Business from Waste Paper

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Business from Waste Paper

FRIDAY, 31 OCTOBER 2008 14:54 ASWATHI MURALIDHARAN OPPORTUNITIES - ENERGY & ENVIRONMENT

Waste paper reuse and recycling not only saves the environment, but also reduces costs

India generates approximately 0.1 million tonnes of municipal solid waste everyday, or about 36.5 million tonnes

annually! Of this waste, 40% is just paper. In other words, we produce 14.6 million tonnes of waste paper every year!

Waste paper is not just thrown away or used only for wrapping your purchases at the local kirana shop. Globally,

recycling of paper is a huge business. There are global exchanges that deal in waste paper and many countries

mandate the recycling of paper.

Currently, the recovery of waste paper in India is low at 26% compared to say Germany at 80%, Thailand at 45% and

China at 38%, according to the Indian Agro & Recycled Paper Mills Association (IARPMA) estimates. Here, it is

pertinent to note that recovery means collecting back for reuse, while recycling means producing paper out of

recovered waste paper. This means that out of our consumption of 8.3 million tonnes of paper, only about 2 million

tonnes is recovered for reuse. Obviously, there are significant opportunities hidden in paper.

Here, we cover three such businesses²recycling, waste paper collection or recovery, and waste paper based

handicrafts.

Paper Recycling

IARPMA projects the demand for paper in India to reach 15 million tonnes by 2015. If we were to reach China¶s

current level of recovery, then we should be recovering 5.7 million tonnes of waste paper for reuse by then. While the

production of recycled paper has increased approximately three folds from just 13% in 1985 to nearly 40% in India,

the potential is much larger.

Paper produced by recycling is generally of four kinds²writing/printing paper, newsprint paper, duplex boards, and

craft paper. Recycled paper is often made into the same grade of paper that it was originally. For example, old

newspapers are recycled to produce newsprint, and corrugated cardboard boxes are recycled to produce paper for

packaging.

Paper production is a highly capital- and labour-intensive activity. According to PG Mukundan, Secretary General,

IARPMA, ³Depending on the production capacity of the mill and quality of the output, the initial investment will not be

less than 50-100 crores.´ Major investments would be on machinery, which includes the pulping machine, multi-stage

washer, head box, felt, paper machine, and dryer. Besides these, one would require pollution control equipment, and

water treatment plants. Other areas of investment would be into land and buildings²yard for stocking, storage area

for keeping and segregating waste paper, and the cutting division. These requirements remain the same for

producing different kinds of paper but some processes may vary. For example, for producing craft or brown paper,

everything is the same minus bleaching.

Compared to the cost of producing virgin paper, the production cost of recycled paper is much less. According to

Jogarao Bhamidipati, Vice President at the ITC Paper boards and Speciality Papers Division (PSPD), ³Production

cost comes down because for producing virgin pulp, you have to first cut the trees, make it into small chips, cook it,

bleach it and make it into pulp. These processes can be avoided by making pulp from waste paper.´ He says

production costs can be down by about 40% with recycled paper. Cutting down these processes also helps to reduce

the levels of pollution caused by paper mills.



The quality of recycled paper would be inferior to that produced from virgin pulp, but there is a way out. According toBhamidipati, ³Manufacturers blend waste paper and virgin pulp to manufacture mixed quality paper. For example,they mix 60% recycled pulp with 40% virgin pulp to attain average quality.´

According to Bhamidipati, ³One of the reasons why the demand of waste paper is high is because not all paper millsare in a position to put up a pulp facility.´ While there has been a significant increase in recycled paper production,collection of paper for recycling has lagged.

Collecting Waste Paper At present, the collection of waste paper is the domain of rag pickers,and scrap dealers. Once collected, it passes through several handsbefore reaching the paper mills, if it does. And if it does, the price atwhich it is sold to the paper mills almost doubles!

In India, there are several companies, large and small, who are intothis business. One way of trading the waste paper thus collected isthrough paper exchanges that facilitate buying and selling of wastepaper on an international level. Another way is collecting the paper,segregating it and selling it to paper mills. An interesting businessmodel in this respect is that of JDC Recycling, a part of the JDC Group.

JDC Recycling collects paper waste from offices and sells it to paper mills for recycling. The company offerscollection services and confidential document shredding services to insurance companies, banks, etc. According to

Sumeet Chopra the founder, ³we have a team of people and collection vans to collect waste paper directly fromoffices.´ The difference in their model comes next. Payment is made either in cash or with stationary made of recycled paper.

A major challenge that the company faces is the lack of awareness among people. Explains Chopra, waste paper isof two types, pre-consumer and post-consumer. Pre-consumer is the waste produced by printers, packaging houses,etc, which does not reach the end consumer. A system already exists for collecting this waste. However, the problemis with the post- consumer waste because of the low awareness level. When households and offices disposewastepaper in the dustbin, it is thrown together with other wastes such as food and the paper becomes so soiled thatit cannot be used for recycling. To tackle this, JDC provides educational materials such as posters and specialcorrugated boxes for collecting paper waste.

