The paper manufacturing industry witnessed skyrocketing success in the last four decades, and transformed from an import-dependent sector to an export-dependent one. However, the industry built with investments worth hundreds of crores of taka is now on the verge of collapse due to crises of gas, electricity, raw materials, dollar and credit.

The sector, which contributed to the development of education and culture, has now lost its competitiveness in the domestic and export markets.

Paper industry entrepreneurs said that although the development of the domestic paper industry began in the 1980s, it became self-sufficient in the 1990s as large industrial groups invested in this sector.

To meet the demand for essential materials for printing books, magazines, newspapers, etc, the country’s paper mills started producing offset, newsprint, writing and printing paper, packaging paper, duplex board, media paper, liner, sticker paper, security paper and various grades of tissue paper.

However, 60% to 70% of the products manufactured are writing and printing paper, which is one of the materials of education. Currently, paper mills have the capacity to produce two and a half times more products than the domestic demand. The demand for various types of paper in the country is about nine lakh metric tonnes. However, the production capacity of domestic paper mills is 1.6 lakh metric tonnes. To meet the domestic demand, excess paper and paper-like products are being exported to 40 countries.

Illegal paper imports, evading customs and VAT, false declarations, and smuggling have been hampering the development of the sector from the beginning. In addition, people involved in the sector have said that the existence of the domestic paper industry is facing a catastrophe due to unequal competition as duty-free paper imported under bonded warehouse facilities is being supplied at low prices in the open market.

When asked, Rezaul Islam, director (commercial) of Pearl Paper and Board Mills Limited, told the Daily Sun, “We are not getting gas in the paper factory. This has reduced production by 30% to 50%. Our factory in Dhamrai has been facing gas problems for a long time, but there is no solution to it. As the interest rate on bank loans has doubled, the operating expenses have increased a lot. This has made it difficult to sustain the factory.”

He said that the production capacity of existing paper mills is 2.5 times more than the local demand. Therefore, it is important not to finance the establishment of new mills in this sector by banks. Besides, reducing the price of gas and electricity used in domestic industry production in line with international market prices, and increasing cash support for exports are also needed.

According to the Bangladesh Paper Mills Association (BPMA), 70 out of 128 paper mills in the country have already stopped production. The remaining 58 factories are running at a standstill due to gas and raw material shortages. More than 300 supporting industries have been developed in the country centered around the paper industry.

BPMA Secretary Nowsherul Alam told the Daily Sun, “The country’s paper mills have been producing offset, newsprint, writing and printing paper, cigarette and bidi paper, packaging paper, duplex board, media paper, liner, sticker paper and various grades of tissue paper, along with all other quality papers. Production in factories has decreased by almost half due to gas shortage, LC shortage, and disruption in raw material imports. Along with this, the risk of default has increased for entrepreneurs due to low sales due to high inflation, high interest rates on loans, and a new wave of loan defaulters. Many have stopped production in factories due to inability to provide working capital.”

Stating that the paper industry is suffering from gas shortage, Alam said, “In the last few years, gas prices have been increased. Initiatives have been taken to increase them again. Even at such a high price, uninterrupted gas supply is not available. Due to this, factories are not able to produce at full capacity. Raw materials have been high in the international market for a long time. This has increased our production costs.

“The abnormal rise in the dollar price has increased import costs. The main raw materials of the paper industry are waste paper, pulp, and chemicals. It can be said that there is no policy protection in this sector, which was built with huge investments. Many people are selling paper in the open market without any problems by bringing it under bonded warehouse facilities. This has threatened the domestic industry. Some are smuggling paper of one grade by announcing it as another grade, and no one is watching. Then how will the domestic industry survive? If all these factories are closed, millions of workers will be unemployed. As a result, it will not be possible to achieve the desired growth of the country.”

In such a situation, Bangladesh Paper Mills Association (BPMA) Secretary General Mustafa Kamal Mohiuddin has expressed concern that the paper industry is becoming a sick industry in a recent letter to Finance Adviser Dr Salehuddin Ahmed.

