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Report
In
AMIFUT ENTERPRISES
On
A Study on Profit Maximization
Submitted in partial fulfillment of the requirements of
Post Graduate Diploma in Business Administration
Submitted by
Arun Jayaraman
……………………………………………………………………………….
Enrollment No:
BATCH -2007
Symbiosis Centre for Distance Learning (SCDL)
1
Declaration
I hereby declare that the Project work entitled, A Study on Profit Maximization
submitted by me for the partial fulfillment of the Post Graduate Program (PGDBA) to
Symbiosis Centre for Distance Learning (SCDL), is my own original work and has not been
submitted earlier either to SCDL or to any other Institution for the fulfillment of the requirement
for any course of study. I also declare that no chapter of this manuscript in whole or in part is
lifted and incorporated in this report from any earlier / other work done by me or others.
Arun Jayaraman
Place :
Date :
2
Acknowledgement
I express my heartfelt gratitude to Mr. Ellayaraja (Manager-Amifut Enterprises), for giving me
the opportunity to undertake a project on A Study on Profit Maximization under his guidance
and observation.
I also express my deep sense of gratitude to my mentor Mr. Venkatesh for her unflinching
support and making herself available for discussion and providing me as required facilities
whatever, whenever needed throughout duration of my dissertation.
Last but not least I would like to sincerely acknowledge the help received from various persons
and sources in collecting data’s and information in completing this satisfactory Project.
3
Study on Profit Maximization
Chapter - 1 Page
INTRODUCTION 8
1.1 Organization Profile 16
1.2 Concepts 17
1.3 Need for this study 18
1.4 Problem 19
1.5 Objectives 19
1.6 Procedure methodology 20
Chapter – 2
2.1 Analysis of the situation 23
2.2 Existing of the system 41
2.3 Need for the change in system 47
2.4 Proposed system 48
Chapter – 3
3.1 Present conditions with special reference to the organization 54
Chapter – 4
Summary, Conclusion and Suggestion
4.1 summary of the system 101
4.2 scope of the system 103
4.3 Suggestion 103
4
LIST OF FIGURES
FIGURE PAGE NO
2.1.1 Level of Variable Cost 27
2.1.2 Level of Fixed Cost 27
2.1.3 Profit and Loss under Absorption Costing 30
2.1.4 Contribution of NP and PWP 37
2.1.5 Profit and Loss under Marginal Costing 37
2.1.6 Comparison Of BEP and Actual Sales 41
LIST OF TABLES
5
TABLES PAGENO
2.1.1 Variable Cost, Fixed Cost and Sales From 1993-94 to 1997-98 23
2.1.2 Absorption Costing From 1993-94 to 1997-98 24
2.1.3 Analysis of Profit & Loss from 1993-94 to 1997-98 25
2.1.4 Variable Cost, Fixed Cost and Sales From 1998-99 to 2002-03 26
2.1.5 Absorption Costing for the Year 1998-99 28
2.1.6 Analysis of Profit & Loss from 1998-99 to 2002-03 29
2.1.7 Analysis of Contribution and Profit & Loss from 1993-94 to 1997-98 31
2.1.8 Marginal costing for the Year 1998-99 32
2.1.9 Analysis of Contribution and Profit & Loss from 1998-99 to 2002-03 33
2.1.10 Analysis of Break Even Sales from 1993-94 to 2002-2003 36
(Rs.in lakhs)
2.1.11 Excess of Actual Cost/MT over Target Cost 41
3.1.1 Targets and Achievements of Indian Paper Industry
Under Various Five-Year Plans 103
6
CHAPTER 1
INTRODUCTION
7
INTRODUCTION
Paper is one of the significant discoveries that turned the history of the world around.
Paper pervades all sectors of our activity from books to bullets and from morning newspaper to
nuclear technology. It helps all the human beings for the growth of education, reading, writing,
storing, knowledge, quality of life, culture and other sectors of the economy.
History of Paper Development
Origin of Paper
Etymologically the word ‘paper’ owes origin to ‘papyrus’. An aquatic plant, which grew
in abundance in the delta of Egypt; The barks and leaves of this plant were woven and pressed
into sheet to be used writing material by the ancient Egyptians. The evidence of papyrus having
been used as writing material can be found even now in some of the European libraries
preserving old manuscripts. The use of papyrus as writing material dates back even 500 B.C.
The Art of Paper Making
The art of paper making was first discovered in China, and its origin was kept a secret in
China for a long time. Then the art of paper making slowly traveled to westward and reached
Smarkand in West Asia. Then the use and manufacture of paper gradually spread along the
southern shores of the Mediterranean. Then through Spain it reached to Morocco.
First Paper Mill in the World
The establishment of first paper mill was in China took place in Baghdad. When paper
was made in that place in 793 A.D, After 40 years once paper mill was established on Hernault
in France Then the paper making entered England via Switzerland and Netherlands.
