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Newsprint price spike may burden print industry with over Rs 4,600 cr additional cost

30-July-2018
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Newsprint price spike may burden print industry with over Rs 4,600 cr additional cost

Despite the death of print media in most parts of the world, newspapers in India have not only managed to survive but have also shown growth. However, with the recent spike in newsprint price, some feel the doomsday might not be far. The rise in newsprint price would mean an annual burden of more than Rs 4600 crore for the print industry in India.

Why the Situation?

With an increase in raw material cost, downfall of Indian rupee against US dollar and China imposing a ban on import of paper waste, the newsprint price has sky-rocketed. The situation looks worrisome for the industry because newsprint, which is the major raw material and represents nearly 30-40% of the overall spend, has seen a spike of over 50% in its price.

Last year around the same time, the rate of US dollar was Rs 64.16 while today it is Rs 68.62. In August 2017, the price of newsprint was around Rs 36,000 per tonne, while now the price has reached around Rs 55,000 per tonne. Annual demand in India for newsprint is around 2.6 million tonnes. The difference in these prices show an over 50% hike in the price of newsprint. At this rate, the industry is estimated to lose more than Rs 4600 crore annually (some waste newsprint is returned by the publishers).

Pauly, General Manager, Metro Vaartha, a Malayalam language daily newspaper published from Kochi, told exchange4media, “Previously, the price was around Rs 36-37 per kg, now it has increased to Rs 55-56 per kg. Imported newsprint price in August 2017 was Rs 35,000/tonne, which has increased to Rs 55,000-56,000k/tonne.”

Speaking about the situation the industry is stuck in, Jwalant Swaroop, former CEO of Sakal and Lokmat publications, said, “With dollar becoming expensive, those using more foreign newsprint will be impacted adversely. Largely, English dailies.”

The impact of newsprint price was also quite visible on HT Media’s Q1FY19 statement that showed a net profit drop of around 86%.  “Our operating performance was also impacted by higher newsprint prices,” Shobhana Bhartia, Chairperson and Editorial Director, HT Media Ltd and Hindustan Media Ventures Ltd, had said in her statement.

In addition to the spike in newsprint price, lack of clarity on the actual user of newsprint in India has also created an issue.

According to a member of the Indian Newsprint Manufacturers’ Association, earlier, only registered mills and publishers could avail concessional taxes. However, after the implementation of GST, third parties are also buying newsprint (which was earlier sold to them as other grade paper). This ambiguity has allowed them to manipulate the GST rates. (There is 5% GST on newsprint while 12% GST on other grade paper). The purchasing of newsprint by third parties causes shortage of supply for publishers.

Impact on Industry

“As far as newsprint prices are concerned, it is locked for almost everybody this year. Because the newsprint orders go about 6-9 months in advance. The higher cost of implication is already baked into the P&L financials of everybody. And hence, some may even go into losses on account of newsprint costs alone. That is the reality of the industry,” Pradeep Dwivedi, Chief Executive Officer, Sakal Media Group, told exchange4media.

With input cost increasing by over 50% and no definite means to compensate it, the impact on the industry has been estimated to be around Rs 4600 crore a year.

A top management official from another leading paper told exchange4media, “The newsprint that we use to buy for $500 per tonne in 2017 is now costing around $750-$780. And we can’t increase the cover price. Also, there is no increase in ad rates. There is nothing that can be seen as a sign of relief. Our newspaper will lose around Rs 250 crore in a year. So newspapers larger than ours, such as the Times of India and Hindustan Times, that use mostly imported newsprint will suffer higher losses.”

Pauly added, “We are spending almost Rs 40 lakh extra every month, but we will never reduce the circulation as it will affect our image.”

Speaking on the condition of anonymity, a senior industry person from a large regional publication in southern India, told exchange4media, “The spike in cost is around 50-60% per cent if you take into consideration the devaluation of the Indian rupee. It is definitely a very difficult time, especially because advertising is not growing.”
He added that because of the price hike, the publication would be spending around Rs 80-90 crore more annually.

“Cutting cost is one of the things we are looking at. In fact, we increased the cover price increased by Re1. It will bring some relief, but definitely not complete relief. The cover price rise can only compensate around 35-40% of the inflation,” the industry veteran further revealed to us.

Interestingly, speaking about the situation, Paresh Nath, Publisher, Delhi Press, had very clear views. While Nath accepted that the situation is severe, he also pointed out that if publishers correct the cover price and stop giving the content for free, it wouldn’t be such a big crisis.

“Irrespective of the recent spike in newsprint price, the cover price should be kept decent. We should not give content this cheap to the reader. It is almost free,” he said.

On being asked if DAVP could do anything about the ad rates to calm the situation down, he said, “One page of government ad is enough to purchase 5 pages of newsprint. In any newspaper, there are only 5-7 ads from DAVP. There are around 70-80 ads from other departments. These are not ads from DAVP, but these ads are given at DAVP rates. So what DAVP spends is less than 5% of the total ad spent. Everybody has been misled about the ads by the industry deliberately.”


What Can Be Done?

Dwivedi, CEO Sakal Media Group, says, “Adex volumes are not growing as much as we would like. And cost pressures, especially on newsprint, have an adverse bearing for almost everyone in the industry.”

Dwivedi further brought the attention towards limited print ad revenue, which he said, “has grown only by 5%-7%.”

For the first quarter of this year, while the data of listed companies is in public domain, some unlisted companies are either flat or have around low single digit growth on top-line, he added.

“The coming festive season of three months is going to be the most critical time. Everyone is hoping that the period will bail them out with stronger adex growth. If the revenue grows, the ability to absorb the cost gets better. That’s when we are expecting a lot more money to come in. In any case, print companies are continuing to focus on digital, activations and event solutions to shore up the revenue,” he added.

“Our partners in the advertising industry should empathise with the newspaper industry. There is a great amount of reluctance from the industry to take up rates. The rates have remained unchanged for the last 4-5 years. It is the only industry probably which sees almost 60% hike in the input cost and still advertisers want lower rates,” an industry veteran said.

Jwalant Swaroop, CEO of Happinessinfinite Solutions, feels that the usual ways to bear the pressure of newsprint prices are cutting down on the number of pages, and opting for compact size rather than broadsheet needs. This needs to be supported by raising the cover price substantially and a serious effort on ad rates. He insisted that these solutions can be opted for only if the industry comes together united.

“No single publisher can individually make that decision in such a competitive environment,” he said.
(Parts pertaining to unconfirmed numbers on loses to organisations have been edited)

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