Paper industry struggles to survive amid pandemic

Bashundhara Paper Mills Ltd has been facing problems as demand for paper products and sales declined due to the closure of educational institutions for around one and a half years amid the pandemic.

"As a strategy to survive in the market, Bashundhara Paper Mills has reduced paper production and increased the production of tissue and hygiene products after the pandemic hit," said Mostafizur Rahman, deputy managing director of Bashundhara Group.

Like Bashundhara Paper Mills, all other paper mills have been facing problems amid the pandemic and are struggling to survive.

Paper industry insiders said the industry is in crisis as the sales of their products have decreased by around 90% compared to the normal times.

According to the Bangladesh Paper Mills Association (BPMA), the paper industry has incurred a loss of about Tk8,000 crore since the Covid-19 hit the country. Entrepreneurs' investment in this sector is around Tk70,000 crore.

Entrepreneurs are currently worried about the halt in production, increase in stocks of unsold products, operating costs, and repayment of bank loans.

An official of the Padma Paper Mills, which produces medium paper used in making cartons for industrial purposes, said, "The amount of goods we sell now is much less than that before the pandemic. We are facing losses like other sectors, including the export-oriented industries, due to the repeated lockdowns. Production has been disrupted and products could not be sold."

The country's paper mills produce offset paper, newsprint, writing and printing paper, packaging paper, duplex board, media paper, liner paper, sticker paper, security paper and various grades of tissue paper.

However, 70-80% of their products are writing and printing papers, which is one of the essential educational materials. The sale of these products has collapsed due to the closure of educational institutions amid the pandemic.

The paper sales increased a bit as the government and private offices were running before the ongoing shutdown, but now it is close to zero, said industry insiders.

Mostafizur Rahman, deputy managing director of Bashundhara Group, said, "Most of the paper manufacturing companies in the country are now facing a similar crisis as the demand of white and printing paper has fallen. Some of the paper mills, which manufactured white paper, printing paper and newsprint only, were closed due to the pandemic."

"Some of them have diversified their products and shifted from using their capacity for producing paper to other products. Paper mills are being run with 10-20% capacity," he added.

According to sources, there are 106 paper mills across the country, of which 79 are closed now. Some of the smaller mills were closed even before the pandemic as they could not survive the dominance of large groups and market competition.

The BPMA could not say exactly how many mills have been closed in the last one year.

Along with reduction in sales, the increase in stockpile of produced goods and halt in production are causing problems for the entrepreneurs in the paper industry as they are struggling to pay their loans back.

In this situation, the BPMA has sent a letter to the Bangladesh Bank on 21 June, expressing their fear that they may not be able to make scheduled repayments of loans and the loan defaulters in this sector may increase.

Production capacity is much higher than the demand

The demand for different types of paper in the country is about nine lakh tonnes, but the domestic paper mills have capacity to produce 16 lakh metric tonne per year. Of the local paper mills, 20-30 are large and the rest are small.

The size of the country's paper market is about Tk5,000 crore. Writing and printing paper products account for 60-70% of the local market and other products account for the rest of the market.

People involved in the sector said even a decade ago, paper was imported from abroad.

Although the domestic paper industry began to develop in the 1980s, the large industrial groups started investing in this sector in the nineties, and gradually the industry became self-sufficient.

The country's paper mills are currently exporting their products abroad after meeting the local demand. This sector employs around 15 lakh people.

According to the BPMA, entrepreneurs have invested Tk70,000 crore in the country's paper industry. Around 300 sub-industries and ancillary industries such as printing, publishing, ink making, decoration, packaging and binding are also related to this sector.

Paper industry entrepreneurs in danger of defaulting on loans

The BPMA said the bank loans in the paper industry amount to around Tk50,000 crore.

In a letter to the central bank demanding increase in deferral benefits for loan classification, the BPMA said if the loans are classified from July this year, 40-50% of the borrowers in the paper sector would be considered as defaulters, leading to a crisis in the business and banking sectors.

However, the central bank has extended the loan classification deadline from July to August.

In the letter to the central bank, the BPMA has sought an opportunity to repay the defaulted installments at a rate of 5% interest in 20 quarters over a fixed period of five years, or at a rate of 2.5% interest in 40 quarters over a fixed period of 10 years

The paper manufacturers have sought the facility to repay the loan installments in the above manner from October 2021.

They also demanded that banks do not classify their loans till October, and even after that do not classify the loan unless a business entity fails to pay four consecutive installments.