8
In 1800 a book was published which described some partial methods for manufacture of paper
from wood pulp and vegetable pulp.
Paper Industry in India
The art of paper making reached India through Arabs who initially learnt from Chinese
prisoners. Prior to this, Aryans settled in North India used “Tammra patra” (copper plates), Tada
patra, Loha patra and like as written material, because human capabilities to memorize the
accumulated wealth of information and knowledge were limited.
As the need for writing surface increased in India, attention was paid to master the techniques of
using metals such as lead, copper and bronze for the purpose of written communication.
Even in olden days, the hand-made paper industry existed throughout the country from
Kashmir to kanyakumari. It registered significant developments in India under the patronage of
Mogul empire. Paper was observed in common use almost all over India at the close of Akbar’s
reign.
The improved qualities of hand-made paper were produced in the late half of the
eighteenth century. William carry started a paper mill in 1812 at Serampore, West Bengal. He
introduced a steam engine in 1820 and he added first four-drinier type machine in 1832 to the
existing mill, which led mechanization.
The Upper India Copper paper Mills, Lucknow (1882), Punalur Paper
Mills,Kerala(1883), Titagarh Paper Mills, West Bengal(1884), Deccan Paper Mills,
Maharastra(1887), Bengal Paper Mills, West Bengal(1891), and Imperial Paper Mills
Corporation, West Bengal(1894) were pioneering units in the industry.
Indian government had given preferential treatment to the indigenous paper production in 1880
to encourage and establishment of paper mills. Over the years, paper industry had been
transformed into one of the major and key industries of the country.
9
The paper industry is accorded ‘core sector’ status since paper is categorized as an
essential commodity by the government. The progress of paper industry is inextricably linked to
the national priorities and with the changing times, its fortunes fluctuate. It is, therefore essential
to trace the manner in which the paper industry has developed to the present stage.
The pulp and paper industry is one of the key industries in India. It is highly fragmented.
Presently (as on 1.1.1990) about 401 paper mills are in existence in the country with an installed
total capacity of about 47.28lakh tones per annum.
The following table shows the targets and achievements of Indian paper industry under
various five-year plans.
Paper is thin material mainly used for writing upon, printing upon or for packaging. It is
produced by pressing together moist fibers, typically cellulose pulp derived from wood, rags or
grasses, and drying them into flexible sheets.
Paper is a versatile material with many uses. Whilst the most common is for writing and printing
upon, it is also widely used as a packaging material, in many cleaning products, in a number of
industrial and construction processes, and occasionally as a food ingredient, particularly in Asian
cultures.
History
The word paper derives from the Greek term for the ancient Egyptian writing material called
papyrus, which was formed from beaten strips of papyrus plants. The immediate predecessor to
modern paper is believed to have originated in China in approximately the 2nd century CE,
although there is some evidence for it being used before this date. Papermaking is considered to
be one of the Four Great Inventions of Ancient China, since the first papermaking process was
developed in China during the early 2nd century CE by the Han court eunuch Cai Lun. China
10
used paper as an effective and cheap alternative to silk, letting them sell more silk, leading to a
Golden Age.
The use of paper spread from China through the Islamic world, and entered production in Europe
in the early 12th century. Mechanized production of paper in the early 19th century caused
significant cultural changes worldwide, allowing for relatively cheap exchange of information in
the form of letters, newspapers and books for the first time. In 1844, both Canadian inventor
Charles Fenerty and German inventor F.G. Keller had invented the machine and process for
pulping wood for the use in paper making. This would end the nearly 2000-year use of pulped
rags and start a new era for the production of newsprint and eventually all paper out of pulped
wood.
Papermaking
Chemical pulping
The purpose of a chemical pulping process is to break down the chemical structure of lignin and
render it soluble in the cooking liquor, so that it may be washed from the cellulose fibers.
Because lignin holds the plant cells together, chemical pulping frees the fibers and makes pulp.
The pulp can also be bleached to produce white paper for printing, painting and writing.
Chemical pulps tend to cost more than mechanical pulps, largely due to the low yield, 40–50% of
the original wood.
Since the process preserves fiber length, however, chemical pulps tend to make stronger paper.
Another advantage of chemical pulping is that the majority of the heat and electricity needed to
run the process is produced by burning the lignin removed during pulping.
Papers made from chemical wood-based pulps are also known as wood free papers. The Kraft
process is the most commonly practiced strategy for pulp manufacturing and produces especially
strong, unbleached papers that can be used directly for bags and boxes but are often processed
further, e.g. to make corrugated cardboard.
11
Mechanical pulping
There are two major mechanical pulps, thermo mechanical pulp (TMP) and mechanical pulp.
