PROPOSAL FOR PAPER BOARD MANUFACTURING | FEASIBILITY STUDY AND BUSINESS PLAN



PURPOSE OF THE DOCUMENT ...................................................................................... 4
CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT..................... 4
2.1 SWOT ANALYSIS ..................................................................... 4
2.1.1  STRENGTH....................................................................................................................... 4
2.1.2 WEAKNESSES................................................................................................................... 5
2.1.3 OPPORTUNITIES ............................................................................................................. 5
2.1.4 THREATS.......................................................................................................................... 5
2.2 KEY SUCCESS FACTORS / PRACTICAL TIPS FOR SUCCESS........................... 6



3 PROJECT PROFILE........................................................................... 7
3.1 OPPORTUNITY RATIONALE ................................................................... 7
3.2 PROJECT BRIEF ......................................................................................... 7
3.3 MARKET ENTRY TIMING ................................................................................. 7
3.4 PROPOSED BUSINESS LEGAL STATUS ................................................................ 7
3.5 PROJECT CAPACITY AND RATIONALE................................................................ 7
3.6 PROJECT INVESTMENT................................................................................... 8
3.7 PROPOSED LOCATION........................................................................ 8

4 PAPER & PAPER BOARD ................................................................................. 9
4.1 PAPER .................................................................................................................................. 9
4.2 PAPERBOARD ................................................................................................................... 10
4.3 RECYCLING OF PAPER & PAPER BOARD .................................................... 10
4.4 REGULATIONS TO PAPER & PAPER BOARD ............................................. 11
4.4.1 Custom Duties and Taxes............................................................................ 11
4.4.2 Environmental Technology / Quality Issues............................... 11

5 RAW MATERIAL .................................................................................... 12
5.1 AVAILABILITY OF RAW MATERIAL........................................................ 12
5.1.1 Wood based material ............................................................................ 12
5.1.2 Agricultural wastes .............................................................................................. 12
5.1.3 Other Raw Material................................................................................... 12
5.2 PLUPING CHEMICALS...................................................................................... 13
5.3 BOX BOARD MAKING CHEMICALS ............................................................... 13
5.4 OTHER CONSUMABLE MATERIALS .............................................................................. 13

6 MARKET INFORMATION ......................................................................... 13
6.1 MARKET DEMAND................................................................................................ 15
6.2 FACTORS AFFECTING DEMAND AND SUPPLY ............................................... 15
6.2.1 Demand................................................................................................................. 15
6.2.2 Future Demand........................................................................................... 16
6.2.3 Supply ...................................................................................................... 16
6.2.4 Demand and Supply Scenario.................................................................... 17
6.2.5 Imports of Paper and Paper Board Products................................................... 18
6.2.6 Import of Pulp & Paper Board..................................................................... 18
6.2.7 Import of Wood Pulp.................................................................................... 18
6.2.8 Import of Waste Paper .............................................................................. 19
6.3 INTERNATIONAL SCENARIO.................................................................... 19
6.4 PAPER BOARD INSUSTRY AND WTO......................................................... 19

7 PRODUCTION PROCESS............................................................................... 21
7.1 BOX BOARD MANUFACTURING .................................................................................... 21
7.2 PRODUCTION METHODS AND TECHNOLOGY .....................................................21
7.2.1 Recycling Process.......................................................................................... 22
7.2.2 Grades of Recovered Paper & Paper Board.................................................. 22
7.3 FLOW CHART FOR BOX BOARD MANUFACTURING .................................24
7.4 PLANT LAYOUT ..........................................................................................25
7.5 MACHINERY REQUIREMENT ........................................................................ 26
7.6 OTHER FIXED ASSETS REQUIREMENT ....................................................... 27
7.6.1 Office Equipment .............................................................................................. 27
7.6.2 Furniture & Fixture ........................................................................................... 28
7.7 MOTOR VEHICLES.............................................................................................. 28

8 LAND & BUILDING REQUIREMENT ............................................... 28
8.1.1 Land................................................................................................................................ 28
8.1.2 Building........................................................................................................................... 28
8.2 UTILITIES REQUIREMENT ....................................................................... 29

9 HUMAN RESOURCE REQUIREMENT................................................................................... 29
9.1 HUMAN RESOURCE REQUIREMENTS.......................................... 29

10
KEY ASSUMPTIONS..................................................................................30
11 FINANCIAL ANALYSIS............................................................................... 31
11.1 PROJECT COST .........................................................................................31
11.2 PROJECTED INCOME STATEMENT..................................................... 32
11.3 PROJECTED CASH-FLOW STATEMENT............................................. 33
11.4 PROJECTED BALANCE SHEET .............................................................. 34

12 ANNEXURES................................................................................. 35

DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject
matter and provide a general idea and information on the said area. All the material
included in this document is based on data/information gathered from various sources and
is based on certain assumptions. Although, due care and diligence has been taken to
compile this document, the contained information may vary due to any change in any of
the concerned factors, and the actual results may differ substantially from the presented
information. SMEDA does not assume any liability for any financial or other loss
resulting from this memorandum in consequence of undertaking this activity. The
prospective user of this memorandum is encouraged to carry out additional diligence and
gather any information he/she feels necessary for making an informed decision.
For more information on services offered by SMEDA, please contact our website:
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DOCUMENT CONTROL
Document No.
PREF-98
Prepared by
SMEDA-Punjab
Issue Date
June 2006
Issued by
Library Officer
3
PREF-98/June, 2006/ Rev 1



THIS IS A SAMPLE | WE ARE PROFESSIONALS IN WRITING



Pre-feasibility Study
Paper Board Manufacturing Unit
1 PURPOSE OF THE DOCUMENT
The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs
in project identification for investment. The project pre-feasibility may form the basis of
an important investment decision and in order to serve this objective, the document/study
covers various aspects of project concept development, start-up, production, marketing,
finance and business management. The document also provides sectoral information,
brief on government policies and international scenario, which have some bearing on the
project itself.
The purpose of this document is to facilitate potential investors in Paper Board
manufacturing by providing them a macro as well as a micro view of packaging business
with the hope that such information as provided herein will aid the potential investors in
crucial investment decisions.
The need to come up with pre-feasibility reports for undocumented or minimally
documented sectors attains greater imminence as the research that precedes such reports
reveal certain thumbs of rules; best practices developed by existing enterprises by trial
and error, and certain industrial norms that become a guiding source regarding various
aspects of business set-up and it's successful management.
This particular Pre-feasibility is regarding "Paper Board Manufacturing Unit" which
comes under the "Paper" Sector. Before studying the whole document one must consider
following critical aspects, which forms basis of any Investment Decision.
2 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT
Below are some factors and variables that have a great bearing on setting up Paper Board
Manufacturing Unit:
2.1
SWOT Analysis
Before making the decision, whether to invest in the Paper Board Manufacturing or not,
one should carefully analyze the associated risk factors. A SWOT analysis can help in
analyzing these factors, which can play important role in making the decision.

2.1.1 STRENGTH
Availability of raw material i.e. soft wood, which is being extensively used by
the match factories available in the locality.
Availability of process water.
Plant Effluent disposal.
Availability of basic infrastructure facilities like roads, railway, electricity, fuel and gas.
Market of end products.
Availability of manpower.
Accessible location.
Suppliers and agents can coordinate as similar business already exists in the area.

2.1.2 WEAKNESSES
The major weaknesses in this field of business are:
Poor-availability of suitable processing variety of raw materials at present. Lack of in-house quality control and testing facilities in conformity with the international standards.
Existing technology obsolescence.
Poor infrastructure facilities such as irregular power supply, high inland
transportation cost etc.
The other major weakness in Pakistan paper board industry is the lack of coherence and co-operation amongst the processors and exporters due to which the problems cannot be effectively addressed and tackled collectively.
Non Availability of properly quality raw material at competitive prices.
Tough competition will be faced from the competitors.
Its water disposal being closed to residential area may pose pollution to the residents.

