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Agro-forestry helps industry in absence of forest-based raw materials
Financial Express - 01 Jan 2010

Betting big on value addition in specialty papers business, ITC’s Paperboards and Specialty Papers Division uses cutting edge environmental technology including ozone bleaching and elemental chlorine-free technology. In a interaction with FE’s BV Mahalakshmi, the company’s chief executive officer Pradeep Dhobale talks about the social and farm forestry initiatives driven by an extensive research based on clonal propagation programme. Pradeep Dhobale who was also the former president of Indian Paper Manufacturers Association (IPMA) stated that the company aims to achieve Forest Stewardship Council certification for various forestry initiatives and paper and paperboard products. Though the paper industry is challenging in the wake of the current scenario, but the dictum for growth is to plant more trees. ITC's Paper, Paperboards and Packaging business had registered a gross turnover of Rs 2,822 crore as on March 31, 2009, is currently a member of World Wildlife Fund Global Forestry & Trade Network which is an initiative to eliminate illegal logging and improve the management of valuable and threatened forests.Excerpts:

How is the paper industry faring at present? Is the industry positioned well to meet the challenges?

The paper industry is currently passing through a domestic overcapacity situation, particularly in writing and printing papers. However, the market continues to grow between 6% and 7%. Hence, situation is expected to ease out in next couple of quarters, particularly with education sector requirements picking up for next academic year. Generally, the image of the paper industry is cutting trees. However, there is a change in the perception and it is plant more trees after cutting as tree plantation continue to act as regenerative resource.

What is the current demand-supply ratio? What is your take on the growth of the industry in the wake of rising pulp prices?

The consumption of paper is close to 10 million tonne currently. However, rising pulp prices will put pressure on margins for the non-integrated players but growth in demand will continue. Paper has received priority in government thinking and has 4% excise duty at present. We expect the budget to continue this preference for this crucial product for any developing economy. More so in GST regime, the states also must levy concessional taxation on paper as well as educational products like notebooks. Thanks to the growth in the education and stationary products, the demand is bound to surge across both rural and urban markets.

Do you see any effect of the Copenhagen meet? Is the industry taking enough steps to combat climate change?

Certainly. I would expect the government to come out with standards for emissions and also incentivise environment-friendly products and operations. The industry is also responding positively in the organised sector.

What are the challenges for the industry? What are the newer developments from this sector?

Challenges continue to be in the area of raw material. Agro-forestry has helped us survive in absence of forest-based raw materials but not allowing us to grow fast enough. The huge potential available in carbon trading from reforestation and resultant employment generation in rural India has not received due attention by the government. ITC's social forestry project is the only one of its kind and size registered by United Nations Framework Convention on Climate Change (UNFCCC) and a model for future.

What are your company's plans in plantation and how do you plan to increase your presence in the niche student retail segment ?

We completed an Rs 1,200 crore expansion in mid-2008.We have greened over 1,05,000 hectare. Out of this, over 3,000 hectare have been identified for clean development mechanism (CDM) project, which is incidentally the first project is the world which has been registered with the UNFCCC. CDM is an arrangement under the Kyoto Protocol allowing industrialised countries with a greenhouse gas reduction commitment to invest in ventures that reduce emissions in developing countries as an alternative to more expensive emission reductions in their own countries.

After registration, the next step is verification followed by certification which can be used for carbon trading. The annual Certified Emission Reductions (CERs) which are climate credits or carbon credits issued by the CDM Executive Board for emission reductions achieved by CDM projects, from these plantations, is estimated at 57,000 CERs per annum valuing about $4 to $5 per CER. About 3,398 farmers or rather tribals across 193 villages in 14 mandals of the Khammam district across 3,070 acres will the ultimate beneficiaries. Though the certification process is likely to take some time, we are hoping to get it with retrospective effect.

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