The latter is known in the USA as ground wood pulp. In the TMP process, wood is chipped and
then fed into large steam-heated refiners where the chips are squeezed and fiberized between two
steel discs. In the ground wood process, debarked logs are fed into grinders where they are
pressed against rotating stones and fiberized. Mechanical pulping does not remove the lignin, so
the yield is very high, >95%, but also causes paper made from this pulp to yellow and become
brittle over time. Mechanical pulps have rather short fiber lengths and produce weak paper.
Although large amounts of electrical energy are required to produce mechanical pulp, it costs
less than chemical pulp.
Recycled paper
Paper recycling processes can use either chemical or mechanical pulp. By mixing with water and
applying mechanical action the hydrogen bonds in the paper can be broken and fibers separated
again. Most recycled paper contains a proportion of virgin fiber in the interests of quality.
There are three main classifications of recycled fiber:
Mill Broke or Internal Mill Waste — this incorporates any substandard or grade-change
paper made within the paper mill which then goes back into the manufacturing system to be re-
pulped back into paper. Such out-of-specification paper is not sold and is therefore often not
classified as genuine reclaimed recycled fiber. However, most paper mills have been recycling
their own waste fiber for many years, long before recycling become popular.
Pre-consumer Waste — this is off cuts and processing waste, such as guillotine trims and
envelope blank waste. This waste is generated outside the paper mill and could potentially go to
landfill, and is a genuine recycled fiber source. Also includes de-inked pre-consumer (recycled
material that has been printed but did not reach its intended end use, such as waste from printers
and unsold publications).
12
Post-consumer waste — this is fiber from paper which has been used for its intended end
use and would include office waste, magazine papers and newsprint. As the vast majority of this
paper has been printed (either digitally or by more conventional means such as litho or gravure),
it will either be recycled as printed paper or go through a de-inking process first.Recycled papers
can be made from 100% recycled materials or blended with virgin pulp. Recycled papers are
(generally) not as strong nor as bright as papers made from virgin pulp.
Additives
Besides the fibers, pulps may contain fillers such as chalk or china clay, which improve the
characteristics of the paper for printing or writing. Additives for sizing purposes may be mixed
into the pulp and/or applied to the paper web later in the manufacturing process. The purpose of
sizing is to establish the correct level of surface absorbency to suit the ink or paint.
Drying
After the paper web is produced, the water must be removed from it by pressing and drying.
Pressing the sheet removes the water by force. Once the water is forced from the sheet, felt (not
to be confused with the traditional felt) is used to collect the water. When making paper by hand,
a blotter sheet is used.
Drying involves using air and or heat to remove water from the paper sheet. In the earliest days
of papermaking this was done by hanging the paper sheets like laundry. In more modern times,
various forms of heated drying mechanisms are used.
On the paper machine, the most common is the steam-heated can dryer. These dryers can heat to
temperatures above 200°F (93°C) and are used in long sequences of more than 40 cans. The heat
produced by these can easily dry the paper to less than 6% moisture.
13
Finishing
The paper may then undergo sizing to alter its physical properties for use in various applications.
Paper at this point is uncoated. Coated paper has a thin layer of material such as calcium
carbonate or china clay applied to one or both sides in order to create a surface more suitable for
high-resolution halftone screens. (Uncoated papers are rarely suitable for screens above 150lpi.)
Coated or uncoated papers may have their surfaces polished by calendaring. Coated papers are
divided into matte, semi-matte or silk, and gloss. Gloss papers give the highest optical density in
the printed image.
The paper is then fed onto reels if it is to be used on web printing presses, or cut into sheets for
other printing processes or other purposes. The fibers in the paper basically run in the machine
direction. Sheets are usually cut "long-grain", i.e. with the grain parallel to the longer dimension
of the sheet.
All paper produced by paper machines as the Fourdrinier machine are wove paper, i.e. the wire
mesh that transports the web leaves a pattern that has the same density along the paper grain and
across the grain. Textured finishes, watermarks and wire patterns imitating hand-made laid paper
can be created by the use of appropriate rollers in the later stages of the machine.
Wove paper does not exhibit "laid lines", which are small regular lines left behind on paper when
it was handmade in a mould made from rows of metal wires or bamboo. Laid lines are very close
together. They run perpendicular to the "chain lines", which are further apart. Handmade paper
similarly exhibits "deckle edges", or rough and feathery borders.
Applications
To write or print on: the piece of paper becomes a document; this may be for keeping a
record (or in the case of printing from a computer or copying from another paper: an additional
record) and for communication; see also reading.
Paper can be produced with a wide variety of properties, depending on its intended use.