2.1.3 OPPORTUNITIES
During construction period it has good opportunity of getting cheaper labour
force and thus minimizing its cost. So cheaper labour force is also a good
opportunity.
Good opportunity exists to manage disposal of product in a short time.
Easy coordination can be made with the suppliers and agents who are already
engaged in the area.
Huge transaction of some of the raw material is already being executed in the
area.
2.1.4 THREATS
The proposed project will be facing the following threat:
Increase in International competition with China, India and Eastern Europe.
Imposition of Quality and Environment standards by importing countries.
Decline in the average sale price for Pakistani products.
Influence of major local and foreign brands operating in the market
Unavailability of quality suppliers and distribution channels.
If business is looked after in the teething stage and is not well established on
modern and scientific lines, it can create threat for the management.
5
PREF-98/June, 2006/ Rev 1


Pre-feasibility Study
Paper Board Manufacturing Unit
Competitors could lower the price of the commodity and can result in low
return to the project.
Since good labor has already been engaged by the competitors, therefore
efforts will be to make available the experienced staff on handsome salary;
otherwise it may be problem for the Mills in the initial stages.
Change in Government regulations
WTO challenges and Paper board industry.
2.2
Key Success Factors / Practical Tips for Success
Boxboard is used for packaging of consumer items such as cigarettes, cosmetics,
garments, detergents, processed foods and spices, matchboxes, bulbs etc. and for making
folders, file covers, books and note books, in addition to consumer items industrial
consumers are the pharmaceuticals, glass, textile, food products, toiletries, tea, electrical
goods, sports and other miscellaneous consumer products. Their consumption is linked
with the state of business activity in the country.
Food, FMCG will remain the largest market for boxes, comprising over 40 percent of
demand. Demand will be fueled in part by popular products such as soft drink beverage
carriers etc. Other nondurable goods markets expected to record above-average gains are
cosmetics, toiletries and pharmaceuticals, tobacco and textiles etc.
Pakistan can only survive in the present scenario on the strength of technical capabilities,
product quality and cost competitiveness, which can be achieved in the following ways:
The plant should be operated by technical staff/technologist to consider the
quality standards of ISO, and Environment Protected Agency (EPA).
Should be best located at sites close to a source of bulk supply of fresh water,
proximity to effluent disposal facilities,
High quality plan for raw material and ease for availability of fibrous raw material
such as grasses, rice husk, sugar cane bagasse and wheat straw.
Keep close interaction with the market demand and producing products in
concurrence with the market requirements.
The project employer should employ people who have a complete technical know
how of the value added product mix to make project feasible.
Product mix and value added production from by products of paper board industry
can be a winning strategy.
Promoting the products in a professional manner etc.
6
PREF-98/June, 2006/ Rev 1

3 PROJECT PROFILE
3.1
Opportunity Rationale
Boxboard is used for packaging of consumer items such as cigarettes, cosmetics,
garments, detergents, processed foods and spices, matchboxes, bulbs etc. and for making
folders, file covers, books and note books, in addition to consumer items industrial
consumers are the pharmaceuticals, glass, textile, food products, toiletries, tea, electrical
goods, sports and other miscellaneous consumer products. Their consumption is linked
with the state of business activity in the country.
Food, FMCG will remain the largest market for boxes, comprising over 40 percent of
demand. Demand will be fueled in part by popular products such as soft drink beverage
carriers etc. Other nondurable goods markets expected to record above-average gains are
cosmetics, toiletries and pharmaceuticals, tobacco and textiles etc.
3.2
Project Brief
This particular Pre-feasibility is regarding "Paper Board Manufacturing Unit" which
comes under the "Paper" Sector. The objective of the Pre-feasibility study is primarily to
provide an overview about the Paper Board Manufacturing business. The proposed Pre-
feasibility defines the criteria on which the investment decision is based. This document
covers various aspects of Paper Board Manufacturing business concept development,
Start-up, Production, Marketing, Finance and Business Management.
3.3
Market Entry Timing
Various Products and Services have high dependence on their commercialization timing
and delivery to the Customers but the Paper Board Manufacturing Unit can be started at
any time during the year due to the availability of Raw Material throughout the year.
3.4
Proposed Business Legal Status
The said project can be a proprietorship or a partnership and even it can be registered
under the Companies Ordinance, 1984 with the Securities & Exchange Commission of
Pakistan. The selection totally depends upon the choice of the Entrepreneur. This Pre-
feasibility assumes the Legal Status of a Sole Proprietorship.
3.5
Project Capacity and Rationale
The proposed size of the project is capable to produce an average of 39 Ton (Box Board)
per day. Considering the local market demand trends, initially the project would be able
to receive and entertain such number of orders which are required for the project to be
economically viable. The plant has a processing capacity of about 14000 Ton per annum

3.6
Project Investment
Total Initial Cost of the Project is worked out as follows:
Table 1-1: Project Cost
Rupees
Capital Investment Requirement
85,270,000
Working Capital Requirements
3,000,000
Total Project Investment Requirement
88,270,000
The proposed pre-feasibility is based on the assumption of 50% Debt and 50% Equity.
However this composition of Debt and Equity can be changed as per the requirement of
the Investor.
Table 1-2: Project Financing
Rupees
Debt @ 50 %
44,135,000
Equity @ 50 %
44,135,000
Total Project Investment Requirement
88,270,000
Table 1-3: Project Viability
IRR
% - age
36.40%
Pay Back Period
3.75 Years
NPV @ 15 %
132,965,591
3.7
Proposed Location
Lahore has been established as one of the big markets for paper and paper board products
manufactured in surrounding districts. The following are the important factors, which
determine the viability of the Paper Board Plant at Lahore.
Availability and supply of desired quality raw material.
Sufficient supply of electrical power.
An ample supply of water.
Adequate facilities for effluent and waste disposal.
Availability of suitable labour and technical staff.
Access to transportation facilities.
Proximity to proposed collection point of Lahore including whole sale Market,
Pulp plant, sorting, cleaning, grading & packing.
The most important factor is that Lahore has flow of paper board products from
neighboring divisions/districts like Gujranwala, Faisalabad, Sheikhupura, Sargodaha. The
availability of quality raw material is possible and plant will be located near to main
market along-with facilities of utilities, fuel, transportation and waste disposal.
Whereas the industrial estate at Sundar which was inaugurate on August 30, 2004. The
PIEDMC initially decided to initiate work only on the 500-acre first phase of the project.
The Sundar Industrial Estate is ultimately to encompass 1,500 acres. The PIEDMC start
the allotment of plots- on September 1 and completed it on September 30, 2004 the
development work at Sundar Industrial Estate was at full swing and more than 20 percent
of the construction work has already been completed.
Keeping in view the locational considerations of the access to raw materials, access to
market for finished products, availability of required infrastructure and adequate
arrangements for effluent disposal, suitable locations for paper and board industry
projects are districts of Sheikhupura, Gujranwala, Gujrat, Kasur, Sialkot, Jacobabad and
Khanpur. They are also fast emerging as trade center of country. It is emerging as second
Hub for the Pakistan

4 PAPER & PAPER BOARD
There is often an overlapping in the terms used for Paper and Board. Normally, thicker
than 0.012 inches or more is called Board, whilst thinner and lighter in weight is called
Paper. The weight of paper varies from 10 grams to 125 grams per square meter, whereas
the weight of paperboard ranges between 125 and 200 grams per square meter. Board
refers to the heavier materials weighing 200 grams and above.
4.1
PAPER
Paper is single ply sheet with weights of between 10 and 125 grams per square meter. By
varying the fibrous and chemicals materials used and by using different surface
treatments, different types and qualities of paper can be produced. Writing and printing
papers have a uniform substance, thickness and moisture profile, both along and across
the sheet. These are clean, free of holes and flat, have good resistance to aqueous
compounds and printability and surface finish.
There are numerous varieties of writing and printing paper distinguished on the basis of
substance and finish depending on the requirements of different end-uses. The specialized
varieties of paper include poster paper, art paper, bond paper, newsprint etc. These
varieties are used for specific purposes and apart from newsprint, have limited market.
The wrapping and packing paper has loser grammage between 40 to 125 grams, and can
be produced on paper making machines through change in input mix and chemical
treatment. Kraft paper has a higher grammage, greater strength and is mostly used for
packing cement.1

