In this article we will discuss about the subject-matter and progress of the paper industry in India.

Subject-Matter of the Paper Industry:

The earliest writing materials used in India were Palm-leaves in the south and Birch-bark in the North. Mohammedans, who had learnt the use of paper from the Chinese, introduced it in India. For sometimes, hand-made paper became a speciality of India.

Although, the process by which paper could be made was fully understood, yet paper industry made no progress in the country until Europeans organised it with the help of modern appliances. The credit for starting the first paper mill in India goes to Dr. William Carey, the famous missionary, who set up a mill in Bengal around 1859.

It however, did not make much headway. The manufacture of paper really dates back from 1867, the year in which the Bally paper mills, a company incorporated in England, was started on the bank of Hoogly. Even this company was not successful and when it was liquidated, its machinery was taken over by the Titaghur Mills which were established in 1882.


From the very inception, the industry, being British dominated, received encouragement from the govt. “In 1879, the Bengal govt., issued orders for the substitution of Bally paper for European printing paper. By 1888, Indian paper was being consumed by all the provinces. In fact, some of the paper mills would not have been started but for the govt., and railway orders amounting to 6-7 thousand tons a year.”

The raw-materials used by these mills were mostly jute and cotton rags and waste paper and later, ‘Moonj’ and Sabai’ grass. The mills found it difficult to complete with foreign paper made cheaply from wood pulp.

In 1903, there were 9 paper mills in India, 4 in Bengal 4 in Bombay and one at Lucknow. They produced nearly 44 million pounds of paper valued at Rs.59 lakhs and gave employment to 4500 persons. A total of Rs.65 lakhs stood invested in the in­dustry.

The industry received a great fillip during the First World War. Imports of paper declined considerably. At the same time, govt., purchases considerably increased, her expenditure on Indian paper and Paste Board rose from Rs.37 lakhs in 1915—16 to 93 lakhs in 1918—19. As a consequence, prices as well as production recorded substantial increase and the industry earned high profits.


When the war was over, competition with imported paper, especially that from Germany and England, became very severe. Many Indian factories were threatened with closure and the industry was forced to apply for protection in 1924.

The Tariff Board, which investigated the case for protection, came to the conclusion that only paper mills using bamboo pulp as raw-material had any chance of development in the country.

The Board, besides recommending a uniform specific duty of Six Paise per pound on all imports of writing and printing paper (with certain exceptions) for a period of 5 years, also proposed that the govt., should advance capital to companies which were best equipped to conduct exploratory work regarding bamboo pulp or help them to raise it from the public by guaranteeing their debentures.

The govt., rejected the Board’s recommendation for the grant of financial assistance but gave effect to the proposal regarding the protective duty by passing the Bamboo Industry Protection Act, 1925. The duty was to last for a period of 7 years.


A second enquiry, conducted in 1931, found that the industry had made satisfactory progress. The Board, therefore, recommended the continuance of the specific duty of six paise per pound or 15% ad valorem which ever was higher for a further period of 7 years.

In order to discourage the use of imported wood pulp, a protective duty of Rs.45/- per ton on imported wood pulp was also recommended. The recommendations of Board were accepted by the govt., which, besides the protective duty, levied a surcharge of 25% for revenue purpose.

On the recommendations of the Board, the surcharge was removed in 1938 and protective duties on paper and wood pulp were reduced to 25% ad valorem. The Board recommended continuance of protection for another seven years but the govt., extended it only for three. In 1947, on the recommendation of the Board, protection was finally withdrawn.

The industry made impressive advance during the period it enjoyed protection. In 1924—25, the year proceeding the grant of protection, the total consumption of printing and writing paper, excluding news-print, was 43,370 tons.

Of this, 23,331 tons was made in India and the rest was imported. By 1936-37, the produc­tion of the above class of paper by the Indian mills had increased by 88% to 43,951 tons whereas the foreign imports of the protected varieties had declined by nearly 41% to 11,839 tons.

The number of mills rose from 9 in 1924-25 to 11 in 1939 and their Paid-up capital increased from Rs.95 lakhs in 1924-25 to 2.2. crores in 1937-38. Some of the new mills were started by Birla Brothers, Karam Chand Thaper and Dalmia Jain groups.