14
To represent a value: paper money, bank note, cheque, security (see Security paper),
voucher and ticket
For storing information: book, notebook, magazine, newspaper, art, zine, letter
for personal use: diary, note to remind oneself, etc.; for temporary personal use: scratch
paper
for communication to someone else:
by transportation of the paper from the place where it is written or printed to the place
where it is read: delivered by sender, transported by a third party (e.g. in the case of mail), or
taken by the receiver
by writing at the same place as where it is read:
if sender and receiver are not there at the same time, in the case of a posted notice
if sender and receiver are both present, but use paper for illustration, or if communication
by talking is not suitable:
because one is mute or the other is deaf
to avoid other people hearing it, because it is secret, or in order not to disturb them
in a noisy environment
For packaging: corrugated box, paper bag, envelope, wrapping tissue, Charta emporetica
and wallpaper
For cleaning: toilet paper, handkerchiefs, paper towels, facial tissue and cat litter
For construction: papier-mâché, origami, paper planes, quilling, Paper honeycomb, used
as a core material in composite materials, paper engineering, construction paper and clothing
Other uses: emery paper, sandpaper, blotting paper, litmus paper, universal indicator
paper, paper chromatography, electrical insulation paper (see also dielectrics and permittivity)
and filter paper
Types, thickness and weight
The thickness of paper is often measured by caliper, which is typically given in thousandths of
an inch. Paper may be between 0.07 millimeters (0.0028 in) and 0.18 millimeters (0.0071 in)
thick.
15
Paper is often characterized by weight. In the United States, the weight assigned to a paper is the
weight of a ream, 500 sheets, of varying "basic sizes", before the paper is cut into the size it is
sold to end customers. For example, a ream of 20 lb, 8½ x 11" paper weighs 5 pounds, because it
has been cut from a larger sheet into four pieces. In the United States, printing paper is generally
20 lb, 24 lb, or 32 lb at most. Cover stock is generally 68 lb, and 110 lb or more is considered
card stock.
The 8.5" x 11" size stems from the original size of a vat that was used to make paper. At the
time, paper was made from passing a fiber and water slurry through a screen at the bottom of a
box. The box was 17" deep and 44" wide. That sheet, folded in half in the long direction, then
twice in the opposite direction, made a sheet of paper that was exactly 8.5" x 11".
In Europe, and other regions using the ISO 216 paper sizing system, the weight is expressed in
grammas per square meter (g/m2 or usually just g) of the paper. Printing paper is generally
between 60 g and 120 g. anything heavier than 160 g is considered card. The weight of a ream
therefore depends on the dimensions of the paper and its thickness.
The future of paper
Some manufacturers have started using a new, significantly more environmentally friendly
alternative to expanded plastic packaging made out of paper, known commercially as paper
foam. The packaging has very similar mechanical properties to some expanded plastic
packaging, but is biodegradable and can also be recycled with ordinary paper.
With increasing environmental concerns about synthetic coatings (such as PFOA) and the higher
prices of hydrocarbon based petrochemicals, there is a focus on zein (corn protein) as a coating
for paper in high grease applications such as popcorn bags.
Also, synthetics such as Tyvek and Teslin have been introduced as printing media as a more
durable material than paper.
16
1.1 ORGANISATION PROFILE
M/S. Tamilnadu Newsprint and Paper Ltd. (TNPL) were promoted by the government of
Tamilnadu (GOTN) for manufacture of Newsprint and Printing and Writing Paper. It was
incorporated in 16th April 1979. The initial capital outlay was Rs.259 crores.TNPL is located at
Kagithapuram in Karur district of Tamilnadu about 400 kilometers southwest of Chennai.
The location was advantages in terms of nearness to sugar mils supplying bagasse, proximity to
river cauvery for souring water, access to broad gauge railway track for transportation of coal,
and a well developed road infrastructure.
The initial commercial operations of TNPL started in October 1985. It is the first
commercially successful bagasse based newsprint project in Asia and second in the world. The
designed capacity was 90,000 tones per annum, comprising 50,000 tones per annum of newsprint
and 40,000 tones of printing and writing paper.
But in 1995 the company had expanded its capacity and doubled their production level to
1,80,000 tones per annum comprising 1,00,000 tones per annum of newsprint and 80,000 tones
per annum of printing and writing paper.
For this expansion process the World Bank reduced direct loan assistance of US $ 75 millions
under renewable resources project system. The expansion’s capital outlay was Rs.585crores. The
commercial operation of expanded capacity started on 31/1/1996.
The company has augmented its production capacity from 1, 80,000 Mts to 2,30,000
Mts during 2002-2003 with the cost of 150crores.
1.2 CONCEPT
Papermaking is the process of making paper, a substance which is used ubiquitously today for
writing and packaging.
17
In papermaking a dilute suspension of fibers in water is drained through a screen, so that a mat of
randomly interwoven fibers is laid down. Water is removed from this mat of fibers by pressing
and drying to make paper. Most paper is made from wood pulp, but other fiber sources such as
cotton and textiles may be used.
