AT THE time of independence, Pakistan had no paper and board production unit. Over the last 53 years paper and board industry has emerged out of its infancy and is now catering nearly 80 per cent of the domestic demand.

It produces various grades of paper with the help of 100 odd paper and board producing units in organized sector with capacities varying from 10 to 200 tons per day producing around 460,000 tons of paper and board annually. These units produce writing and printing paper, packaging board, liner board. corrugation medium and various other grades while various finer grades, art papers and above all newsprint are imported due to zero wood pulp production capacity in Pakistan.

The per capita consumption of paper and board stands dismally low at 3.4 kg in Pakistan compared to 75-100 in developed countries. Low per capita income and literacy rate and rural concentration are some of the factors for this low demand.

Scenario: The international paper and board sector is dominated by NORSCA (USA, Canada, Finland and Sweden) which comprise for roughly 75 per cent of high quality products. High wood pulp based products are produced in these countries due to their proximity to woodlands. Further, developed industrial base, world’s leading chemical manufacturing facilities and downstream packaging industry supplement the paper and board sector in the NORSCAN. China, Indonesia and Taiwan dominate Asian markets while low-grade pulp made of eucalyptus is made in South American countries like Argentina and Brazil. Spain is the main producer in Europe of wheat straw pulp otherwise produced in South Asian region.

The total world paper and board production is around 315 million tons, of which North America commands market share in newsprint, writing and printing papers and packaging boards followed by Europe. Asian producers have lately entered into low pulp grades and now commands considerable markets in writing and printing and packaging board grades. Gradewise paper board comprises of around 50 per cent of paper and board market followed by writing and printing and newsprint. The international pulp and paper industry has been adversely affected due to North American economic slowdown and its impact on European producers. Shipments have dropped by 16 per cent this year resulting in and business conversion. The international board market is also depressed due to weakness of the packaging sector. Weak consumer buying especially catalogue and retail buying is resulting in low packaging growth. However, newsprint has shown some stability due to shift from dotcom advertising to newspapers.

While before going in details it must be understood that basic fibrous raw material for production of paper and paperboard comprise of wood pulp, non-wood pulp and recycled paper. Due to extremely low density of forests in Pakistan and perilously unhindered de-forestation, the availability of consistent wood supplies is not contingent. Pulp production in Pakistan is therefore based on non-wood fibrous material like wheat straw, baggase and river grass. More than 90 per cent of non-wood pulp is produced by combining wheat straw and river grass fibres while augmenting them with mix of imported wood pulp and recycled paper procured locally and through imports.

In the organised sector paper board production is divided into two types of units: one, those which are integrated pulp and producing units while others only produce paper and board and do not have pulp mills. Integrated pulp and paper industry on the basis of manufacturing process is highly value-added industry and its process is convergent of various process variables. Hence it requires technical and process know how and command over manufacturing processes for continuous quality supplies. It is due to these technical variables that very few units in Pakistan have succeeded to operate and there is a long list of inoperative and closed units.

At present, 7 units with a daily production of more than 100 tons per day are operating in Pakistan. Compared to local size of mills international average economic size of paper mill is 3,000 tons per day that helps in capitalizing on production economies of scale an chemical and fibre recovery processes while co-generating energy and steam. Due to non-wood pulp production and low economies of scale chemical and fibre recovery plants is local paper mills is not viable increasing production costs.

The production costs of paper pills in Pakistan is highly unpredictable as it is dependent on international pricing of wood pulp and recycled paper and seasonal agricultural output of wheat. Paper board market is further vulnerable to economic growth trends as its downstream conversion industry comprising of printing packaging is highly growth elastic. Introduction of innovative packaging designs and high quality printing on fast machines especially for fast moving consumer goods (FMCG) industries has created a lot of pressures on Paper Board sector in maintaining quality standards.

Paper and its downstream sector are currently enjoying robust growth. During first eight months of the current financial year (July-Feb 01) it grew by more than 22 per cent compared to 14 per cent growth last year. Cumulatively it has grown by more than 36 per cent in last 20 months, which is more than commendable beating all the other sectional growths. However, pressures on existing capacities have been created due to weak direct investment in the sector. Further growth in the sector would depend on attainment of GDP growth figures (3.8 per cent) while reduction in tariff rates next year may induce imports especially with weak Asian demand and industry problems arising in Indonesia and with debt ridden companies.

Currently various impediments are affecting growth of Pakistan Paper and Board Industry. Menace of dumping of paper and board form Far Eastern countries at under invoiced rates is infringing level playing field. Under invoicing tends to reduce duty for commercial importers, while local producers are subject to excise duty, sales tax and other corporate and local taxes. Under-invoicing also affects national exchequers in face of lower than actual duties. Similarly, the prevalent imbalance of tariff structure deteriorates the operational profitability of local producer’s vis-a-vis foreign producers. Duties on various raw materials mainly chemicals are substantially higher compared to that on finished Paperboard creating distortions to the local industry as imported material costs 50 per cent of total cost of production. Local paper and board Industry is also under tremendous pressure due to high rates of Fuel and Power compared to competitor countries. Fuel cost forms about 30 per cent of manufacturing costs in pulp and paperboard production. Considerations: Pulp and paper sector internationally is under pressure regarding high level of pollutant discharges owing to chemical process while manufacturing paper. It is anticipated that during 2001-2003 US pulp and paper companies would be spending more on Environmental Projects as compared to capacity development or process improvements. This is due to enforcement of tough environmental laws and regulations. Pakistan’s pulp and paper sector may also have to increase investment in the Environmental Management Programme to prepare itself for international competition, overhanging environmental concerns and the NEQS (National Environmental Quality Standards) implementation to improve environmental management.

In this context FPCCI initiated ETPI Programme (Environmental Technology Programme for Industry) has provided a base for stakeholders to make industry prepare itself for coming tough times. Paper industry has taken some initiatives but it’s still a long way to go for attaining environmental standards.