Valaichchenai paper mill rises from the ashes

By Shirajiv Sirimane

Like in the present era, the government that was in power in 1955 had wanted to create an industry to usher in economic prosperity to the North East. Looking at the resources available the then government decided to construct a paper mill since there was an abundance of saw dust available.

Putting this thought into deed, the country’s first paper factory which was established in 1955 was commissioned for commercial operation in 1956 at Valaichchenai thus becoming the oldest industry of the country. The total investment for the factory was Rs. 32 million and 50 percent of it came via a grant.

The government imported German Voith Machines which are considered the world's leading machines in the industry and the mill was one of the best factories functioning in South Asia.

Open market policy

Valaichchenai Paper Mills was renamed as Eastern Paper Mills Corporation in 1958 and the Board Machine was commissioned in 1972. With the expansion program the second paper mills was put up at Embilipitiya in 1976 and it was renamed as National Paper Corporation. (Embilipitiya Paper Mills was later privatized in 2011).

National Paper Corporation was converted into a limited liability Company from 1992 and incorporated under the Company’s Act No.17 of 1992 as National Paper Company Limited (NPCL). NPCL was the market leader holding most of the market shares until the implementation of the open market policy and waiving off the 35 percent tariff on the importation of paper and the board in 1994 it became bad to worse and the profit started to drop.

One more reason for waiving off the tariff was the paper mill was in a terrorism-affected area.

With permanent peace the present government decided to resurrect this and the task was given to Ministry of State Resources and Enterprises Development.

Then the Government appointed Mangala Senerath as Competent Authority of the National Paper Company to turn it into a profit-making venture.

Shrub jungle

“Being a seasoned businessman myself I saw the potential of this mill and how it could contribute a large portion to the GDP as well.

The smooth function of the factory could also uplift the local industry and save nearly 300 families who are directly employed and some 200 indirectly employed”, said Mangala Senerath.

“When I first visited the Valaichchenai Paper Mills after assuming office in April 2012, it looked ghostly with damaged buildings and the area covered by shrub jungle. Employees there were in uncertainty as they had not been paid their salaries to the value of Rs. 4.5 million and other payments including welfare facilities.”

In addition corruption and mismanagement too had contributed to the downfall of the mill.

One of the priorities I saw to get the mill back to its past glory was to repair the boiler since the steam boiler is the heart of the mill and without steam, paper couldn't be dried. We called for tenders and received one for Rs. 26 million.

But we managed to repair this by using our own resources at a cost of Rs. 11.5 million!,” he said.

In addition several other urgent repairs were done and Valaichchenai paper mill increased production from 35 to 319 metric tons per month.

Difficulty

He said that due to pressure from environmentalists they were forced to stop the use of stew dust. It was then decided to use used paper and paddy husk as the main raw material.

“However, since 20,000 metric tonnes of waste paper is exported to India every month we face a severe difficulty in finding the waste paper required for our production.

Of the waste paper exported we need at least 6,000 metric tonnes to run the mill as we have increased production. Now we are looking for a way to buy this reused paper. We have suggested a tax to exports which would discourage the exports of used paper.”

He said that they are now looking at a financial injection to increase production and meet the future demands of the country which are very diversified. “With some capital to the mill we will be able to reach the breakeven point in four months as it would help double our capacity.”

He said together with the State Resources and Enterprises Development Minister Dayasritha Tissera their priorities are to turn around this company in to a profit making venture and they are slowly but surely moving towards this target.

“Our aim is also to reduce the import of paper thus saving millions of dollars to the country.”