Papermaking, regardless of the scale on which it is done, involves making a dilute suspension of
fibers in water and allowing this suspension to drain through a screen so that a mat of randomly
interwoven fibers is laid down. Water is removed from this mat of fibers by pressing and drying
to make paper.
First the fibers are suspended in water to form slurry in a large vat. The mold is a wire screen in a
wooden frame (somewhat similar to an old window screen), which is used to scoop some of the
slurry out of the vat. The slurry in the screen mold is sloshed around the mold until it forms a
uniform thin coating. The fibers are allowed to settle and the water to drain.
When the fibers have stabilized in place but are still damp, they are turned out onto a felt sheet
which was generally made of an animal product such as wool or rabbit fur, and the screen mold
immediately reused. Layers of paper and felt build up in a pile (called a 'post') then a weight is
placed on top to press out excess water and keep the paper fibers flat and tight. The sheets are
then removed from the post and hung or laid out to dry. A step-by-step procedure for making
paper with readily available materials can be found online.
When the paper pages are dry, they are frequently run between rollers (calendered) to produce a
harder writing surface. Papers may be sized with gelatin or similar to bind the fibers into the
sheet. Papers can be made with different surfaces depending on their intended purpose. Paper
intended for printing or writing with ink is fairly hard, while paper to be used for water color, for
instance, is heavily sized, and can be fairly soft.
The wooden frame is called a "deckle". The deckle leaves the edges of the paper slightly
irregular and wavy, called "deckle edges", one of the indications that the paper was made by
18
hand. Deckle-edged paper is occasionally mechanically imitated today to create the impression
of old-fashioned luxury. The impressions in paper caused by the wires in the screen that run
sideways are called "laid lines" and the impressions made, usually from top to bottom, by the
wires holding the sideways wires together are called "chain lines". Watermarks are created by
weaving a design into the wires in the mold. This is essentially true of Oriental molds made of
other substances, such as bamboo. Hand-made paper generally folds and tears more evenly along
the laid lines.
Hand-made paper is also prepared in laboratories to study papermaking and to check in paper
mills the quality of the production process. The "hand sheets" made according to TAPPI
Standard T 205 are circular sheets 15.9 cm (6.25 in) in diameter and are tested on paper
characteristics as paper brightness, strength, degree of sizing.
1.3 NEED FOR THIS STUDY
The main purpose of this study is to maximize the profit at any critical situation. Since now-a-
days more competitions are prevailing in all industries including paper industry also. In order to
meet these situations, the management has to make such decisions for maximizing the profit of
the organization. For the above reason, this study has been carried out.
1.4 PROBLEM
The study is mainly based upon the sources of secondary.
Some of the applications of costing techniques have done only based on assumption values.
The validity of analysis and suggestions depends on the financial statements report alone,
provided by TNPL.
19
This study forces on the financial analysis of the paper mill. But the production practices,
marketing and personnel management problems could not be taken for the study.
1.5 Objectives
This study is undertaken with the following objectives.
To determine the cost of each product like newsprint, printing and writing paper of TNPL
based on different costing techniques.
To determine the cost of product and the selling price of the products of TNPL.
To fix the target selling price in order to reduce the cost of production for maximizing the
profit of TNPL.
To find out the break even point in order to determine the required sales volume as well
as cost of production of TNPL.
To help the management for short-run decision making in certain critical situation.
To establish what will happen the financial results if a specified level of activity or volume
fluctuations.
1.6 PROCEDURE METHODOLOGY
“Research design is purely and simply the framework for the study that guide the
collection and analysis of data.”
There are three types of research design
Exploratory Research Design
20
Descriptive Research Design
Experimental Research Design
Exploratory Research Design
Exploratory research design has selected for this study. The exploratory research design
is termed as formulate research design. The main purpose of such studies is that of developing
the working hypotheses from an operational point of view. The major emphasis in such studies is
on the discovery of ideas and insights. As such the research design appropriate for such studies
must be flexible enough to provide opportunity for considering different aspects of problem
under study.
Field of the Study
The study has been carried out at M/S.TamilNadu Newsprint and Papers Ltd., Pugalur,
Karur(Dt.).
Data Collection
In this study secondary data have been used for analysis purpose. The secondary data
have collected from Annual Reports of TNPL for 10 years from 1993-94 to 2002-03 and internal
records.
