Gujarat’s Paper Mills in Crisis: 25 Shut Down, 32,000 Workers Jobless

Overproduction and Decreased Export Hit Paper Mills, Leaving Thousands Jobless


Surat : In a distressing development for the paper mill industry in Gujarat, around 25 paper mills, with 21 located in Morbi and 4 in Vapi, have been forced to shut down in the past two years. The closures have resulted in the loss of employment for over 32,000 workers, raising concerns about the future of the industry. The Gujarat Paper Mills Association has appealed to both the Gujarat state and Central governments to provide much-needed relief measures to salvage the struggling sector.

Gujarat is home to approximately 120 paper mills, primarily concentrated in Vapi, Morbi, Surat, and Ahmedabad. These mills collectively produce around 4 lakh tonnes of paper each month, with Vapi alone contributing approximately 35% to the state’s total paper production.

According to Sunil Agarwal, President of the Gujarat Paper Mills Association, the industry has been grappling with overproduction issues over the past two years. Previously, around 1.5 lakh tonnes of paper were exported to Gulf countries and China, benefiting from the Merchandise Exports from India Scheme (MEIS) and a duty drawback of 4.5%. However, the Central Government subsequently reduced the duty drawback to 2.25%, leading to a drastic decline in paper exports to a mere 30,000 tonnes per annum.

Agarwal warns that an additional 25 paper mills are teetering on the brink of closure, which could result in a further loss of over 30,000 jobs. To address this crisis, the Gujarat Paper Mills Association has approached the state government, urging them to eliminate the 15% electricity duty imposed on paper mill owners. Additionally, they have appealed to the Central Government to raise the duty drawback back to 4.5% to support paper exports.

Furthermore, the Association has highlighted the disparity between existing and new paper mills, with the latter enjoying a 10-year Goods and Services Tax (GST) rebate. This advantage has made it difficult for the older mills to remain competitive in the market.

“The paper mills in Gujarat are on the deathbed,” expressed Sunil Agarwal, President of the Gujarat Paper Mills Association. “With approximately 1.5 lakh workers employed across 120 mills in the state, we have been facing overproduction and financial losses for the past two years. If this situation persists, we will be forced to shut down our mills permanently.”

The closure of paper mills has had a significant impact on the local economy, as thousands of workers and their families are now facing unemployment and financial uncertainty. The Gujarat Paper Mills Association’s plea for government intervention stems from the urgent need to prevent further closures and safeguard the livelihoods of those dependent on the industry.

The paper mill owners argue that the 15% electricity duty imposed on them puts an additional burden on their already struggling businesses. They believe that abolishing this duty would provide much-needed relief and allow them to allocate resources towards improving production and competitiveness.

Furthermore, increasing the duty drawback from the current 2.25% to the previous rate of 4.5% would encourage paper mill exports and help the industry regain its footing in the global market. By reinstating the previous benefits, the paper mill owners hope to stimulate demand and restore the industry’s profitability.

The Gujarat Paper Mills Association has emphasized the urgency of the situation, with Sunil Agarwal highlighting that continued overproduction and financial losses have pushed the industry to a breaking point. Without immediate government support and intervention, the closure of more paper mills seems inevitable, which would exacerbate the unemployment crisis in the region.

“The association urges the Gujarat state government and the Central Government to carefully consider their demands and take decisive action to save the paper mill industry in Gujarat. Protecting existing jobs, reviving the market, and ensuring the competitiveness of older mills are critical steps toward revitalizing this vital sector” said Agarwal.