1 Market Survey

4.2
PAPERBOARD
Paperboard is a multiple sheet with gramage in excess of 125 per square meter. It
possesses uniform substance, thickness and moisture profiles, both along and across the
sheet. These should have a clean top liner ply, smooth receptive printing surface, good
opacity and good creasing quality. The critical physical strength properties are rigidity
and good ply adhesion. The main sue of paperboard are for domestic and commercial
packaging in the form of printed and un-printed cartons. These are most commonly used
in packing of cigarettes, toiletries, detergents, tea, pharmaceuticals, food and other
consumer items.
The following are the general categories of Paper and Board.
Paper Board
Box Board
Newsprint
Packing & Wrapping Paper
Kraft Paper/Liner Paper
Fluting Paper
Printing & Writing Paper
Specialty Paper

4.3
RECYCLING OF PAPER & PAPER BOARD
The paper board industry has recycled used paper and paper board for over 600 years.
After using rags for centuries, wood became the main raw material source for
papermaking in the 19th century. In recent decades, used paper has become an
increasingly important raw material source and, compared to many other materials, is
easy to recycle.
Almost any paper can be recycled including used newspapers, cardboard, packaging,
stationery, postal mail, magazines, catalogues greeting cards and wrapping paper. The
collection of used paper and paper board is the first step in the recycling process. There
are different national and regional collection systems for paper. Papermakers usually buy
their raw material for recycling from recovered paper merchants. These merchants may
be owned by paper and paper board mills and is an integrated part of a mill company, or
they may be an independent firm which specializes in particular grades or which perhaps
operates in a smaller geographical area.
Until recently, apart from old newspapers and magazines, most recovered paper came
from industrial and commercial sources, because it was the easiest, cleanest and most
economical to collect. But demand for recovered paper is set to grow substantially, so
additional sources like households need to be tapped.
The collecting system in operation must be cost-effective and efficiently organized so
that the necessary volumes and qualities of recovered paper can be obtained and
appropriately recycled. The paper and paper board mills that depend on recovered paper
must have assurance of a regular supply.

4.4
REGULATIONS TO PAPER & PAPER BOARD
The current Laws, Regulations and Government Duties on paper and paperboard are as
follows:
4.4.1 Custom Duties and Taxes
Chapter 48 of Custom Tariff and Trade Controls lists the tariff applicable to paper &
paperboard, which is given in annexure 3, page 36.
4.4.2 Environmental Technology / Quality Issues
The existing production units require technological up gradation through greater
investments for overcoming the environmental hazards arising from their operations. The
pulp and paper mills contaminate the environment both as a result of atmospheric
pollution through gaseous discharges as well as water pollution through discharge of
process and conveying water. The new investment for rover coming pollution is almost
equal to the total initial investment in the unit. Local Mills are making progress to control
pollution and treat effluent. Mills are also working with EPA and NGOs and other local
& foreign institutions to develop home grown and financially viable treatment process.2
Use of large quantity of water for pulp involves disposal of large quantity of waste water.
In recent years disposal of waste has assumed importance because of restrictive
legislation enacted to prevent pollution of rivers, streams, lakes etc, into which mill's
effluents were discharged. The only impurity involved is suspended fibrous matter and it
is both easy and remunerative to recover it from the effluent
An effective and economical method of disposal of mill's waste is to discharge it into
streams with adequate flow throughout the year to furnish dilution, so that the prescribed
B.O.D (Biological Oxygen Demand) is maintained and there is no risk to fish and aquatic
life or pollution of water used by cattle and human beings for drinking purposes or for
washing and irrigation purposes. Another device, applicable only to relatively small
alkaline pulp mills, is to segregate the small volume of bad effluents, partly treat it by
sedimentation, and discharge it with permission from concerned authorities into local
sewerage system, so that it is mixed with domestic sewage of locality and is treated in
usual way.

2 Expert Advisory Cell

5 RAW MATERIAL
5.1
AVAILABILITY OF RAW MATERIAL
The basic raw material sources for manufacturing of paper and paper board can be
broadly classified into three groups:
5.1.1 Wood based material
Among the wood based raw materials, coniferous pine is in short supply in Pakistan. The
soft wood forests in the country exist in extreme northern hills of North West Frontier
province and Azad Kashmir which are mostly inaccessible due to lack of suitable
communication facilities.
Popular and eucalyptus, among the non-coniferous species, are produced mostly on
irrigated land. The eucalyptus trees however, more are extensively grown but their
plantations are not yet sufficient to meet pulping requirements of the paper industry.
Besides, their cost is significantly higher as compared to other local material available for
pulping.

Among the agro-based wastes the following are being extensive used:
Straws
Straws are by-products of cereal crops, the major being wheat and rice. Paper and
paper board industry is presently the main user of the marketed supplies of wheat
straw. Adequate quantities of wheat straw are available for the industry. Rice straw is
generally used as packing material for glass and ceramic products. Its use in paper
making is limited as it contains silica and gives some process problems.

Bagasse
It is a well established raw material for making almost al grads of paper, from fine
quality paper to board.
Grasses
There is a wide range of grasses grown in Pakistan which can be used for making
pulp and paper. Kahi grass grows wild along the river banks, some quantity are
already being use by paper mills. Other grasses available in Pakistan are Bhabbar,
Gauj Gumaz, Rhodes Grass, Chorkha, Pawpi, Chari and Dhawar. The main problems
for using grasses relate to their collection and procurement.
5.1.3 Other Raw Material
The group of other raw material used for pulp and paper making include the following:

Waste Paper
There are two main sources of collection of waste paper. One is waste paper collected
at offices and factories such as government offices, business concerns, banks,
newspapers and publishing companies, printing and book binding concerns etc. the
other source is waste paper purchased by trash dealers from private persons at their
homes. It is estimated that adequate quantities of waste paper are available for use in
paper board industry. It is also being imported for the paper industry.
Cotton Linters and Waste
These are available from ginning and spinning operations as their by-products and are
used for making pulp of high quality for producing superior paper as well as blending
with short fibre pulp produced from wheat straw and grasses. Adequate quantities of
cotton linters and wastes are available for paper industry while about 10 % of the
cotton waste is also exported from Pakistan.
5.2
PLUPING CHEMICALS
The quantity of pulping chemicals required depends on the pulping process. In the case of
sulphate pulping, a chemical recovery system which regenerates the cooking chemicals is
incorporated in the process. The Sulphate pulping process uses sodium sulphate and
limestone (calcium Carbonate). The chemicals used in bleaching pulp are chlorine,
caustic soda, lime, sodium chlorate and sodium peroxide.
5.3
BOX BOARD MAKING CHEMICALS
Alum, starch, rosin, clay, soap stone, caustic soda and other chemicals are used at product
making stage. Stock is treated with starch to improve adhesion of fibres to each other and
with rosin to prevent the spread of ink, while clay and various chemicals are used to
improve weight, opacity and printing qualities.
Caustic soda, rosin, starch, alum and limestone are available in adequate quantities for the
paper and paper board industry from local sources while other chemical are imported.
5.4
OTHER CONSUMABLE MATERIALS
These materials include machine wires, felt, lubricants and all other non-chemical
material consumed during the manufacture of pulp and paper board as well as spare parts
and tools.
6 MARKET INFORMATION
In 1947 when Pakistan came into existence, there was not a single plant to manufacture
paper in the country. All the requirements of the paper in the country had to be met
through imports. Pakistan Industrial Development Corporation (PIDC) was set up for the
establishment of different industries including paper mill in public sector. In 1953, PIDC established the first paper mill at Chandargona in East Pakistan (Now Bangladesh),
followed by a high grade paper mills (Now Adamjee Paper & Board Mills) at Noshera in
NWFP, and a Newsprint Mill at Khulna in East Pakistan (Bangladesh) in 1959. With the
separation of East Pakistan in 1971 when it emerged as Bangladesh, a serious shortage of
writing/printing paper and newsprint was created in West Pakistan, as the supplies of
these papers were completely cut off from Bangladesh. Approximately 25,000 to 30,000
Ton of writing/printing paper and 27,000 Ton of newsprint were supplied from East
Pakistan to West Pakistan.
Due to several reasons such as non-availability of required quantity of bagasse and
inefficient working, the plant is running below capacity. The position with regard to
newsprint is, however, altogether different as no newsprint plant has so far been
established in Pakistan, with the result that Pakistan imports its all requirement of
newsprint from abroad.
Paper
Paper Board
Year/month
No. of reporting
Production No. of reporting Production
factories
(Tonnes)
factories
(Tonnes)
1999-00
80
206,543

