Opportunity for Increasing Waste Paper Reuse in India

Along with advances in education and a large growing middle class in India the FMCG (Fast Moving Consumer Goods) sector is rapidly growing which in turn became the locomotive for the rapid growth in the paper packaging sector. Consequently, this will most likely increase the demand for paper and paper board that is typically used to create paper based packing.  The Indian packaging industry has a current value of INR 650 billion, with an expected growth to INR 825 billion by 2015.  India’s paper consumption has grown steady at an 8% rate in the past five years. Due to this the industry has been scaling up their operations to meet the growing demand. 

FIG 1 : Growth of paper per capita consumption in India

Sources: Deloitte Paper Industry 2012, media reports

FIG 2: Flow of paper from raw material to end user  

Sources: Sustainability Outlook analysis

Indigenous paper collection in India is poor. As shown above, the present recover and utilisation of waste paper in mills in India is only 3 million tons annually. This means only 27% of the total paper and paperboard consumed in India is reintroduced into the system. This rate is low compared to many developed countries including Italy (45%), Sweden (69%), Germany (73%) USA (49%) and Japan (60%). 

Recycled fibres from waste paper are an important input raw material to paper product production. The breakdown of India’s raw material share used in paper product production is shown above. The majority share of raw materials (forest based, agri-residue, waste paper) in Indian paper production comes from waste paper. 

Since indigenous waste paper collection systems are poor, roughly 60% of waste paper used as recycle fibres in paper production is imported from developed countries and is not sourced domestically. Around 4.0 million tons of waste paper is imported into India per year. The largest exporter of waste paper to India is the United States with 34% of the market share. Following is the U.K with 17% and then the rest of Europe with 18%. Once received, waste paper in turn is converted into a value product for local consumption in India. 

Over the past five decades waste paper overtook wood as the predominant raw material. In the early 70’s the share of waste paper used was only 7% compared to 2011 where it constituted the majority share at approximately 47% of total production.  It is estimated that the import of waste paper has increased greatly from 5.1 million USD in 1980 to 1 billion USD in 2011.  These trends are expected to persist. 

Sources: Data points source to DIPP, Government of India

How is Indian waste paper collected & recovered? 

The collections & recovery process for waste management begins with direct collectors from various source points and smaller shops. Here primary sorting of the waste into different materials occurs. Then the waste is transported to zonal segregation centres, where the material is collected from small shops and baled for dispatch to the end users. The Indian waste paper collection is mostly carried out by the informal sector, rag pickers and door to door collectors.  It is estimated that 95% of the collection of waste in the country is performed by the informal sector. 

The opportunity in packaging and waste paper recycling

Paper and paperboard is expected to grow at an average rate of 7.8% per year which means by 2025 India will be producing 22.0 million tons a year.  This corresponds to a demand for recycled fibre from paper waste (in the current raw material mix) of 10-11 million tons a year, of which 6-7 million tons a year may potentially be imported if a 60/40 ratio is maintained. This is nearly a doubling of present day imports in the next decade. 

However, the cost of transport of waste paper imports is also expected to increase and provide natural market incentives to overcome domestic collection costs and increase domestic recovery & recycling rates. 

Other benefits from implementing suitable waste management schemes India will be able to decrease waste direction to landfill, provide an opportunity for formal employment creation and meet the future demand for waste paper as a raw material. 

If the collection and recovery rates of 27% do not change, the current system in India leaves a huge hole in the value chain by not incorporating local waste management and recycling. 

Sources: Paper Mart, media reports

Key References:

Turning the page on India’s paper industry: A new chapter in investment potential and growth, April 2012, http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Document...

Discussion Paper On Collection and Recycling of Waste Paper in India, N/A, http://dipp.nic.in/english/Discuss_paper/DiscussionPaper_Recycling_Waste...

India's paper consumption set to double by 2020,  August 2013, http://archive.indianexpress.com/news/indias-paper-consumption-set-to-do...

Waste Paper Collection Mechanism in India, March 2014, http://papermart.in/2014/03/01/waste-paper-collection-mechanism-in-india...