Riding a strong demand, the country's leading paper producers have lined up investments of over Rs 5,400 crore (Rs 54 billion) to set up fresh capacity of almost 700,000 tonnes per annum.
The largest investment of Rs 2,500 crore (Rs 25 billion) has been announced by ITC Ltd. The company has said it will add 125,000 tonnes to its existing production capacity, though it has not specified if it will be a brownfield expansion or a greenfield venture.
The LM Thapar-controlled Ballarpur Industries Ltd, the country's largest paper company, plans to double its capacity to 850,000 tonnes over the next 3-4 years.
"The investment could be up to Rs 1,200 crore (Rs 12 billion)," Bilt vice-chairman and managing director Gautam Thapar told Business Standard.
Andhra Pradesh Paper Mills, an LN Bangur company, is expanding its capacity to 193,700 tonnes by 2007-08, from 153,700 tonnes, at a cost of Rs 635 crore (Rs 6.35 billion). Tamil Nadu Newsprint and Papers Ltd, too, is investing Rs 565 crore (Rs 5.65 billion) to increase its capacity to 245,000 tonnes.
Sirpur Paper Mills has embarked on a Rs 294 crore (Rs 2.94 billion) expansion plan that will raise the capacity of its plant in Andhra Pradesh from 83,000 tonnes to 133,000 tonnes. JK Paper Ltd, a Hari Shankar Singhania company, has lined up investment of Rs 235 crore (Rs 2.35 billion) in its paper and boards business.
The investments per tonne vary across companies, as some of these are greenfield ventures, while the rest are brownfield plans. In either case, the industry wants to capture the impending paper boom in the country.
The demand for paper in India is growing at 6-7 per cent per annum, led by the government's enhanced spending on education. This places India among the fastest growing markets in the world. Developed nations do not expect to grow beyond 2-2.5 per cent in the same time-frame.
"In fact, a government study has indicated a shortage of paper up to 1 million tonnes by 2010," said APPL Executive Director RC Mall.
There is another reason why the country could see a shortage of paper in the coming years. The rising prices of pulp worldwide and the new environment laws that will come into force soon will render large production capacities unviable.
At present, the total paper capacity in the country is six million tonnes. While the integrated producers account for about two million tonnes, the remaining capacity is scattered amongst a large number of standalone producers. These are the paper mills that are expected to be hit hard by the new environmental laws.
"About 10-15 per cent of this capacity is unviable and could shut down," The Sirpur Paper Mills Ltd Chairman Ranjan Poddar said.
Much of the fresh investment is going into writing and printing paper as this segment of the market is growing at 12-13 per cent per annum.