The letter states, “The global economic recession, the Russia-Ukraine war, the long-term impact of Covid-19, and the weak economic situation in the country have led to a near-total shutdown of business activities, resulting in a severe capital crunch for industrial entrepreneurs and businessmen. Out of the 128 paper mills established in the country, 70 have already stopped production due to the decline in local demand. The remaining mills are somehow running aground.”

The domestic paper industry, which is important at the national level, is now facing a severe crisis due to various adversities. Currently, due to the contraction of domestic demand for the global recession on the one hand and the inability to expand the export market on the other hand, there is a fear that this promising industry will turn into a sick one.

The letter further states that the fuel crisis, including the increase in gas and electricity prices, delays in providing connections, frequent load shedding and other problems, are a major obstacle to this sector becoming a profitable industry.

In recent times, the price of fuel has increased by about 300%. As a result of the gas and electricity crisis, the production cost has increased by 20% to 30%. Bank interest rates have been increased from 9% to 15%, which is not allowing the paper industry to reach a sustainable position in the competitive market.

About 70% of the main raw materials of the paper manufacturing industry, including waste paper, pulp, and chemicals, are imported from abroad. Currently, domestic paper mills are unable to import the main raw material pulp due to the liquidity crisis. Therefore, there is a fear of disruption in the timely supply of paper required by the National Curriculum and Textbook Board (NCTB).

The existence of the domestic paper industry has faced extreme hardship due to unequal competition as paper imported duty-free under bonded warehouse facilities is supplied at low prices in the open market.

If the government and the Bangladesh Bank do not provide support during this crisis, the huge potential domestic paper industry will disappear, investments worth lakhs of taka will be damaged, and the livelihoods of crores of workers will be threatened.

In this adverse situation, if special incentives/facilities are not provided for repayment of bank loans, the borrowers of this industry will be considered as loan defaulters. As a result, the overall business and banking sector will be in a state of disaster.

Considering the contribution of the paper sector to import substitution and export orientation and the expansion of national education, the interest/profit and actual due date of the outstanding loans of the paper industry sector should be transferred in different ways, with the option of paying in installments over 15 years with a two-year moratorium facility, and the down payment at the rate of 1% of the loan balance should be accepted in case of providing blocked facilities for the loan accounts of the borrowers, the Secretary General of BPMA said.

Industry insiders say that due to insufficient demand in the local market, it is not possible to sustain the existence of domestic paper mills without increasing exports. If the products made by this industry do not create opportunities for increased exports under government sponsorship, this industry will definitely become a sick industry.

When asked, Bangladesh Paper Mills Association (BPMA) Secretary General and Magura Paper Mills Limited Chairman Mustafa Kamal Mohiuddin told the Daily Sun, “There is no need to import paper in Bangladesh at this time except for one or two specialty paper products. In fact, paper is being exported from Bangladesh to more than 40 countries. It is not right for Bangladesh to import where it has the ability to export. Therefore, import duty should be increased two to three times to develop the domestic industry.”

Citing examples from various countries, including India, the industrialist said, “Even though neighboring countries import paper, they have to pay very high tariffs. Therefore, if the same policy is not adopted in our country, the domestic paper industry will be destroyed.”

Mustafizur Rahman, chairman of BPMA’s Business Development and Export Standing Committee, believes that there is no alternative to increasing customs duty on imported paper to save the domestic paper industry.  He told the Daily Sun, “In the past, domestic paper mills have been supplying quality paper for use in textbooks. The paper industry has established itself as an import-substituting, export-oriented and environment-friendly industrial sector in the Bangladeshi economy.

“Therefore, in this time of dollar crisis, imports should be discouraged. Many unscrupulous businessmen are using the bonded warehouse facilities provided by the government to import paper and paper-like products and sell them in the open market, claiming that they are used in factories. Due to this, the government is losing a large amount of revenue every year. Strict action should be taken against these.”