discounted
Unless otherwise agreed in an MoU, the payment cycle ranges between
45-90 days from manufacturing of material, and the first installment is
in the range of 80-90%; the balance is released only after successful
testing of samples drawn from supplied paper.
Unless an order is supported by advance payment, there is considerable
fund blockage and that too for long periods. During a fund crunch
situation, catering to this segment becomes difficult.
Economy of scale:
Since institutional orders come in single or 2 GSMs/sizes, economy of
scale is high.
penalty: Penalty structures are integral part of tender. In the
event of delay/non-supply of material or non-compliance with product
specifications, huge deductions are made and sometimes even blacklisting
is done by the tenderer.
storage: Some institutions insist on DGS&D inspection at mill before
dispatch of paper, which is a cumbersome and time consuming procedure
and leads to fund blockage.
customers do not accept total material directly at their godwns due to
space constraints and some storage arrangement has to be made which have
cost implications on account of godown charge and insurance premium.
Pricing strategy for
the Institutional segment where paper is directly purchased:
are spread throughout the country. Every state floats tender either for
purchase of paper or for printed books. Out of total 700+ paper mills in
the country, only 25-30 mills take active interest in this segment while
other mills normally avoid it due to complexity and uncertainty of
getting order every year, and also for the large blockage of fund for a
very long period vis-a-vis market sales, possibility of deductions,
rivalry among mills, etc.
As such, pricing
strategy for this segment is complex in nature. While deciding a price
to be quoted, many factors like their product specification versus our
capability to meet said specification, their last purchase price,
possibility of competition and the prices that they may be expected to
quote, local active mills in the vicinity of that Text Book board, past
experience of dealing with the tenderer, their penalty structure on late
delivery or on variations in specifications of NIB versus supplied
paper, EMD amount, Freight factor, deductions they have made from HPC
supplies in past, our fund position and comfort level to block the fund
for such a long time, interest cost, allied costs and most importantly
our production capability versus our order position and their supply
schedule (whether clashing with those of other valued buyers), loss of
deckle matching on manufacturing their paper, etc., are considered.
Most of the text book
corporations opt for splitting the tendered/order quantity among all the
bidders subject to their acceptance of L-I rate. Based on all of the
above a pricing strategy is decided as to whether to be aggressive or
moderate. L-I bidder is given maximum quantity and has to shoulder the
responsibility of completing the supplies in stipulated time. The
pressures are quite heavy and in the event of delay in supply, penalty
burden and possibility of blacklisting are very high.
Due to production
constraints and uncertainty of fund constraints, HPC has adopted a
Moderate approach, however, we have been quoting in most of the tenders
where their product specifications are matching with our capability to
meet said specifications so that HPC is not burdened and at the same
time we get some quantity of the order and HPC’s presence is always
institutional customers is a very sensitive issue. Hence, it is closely
finalized based on the above factors.
NSR from institutional
customers is apparently higher than the prevailing NSR from market sale.
However, due to other factors, viz., deckle mismatch, interest cost,
freight and storage, deductions in the event of non-supply/delayed
supply, etc., this gap narrows down.
orders are taken on a FOR/delivered price basis, spread over a longer
period, and as such, in the event of any change in transportation cost
and other allied costs, it cannot be passed on to the customer, whereas
in case of market sales, possibility of revising the price according to
market dynamics is always there.
B) Direct Purchase
of Text Book
In order to avoid the lengthy
procedure of procurement of paper, problem of managing double
allocation and distribution of fund under two separate heads, i.e.,
purchase of paper and printing of books, possibility of damages due to
double handling of paper reels etc., some of the State Text Book Boards,
viz., U P Text Book Board, Jharkhand Education Project Council,
Uttarakhand Text Book Board, Karnataka Text Book Board and also some
State Departments of SSA, are procuring printed text books directly
from the printers.
||Text Book Board invites technical
bids from the printers alongwith paper samples of mills
||Printers are supposed to use the
paper only from the mills empanelled/approved by the respective Text
||There is no quantity allocation to
any individual mills/binding on printers to buy any pre-fixed
quantity from a particular mill. Printers are at liberty to
procure/buy paper either from one or more numbers of approved/
empanelled mills. Hence, the mills have to market their product
among the approved printers.
||This segment has multiple buyers
with their mixed and non matching delivery schedules, unsecured
payments, and as such, this segment is catered through the stockist
who brings consent letter from maximum number of buyers (Printers).
||Since this segment is highly
competitive and unsecured, hence paper is sold as per the prevailing
price and policies in vogue.