31
228,073

2000-01
87
284,818

34
246,315

2001-02
19
137,852

26
187,568

2002-03
19
147,962

26
228,208

2003-04
19
156,822

26
247,874

3
In the organized sector paper board production is divided into two types of units: one,
those which are integrated pulp and producing units while others only produce paper and
board and do not have pulp mills. Integrated pulp and paper industry on the basis of
manufacturing process is highly value added industry and its process is convergent of
various process variables. Hence it requires technological and processes know how and
command over manufacturing processes for continuous quality supplies. It is due to these
technical variables that very few units in Pakistan have succeeded to operate and there is
a long list of inoperative and closed units.
The production costs of box board mills in Pakistan are highly unpredictable as it is
dependent on international pricing of wood pulp and recycled paper and seasonal
agricultural output of wheat. Paper board market is further vulnerable to economic
growth trends as its downstream conversion industry comprising of printing packaging is
highly growth elastic. Introduction of innovative packaging designs and high quality
printing on fast machines especially for fast moving consumer goods (FMCG) industries
has created a lot of pressures on Paper Board sector in maintaining quality standards.4

3 Pakistan Pulp Paper & Board Mills Association
4 DAWN ­ Business Oct 08, 2001

Forest area plays an import role in the development of paper and paper board industry as
it provides the basic raw material for it. Today forest cover one-fourth of the total land
area of the world excluding Antarctica and Greenland. Seven countries ­ Russia, Brazil,
Canada, US, China, Indonesia and the Democratic Republic of Congo (former Zaire)
hold over 60 per cent of the world's forest area.
However, forest area constitutes just 4.8 per cent or 4.2 million hectares in Pakistan
which is far below the internationally acceptable ratio of 20-30 per cent necessary for the
balanced economy. In addition, actual production from the forest area in Pakistan is even
smaller as only one-third of it is productive while the remaining two-third is maintained
for environmental protection.5
6.1
MARKET DEMAND
The demand for the various categories of paper and paper board has shown a steady
increase over the years and is expected to continue increasing as literacy improves and
economic growth takes place. The shortage so far has been met through imports.
6.2
FACTORS AFFECTING DEMAND AND SUPPLY
6.2.1 Demand
The major factors affecting the demand for the products of paper, paper board and
packaging industry include the following:
The demographic trend and age group
The education sector developments and future education policy
The economic growth trends and projections of gross national product
Trends in industrialization and future projections
Development of electronic media
Demographic Trends: In developing countries, increase in population and in the
standard of living result in a tremendous demand for paper, packaging and fibre.
According to the age-group classification based on 1981 census result, about 40 percent
of the total population belongs to the age group of 5-19 years. This is the population
segment which is directly related to the education sector and hence has the greatest effect
on the demand for paper and paper board.
Education: Education facilities in Pakistan have been expanding overtime but have not
kept pace with the requirements of a modernizing society. The literacy rate which is
estimated at 53 %, activities associates with the education sector account for almost one
half of the paper consumption in the country. The significant development of the

5 Pakistan Economist
education sector in the next five years, as envisaged in the new education policy would
lead to considerable increase in demand for the writing and printing paper.
Economic Growth Trend: The demand for paper, paper board and other packaging
materials is directly influenced by the level of economic activity. In Pakistan the annual
Gross Domestic Product (GDP) has grown at the rate is 8.4 percent in 2004-05. The
increase tempo of economic activity and investment friendly policies of the government
are expected to lead to greater demand for paper products.
Development of Electronic Media: It is some times asserted that the demand for paper
might be adversely affected due to the phenomenal growth and popularity of electronic
information system. It is asserted that we are moving towards the paperless office
scenario. The argument however does not have much force. We may use computers but
we still like to print out our works, as for electronic information, it works only up to a
point.
6.2.2 Future Demand
The demand of paper and paper board is a function of number of parameters. The most
important of the parameter is the per capita GNP which is an Index of the income and
purchasing power of the people. It has been established by study that the demand for
paper is strongly related to per capita GNP. The demand increases rapidly at low levels of
per capita GNP and less rapidly at higher levels of per capita GNP.
A second important parameter is the growth of literacy and education in a country. A
third parameter is the rate of urbanization. Per capita consumption of paper is higher in
urban areas than in the rural sector, at present, the Government checking the urbanization
through several rural development programs. Another significant factor is
industrialization. Since most industries use paper for packing purposes, the consumption
of paper will increase as industrial production increases.
Food, beverages, FMCG will remain the largest market for boxes, comprising over 40
percent of demand. Demand will be fueled in part by popular products such as soft drink
beverage carriers etc. Other nondurable goods markets expected to record above-average
gains are cosmetics, toiletries and pharmaceuticals, tobacco and textiles etc.
6.2.3 Supply
The domestic paper board industry has currently been facing a number of challenges
affecting its supply. The major factors contributing to the present sate of affairs are
explained below:
Devaluation of Pak Rupee
Increase in input costs
Changes in the level of duties

Devaluation of Pak Rupee: The value of Pak rupee has been persistently declining in
terms of foreign currencies through official policies of adjustment of foreign exchange
rates. This has resulted in increase in rupee value of imported inputs, especially of long
fibre wood pulp needed for mixing with local short fibre pulp for paper making.
Increase in Input Costs: The increase in the rates of local energy and other input
charges have also contributed to increase in cost of production. The local producers are
thus placed at a comparative disadvantage in competition with imported supplies.
Changes in the Level of Duties:
The industry sources feel that the discriminatory
changes in the duty structure, the rising fuel cost and current rate of import duties on
imported materials like felts, wire and chemicals etc,. The industry is confident that with
the proper encouragement on the part of the government, Pakistan paper, paperboard and
printing industry can conquer the international market in the United State, Europe and the
Middle East, thus earning a good name for the country as well as lots of foreign
exchange.
Chapter 48 of Custom Tariff and Trade Controls lists the tariff applicable to paper &
paperboard, the exports of paper and paperboard from Pakistan are as follows
Table 1 EXPORTS OF PAPER AND PAPERBOARD
(in Thousand Rupees)
Apr.,2005
Cuml from Jul-2004
Apr.,2004
Cuml from JUL., 2003
Unit
QTY
Value
QTY
Value
QTY
Value
QTY
Value
KG
28,581
3,801
1,666,894
203,241
157,847
11,609
1,064,308
94,840

6
6.2.4 Demand and Supply Scenario
The short fall in demand is met through imports from various countries. Paper and Paper
Board market demand has grown at a compound growth rate of 9% during 1997-98 to
2002-03.Data on aggregate demand, physical production and imports of the last five year
is given hereunder:
(Tons)
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
Demand (all grades)
376,995

404,222

466,317

481,196

524,057

549,461

Local Production*
254,984

258,452

305,947

337,193

345,727

354,852

Imports
122,011

145,770

160,370

144,003

178,330

194,609

Consumption/capita (Kgs.)
2.87
3.01
3.39
3.45
3.69
3.79
* Production of Association Member Units
7

6 Federal Bureau of Statistics, Pakistan.
7 Expert Advisory Cell - 2004

6.2.5 Imports of Paper and Paper Board Products
The paper board industry has achieved the expertise along with modern technology of the
highest repute. However the high cost of imported raw material renders the industry
abandon the game over before going for a kickoff.
Paper board products are imported from Finland, Canada, USA and China. Newsprint
comprises the major imported finished product followed by white dup/coated board.
Break-up of various types of paper & paper boards imported during the 1997-98 to 2002-
03 is shown in the following table:
(Tons)
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
Writing & Printing Paper
6,898