ITC is working on a similar program to cater to its needs as part of its Corporate Social Responsibility initiatives. Ithas launched a program called Wealth out of Waste (WOW), which entails buying domestic waste, separating wastepaper and sending it to the company¶s paper mills for recycling. ITC provides households with two paper bags²one

for wet waste and the other for dry waste. According to market sources, it is collecting 400 tonnes of dry waste per month and is expected to hit 2,000 tonnes a month in the next six months.

Handicrafts

Papier mache is a craft made out of waste paper. Producing papier mache items does not involve expensive inputs.Paper and paste are the basic materials. According to Kamal Jyoti Das of Papier Mache Craft, they create a variety of products, ranging from beautiful intricately painted masks to pen stands painted with vivid colours. The product costsrange from Rs 100 to Rs 1,500 depending on the intricacy of the design. According to Das, marketing these productsis a challenge, and he has created a website to reach a wider audience. On the other hand, Ranjay Kumar Jha, asmall papier mache products manufacturer, displays his products at the capital¶s Dilli Haat. He claims to sell nearly20-25 pieces per day, in the price range of Rs 75 to Rs 1,000. And his profit margin? 20-30%. Though papier macheproducts are made by many states, large scale sale of these products has not been attempted yet.

So the next time you crumple up and throw away a piece of paper, just keep in mind that you are throwing away abusiness opportunity!

Waste Paper Business

TUESDAY, 01 DECEMBER 2009 00:00 ASWATHI MURALIDHARANOPPORTUNITIES - ENERGY &ENVIRONMENT

Waste paper is not ³waste´ after all. It is a flourishing business that is now attracting big players

Be it newspapers, magazines, bills, memos, diaries or notebooks, they all land with the scrap dealer after being used.But what happens after that?

What you need to collect waste paper

Warehouse²to store and sort

Vehicles²to collect and transport

Shredders²to shred important papers

Bailing Machine²to pack efficiently



Well, after that the waste paper changes several hands before reaching the recycling mills. The paper is then de-inked, made into pulp and again into paper, before it reaches the market as recycled paper. In this story, DAREtracks down the route that waste paper takes before reaching the paper recycling mills, which could be a lucrativebusiness opportunity.The industry landscape

The operating capacity of the Indian pulp and paper industry has been estimated to be 8.5 million tons by the IndianAgro and Recycling Paper Mills Association (IARPMA). Paper mills can be broadly divided into three types²wood-

pulp-based mills, agro-residue-based mills (non-wood-based segment) and waste-paper-based mills. According tothe IARPMA, waste-paper-based mills account for almost one third of the industry at approximately 40 percent,whereas the wood-based mills account for 29 percent and the agro-residue-based mills comprise 31 percent of thetotal industry pie. Despite the fact that more than one third of the industry is dependent on waste paper, waste paper recovery is very low. In fact, according to available figures, only 2 million tons of the paper finally finds its way to therecycle mills. This means that nearly 6.5 million tons of paper reaches landfills and is lost forever.

It has been estimated that the recovery rate of paper in Indiais only 26 percent, compared to Thailand¶s 45 percent,China¶s 38 percent, and Germany¶s 80 percent. This is mainlydue to low awareness among people as well as theunorganized nature of the business. In India, waste paper collection is mainly done by rag pickers and kabariwallahs(scrap dealers), who collect waste in a crude manner. This

makes India highly dependent on waste paper imports fromcountries like Canada, the USA, the European Union andMiddle East. Within India, waste paper is mostly collectedfrom the western region that comprises 39 percent, followedby northern region at 28 percent, southern region at 23percent and eastern region at just 10 percent.

The business model As mentioned above, waste paper collection in India is very low compared to other countries, and whatever paper iscollected passes through several hands before reaching the paper mill. Briefly, it passes through three middle men²the scrap dealer, the local area dealer and the wholesaler²before it is converted back to reusable paper. Nitin Goelof GreenOBin, an organized player in this sector says, ³A street raddiwala cannot directly go and sell to the recycler due to the limitation on the collection amount. Any paper mill based on waste paper as their raw material has got adaily requirements in tons and the street raddiwala cannot cater the same daily.´ The cost escalation during thisprocess is twice the amount when compared from a street

scrap dealer to the paper recycler.

The first link to the chain starts with the scrap dealer, alsoknown as the kabariwallah, who collects waste fromhomes. The scrap dealer¶s major cost heads are a cycle, aweighing scale and some sacks. This dealer collects allkinds of waste from homes like old newspapers,magazines, loose paper, old bottles, metal waste, and soon. He does a basic level segregation and sells his goodsto the local dealer. In terms of paper waste, newspapersare what hold the key to his profits because of largequantity compared to magazines, old books and loosepaper. A scrap dealer tells us that these days a number of households generally get at least two papers andmoreover, the weight of the newspaper is also more

because a number of add-on supplement papers andcontent. He buys the newspaper at approximately Rs 5.50per kg from the households and sells it to the local dealer at Rs 7, whereas magazines go at approximately a rupee less because of the glossy paper used. Ultimately, hisprofits depend on his negotiating skills²the better his negotiating power the more profit he earns.

