Finnfund

West Coast Paper Mills Ltd. (WCPML) has been making paper and board in Dandeli, Karnataka state, since 1959. Currently the company is undertaking the largest mill investment in its history, which will double its production capacity in writing, printing, wrapping and packaging papers to 320 000 tonnes annually.

“We have always tried to anticipate market development and remain ahead of our competitors by raising capacity at the right time and by the right amount,” says S.K. Bangur, chairman of the WCPML board. “Our new investments will reinforce company competitiveness and also help us reach a level of productivity that meets international standards.”

After capital spending of about 250 million dollars, WCPML will become one of the largest producers of paper products in India. Among the institutions financing the project are the International Finance Corporation IFC – part of the World Bank group – and two Indian banks, ICICI and the State Bank of India.

Finnfund is participating in a syndicated loan arranged by the banks.

“We wanted to participate in the project because of its positive environment and development effects,” says senior investment manager Juha-Pekka Tuomipuu of Finnfund. “Adoption of this new technology will mean a reduction in the consumption of electricity, steam and raw materials in proportion to output and will also curb emissions. Moreover, the extra production capacity will cut paper imports and reduce price pressures.”

Fibre line from Metso paper

Part of the investment plan is a new fibre line for the pulp mill, to be supplied by Metso Paper. The value of the order is nearly 25 million euros. The target daily capacity of the new line will be 725 absolutely dry tonnes of fully bleached pulp. It is believed to be the largest individual fibre line at a pulp mill in India.

WCPML is an old customer of Metso Paper. The Finnish company has previously supplied Dandeli with equipment used in pulpmaking.

The new fibre line is the first phase in WCPML’s expansion plan. By the end of the decade, a new paper machine, a power plant and other equipment to boost capacity will have been built at Dandeli. The investments will boost the quality of products and curb emissions to air and water. The new processes will also lower the amount of solid waste created.

The equipment being supplied, by Metso Paper and others, uses the best available environmental technology. After the investment project is complete, WCPML’s production plants will meet the tough environmental and corporate social responsibility criteria of the World Bank.

Paper consumption rising apace

When WCPML began production nearly five decades ago, the capacity of its Dandeli plant was a modest 1800 tonnes per year. Over the decades the company has invested in new capacity. A new packaging board machine that started up in 2002 raised output significantly from 126 000 tonnes to 171 000 tonnes a year.

In India the market outlook for forest industry products is exceptionally good. The national economy has been growing at about 8% a year, boosting demand for paper and board. Annual growth in writing, printing and industrial papers is about 7%. Demand for special papers is increasing at 5%.

In proportion to the nation’s size and great population, production of paper and board is still low, about 7.5 million tonnes a year. So is paper use: consumption per capita is only about 7 kilos a year.

“If consumption per capita goes up by just 1 kilo, demand for paper products will grow by a million tonnes,” S.K. Bangur remarks.

Compared with developed countries and even many developing economies , the level of consumption is negligible. North Americans use almost 340 kilos of paper per capita and Western Europeans 110 kilos. The corresponding figure for China is 30 kilos.

Wood from local farmers

One of the main factors constraining the growth of India’s forest-industry is a shortage of domestic feedstock. There is very little natural forestland left and fellings there are forbidden by law. There are also insufficient plantation forests, so pulp has to be imported from abroad. Transport costs and import duties mean a major increase in the costs of Indian paper producers.

About 90% of wood consumed in India is used as fuel. Less than 4% reaches the forest industry. Apart from wood, paper makers use straw, other agricultural by-products and recycled fibre as a feedstock.

In Karnataka state, WCPML has created a wood procurement system that provides its production plant with the bulk of the raw material it needs from local plantation forests. “Wood bought from local farmers is an important competitive advantage for us,” Bangur notes.

The main feedstocks used by the mill are casuarina – a common tree in India – as well as eucalyptus, acacia and bamboo. In recent years the company has been spending on research to improve the production characteristics of wood species.

WCPML cultivates saplings of the more productive species and sells them to farmers at a subsidized price. The aim is to raise plantation yields to as much as 120 tonnes per hectare compared with 25 tonnes per hectare produced by traditional forestry.

“Thanks to investment, the number of local contract farmers is increasing, which will lift the incomes of the rural poor. The new trees are planted in areas that are ill-suited for agriculture,” Juha-Pekka Tuomipuu points out.
 

For more information please contact Mr Juha-Pekka Tuomipuu tel. +358 9 3484 3321, email firstname.lastname@finnfund.fi