7,391

7,08

6
6,675

10,838

11,8

86
Wrapping & Packing Paper
16,455

16,491

18,5

78 18,400

21,282

28,5

48
White Dup / Paper Board
31,614

41,906

41,1

97 41,543

56,105

55,8

70
Coated Paper / Chip / Other Board
7,507

11,277

10,3

21 10,502

11,215

12,5

19
Paper of all Kind
4,672

5,571

6,02

1
7,199

8,097

9,452

Sub-total
67,146

82,636

83,2

03 84,319

107,537

118,

275
Newsprint
54,865

63,134

77,1

67 59,684

70,793

76,3

34
Total
122,011

145,770

1
60,370 144,003

178,330

194,

609
6.2.6 Import of Pulp & Paper Board
(Value in million Rupees)
2000-01
2001-02
2002-03
2003-04
Items
Unit
Qty.
Value
Qty.
Value
Qty.
Value
Qty.
Value
Pulp & Paper Board
255,490.0 9,061.6 342,043.0 10,290.0
11,832.7
14,153.2
Wood Pulp
MT
94,937.0 1,677.1 124,881.0 1,892.9 214,632.0 2,217.7 156,452.0 2,382.4
Uncoted kraft paper, roll sheet
MT
18,270.0 646.0 21,644.0 736.5 29,151.0 982.6 35,115.0 118.1
Fiber bond including building board
MT
34.0 0.8

39.0 1.8 206.0 6.0 292.0 9.0
Newsprint, in rools or sheets
MT
59,484.0 2,260.8 70,793.0 2,368.6 76,333.0 2,087.1 87,369.0 2,484.4
Un-coate paper P-board, writing
MT
14,436.0 650.8 22,322.0 944.6 25,526.0 1,011.4 32,978.0 1,335.6
Other paper and paper board
MT
56,299.0 2,497.0 69,775.0 2,985.8 89,815.0 4,107.7 111,773.0 5,033.2
Article made of paper & paper board
MT
11,830.0 1,329.1 12,564.0 1,359.7 12,940.0 1,420.2 16,754.0 1,720.5
6.2.7 Import of Wood Pulp
Wood pulp is imported mainly import from USA, Sweden, Canada and Far East. Imports
of Wood Pulp are tabulated below:
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
Quantity (Tons)
50,798

39,955

33,8

63
35,519

54,922

59,126

Value (Rs.in million)
1,092

895

982

1,229

1,42

7
1,57

9
Imported from Countris (in %)
U.S.A
40.82
43.26
16.8
28.98
51.33
40.49
Canada
18.74
16.21
47.4
31.25
12.15
32.35
Indonesia
18.22
8.7
-
-
0.95
-
Sweden
16.24
20.71
30.68
15.83
16.98
10.5
Russian Fed.
0.78
-
-
0.26
-
-
Others
5.2
11.12
5.12
23.68
18.59
16.66

6.2.8 Import of Waste Paper
Waste paper is being imported from USA, UAE, Saudi Arabia & Singapore. Imports of
waste paper from various countries are tabulated below:
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
Quantity (Tons)
43,380

34,860

39,047

45,948

51,510

58,112

Value (Rs.in million)
241

222

253

325

325

442

Imported from Countris (in %)
Singapore
29.38
22.95
17.88
14.99
6.06
5.4
U.S.A
19.23
23.59
20.81
35.3
27.5
26.34
Saudi Arabia
14.87
10.19
11.17
13.09
13.17
8.41
Germany
6.39
6.4
0.43
0.31
2.13
1.52
Belgium
4.93
7.7
0.05
0.64
1.26
4.61
Malaysia
2.07
1.07
0.04
Dubai
15.4
20.76
22.54
17
26.45
19.88
Netherlands
7.25
Others
7.24
7.34
27.08
18.67
23.43
26.59
8

6.3
INTERNATIONAL SCENARIO
The international paper board sector is dominated by NORSCA (USA, Canada, Finland
and Sweden) which comprise for roughly 75 per cent of high quality products. High
wood pulp based products are produced in these countries due to their proximity to
woodlands. Further, developed industrial base, world's leading chemical manufacturing
facilities and downstream packaging industry supplement the paper and paper board
sector in the NORSCAN. China, Indonesia and Taiwan dominate Asian markets while
low-grade pulp made of eucalyptus is made in South American countries like Argentina
and Brazil. Spain is the main producer in Europe of wheat straw pulp otherwise produced
in South Asian region.9

6.4
PAPER BOARD INSUSTRY AND WTO
Paper board industry is considered as one of the important industry for the economic
development of any developing country, but it stands neglected in our country. It is an
industry that provides direct as well as indirect employment to technical, skilled, semi-
skilled and unskilled workers. It employs about 100,000 people. The industry comprises
around 44 paper and paper-board manufacturing units, 38 wrapping and packing paper
plants and 18 writing and printing paper units.
By international standards our local industry is poorly developed. The main reasons for
this are: low product demands, lack of investment in technology, non-availability of local
wood fibres, faulty technological base, lack of infrastructure and non-availability of

8 Digest of Industrial Sector in Pakistan - 2004
9 DAWN ­ Business; Oct 08, 2001

skilled manpower. Despite such problems, the industry saves $300 million in foreign
exchange through import substitution.
In the changing global economic scenario the demand for paper and paperboard has risen
due to changes in social and economic patterns mainly through urbanization, packaged
foods, consumer durables and literacy. However, the domestic industry lags behind and is
unable to operate efficiently. Many units have become inoperative. Some are facing acute
financial constraints. A few have closed down or are on the verge of doing so. Factory
owners say that the main problems facing the industry include the non-availability of
wood, wood pulp and other raw materials, low capacity utilization, fiscal anomalies,
under invoicing and dumping of cheap paper products.
Due to massive and unchecked deforestation, wood pulp and basic raw material for
making paper and paperboard is scarce. Pulp production is based on agriculture waste,
such as wheat and rice straw, cotton and lint, waste paper, biogases and kahi grassroots.
But these are also in short supply, as their resources have not been fully tapped. Mills are
facing difficulties in the procurement and storage of these materials. At the same time,
agriculture waste available in Pakistan is used for producing only short-fibre pulp. As a
result, the quality of paper produced locally suffers and is inferior to imported paper.
Under the new WTO regime, the domestic industry will face stiff competition from Asian
countries like China, India, Indonesia, Thailand and Taiwan that have a proximity to the
Pakistani market as well as technological and other advantages. A comparison of tariff
and bonded rates of India and Pakistan shows that although bonded rates under the WTO
regime are lower in India: 40 per cent versus 50 per cent in Pakistan.
The Pakistani paperboard industry, with a capacity of 0.6 million Ton, will be in direct
competition with countries like China, which has a capacity in excess of 50 million Ton,
and India, which has a capacity of 5.6 million Ton. These countries enjoy economies of
scale, a technological edge, trained and qualified manpower and domestic supplies of
major processing inputs, required for paper board production. Moreover, consumables
like paper board machines for clothing, chemicals and spare parts are locally produced in
these countries at much lower prices. China enjoys cheaper power rates, which
constitutes around 15-20 per cent of total cost of production. However, due to opening of
market and slashing of customs duties, various products used in the paperboard industry
may also become cheaper for Pakistani producers to import, which would reduce
production costs. The domestic industry will also need to improve environmental
standards to meet buyers' requirements. The implementation of TRIPS (Trade Related
Intellectual Property Rights) and TRIMS (Trade Related Investment Measures) may also
have negative impact on the industry.
The government and the industry need to address these problems on a war footing to
meet the challenges of the WTO regime, which is due to take effect from January 1,
2005. The government should give due priority to this industry in the agenda list of the
ministry of industries and productions. 10
7 PRODUCTION PROCESS
7.1
BOX BOARD MANUFACTURING
Industries in the paper board manufacturing sub sector make pulp, paper, paper board,
liner, fluted, box board etc.) or converted paper products. The manufacturing of these
products is grouped together because they constitute a series of vertically connected
processes. There are essentially three activities.
The manufacturing of pulp involves separating the cellulose fibers from other
impurities in wood or used paper.
The manufacturing of paper board involves matting these fibers into a sheet.
Converted paper board products are made from paper and other materials by
various cutting and shaping techniques and include coating and laminating
activities.
7.2
PRODUCTION METHODS AND TECHNOLOGY
Production processes used in the industry depend on the type of desired output and
variety of raw materials used for paper board making. The use of soda process is
preferred for high grade board from waste paper and paper board, Tori and straw etc.
The following sequence of operations are generally followed to produce quality type
paper board (box board), though the ultimate process depends upon the type of output
and the variety of raw material used for pulp making.
The different type of waste papers, paperboard etc. after refining are stirred
separately.
Waste material is now forward to the pulper for water mixing.
These are blended proportions in a stock blending chest where it used to mix with
water.
Pumps take this material into dump chest.
The pulp passed through the screen for removing all foreign material like nails,
pins twigs and un-dissolved knots.
This material passes through to refiner.
The pulp after stock preparation and proper dilution is usually sent to the machine
through one or more screens.
Pulp from the machine chest is pumped to the head box where it is mixed with
water.