Tools Employed
In this study, there are four costing techniques have employed. There are
1. Absorption costing
2. Marginal costing
3. Cost-Volume-Profit Analysis
21
CHAPTER 2
ANALYSIS
22
2.1 ANALYSIS OF THE EXISTING SYSTEM
Absorption costing
Absorption costing is a principle where by fixed as well as variable costs are allotted to
cost units and total overheads are absorbed according to activity level. In this study the
calculations have made under absorption costing technique for 10 years from 1993-94 to 2002-
03. The analysis have made based on following given data.
TABLE 2.1.1
Variable Cost, Fixed Cost and Sales From 1993-94 to 1997-98
Year
Variable Cost Fixed Cost Sales
NP PWP NP PWP NP PWP
1993-94
1994-95
1995-96
1996-97
1997-98
3195
2780
2210
5083
7283
5702
6134
9013
16061
16427
2357
2154
2065
3240
5677
4208
4840
8423
10236
12805
7113
6299
5665
9248
10745
12005
13583
22277
28157
29348
23
TABLE 2.1.2
Absorption Costing From 1993-94 to 1997-98
Particulars
1993-94 1994-95 1995-96 1996-97 1997-98
NP PWP NP PWP NP PWP NP PWP NP PWP
Variable
cost
Add: Fixed
cost
Total Cost
Profit or
Loss
Sales
3195
2357
5702
4208
2730
2154
6134
4840
2210
2065
9013
8423
5083
3240
16061
10236
7283
5677
16427
12805
5552
1561
9910
2095
4884
1415
10974
2609
4275
1390
17436
4841
8323
925
26297
1840
12960
(2215)
29232
116
7113 12005 6299 13583 5665 22277 9248 28157 10745 28348
24
TABLE 2.1.3
Anal ysis of Profit &
Loss from 1993- 94 to 1997-98
Interpretation
As per the above table the profit of the NP was lower than the profit earned from PWP.
The profit of NP has been decreased gradually. In 1997-98, NP sales incurred loss. Due to
sluggish market condition, cheap imports, demand-supply imbalances and stiff competition from
domestic companies, the sales realization of both NP & PWP have registered a down trend.
Lower sales realization and higher input costs compared to the previous year have put pressure
on the profit margin of the company.
Year
Profit & Loss
NP PWP
1993-94
1994-95
1995-96
1996-97
1997-98
1561
1415
1390
925
(2215)
2095
2609
4841
1860
116
25
Up to 1996 the profit of PWP had been increased. But after then it has been reduced.
Due to expansion of capacity utilization, it incurred higher costs.
TABLE 2.1.4
Variable Cost, Fixed Cost and Sales From 1998-99 to 2002-03
(Rs.in lakhs)
Year
Variable Cost Fixed Cost Sales
NP PWP NP PWP NP PWP
1998-99
1999-00
2000-01
2001-02
2002-03
8352.90
4999.82
8883.09
4742.08
2566.12
14457.10
18754.42
18436.05
20983.90
18452.43
7251.60
4109.09
6338.9
8592.82
2412
12246.43
15413.27
13155.83
15898.39
17344.17
14923.73
8102.86
16847.71
8980.58
4255.77
27218.74
36592.61
36691.46
41682.66
41804.54
Additional Data
In the year 1998-99 the opening stock of PWP is 1135 tones.
Total cost of PWP
Therefore, the cost of opening stock =
* 1135
Production volume
Of PWP
= 26903.53
* 1135
26
11125
= Rs.274.46
FIGURE 2.1.1
Level of variable cost
0
5000
10000
15000
20000
25000
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
year
va
ria
ble
co
st
NP
PWP
FIGURE 2.1.2
Level of Fixed Cost
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
year
Fix
ed c
ost
NP
PWP
27
TABLE 2.1.5
Absorption Costing for the Year 1998-99
(Rs.in lakhs)
Table
2.5
Particulars NP PWP
Variable cost
Add: Fixed cost
Total cost
Add: cost of opening
stock
Total cost
Profit or Loss
Sales
8352.90
7251.60
14457.10
12446.43
15604.50
Nil
26905.53
274.46
15604.50
(680.77)
27177.99
40.75
14923.73 27218.74
28
TABLE 2.1.6
Analysis of Profit & Loss
from 1998-99 to 2002-03
Interpretation
The above table shows the profit of NP for 5 years is very low. NP incurred loss for 3
years. Based on market trends, the company reduced the production of NP to the level of demand
for it & simultaneously increased the production of PWP. So TNPL has been reduced its NP
production gradually.
Year
Profit & Loss
(Rs.in lakhs)
NP PWP
1998-99
1999-00
2000-01
2001-02
2002-03
(650.77)
(1006.05)
1625.72
645.68
(722.35)
40.75
2424.92
5099.57
4800.37
6007.94
29
The profit of PWP has been increased from 1998. The table shows better earnings of
PWP. Due to high demand of PWP, the earnings have been increased.
FIGURE 2.1.3
Profit and Loss under Absorption costing
-3000
-2000
-1000
0
1000
2000
3000
4000
5000
6000
7000
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99 1999-00 2000-01 2001-02 2002-03
Year
Pro
fit
and
lo
ss
NP
PWP
Marginal Costing
Marginal costing is a principle whereby variable costs are charged to cost units and the
fixed costs attributable to the relevant period is written off in full against the contribution for that
period.
