Small Is Not Beautiful-A Study of the Paper Industry

A Study of the Paper Industry Alka Subramanian Government policy which has discriminated against large paper mills and favoured the small nulls sector has been largely responsible for the entry of numerous small mills into the paper industry since the mid-seventies even as there has been considerable excess capacity in the industry. The author's analysis of a sample of 28 paper mills also leads to the conclusion that small mills have higher costs of production relative to the large mills because they cannot avail of the pronounced economies of scale that characterise the paper industry The current installed capacity of the paper and paper board industry is sufficient to meet present and near- term future demand and the industry should, therefore, concentrate on utilising existing capacity rather than on fresh capacity creation. Government should aid the modernisation of large mills and small nulls should concentrate on the varieties of paper that are reserved for them. The author also suggests changes in the structure of excise duties so as to maximise capacity utilisation in the industry.