The industry received great stimulus during the second world war. Imports from Germany and Scandinavian countries were cut off while shipping difficulties greatly reduced the quantity available from England. The value of imports of paper and paste Board declined from Rs.4.1 crores in 1930—40 to Rs.2.2 crores in 1942-43.

Consequently, the home production rapidly advanced to 1.06 lakh tons in 1946. Even though production had more than doubled, total output even supplemented by hand-made paper was wholly inadequate to meet the domestic and govt., requirements.

The rationing of paper on the basis of 10% and 90%, later changed to 30% and 70% as between civilian and govt., uses, did not help matters in so far as the ordinary man was concerned.


There was literally a paper famine in India and consumers were forced to get whatever was available in the black markets at approximately four times the controlled price. No wonder, the index of profits (1928 = 100) rose 151.8 in 1939 to 488.4 in 1942.

The first few years after the war saw some decline in output. This was caused by a return to a more normal level of govt., consumption, the general political unrest and a shift to a higher quality paper output.

The Partition, for­tunately, had no effect on the industry and by 1949, several expansion progrmames had been started. In 1951, the industry had attained an established capacity of 1.37 lakh tons while actual production was 1.31 lakh tons.

Though the war-time price control was formally dropped in 1950, it continued informally even thereafter. However, the prices fixed permitted a far higher rate of return, and with operation of the industry at a level close to 100% of the capacity, rates of profits were “substantially above the general industrial average even in the comparatively slow period of 1950-53.”


The index of profits rose sharply from 167.6 in 1947 to 604.1 in 1951.

Progress under the Plans:

The targets fixed for the First and the Second Plan were achieved more or less to (he extent of 100% and the output of paper increased by 64% during the First Plan and by 85% during the Second. After 1960-61, it was a different story.

Production in the Paper Industry

The Third Plan aimed at achieving self-sufficiency in respect of paper and paper products and set a target of 8.20 lakh tons capacity and 7 lakh tons production. The production of newsprint was also proposed to be stepped up five times.


Actual performance was far from satisfactory-the output of paper barely touched 5.58 lakh tons. The reason for this relatively slow progress was the low profit margin which was squeezed between rising costs and controlled prices.

The Chinese Aggression and the shyness of Indian capital were other contributory factors. Taking the period of the three plans as a whole, the number of mills rose from 17 at the beginning of the First Plan to 55 which were in operation in 1966. Production rose by a little less than 5 times —from 1.14 lakh tons to 5.58 lakh tons.

The Third Plan had also provided for the establishment of small paper plant using local raw-materials. Quite a number of investors were attracted by the proposal and nearly 30 paper mills came into being to develop a capacity of 50,000 tons.

One noteworthy feature of the post-Independence period was the more rapid development of the industry in the States of Maharashtra and Mysore. In Maharashtra, production more than doubled between 1962—65 while in Mysore, it increased by 34% during the same period although Bengal still continued to retain the first position.

The paper industry, from the very beginning, was dominated by British capital so much so that, in the rate 1930’s, three British owned mills produced more than 80% of the total production.

Since 1947, however, the English owned firms expanded much less than their competitors. Might be that the Indian firms displayed greater aggressiveness and willingness to take chances in contrast to the conservative entrepreneurship in the British firms.


This conservatism was perhaps due to the difficulties of the British firms in adjusting to Indian in­dependence and the new conditions of business operation and labour relations which accompanied the political changes.

Besides, the fact that British firms were able to earn high profits in the protected market with an almost guaranteed demand for their high quality output certainly acted as a disincentive for them to expand.

The main problem before the industry was that of raw-material supply. An important clement in the growth of the paper industry is the production of paper- grade pulp which had not developed in the country. So far as rayon-grade pulp is concerned, one unit was established in Kerala during the Third Plan period.

The exploitation of Bamboo, the main raw-material for the industry, gave rise to controversy. Many Indian mills complained of inadequate and irregular supplies of Bamboo from the surrounding areas.

They had, therefore, to obtain their supplies from far-off places such as Assam. In addition, (here were inter-state differences in royalty. Some of the stales refused to grant lease of forests to mills not situated in their geographical boundaries.

Above all, the supply of bamboo is not unlimited and as the demand for paper increases with the spread of literacy, more and more bamboo will be required. To this end, the Planting of bamboo of various species will have to be undertaken.