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 businesses—recycling, 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 kinds—writing/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, “Depending 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 buildings—yard 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), “Production
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 to
Bhamidipati, “Manufacturers 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, “One of the reasons why the demand of

waste paper is high is because not all paper mills are in a position to What you need to collect waste paper
put up a pulp facility.” While there has been a significant increase in
recycled paper production, collection of paper for recycling has Warehouse—to store and sort
lagged.
Vehicles—to collect and transport
Collecting Waste Paper
At present, the collection of waste paper is the domain of rag Shredders—to shred important papers
pickers, and scrap dealers. Once collected, it passes through
several hands before reaching the paper mills, if it does. And if it Bailing Machine—to pack efficiently
does, the price at which it is sold to the paper mills almost doubles!

In India, there are several companies, large and small, who are into this business. One way of trading the waste
paper thus collected is through paper exchanges that facilitate buying and selling of waste paper on an international
level. Another way is collecting the paper, segregating it and selling it to paper mills. An interesting business model 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 offers
collection services and confidential document shredding services to insurance companies, banks, etc. According to
Sumeet Chopra the founder, “we have a team of people and collection vans to collect waste paper directly from
offices.” 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 is
of 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 problem
is with the post- consumer waste because of the low awareness level. When households and offices dispose
wastepaper in the dustbin, it is thrown together with other wastes such as food and the paper becomes so soiled that
it cannot be used for recycling. To tackle this, JDC provides educational materials such as posters and special
corrugated 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. It
has launched a program called Wealth out of Waste (WOW), which entails buying domestic waste, separating waste
paper and sending it to the company’s paper mills for recycling. ITC provides households with two paper bags—one
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 costs
range from Rs 100 to Rs 1,500 depending on the intricacy of the design. According to Das, marketing these products
is a challenge, and he has created a website to reach a wider audience. On the other hand, Ranjay Kumar Jha, a
small papier mache products manufacturer, displays his products at the capital’s Dilli Haat. He claims to sell nearly
20-25 pieces per day, in the price range of Rs 75 to Rs 1,000. And his profit margin? 20-30%. Though papier mache
products 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 a
business opportunity!

Waste Paper Business

TUESDAY, 01 DECEMBER 2009 00:00 ASWATHI MURALIDHARANOPPORTUNITIES - ENERGY &
ENVIRONMENT
Waste paper is not “waste” 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?
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, DARE
tracks down the route that waste paper takes before reaching the paper recycling mills, which could be a lucrative
business 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 Indian
Agro and Recycling Paper Mills Association (IARPMA). Paper mills can be broadly divided into three types—wood-
pulp-based mills, agro-residue-based mills (non-wood-based segment) and waste-paper-based mills. According to
the 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 the total
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 the recycle
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 India

is only 26 percent, compared to Thailand’s 45 percent,
China’s 38 percent, and Germany’s 80 percent. This is
mainly due to low awareness among people as well as the
unorganized 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 from
countries like Canada, the USA, the European Union and Middle East. Within India, waste paper is mostly collected
from the western region that comprises 39 percent, followed by northern region at 28 percent, southern region at 23
percent 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 is
collected passes through several hands before reaching the paper mill. Briefly, it passes through three middle men—
the scrap dealer, the local area dealer and the wholesaler—before it is converted back to reusable paper. Nitin Goel
of GreenOBin, an organized player in this sector says, “A
street raddiwala cannot directly go and sell to the recycler Availability of Waste Paper by Geography
due to the limitation on the collection amount. Any paper
mill based on waste paper as their raw material has got a
daily requirements in tons and the street raddiwala cannot
cater the same daily.” The cost escalation during this
process 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, also
known as the kabariwallah, who collects waste from
homes. The scrap dealer’s major cost heads are a cycle,
a weighing scale and some sacks. This dealer collects all
kinds of waste from homes like old newspapers,
magazines, loose paper, old bottles, metal waste, and so
on. He does a basic level segregation and sells his goods
to the local dealer. In terms of paper waste, newspapers
are what hold the key to his profits because of large
quantity compared to magazines, old books and loose
paper. A scrap dealer tells us that these days a number of households generally get at least two papers and
moreover, the weight of the newspaper is also more because a number of add-on supplement papers and content.
He buys the newspaper at approximately Rs 5.50 per 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, his profits
depend on his negotiating skills—the 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 this
local 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
level. In case of newspaper waste, each newspaper has to be straightened, sorted and bundled neatly before it can
be sold further. These dealers work with different wholesalers—there 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 the
wholesaler at approximately Rs 7.20 (a ballpark figure). This is when the transportation is taken care of by the
wholesaler. 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 from
the dealer to the godown as well as from the godown to the paper recycling mills is generally his responsibility. The
mill 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 turn
is dependent on paper availability at that point of time, has a direct impact on the price of waste paper in the domestic
market.

Since this link or segment of waste paper chain is highly dependent on transportation, another major factor impacting
this trade is the price of oil. Roughly estimating, this price comes out to be approximately Rs 8 per kg (a ballpark
figure). 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 through
several 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. Business
conglomerate ITC was one of the first to tap this segment with its Wealth out of Waste (WOW) program. Under the
program, 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 bags—one for wet waste and the other for dry waste.
Jogarao Bhamidipati, Vice President, Commercial of ITC’s Paperboards & Specialty Papers Division (PSPD)
explains, “Waste paper bought from households and commercial areas at Rs 4 per kg, would reach the sorting
facility, where it gets sorted into different grades and gets baled. Here the costs could be Rs 1.5 to 2 per kg. Baled
material 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 sector—

Opportunities Worth Exploring
one such being GreenOBin, which was started in 2009. The
organization classifies their clients in three different ways—small Organized paper collection from homes and offices
company (50-200 employees), medium company (200-500
employees) and large company (500 & above employees). Nitin Scientific collection and grading centers
explains, “We 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, security shredding 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 the
paper industry, thus making it highly dependent on waste paper imports. The collection of waste paper is not done in
a scientific manner, therefore, all the different kinds of paper waste get mixed and go to the paper mill, which may
have a lower capacity of paper production. Explains Narayana Moorty, Secretary General of Indian Paper Mills
Association (IPMA), “Abroad, 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 in
India 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 hence
looses strength. However, in India, there is no mechanism to determine it in terms of usage. Unless a paper is graded
and segregated in terms of what has been the first usage of paper, the secondary fiber all becomes mixed. This
becomes a problem because after the quality of the paper depreciates with subsequent recycling—the paper
becomes brittle and yellow—thus affecting the final paper quality.

Explains Moorthy, “In 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 a
magazine 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, import
paper 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 on
environment-related issues.