'Wastepaper is needed' - Valachchenai Paper Mill CA

By Ranil Wijayapala

In the past we had many local industries as national assets. But many of them ground to a halt in the face of the inflow of foreign products and due to lack of state sponsorship to compete with other products. The blessing of the people and the government and its help therefore are essential to produce a truly national product.

The paper mill at Valachchenai which once operated as a 100 percent profit making entity is one such industry that made Sri Lankans proud with its products to fulfill the stationary requirement of the government institutions and the country.

Having undergone many setbacks due to the conflict situation that prevailed in the North and East, due to technical and financial constraints and poor handling of the operation by respective managements the Valachchenai paper mill is now making an effort to resume operations with the task of fulfilling at least five percent of the paper requirement of the country through its products.

As a country which imports 44,000 metric tonnes of paper per month to fulfill the stationary requirement of the country, the effort made by the Valachchenai paper mill under the leadership of its Competent Authority Mangala C. Senerath is noteworthy.

According to Senerath, Valachchenai paper mill is now marching towards reaching its break-even point of manufacturing 500 metric tonnes of paper per month after overcoming many obstacles it had faced during the past two and half years.

Starting in 2012 with a mere Rs. 12,574 bank balance in the name of Valachchenai paper mill and a burden of Rs. 5.5 million unpaid salaries, EPF and ETF dues of the employees, a staggering Rs.3.8 million unpaid electricity bill and another Rs. 1.6 million bill for the head office staff, Senerath had to evaluate whether the factory can be run or not with the 261 employees there producing only 38 metric tonnes of paper per month.

After having a visit to the paper mill which had turned out to be a bitter experience with the employees, he as a manufacturer in the business field, realised that it can be turned into a 100 percent profit making industry worth millions, giving a life-time warranty with investment from the Government as a working capital.

To motivate him and the employees the Secretary to the Ministry of State Resources and Enterprise Development immediately made available Rs. seven million to settle the unpaid salaries of the employees.

Employees engaged in packing file covers produced at the factory

Valachchenai Paper Mill

"The employees were having a hard time and they were not having even a plain tea during their working hours. I motivated them by arranging many things and to increase the manufacturing capacity of the mill from producing13 metric tonnes per month to 320 metric tonnes", explaining the arduous journey he had to take, Senerath said.

The employees were convinced that they be provided with all the facilities, when the paper mill reached the break-even point by manufacturing 500 metric tonnes of paper per month.

"We were able to repair the steam boiler with seven metric tonnes capacity at the mill which provides energy to run the machine, at a cost of Rs.11.5 million and out of it Rs. eight million was made available from the Treasury. With the repaired steam boiler the production capacity of mill increased from 1.5 metric tonnes per day to 27.5 metric tonnes recording 319 metric tonnes in June 2013 for the first time after 11 years", he said.

"I am 100 percent confident that if we can repair both paper machine and the board machine this mill can be run as a profit making business as the paper machine can manufacture different varieties of paper ranging from 40 GSM to 120 GSM and the board machine can manufacture 125 GSM to 450 GSM varieties of boards", he said.

"The paper machine can produce cover papers, manila paper etc and the board machine can manufacture file covers, box boards, chip board etc.

"To repair the paper machine and the board machine, we need 650,000 US dollars and to import a new steam boiler with 15 metric tonnes capacity will cost another 250,000 US dollars. So with nearly one million US dollars we can totally repair the machines", he said.

"If we get Rs.300 million working capital I can definitely run this mill as a profit making body, but unfortunately the financial institutions of this country do not understand this reality and the capability of running this mill as a profit making venture and reluctant to fund us based on the past record of the mill", the Competent Authority said.

Apart from these financial constraints, the Valachchenai paper mill's effort to reach the break-even point of manufacturing 500 metric tonnes of paper products per month is also facing a tricky situation as they cannot collect enough stocks of waste paper. Waste paper is the main raw material to manufacture paper and paddy husk is used as the fuel for the steam boiler.

To remedy the situation the Treasury issued a circular to the government institutions to purchase National Paper Company products and to provide the collected wastepaper to the paper company, but some government institutions are not complying as they can sell wastepaper to private companies.

"If we can manufacture 3,000 metric tonnes of paper per month once we repair our machines we need 4,500 metric tonnes of wastepaper.

Private sector institutions export nearly 20 to 25,000 metric tonnes of wastepaper to India per month. I do not want to stop that. If we have 5,000 metric tonnes available to us that is sufficient for us to run the mill and maintain our production capacity", he said.

"Or else the Government can impose a 50 cents cess per one Kg of exporting wastepaper and invest that money for the improvement of the national paper industry", he said.

"To reach break-even point of 500 metric tonnes of paper per month the paper mill needs 750 metric tonnes of wastepaper and 750 metric tonnes of paddy husk. But as we don't have an adequate capital we are facing difficulties in purchasing wastepaper and paddy husk.

"If I get Rs.300 million working capital I can definitely run this mill as profit making body", he said.

"However, the National Paper Company is trying to cover its own expenses by National Paper Company branded exercise books, photocopy papers, schools bags and other stationeries and file covers to the market.

"We are trying to give a quality product to the people and we are targeting the market in the North and East first", he said.

"I am confident President Mahinda Rajapaksa understands this national requirement and his blessings will be with us in finding the required working capital to run this as a profit making industry and bring the pristine glory of the past back to this paper mill", Senerath said.