10 Weekly Business Review (www.jang.com.pk)

The suspension is then spread uniformly across the full width of a moving endless
screen.
The screen travels over table rolls and suction boxes where water drums are
driven by the effect of gravity and vacuum.
The screen then passes under roll squeezing additional water from mat. The mat
sheet then passes over to a woolen or synthetic cloth belt passing between
batteries of press rolls. Here water is further squeezed out and the mat gets
compacted.
The water content is then further reduced by evaporate drying. This is followed by
calendaring and collecting operations.
Quality testing of the nature and susceptibility of the output to physical and
chemical properties are carried out at this stage.
The output is then converted into standard marketing size.
7.2.1 Recycling Process
The final production process for recycling paper is the same as the process used for box
board made from virgin fibres but, as the recovered paper fibres have already been used,
they have to be cleaned.
As a first step, recovered paper is sorted and graded then delivered to a paper board mill.
Large non-fibrous contaminants are removed (for example staples, plastic, glass etc.).
The fibres are progressively cleaned and then the pulp is filtered and screened through a
number of cycles to make it more suitable for paper board making. The fibres have to be
de-inked. The pulp is then ready to be made into paper or paper board. Depending on the
grade of paper board being produced, quantities of virgin pulp from sustainable sources
may be added. Some paper products, such as newsprint and corrugated materials, can be
made from 100% recycled paper. Once the paper is used, it can be recycled and the
process starts again.
There are paper board products that cannot be either collected or recycled. The portion of
such paper board products, which consist, for example, of cigarette papers, wallpaper,
tissue papers and archives, is estimated to be about 19% of the total paper board
consumption. In addition to non-collectable and non-recyclable paper products, it would
not be economically or environmentally sound to collect and recycle everything.
7.2.2 Grades of Recovered Paper & Paper Board
There are different grades of recovered paper and board to satisfy the needs of different
producers, according to strict specifications. For example, it is not possible to take mixed
recovered paper consisting of different paper grades (newspapers, cartons, corrugated
boxes) to make printing and writing paper. Mixed recovered paper is best used in
packaging grades. More than 50 grades of recovered paper and board are defined in the
European Standard EN634. They can be described as follow:

Low grades (mixed papers, old corrugated containers, board etc.) constitute the
main part of the recovered paper consumed. These are used to produce packaging
papers and boards.
De-inking grades (newspapers and magazine, graphic papers etc.) are usually also
considered as low grades. These are for graphic and sanitary papers.
High grades (scraps, sheets, print off-cuts etc.) require little or no cleaning. They
can be used for the production of any paper product as pulp substitute.
Modern recycling processes require little energy and the auxiliary materials involved are
environmentally compatible. The contraries (the pins, staples, adhesives etc.) removed
during the recycling process create a `sludge' which may be burned for energy recovery,
put into landfill or used for other industrial purposes; they can be used as raw materials
for other industries (for example land construction) or they can be spread on agricultural
land.

7.3
FLOW CHART FOR BOX BOARD MANUFACTURING
Raw Material
Sorting / Refining
Water Mixing
Screen Flow
Stock Chest
Pump
Color Mixing
Paper Machine
Roller
Dryers
Rewinder
Quality Inspection
Finished Product

7.4
Plant Layout
7
15
8
6
9
5
10
4
14
11
3
13
12
1
2
1 Admin Block
9 Roller
2 Raw Material Sorting
10 Boilers
3 Vessels / Water Mixing
11 Pre-Dryer
4 Screen Flow
12 Yankee
5 Stock Chest
13 After Dryer
6 Pumps / Vaccume
14 Quality Inspection
7 Color Mixing
15 Store Room for Finish Product
8 Paper Machine

7.5
Machinery Requirement
Following table shows the machinery & equipment requirement for setting up a Paper
Board Manufacturing Unit.
Sr. No.
Description
Qty
Total Amount
1
Stock Preparation System
14,000,000
2
Cylinder Mould Section
4
1,830,000
3
Wire Part
9,880,000
4
Press Part
1,800,000
5
Pre-Dryer
12
5,850,000
6
Yankee
3,650,000
7
After Dryer
6
3,000,000
8
Callender
1,780,000
9
Pope Real
700,000
10
Mechanical Workshop
2,300,000
11
Boiler
1
6,000,000
Total
50,790,000
Following is the List of major suppliers of Paper Board Manufacturing Unit:
International:
Sr.#
Name & Address
1
RIVER MACHINERY CORPOPATION
NO, 101, DUNG SHUEN ST., SHU LIN CITY, TAIPEI HSIEN, TAIWAN
TEL: 886-2-86867648, 86867649, 86869268,86869269
FAX: 886-2-86868968
HTTP://WWW.H-F.COM.TW
2
SHANGHAI LIGHT GOOD PAPERMAKING MACHINERY EQUIPMENT PLANT
ADDRESS : SHANGHAI, CHING CHUNG HIGHWAY 3201,
TEL : 021-59745501 021-59741988
FAX : 021-59741437
E-MAIL : SHQLZZ@SH163.NET
3
RAMESH INDUSTRIES
MR. RAMESH CHANDRA
D-122, INDUSTRIAL AREA, BS ROAD
GHAZIABAD - 201 001, UTTAR PRADESH (INDIA)
TEL : +(91)-(120)-2700791/2796264
EMAIL : INFO@RAMESHINDUSTRIES.COM
4
CMC International Industries Limited, China
tel: 86-755-25712086,25713486,852-67274608
fax: 852-30145709,30147609
email1: sales@machineschina.com
email2: 13006688069@gd165.com

Local:
Sr.#
Name & Address
1
Abdul Jabbar & Co
88-Railway Road, Lahore
Ph: 042-7661871
Fax: 042-7636098
2
H.B sayyed (Pvt.) Ltd.
130-D. 1st Flr., Green View Apt., B0Commercial Area,
Phase II, Defence, Karachi.
Ph: 021-5896021 - 5895790
Fax: 021-5895941
3
MAQ Engineering Company
Gondlanwala Road, Near Jinnah Road Chowk,
Gujranwala
Ph; 055-4230498 - 4230497
4
Al-Ahmad Enterprises
10-Bangali Street, Shahrah-e-Millat, Lahore
Ph: 042-4121172 - 7121171
Fax: 042-712173
The machinery, equipment and accessories required for Box Board plant at Lahore are
fabricated locally. Most advanced technology for drying parameter control, stock
preparation system, head box, belt control and belt structure etc., is also used. For this
purpose international suppliers are also available to produce finished products confirm to
national as well as international standards.
7.6
Other Fixed Assets Requirement
Following additional fixed assets are required for factory and management offices.
7.6.1 Office Equipment
Items
Number
Unit Cost
Total Cost
Fans & Lights
10
3,000
30,000
Air-conditioning
4
25,000
100,000
Computer
5
20,000
100,000
Printer Laser
2
25,000
50,000
Fax
2
25,000
50,000
Networking
1
100,000
100,000
Total
430,000

7.6.2 Furniture & Fixture
Items
Number
Unit Cost
Total Cost
Executive Table
1
25,000
25,000
Computer Tables and others
10
6,500
65,000
Sofas
5
10,000
50,000
Chairs
15
4,000
60,000
Carpet, Curtains, etc.
1
25,000
25,000
Total
225,000
7.7
Motor Vehicles
The proposed project will also be following vehicles.
Items
Number
Unit Cost
Total Cost
1300 CC Car
1
1,000,000
1,000,000
1000 CC Car
1
650,000
650,000
Loader
2
670,000
1,340,000
Total
2,990,000
8 LAND & BUILDING REQUIREMENT
8.1.1 Land
Keeping in view the proposed capacity, approximately sixteen (16) Kanals of land i.e.
seventy two thousand (72,000) square feet is sufficient to set up the Box board Plant. An
amount of Rs.12,800,000 has been allocated for the acquisition of sixteen (16) Kanals
land in the area of Lahore However, cost of land may vary according to location.
8.1.2 Building
The Construction for infrastructure will be carried on an area of 17,000 sq. ft. The rest of
the area will be left uncovered. The total cost of construction is estimated at Rs.17
million. The proposed building will comprises of the following
Admin Block
Boilers
Processing Section
Dryer
Vessels
Re-winder
Paper Board Machine
Quality Inspection
Roller
Finished Products Store