After collecting all the waste, the scrap dealer sells his goods to the local area dealer. The major cost heads of thislocal area dealer is space to store different kinds of waste, a weighing scale, and manpower to segregate the waste.This local dealer has several scrap dealers working for him. For example, Mohammad Irfan, a local area scrap dealer in Delhi, has 25 scrap dealers working for him. These scrap dealers sell all their waste, be it paper, bottles, or metal,at the end of each day. After collecting the waste from the dealers, another level of basic segregation happens at this

Availability of Waste Paper by Geography



level. In case of newspaper waste, each newspaper has to be straightened, sorted and bundled neatly before it canbe sold further. These dealers work with different wholesalers²there are separate wholesalers for different kinds of waste. In the case of newspaper waste, he buys it from the scrap dealer at Rs 7 (the current rate) and sells it to thewholesaler at approximately Rs 7.20 (a ballpark figure). This is when the transportation is taken care of by thewholesaler. This price fluctuates and depends on the demand and supply of paper in the market.

The wholesaler, on the other hand, is a larger player who has several dealers working under him. Transportation fromthe dealer to the godown as well as from the godown to the paper recycling mills is generally his responsibility. Themill price at which he sells to the paper mills is also highly fluctuating. As the quantity of paper re-collected is fairly



low, a major part of their waste paper supply comes from imports. The price at which paper is imported, which in turnis dependent on paper availability at that point of time, has a direct impact on the price of waste paper in the domesticmarket.

Since this link or segment of waste paper chain is highly dependent on transportation, another major factor impactingthis trade is the price of oil. Roughly estimating, this price comes out to be approximately Rs 8 per kg (a ballparkfigure). These wholesalers are also directly in touch with several media companies, publishing houses, printing

presses, etc, whose paper waste is considered to be good in quality compared to the others that passes throughseveral hands. This waste fetches a higher price for these wholesalers in the market. For example, Cybermedia,which sells its paper waste twice or thrice a year, sells approximately 6,000-7,000 kg of waste in a single deal. So, for these wholesalers this kind of a deal becomes much more profitable.

Organized waste paper collection

Given the huge demand for waste paper in India, several companies have started to enter this space. Businessconglomerate ITC was one of the first to tap this segment with its Wealth out of Waste (WOW) program. Under theprogram, ITC collects waste from households, segregates waste paper and sends it to its paper mills for recycling.For this purpose, ITC provides households with two paper bags²one for wet waste and the other for dry waste.Jogarao Bhamidipati, Vice President, Commercial of ITC¶s Paperboards & Specialty Papers Division (PSPD)explains, ³Waste paper bought from households and commercial areas at Rs 4 per kg, would reach the sortingfacility, where it gets sorted into different grades and gets baled. Here the costs could be Rs 1.5 to 2 per kg. Baledmaterial gets sold to mills at an average price of Rs 8 per kg.´ According to market sources, ITC collects 400 tons of dry waste per month and is expected to hit 2,000 tons a month in the

next six months.

There are several other companies mushrooming in this sector²onesuch being GreenOBin, which was started in 2009. The organizationclassifies their clients in three different ways²small company (50-200 employees), medium company (200-500 employees) and large company (500 & above employees). Nitinexplains, ³We offer three different categories of membership to which different services are attached accordingly.Major services that GreenOBin provides are waste pickup, waste audit, training and awareness programs, securityshredding and source segregation bins.´

After collecting the cash, the company offers recycled paper office stationery products to the corporate instead of paying them back in cash.

Challenges

In India, as there is no proper mechanism for segregating paper waste as there are several challenges faced by thepaper industry, thus making it highly dependent on waste paper imports. The collection of waste paper is not done ina scientific manner, therefore, all the different kinds of paper waste get mixed and go to the paper mill, which mayhave a lower capacity of paper production. Explains Narayana Moorty, Secretary General of Indian Paper MillsAssociation (IPMA), ³Abroad, all the paper is scientifically collected and segregated according to different grades.This does not happen here and all types of paper are mixed with each other. Paper has got 2000+ varieties, but inIndia a layman calls it all paper.´

Moreover, a paper can be recycled only for a fixed number of times as the paper fiber becomes shorter and hencelooses strength. However, in India, there is no mechanism to determine it in terms of usage. Unless a paper is gradedand segregated in terms of what has been the first usage of paper, the secondary fiber all becomes mixed. Thisbecomes a problem because after the quality of the paper depreciates with subsequent recycling²the paper becomes brittle and yellow²thus affecting the final paper quality.

Explains Moorthy, ³In other countries, there are dedicated collection centers where the grading takes place properly,if it comes out of a book it is of a different variety, if it comes from the packaging it is different, if it comes from amagazine it is different. There is a grading system, so when the paper is graded, bailed and made ready for sale, it is

priced accordingly. This does not happen here.´ Therefore, the larger paper mills, which are quality conscious, importpaper in large quantities for their use. Besides these, there are other issues such as habits of people, lack of infrastructure, lack of legislation and penalty for non-source segregation of recyclables, and lack of awareness onenvironment-related issues.

Opportunities Worth Exploring

Organized paper collection from homes and offices

Scientific collection and grading centers

Business from Waste Paper

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