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January 22, 2001

Newsprint

Newsprint is a special type of paper used for printing newspapers and magazines. Standard newsprint is used for usual newspapers and magazines, while glazed newsprint used for colour sections of magazines and newspapers.

Though newsprint is a type of paper, very few paper units manufacture both newsprint and other varieties of paper.

Newsprint requires slightly different pulping process to yield characteristics like higher strength, absorbency (to absorb mineral oil), pliability (resistance to deformation), printability, opacity, low grammage, etc.

A combination of mechanical and chemical processes is used during the pulping stage of newsprint production. The usual proportion of mechanical to chemical pulp is approximately 80:20. The larger proportion of mechanical pulp leads to higher consumption of energy (1500 KWh), but lower chemical consumption per ton of output.

India was completely dependent on imports for supply of newsprint till 1955. The first newsprint manufacturing facility was started in 1955 by NEPA (National Newsprint and Paper Mills) with a capacity of 80,000 tpa. The next two decades (till 1980) witnessed no new addition to capacity. Tamila Nadu Newsprint and Papers Ltd. set up in 1979 started manufacturing of newsprint in 1982. It is the worlds first commercially successful integrated newsprint mill with bagasse as the primary raw material.

In 1980s, three more new mills were started which increased the capacity to 0.35 million tpa.

In 1989-90, the government opened newsprint sector for private participation and encouraged units based on agro-residue through special concessions. This lead to flood of new players (approximately 15 new companies entered the field) and increased the production capacity to 0.6 million tpa by 94-95.

South India accounts for more than half of the production capacity as it is a base for nearly 35% of the printing presses in the country. Tamil Nadu leads amongst the states with the maximum number of units (7) and capacity base of 0.125 million tpa.

In 1999-2000, the domestic newsprint industry was adversely affected by the government's decision to reduce import duty to 5 per cent.

The demand for newsprint is directly dependent upon literacy rate in the country, number of magazines and newspapers published, average size of booklet, etc. The increased circulation levels of national and regional newspapers and magazines have resulted in an upward trend in newsprint consumption levels. This increase (12 percent for newspapers in 1998) is expected to drive growth in the market for newsprint at an average rate of 7 percent over the next two years, from USD 507 million in 1998 to USD 519.6 million in 2000.

In the next few years, demand for newsprint is expected to grow by around 6 per cent per annum while supply may grow at a much slower pace, resulting in increased imports. Since imports are under OGL with zero import duty, domestic producers will be vulnerable to fluctuations in international newsprint prices.

The increased number of papers and periodicals has brought greater competition in the publishing industry forcing publisher to provide more volume per paper, better print quality and special features (in colour/glazed pages), etc.

The production of newsprint has increased from 0.275 million tpa in FY90 to 0.836 million tpa in FY2000. The increase in production was brought about by new agro-based mills and increased operating efficiency of PSU's. The major players in the newspaper segment with their production capacities are given below.

The PSUs control a major share of domestic production by supplying 60 to 65% of total industry production. Private sector players have very small capacities in comparison to PSUs.

The domestic supply is not sufficient to fulfil the country's newsprint demand, hence dependence on imports has become necessary.

The government policies on import of newsprint had a marked impact on supply of paper. The important policies with details are given in the table below.

The capacity utilisation level in newsprint segment has been uneven. It increased steadily from a low of 42% in 1982-83 to reach 97% in 1986-87. Then it was range bound between 80 to 90% for the next few years, before reaching a peak of 95% in 1991-92. The capacity utilisation levels in the nineties have come down substantially and have been around 45 to 60%.

Till 1955, the country was completely dependent upon imports under OGL. With the setting up of NEPA in 1955, the dependence on imports was reduced to some extent. The imports have come in handy to support demand supply gap in the country. The country's imports were in the region of 0.2 to 0.3 million tpa during the period 1980 to 1995.

In the recent past with the easing of import duties, imports are acting as a threat to domestic production. Imports have increased from 0.34 million tpa in 1996 to 0.5 million tpa in 1998. But as per some estimates it includes large quantities of writing and printing paper in disguised form (to take advantage of the disparity in duties). For example in 1996-97, the imports under disguise form were to the extent of 0.15 million tpa.

The quantitative restriction placed on import of newsprint in the early nineties lead to setting up of fake newspaper and magazine publishing companies to obtain licence for import of newsprint and then sell the imported newspaper to actual users at a premium. Even small newspaper manufacturers used the opportunity to sell excess imports in the domestic market. This resulted in drop in demand for domestically produced newsprint in the country. Therefore to overcome the problem GOI reversed the earlier decision on quantitative restrictions.

The basic customs duty on newsprint was further reduced from 10% to 5% in 1998-99 budget. Also it was exempted from special additional customs duty of 4% levied on all imports. This has increased the threat of imports from Asian countries at lower prices especially after the Asian crisis. For the year 1999-2000 there has been no major change in import duties of newsprint.

The newsprint industry has been asking for imposing anti-dumping duty and a floor price on newsprint imported from Asian countries, which is pending for last two years. However, the strong and vocal newspaper lobby has been effective in stalling this.

Increased competition and dumping by third country suppliers over the years has reduced the level of India's newsprint imports from the U.S. These have fallen from a high of USD 229 million in 1996 to an average level of between USD 7-8 million over the past two years. U.S. exporters of newsprint face increased competition from new suppliers that are emerging with each passing year. Imports constitute approximately 30 percent of the India's supplies of newsprint. These imports are competitively priced, and domestic supply will therefore be unable to affect imports in any significant way in the years ahead. India has always been a net importer of newsprint. All Indian mills use different raw material mixes and manufacturing processes, resulting in wide differences in the quality of newsprint output. The largest newsprint suppliers to India are Russia, followed by Canada, Germany and Finland. The newspaper industry is the largest consumer of imported newsprint. Imported newsprint has a superior whiteness, surface smoothness and strength. It is the preferred material for high-speed printing.

Presently the international price of newsprint has increased by US$50 to around US$550. Due to this and to the accumulated inventory, it is estimated that import of newsprint will drop by 30 percent in the current financial year. However, the Russian newsprint price has remained at a steady level, and has harmed the profitability of the industry.

The increase in international prices is expected to result in a proportionate rise in the domestic newsprint price. The increased margin will be offset to some extent by the increase in the cost of imported waste paper.

However, 6-8 percent growth in demand coupled with 30 percent drop in imports will give a good scope to improve capacity utilization resulting in cost reduction. Thus, the newsprint sector can expect a better margin for 2000.

The domestic demand for newsprint is expected to increase from 0.836 million tpa in FY2000 to 0.939 million tpa by FY2002 at a CAGR of 6%. The domestic production for the corresponding period is expected to increase from 0.4 million tpa in FY98 to 0.56 million tpa in FY2001. The imports have been assumed to remain range bound at around 0.3 million tpa for the coming years (excluding disguised imports).

Courtesy: Indiainfoline