8.2
Utilities Requirement
An industrial connection of natural gas is required at the plant site. Average daily
consumption of the gas is 12 Hm3 for Box Board production. Natural gas has been
charged at Rs. 850/Hm3.
The factory site will be connected with a WAPDA power connection. Average daily
consumption of electricity is 950 KW depending on the number of unit operations
involved in the process. The costing has been done @ Rs. 6.50/unit.
9 HUMAN RESOURCE REQUIREMENT
9.1
Human Resource Requirements
Following table shows the requirements of Human Resources in the Paper Board
Manufacturing unit. Salaries and wages are assumed to grow at 10% per annum.
Description
No.
Monthly Salary / Month
Per Year
(Rs.)
(Rs.)
MD
1
200,000 2,400,000
Production Staff
GM Factory
1
85,000 1,020,000
Accountant
1
30,000 360,000
Engineer
3
30,000 1,080,000
Mechanic-cum electrician
1
22,000 264,000
Skilled Workers
10
8,000 960,000
Semi Skilled Workers
15
4,500 810,000
Watchman & Gatekeeper
4
3,500 168,000
Admin & Accounts
Chief Accountant
1
55,000 660,000
Accountant
1
30,000 360,000
Sales Supervisor
2
12,000 288,000
Driver
2
6,500 156,000
Receptionist
1
12,000 144,000
Production Staff
4,662,000
Admin & Accounts
4,008,000
TOTAL
8,670,000

10 KEY ASSUMPTIONS
Plant Processing Capacity (Tones)
14,000
Project Cost
88,270,000
Inflation Rates
10.0%
Increase in Selling Price
10.0%
Processing days
360
Raw Material-waste paper Requirements per Ton
1.22
Raw Material-waste paper Requirements per Kg
1.22
I ton
1,000.00
Raw Material-waste paper Per Ton
Rs.7,500.00

Chemicals / Ton
Soap Stone per Kg
Rs.3.50
Alum per Kg
Rs.12.00
Caustic Soda per Kg
Rs.22.00
Annual Processing Capacity in Ton
14,000
Monthly Processing Capacity in Ton
1,167
Processing Capacity/day in Ton
39
Preparatory-Line Losses %
22%
Prepared Material
30
Moisture Content
0%
Finish Product Per day
30
Finish Product Per Year (Kg)
10,920
Selling Price (in Rs.) Local
Rs.22,000
Packing Cost per Ton
Rs.50
Repair & Maintenance as % of Plant & Machinery
5%
Average Daily Consumption of Natural Gas
12 HM3
Price of Gas / HM3
Rs.850
Average Daily Consumption of Electricity
950 KW
Cost of Electricity Per Ton
Rs.6,175.0
Electricity Rate Per Unit
Rs.6.5
Current Assets
Basis
Receivables
50 Days worth Sales
Raw Materials Stock
30 Days worth Raw Material
Work in Process
1 Day worth COGS
Store and Spares
10.0% of machinery
Current Liabilities
Accounts Payable
20 Days worth Material Purchased
Utilities Payable
One Month Bill

11 FINANCIALANALYSIS
11.1
Project Cost

Rs.
Rs.
Land
Land 16 Kanal @ 0.7 million per Kanal
12,800,000
Project Development cost
Building - Civil Works
17,000,000
Machinery & Equipment
50,790,000
Vehicles
2,990,000
Office Equipments
430,000
Furniture & Fixture
225,000 71,435,000
Preliminary Expenses
Utility Connections Charges
1,000,000
Incorporation Charges
35,000 1,035,000
Working Capital
3,000,000
Total Assets
88,270,000
Total Capital Employed By:

Equity Contribution by
50%
4,135,000
Loan
50%
4,135,000
Total Capital including land
100%
88,270,000
Financial Viability
IRR
36.40%
Payback Period
3.75 Years
NPV @ 15%
132,965,591

11.2
Projected Income Statement
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Sales
108,108,000 118,918,800 145,345,200 159,879,720 193,454,461 232,145,353 276,639,880 304,303,867 360,483,043 396,531,347
Cost of Sales
60,042,399
65,538,739
78,142,640
85,499,794 101,441,159 119,530,669 140,491,078 154,169,927 180,543,195 198,264,281
Gross Profit
48,065,601
53,380,061
67,202,560
74,379,926
92,013,303 112,614,685 136,148,801 150,133,941 179,939,848 198,267,066
Operating Expenses:
Operating Expenses
7,131,834
7,581,017
8,339,119
9,173,031
10,090,334
11,099,368
12,209,304
13,430,235
14,773,258
16,250,584
Depreciation
6,678,500
5,967,550
5,345,270
4,798,185
4,315,338
3,887,732
3,528,609
3,184,139
2,877,841
2,604,704
Amortization
207,000
207,000
207,000
207,000
207,000
-
-
-
-
-
14,017,334
13,755,567
13,891,389
14,178,216
14,612,672
14,987,100
15,737,913
16,614,373
17,651,099
18,855,288
Operating Profit
34,048,267
39,624,494
53,311,171
60,201,710
77,400,630
97,627,585 120,410,888 133,519,567 162,288,749 179,411,778
Interest on Loan
2,648,100
4,878,079
4,320,584
3,763,089
3,205,595
2,648,100
2,090,605
1,533,111
975,616
418,121
Interest on Lease
-
-
-
-
-
-
-
-
-
-
2,648,100
4,878,079
4,320,584
3,763,089
3,205,595
2,648,100
2,090,605
1,533,111
975,616
418,121
Profit before Tax
31,400,167
34,746,415
48,990,587
56,438,620
74,195,036
94,979,485 118,320,283 131,986,457 161,313,133 178,993,657
Taxation (see working)
1,201,958
13,006,180
17,913,841
20,450,298
26,601,406
33,818,388
41,876,156
46,616,794
56,842,915
62,996,681
Profit after Tax
30,198,209 21,740,235 31,076,746 35,988,322 47,593,629 61,161,097 76,444,127 85,369,662 104,470,218 115,996,976
Balance B/F
- 30,198,209
51,938,443
83,015,189 119,003,511 166,597,141 227,758,238 304,202,365 389,572,027 494,042,245
Retained Earnings
30,198,209
51,938,443
83,015,189 119,003,511 166,597,141 227,758,238 304,202,365 389,572,027 494,042,245 610,039,221
Balance C/F
30,198,209
51,938,443
83,015,189 119,003,511 166,597,141 227,758,238 304,202,365 389,572,027 494,042,245 610,039,221

11.3
Projected Cash-flow Statement
SOURCES
1
2
3
4
5
6
7
8
9
10
FROM OPERATION
Profit Before Tax
31,400,167
34,746,415
48,990,587
56,438,620
74,195,036
94,979,485 118,320,283 131,986,457 161,313,133 178,993,657
Add: Depreciation
6,678,500
5,967,550
5,345,270
4,798,185
4,315,338
3,887,732
3,528,609
3,184,139
2,877,841
2,604,704
Amortization
207,000
207,000
207,000
207,000
207,000 -
-
-
-
-
6,885,500
6,174,550
5,552,270
5,005,185
4,522,338
3,887,732
3,528,609
3,184,139
2,877,841
2,604,704
38,285,667
40,920,965
54,542,857
61,443,805
78,717,374
98,867,217 121,848,892 135,170,595 164,190,974 181,598,361
APPLICATION
Capital Expenditure
-
-
-
-
-
-
-
-
-
-
Repayments of Loan
2,322,895
4,645,789
4,645,789
4,645,789
4,645,789
4,645,789
4,645,789
4,645,789
4,645,789
4,645,789
Tax Payment
1,201,958
13,006,180
17,913,841
20,450,298
26,601,406
33,818,388
41,876,156
46,616,794
56,842,915
62,996,681
Dividend Paid

