ITC’s Paper Business: Contributing to the socio-economic development of Telangana

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Khammam: ITC’s Paperboards & Specialty Papers Business is India’s largest and has the greenest facility in the country. It is also the largest manufacturer of Packaging and Graphic boards in South Asia. The integrated mill at Bhadrachalam, Telangana, is today recognised as one of the world’s finest mills in terms of quality of products and its environmental stewardship. This state-of-the-art factory is a befitting illustration of the creation of a vibrant eco-system that has generated large-scale livelihoods and contributed to environmental replenishment.

ITC has invested significantly over the years in this Business which includes a world-class state-of-the art pulp mill, paperboard machines, power plant and new technologies. The pulp mill at Bhadrachalam utilises pulpwood that is sustainably grown in the country. It not only substitutes imported pulp but also enables offtake of produce from local tribals and farmers, thereby enhancing their incomes. Augmenting its capacity to 7 lakh tonnes, ITC’s Paperboards Unit at Bhadrachalam not only carries the products to shelves globally but also enables value addition of key FMCG brands in the country.

ITC’s Bleached Chemi-Thermo Mechanical Pulp mill helping in import substitution:

To reduce dependence on specialized imported pulp which earlier could not be produced in the country, ITC has invested in a first-of-its-kind Bleached Chemi-Thermo Mechanical Pulp (BCTMP) Plant at Bhadrachalam. This state-of-the art plant with a production capacity of 100,000 tonnes per annum has enabled the Company to substitute imported pulp.. This development has served to save foreign exchange by substituting imports for the country.

ITC’s large-scale afforestation programme creating livelihoods and enriching the environment:

ITC has implemented a large scale afforestation programme, which has created a green cover over 7,20,000 acres, covering more than 2.4 lac farmers in almost 10 states of the country. In this green journey over last 20 years, over 1.3 billion high quality saplings have been planted and nearly 130 million person-days of livelihood have been generated, benefitting over 2 lakh farmers. ITC’s Paper and Paper Boards factory at Bhadrachalam has itself created large-scale direct and indirect employment in the region. These transformed a once troubled region into a vibrant socio-economic hub.

More than a decade ago, ITC had adopted a choice of business strategy which focused on innovation in fibre-sourcing through renewable plantations by empowering farmers and small tribals to grow trees in their private wastelands. This strategy has not only made the business globally competitive today but have in the process also created large-scale livelihoods and a large green cover. The plantation incomes are a life-changing proposition, helping to pull these tribals and small farmers out of endemic poverty. The growers however also have the freedom to sell to the highest bidder in the open market.

ITC’s Agro-forestry initiative in the region presents an innovative way to synergise tree growing with traditional crop production. Currently, over 1,11,000 acres have been covered under agro-forestry, providing farmers with additional incomes from their limited land resources. ITC is progressively scaling up this initiative. To further expand the afforestation initiative, ITC’s Life Sciences & Technology Centre is working on developing higher yielding second generation clones that can be nurtured around the plantations to maximize value that farmers obtain from the agro-forestry model. This will help farmers to increase their farm yields and hence realization.

ITC is today not only a world-class producer of environmentally friendly, state-of-the-art elemental chlorine free paper & paperboard – the only one of its kind in India — but has created a green cover for carbon sequestration, ground water recharge, regeneration of biomass and the nurturing of depleted soils, thereby contributing to addressing the threats of climate change. ITC’s afforestation initiative led to nearly 54.58 lakh MT of CO2 sequestration during 2017-18 alone. ITC is thus the only company in the world of comparable dimensions to be Carbon positive, Water positive and Solid waste recycling positive for more than a decade.

Developing a Paper Value chain

The renewable plantations cultivated as part of ITC’s large-scale afforestation initiative enable ITC to offer the greenest paper and paperboards products manifest in the Company’s stationery brands such as Classmate and Paperkraft. These plantations also provide a source of wood pulp to ITC’s Paperboards and Specialty Paper Business which has also developed world-class B2B brands.

ITC is working with farmers to maximize their benefits:

ITC’s Paperboards and Specialty Papers Division is taking several measures to facilitate realization of fair prices to farmers growing pulp wood plantation. ITC has spearheaded measures to streamline and strengthen critical aspects of pulpwood procurement including payment.

ITC officials have been continuously engaging with farmers to enable them to supply their ready produce directly to the Company’s mill at Sarapaka, Bhadradri-Kothagudem district, Telangana. In such cases of direct supply, the Purchase Orders are being issued to the farmers and payment as per mill landed price (including cost of transportation and harvesting) is being made directly to their respective bank accounts, within 10 days of receipt of material with acceptable quality

Since April 2018, ITC spearheaded a special initiative to procure wood directly from farmers in Khammam through the direct Purchase Order (PO) system. In February 2019, nearly 75% of the 15,175 MT of wood procured from Khammam, was through direct PO from farmers. ITC has also communicated to the farmers that those who are not able to arrange for harvesting / transportation, can use the ITC-nominated suppliers to sell their produce. The company has clarified that the role of suppliers is to help farmers organize harvesters and transportation and pay to the farmers the rate as agreed with ITC and tonnages based on the Focal Point Weighbridges nominated by ITC. While selling to the suppliers, farmers have been advised to sell on tonnage basis and not area (acre, hectare) basis. ITC has put in place systems to monitor and verify that fair prices have been remitted to the farmers’ accounts. Throughout the year, ITC buys most of the available mature wood (4 year old plantations) from Khammam, so that the pulpwood growing farmers can be supported with appropriate pulpwood price, more and more livelihood is generated and farm incomes are protected.

Policy Recommendations:

Today, India imports USD 6.8 billion worth of wood and wood-based products. ITC believes that in order to encourage an indigenous value chain based paper industry, Customs Duty on wood imports needs to be raised to 10%, as the current rate of 5 % (nil from ASEAN countries under preferential agreements) discourages investment in agro-forestry in India. It would be also desirable to extend to agro-forestry all the benefits applicable to agriculture including unrestricted movement of such produce. In order to support farmer investment, institutional credit needs to be provided in the form of long term loans, depending on the species being planted.

In line with the Government’s Make in India philosophy, it is necessary to encourage production of more d hard wood pulps in India. Similarly, it is also desirable to Bring model Contract Farming Act in all the states, to enable consolidation, scaling up and mechanisation of block plantation in agro forestry. Encouragement is also needed to facilitate research work in the area of genetic improvement of planting stock of most used tree species in agroforestry practices of different agro-ecological zones.