HPC has no scope of
participating directly in this segment.
price, terms & conditions are applicable for this segment.
Material is sold only
against advance payment before delivery.
However since supplies
are time bound related to text book boards and academic sessions, supply
preference is given to this segment over market sales.
8.2 Market Sales:
||HPC has a wide network of
accredited stockists across the country who are attached to the
||They represent HPC in the market
and procure orders from end consumers.
||Stockist has the option of take
material on Ex-Mill/Ex-Depot Basis.
||At present, credit option has been
dispensed with and all market sales take place only against advance.
||Quantity discount and cash
discount are allowed to stockists as per policy.
||Present structures of the above
incentives are reproduced below:
Quantity lifted in calendar month (MT)
50 & above
100 & above
200 & above
400 & above
600 & above
Discount is allowed at 3.25%
Price lists are given
as Annexure A
Salient features of
||Order acceptance and supply takes
place only against advance payment. Hence, Market orders help in
||There is hardly any deckle
mismatch generation as manufacturing is done after matching and
combining various compatible order sizes in same GSM received from
||There is no sample testing
involved and as such there is no question of any deduction. However,
at times, in case of any established manufacturing defect
compensation may be required to be paid, which rarely happens.
||Flexibility of price revisions as
per market dynamics
||Since manufacturing is against
firm orders hence dispatches are immediate.
In view of the facts
stated above, a healthy ratio is a mix of both segments in 50:50.
However, due to
production constraints it has not been possible to maintain such an
ideal ratio and much preference had to be given to cater to
institutional orders in time, to avoid levy of penalties and the
possibility of blacklisting.
Pricing policies for
Pricing strategy for
market sales is also a very complex one. There are around 750 mills in
the country out of which about 50 mills are there which really matter.
All are in private sector where pricing, discount structure, etc. keep
changing according to market dynamics. Unlike a CPSU, the private sector
acts/reacts fast and they have the flexibility to meet the market
dynamics. Discounts/incentives are an integral part of Paper Industry
the form of Trade discount, Reel discount, cash discount, offtake
discount, freight rebate, yearly bonus, special discount, regional
discount are integral part of industry practice which keeps changing as
per the market scenario. HPC being a small player which hardly caters
around 4-5 % of the total Writing & Printing paper segment cannot stay
out of the same and has to follow the system.
For taking any price
decision, opinion/feedback of depots are taken into consideration and
accordingly price and discount structures are revised.
9.0 Bulk Incentive
Paper market has been
highly subdued for the last 4-5 years on account of large paper
manufacturing capacity addition till 2013 and also large scale import
under FTA (FREE TRADE AGREEMENT) among ASEAN countries at
Concessional/Zero custom duty. Simultaneously, HPC has been facing
severe financial crisis due to sub-optimal capacity utilization at CPM
on account of large-scale flowering of bamboo(which renders bamboo
unusable for paper production) in NER for a period of 3 years and
subsequent embargo by National Green Tribunal (NGT) w.e.f. May
2014 and its cascading effects on the finances of Corporation. Bankers
are not ready to extend any further exposure to the Corporation due to
continuous losses and negative worth.
Therefore, from time to
time BIS (Bulk Incentive Scheme) has been launched with special features
to mobilize maximum fund by way of advance from the market and also to
ensure continuous machine booking throughout the year, when adequate
institutional orders which are uncertain in nature and are to be
supplied on a payment cycle of 75-90 days are not in hand. BIS
has helped in mobilizing large funds at Zero interest and to maintain
10.0 Appointment of
Please visit website
“www.www.petaquilla.cn > Notice/Advertisement > Appointment of Stockists/Channel
Partners?for full details of the appointment procedure.
||In case of Ex-Mill sale, the buyer
arranges for the Insurance. Sometimes HPC also arranges insurance,
at the cost of buyers at actuals.
||In case of Ex-Depot sale, the
material is insured for damage, shortage, pilferage, fire and other
eventualities during transit period and for a certain stipulated
period of storage after material reaches destination.
||In case of institutional supplies,
HPC takes the responsibility of insuring the material as prices to
institutional customers are quoted on FOR/Delivered basis.
12.0 Customer Service:
||Customer complaints are attended
and processed by the Customer Service Cell.
||Details of any complaint are
conveyed to respective mill alongwith samples, inspection reports,
etc. and based on the report of the mill, claims, if any, are
||HPC earlier exported paper to
various countries, viz., Sri Lanka, Myanmar, Bangladesh, Egypt,
||Due to the perennial production
constraints through which HPC has been going for the last few years,
export has been kept in abeyance.