Contribution
30
The contribution is the difference between sales and the marginal of sales. It is a pool of
amount from which total fixed costs will be deducted to arrive at the profit or loss.
TABLE 2.1.7
Analysis of Contribution and Profit & Loss from 1993-94 to 1997-98
(Rs.in lakhs)
Year
Contribution
Profit
NP PWP
1993-94
1994-95
1995-96
1996-97
1997-98
3918
3569
3455
4165
4982
6303
7449
13264
12096
9392
3658
4024
6231
2785
161
31
Interpretation
To compare the Newsprint contribution with Printing and Writing Paper, the PWP
contribution was high. The results had come due to high production and sales of PWP. Therefore
PWP product was more profitable product during those years. But the profits for the years 1996-
97 & 1997-98 were lower than previous years due to installation of high production capacity in
the year 1995. Because after the installation, the starting production was low and cost was high.
TABLE 2.1.8
Marginal costing for the Year 1998-99
(Rs.in lakhs)
Particulars NP PWP Total
Sales
Less: Variable cost
Less: cost of
opening stock
Contribution
Less: Fixed cost
Profit or Loss
14923.73
8352.90
27218.74
14457.10
42142.47
22810
6570.83
Nil
12761.64
147.49
19332.47
147.49
6570.83
12614.15
19184.98
19637.63
(425.65)
32
TABLE 2.1.9
Analysis of Contribution and Profit & Loss from 1998-99 to 2002-03
(Rs.in lakhs)
Year
Contribution
Profit
NP PWP
1998-99
1999-00
2000-01
2001-02
2002-03
6570.83
3103.04
7964.62
4238.50
1689.65
12614.15
17838.19
18255.41
20698.76
23352.11
(452.65)
1418.87
6725.39
5446.05
5285.59
Interpretation
33
The above table show the contribution of PWP has been increased every year where as
the contribution of NP has been fluctuated. In 2002-03 the contribution of NP was low due to
reduction in production. In 1998-99 loss had occurred due to less contribution of NP and also the
fixed cost of NP during that year was higher than the contribution. The profit for the year 2001-
02 was lower than the profit for the previous year. Because of decrease in sales of NP during that
year and the production was also production.
FIGURE 2.1.4
Contribution of NP and PWP
0
5000
10000
15000
20000
25000
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
Year
Co
ntr
ibu
tio
n
NP
PWP
FIGURE 2.1.5
34
Profit and Loss under Marginal Costing
-1000
0
1000
2000
3000
4000
5000
6000
7000
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
Year
Pro
fit
and
Lo
ss
Profit
Decisions under Marginal Costing for TNPL Product
In this study the data have analyzed based on two applications of marginal costing
technique. The data for the year 2002-03 have taken for decision analysis purpose.
1) Pricing Decision
2) Product Decision
I. Pricing Decision
As per the absorption costing technique in the year 2002-03, the production of NP has
made loss to the company and the contribution in marginal costing is also low. The reason for
that is the sales revenue of NP is low. The only reason for the loss incurred on account of this
product is due to the international prices. The domestic newsprint prices came under heavy
35
pressure due to cheaper import prices. So the main problem of management is to make profitable
production in NP or to take any alternative decision for maximizing profit.
Like this critical situation marginal costing helps to make suitable pricing decision in
order to maximize profit.
Assume that the company has received special order from abroad for 1000 tones at
Rs.27, 700 per tone of NP. Now the management has to conclude that whether this order is
profitable or not.
TABLE 2.1.10
Particulars NP
Sales
Less: Variable Cost
(1000 * 12520)
Contribution
Less: Fixed cost
Profit
277
125.20
151.80
117.68
34.12
36
The special order will make profit to the NP product. Therefore the management can
accept this order with the price of Rs.27700. Like that the management can decide the selling
price for given order with the help of marginal costing technique. And also the management can
decide whether the given order is profitable or not and whether to accept the order or reject. Here
the NP production has been making loss continuously. So the management should take steps to
make this type of decisions before accepting order for profitable sales of NP and also to avoid
losses.
II. Product Decision
Compare to last five years absorption and marginal costing from 1998 to 2003, the
product of NP has made loss in 3 years. Its contribution is very low.
Assume that due to loss of NP, the management decided to drop the production of NP for
maximizing the profit.
Should the management carry out the proposal?
Decision Analysis for 2002 – 2003
The production tones of NP = 20496 tones
The production of PWP = 147382 tones
As per the marginal costing for the year 2002 – 2003
The contribution of NP = Rs.1689.65lakhs
The contribution/Mt = Rs.8243
The contribution of PWP = Rs.23352lakhs
The contribution /Mt = Rs.15845
37
The excess of PWP
Contribution over NP = 15845 – 8243
= Rs.7602
If the management will produce 20496 tones of PWP instead of NP, the profit will be
= Rs.7602 x 20496
More profit earned by management = Rs.1558.10lakhs.