3,524,853.19 17,651,969.64 22,559,630.02 25,096,087.30
31,247,196
38,464,178
46,521,945
51,262,584
61,488,705
67,642,471
Surplus / (Deficit)
34,760,814
23,268,995
31,983,227
36,347,718
47,470,178
60,403,040
75,326,946
83,908,011 102,702,270 113,955,891
Increase/(Decrease) In
17,841,176
1,431,039
3,888,730
2,116,674
4,944,462
5,713,345
6,561,418
4,045,439
8,289,381
5,276,864
Working Capital
Net
16,919,638
21,837,956
28,094,497
34,231,044
42,525,716
54,689,695
68,765,528
79,862,573
94,412,889 108,679,027
Increase/(Decrease)
Opening Bank
3,000,000
19,919,638
41,757,594
69,852,091 104,083,135 146,608,851 201,298,546 270,064,074 349,926,646 444,339,535
Balances
Closing Cash Balance
19,919,638
41,757,594
69,852,091
104,083,135 146,608,851 201,298,546 270,064,074 349,926,646 444,339,535 553,018,562
WORKING CAPITAL
17,841,176
19,272,214
23,160,944
25,277,618
30,222,080
35,935,425
42,496,844
46,542,283
54,831,664
60,108,527
Increase (decrease)
17,841,176
1,431,039
3,888,730
2,116,674
4,944,462
5,713,345
6,561,418
4,045,439
8,289,381
5,276,864

11.4
Projected Balance Sheet
YEAR
Start up
1
2
3
4
5
6
7
8
9
10
Fixed Assets
84,235,000
77,556,500
71,588,950
66,243,680
61,445,495
57,130,157
53,242,424
49,713,816
46,529,677
43,651,836
41,047,132
84,235,000
77,556,500
71,588,950
66,243,680
61,445,495
57,130,157
53,242,424
49,713,816
46,529,677
43,651,836
41,047,132
Preliminary Exp.
1,035,000
828,000
621,000
414,000
207,000
-
-
-
-
-
-
85,270,000
78,384,500
72,209,950
66,657,680
61,652,495
57,130,157
53,242,424
49,713,816
46,529,677
43,651,836
41,047,132
Current Assets
Acc. Receivables
- 15,015,000
16,516,500
20,186,833
22,205,517
26,868,675
32,242,410
38,422,205
42,264,426
50,067,089
55,073,798
Raw Mat. Stock
-
3,746,925
4,121,618
5,037,533
5,541,286
6,704,956
8,045,947
9,588,087
10,546,895
12,494,015
13,743,416
Work in Process
-
166,784
26,983
29,681
32,649
35,914
39,506
43,456
47,802
52,582
57,840
Advances &
-
2,248,155
2,248,155
2,248,155
2,248,155
2,248,155
2,248,155
2,248,155
2,248,155
2,248,155
2,248,155
Prepayments
Cash Balances
3,000,000 19,919,638
41,757,594
69,852,091
104,083,135 146,608,851 201,298,546 270,064,074 349,926,646 444,339,535 553,018,562
3,000,000
41,096,503
64,670,850
97,354,293 134,110,742 182,466,551 243,874,564 320,365,977 405,033,925 509,201,376 624,141,772
Total Assets
88,270,000 119,481,003 136,880,800 164,011,973 195,763,237 239,596,708 297,116,988 370,079,793 451,563,602 552,853,212 665,188,904
Share Capital*
44,135,000
44,135,000
44,135,000
44,135,000
44,135,000
44,135,000
44,135,000
44,135,000
44,135,000
44,135,000
44,135,000
Unapp. Profit
- 30,198,209
51,938,443
83,015,189
119,003,511 166,597,141 227,758,238 304,202,365 389,572,027 494,042,245 610,039,221
44,135,000 74,333,209
96,073,443
127,150,189 163,138,511 210,732,141 271,893,238 348,337,365 433,707,027 538,177,245 654,174,221
Long Term
Liabilities
Long Term Loan
44,135,000
41,812,105
37,166,316
32,520,526
27,874,737
23,228,947
18,583,158
13,937,368
9,291,579
4,645,789
-
44,135,000
41,812,105
37,166,316
32,520,526
27,874,737
23,228,947
18,583,158
13,937,368
9,291,579
4,645,789
-
Current Liab.
Creditors
-
3,335,689
3,641,041
4,341,258
4,749,989
5,635,620
6,640,593
7,805,060
8,564,996
10,030,177
11,014,682
-
3,335,689
3,641,041
4,341,258
4,749,989
5,635,620
6,640,593
7,805,060
8,564,996
10,030,177
11,014,682
TOTAL
88,270,000 119,481,003 136,880,800 164,011,973 195,763,237 239,596,708 297,116,988 370,079,793 451,563,602 552,853,212 665,188,904
*
4,413,500 Shares @ Rs.10/- each

12 ANNEXURES
Annexure # 1
Revenue Calculation
Description
Box Board
Annual Processing Capacity in Ton
14,000
Monthly Processing Capacity in Ton
1,167
Processing days
360
Processing Capacity per day
39
Preparatory-Line Losses %
22%
Prepared Material
30
Finish Product Per day
30
Finish Product Per Year (Ton)
10,920
Selling Price (in Rs.) /Ton
Rs.22,000
Annexure # 2
COGS Calculation
Description
Box Board
Processing days
360
Processing Capacity per day
39
Price of Packeging per Ton
Rs.50
Waste Paper Per Ton
7,500
Chemicals
Soap Stone
Rs.3.50
Alum
Rs.12.00
Caustic Soda Per Ton
Rs.22
Annual Increase
10.0%

Annexure # 3
Custom Duties and Taxes
HS Code
Description
CD%
ST%
Unit
(1)
(2)
(3)
(4)
(5)
4802.6100
--In rolls
20(4)
15
Kg.
4802.6200
--In sheets with one side not exceeding 435 mm and the other
15
Kg.
20(4)
side not
Other uncoated paper and paperboard, in rolls or sheets not
(3)
48.05
further
4805.1100
--Semi-chemical fluting paper
20
15
Kg.
4805.1200
--Straw fluting paper
20
15
Kg.
4805.1900
--Other
20
15
Kg.
-Testliner (recycled liner board) :
4805.2400
--Weighing 150 g/ m² or less
20
15
Kg.
4805.2500
--Weighing more than 150 g/ m²
20
15
Kg.
4805.3000
-Sulphite wrapping paper
20
15
Kg.
4805.4000
-Filter paper and paperboard
10
15
Kg.
4805.5000
-Felt paper and paperboard
20
15
Kg.
- Other :
4805.9100
--Weighing 150 g/ m² or less
20
15
Kg.
4805.9200
--Weighing more than 150 g/ m² but less than 225 g/ m²
20
15
Kg.
4805.9300
--Weighing 225 g/ m² or more".
20
15
Kg.
4807.0000
Composite paper and paperboard (made by sticking flat
20(3)
15
Kg.
layers of paper or paperboard together with an adhesive), not
surface- coated or impregnated, whether or not internally
reinforced, in rolls or sheets.
Paper and paperboard, corrugated (with or without glued flat
48.08
(3)
surface
sheets), creped, crinkled, embossed or perforated, in rolls or
sheets, other than paper of the kind described in heading
48.03.
4808.1000
-Corrugated paper and paper board,whether or not perforated
25
15
Kg.
4812.0000
Filter blocks, slabs and plates, of paper pulp.
20
15
Kg.
Cigarette paper, whether or not cut to size or in the form of
(3)
48.13
booklets or
4817.3000
-Boxes, pouches, wallets and writing compendiums, of paper
25
15
Kg.
or
paperboard, containing an assortment of paper stationery
48.19
Cartons, boxes, cases, bags and other packing containers, of
paper, paperboard, cellulose wadding or webs of cellulose
fibres; box files, letter trays, and similar articles, of paper or
paperboard of a kind used in offices, shops or the like.
4819.1000
-Cartons, boxes and cases, of corrugated paper or paperboard
25
15
Kg.
4819.2000
-Folding cartons, boxes and cases, of non corrugated paper or
25
15
Kg.



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