Paper Consumption will increase only when educational institutions are opened: AS Mehta, JK Papers Ltd

AS Mehta, President and Director, JK Papers Ltd, talks about the demand pattern, recovery, Production closure at Sirpur Paper Mills, capacity utilization and import duty among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

As per our analysis, the demand has been muted so far. Is it right? Also, tell us about the kind of demand that is expected in the next few months?
Your analysis is absolutely correct. You know it well where the paper is consumed and where the maximum paper is used. The education sector is the biggest sector where the paper is consumed. It includes schools, colleges, universities and coaching centres among others. The paper consumption is almost negligible/ is almost closed, at present, because the schools are colleges are shut.

When the online classes are conducted or while studying at the home, there are few children - who do everything seriously like reading and writing –will use papers. Otherwise, rest of the children completes their work under a school pressure or peer pressure or pressure of the teacher, but their respective parents only know the kind of work they are doing when they are free and are at their homes. I assume that there are only 20-30% children who do their work seriously and the remaining adopt a casual approach in doing their tasks. This is why paper consumption has gone down.

Secondly, a lot of paper is consumed at the coaching centres but they are closed at present. Therefore, the demand for paper has gone down significantly. When it comes to offices, then I will say that around 50% strength would be present in the offices at present across the country, if an average is seen. It would be slightly less than 50% somewhere while it would be slightly more than 50% in places, so on average, it is 50%. So, if such kind of attendance is seen even at the offices then 50-60% of paper will be consumed there.

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When recovery is expected and how the next two months are looking to you, do you think that the pattern will be the same or there can be some major changes in it?
As far as recovery is concerned then I will say that demand for writing and printing papers will remain the same that we are seeing in August, till the schools, colleges and coaching centres are not opened. I think education will be compromised in the same way as it is happening until these facilities are not opened. I feel that the government should have a serious look on this aspect and think about it as small children can’t be kept online for long hours as it is related to their health issue as having an impact on their eyesight. So, physical classes should happen, they can start in September or October or November or anytime that is best for it.

You have announced a temporary closure of production operations at the Sirpur Paper Mills in Telangana because of the current market conditions. Have you closed it just because the demand is low, if yes, then how long the plant will remain closed? Also, tell us about the kind of savings you will make from this closure?
There is only one reason to close it. We were running the unit when the lockdown was lifted although there was no demand in the market. We were keeping it operational to test how the market will recover; if it is fast then the plant will remain operational. In between, we have closed the plant twice for 10 days and 5 days. But it is a continuous process plant and that’s why it is very difficult to run it by shutting them down repeatedly as some many processes and protocols should be followed. Safety is a major concern that’s why we do it with great care. So, we took a call that when the products are not selling and there is no demand in the market and we have adequate inventory at Sirpur with which can cater to the market for the next month and a half if the demand remains same. So, the plant has been closed and will keep review it at a regular interval and then talk a call on it. Till then the plant will remain closed.

Update us about the capacity utilization situation in other plants and do you have any plan to take a call on other any plant(s) like Sirpur? 
We produce two particular categories of products, namely Copier Paper and Coated Paper, at the Odisha plant. When it comes to coated paper then there are only two producers of the product in India. So, the unit is being run at 70-80% capacity as its production is sold in the market, which means it is in demand and that’s why the plant is running. There is a 50-60% demand for Copier paper and we also have few export markets for it. So, this unit is also running at 70-75% capacity and it will run continuously. Because as long as it runs at 70-80% capacity, maybe it is inefficient, it contributes and earns a profit. So, there is no question to shut down that plant it will continue to be operational and as the market will pick-up, its production will be increased and it is not an issue.

Similarly, packaging boards are manufactured at the Gujarat Plant. I would like to say that 90-95% demand has returned in this segment because few sectors, like the Pharmaceutical sector and FMCG sector, are normal. Apart from this, speciality paper is also manufactured at the plant and it is in demand. It is used in cheque paper, security paper and few other special varieties of papers and that’s why its production is running on one machine. So, 75-80% capacity of this unit is also being utilized and the plant will remain functional.

Demand for packaging has increased a bit as people are opting for online shopping, which needs packaging. Have you seen a huge surge in demand of that particular product and are you seeing an increase in your market share in the segment?
The packaging board manufactured by us is used for high-end applications. It is used in pharmaceuticals and food products at large and certain part goes for textile and cosmetics. FMCG, food products and pharmaceuticals have reached the pre-COVID levels, so the demand is good in these segments. But, the market of textiles and cosmetics are depressed to a great extent. So, the packaging board unit will not reach 100% or better utilization until and unless these two sectors are not revived completely. You can assume that at such a time when people are locked at the homes then how can they remember the cosmetics. Same is the situation of textile, which is not performing at the moment. These two sectors are impacted and that’s why it is running at 90-95% capacity.

We have talked a lot on import duty hike in the past but the government has not taken any major step on the front. So, update us on the kind of talks that are going on it? 
I can just say that we make efforts in every situation and request the government again and again and provide our submission related to it. But I can just say that it is unfortunate that the speed at which our government operates is not a speed at which business is done. It has been almost a year since when the talks on the subject were started and requested the government to take some action on it but it is very difficult to say that when the action will be taken. The subject is taken up at regular intervals and the government, as well as the minister, says something on it. But the kind of system, bureaucracy, people and processes we have, it takes a long time to take action. We haven’t reached the speed at which business is done.