Wood scarcity hurting Indian paper sector

by Dave

The Economic Times

Paper demand in India is increasing nearly 8% annually and supply has not been able to keep pace. Globally also paper capacity is shrinking. Wood
prices, stable for several years, are going up due to farmer revolts over plantation land in South America, exorbitant export duty on wood by Russia, warm weather in Scandinavia reducing forest harvest, illegal forest cutting in Indonesia and forest environmental issues in Canada, the US, Finland and Sweden. In India no greenfield wood based capacity has been added for more than two decades. No MNC or international paper maker has set up paper making capacity in India though other BRIC nations — Brazil, Russia and China — have attracted huge investments in this sector.

Wood is a key raw material for paper making and India is a wood deficient nation. Landed cost of wood has risen sharply in last few years. World Bank has estimated India’s timber supply deficit as 39 million m3 (cubic meter) in 2006. (M3 is a unit for expressing wood quantity. Wood can also be expressed in MT but the problem is of moisture. In a standing tree moisture is almost 50% of total weight which evaporate slowly after cutting. M3 does not change by moisture content. One m3 is normally equivalent to 0.7 to 0.75 MT on standing tree basis.)
As per Stephan Walker in his 2006 study on ‘Hard-wood fibre requirements of Indian Pulp and Paper industry’ for Australian Forest Produce Industries, India is cutting legally and otherwise more than 250 million m3 wood against an ideal cut of 106 million m3 from forests. India has all the necessary inputs for wood plantation like tropical climate, year-long sunshine, good rainfall, huge degraded land and increasing number of unemployed youth but it has not harnessed these as done by Brazil, Chile, Argentina and Indonesia.

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