The company earns more Rs.1558.10lakhs as profit if the company drops the NP
production. Therefore the management can drop the product of NP for maximization of profit.
With the help of marginal costing technique the management can do profitable analysis.
In this study the above two decisions under marginal costing which will give valuable
ideas to the management. Since NP production only arises either loss or provides only minimum
contribution every year.
Cost-Volume-Profit Analysis (CVP)
Cost-Volume-Profit Analysis studies the relationship between expenses (costs), revenue
(sales) and net income (net profit). The CVP analysis will be done with the help of Break-Even
Analysis.
Break-Even Analysis
Break-Even Analysis refers to ascertainment of level of operations where total revenue
equals to total costs.
In Break-Even Analysis, the Break Even Point (BEP) can be calculated based on
following approach.
38
Fixed Cost
BEP in units =
(4.1)
Selling price - Variable cost
Per unit per unit
BEP amount = BEP (units) * Selling price per unit
CVP Analysis helps to determine the following results
(i) Profit-Volume Ratio (P/V Ratio)
P/V Ratio reveal the rate of contribution per product as a percentage of turnover. It
indicates the relationship of contribution to turnover.
Contribution
P/V Ratio = * 100 (4.2)
Sales
(ii) Margin of Safety
The margin of safety refers to sales in excess of the break even volume. It represents the
difference between sales at a given activity level and sales at BEP. It is important that there
should be a reasonable margin of safety to run the operations of the company in profitable
position.
39
Actual Sales - BE Sales
Margin of Safety = * 100 (4.3)
Actual Sales
TABLE 2.1.11
Analysis of Break Even Sales from 1993-94 to 2002-2003
(Rs.in lakhs)
Year BEP Sales Actual Sales Margin of
Safety
( P/V Ratio)
1993-94 11916 19805 39.83% 55%
1994-95 12343 20447 39.63% 57%
1995-96 17197 28705 40% 61%
1996-97 32722 39671 17.5% 41%
1997-98 34411 40093 14.17% 41%
1998-99 43062 42142 Nil 45.56%
40
1999-00 42694 44695 4.47% 47%
2000-01 39793 53539 26% 50%
2001-02 39748 50466 21% 49%
2002-03 36332 46060 21% 54%
Interpretation
The above table shows in 1998-99 there was no margin of safety. Because BEP sales
was greater than actual sales;The highest P/V ratio from 1993 to 1997-98 was 61% which was
attained in 1995-96. Since actual sales was higher than BEP sales. Similarly the highest P/V ratio
of after five years i.e., from 1998-99 to 2002-03 was 50% which had attained in 2000-01.
FIGURE 2.1.6
Comparision of BEP and Actual Sales
0
10000
20000
30000
40000
50000
60000
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
Year
Sal
es BEP Sales
Actual Sales
Break Even Chart
41
Break Even Analysis is made through graphical charts. Break Even chart indicates
approximate profit or loss at different levels of sales volume within a limited change. In this
study three charts have drawn during the years 1995-96, 1998-99 and 2002-03. The purpose of
taking these three years to show the differences in Break Even Chart, Since in 1995-95 actual
sales higher than BEP sales, in 1998-99 actual sales lower than BEP sales; The chart for the year
2002-03 is to analyze the current position of TNPL.
2.2 EXISTING SYSTEM
This study has taken some applications of Break Even Analysis for profitable analysis
for giving ideas to TNPL for maximizing profit.
In this study the applications of Break Even Analysis have taken and these applications
have worked out under various assumptions. This will help management to take valuable
decisions in critical situations for maximizing profit.
1. Sales volume required to produce desired operating profit
As per the budget details, the desired operating profit of TNPL is Rs.5340lakhs. If the
company decides to earn desired profit, it should achieve required sales volume. One of the
application of Break Even Analysis helps to determine the required sales volume. In this study
the required sales volume have determined for achieving desired profit of Rs.5340lakhs;
(4.4)
42
Fixed Expenses + Desired Operating Profit
The required sales volume =
P/V Ratio
Fixed Expense for
the Year 2002-03 = 19756.17
P/V Ratio = 54%
19756.17 + 5340
Therefore the required sales volume =
0.54
= Rs.46474.39lakhs
The company has to make required sales of Rs.46474.39lakhs in order to achieve desired
profit.
(ii) Effect on Operating Profit of a Given Increase in Sales Volume
Operating profit at a given
level of sales volume = (Budgeted Sales – BEP Sales) * P/V Ratio (4.5)
Suppose that TNPL forecasts 10% increase in sales next year, the projected profit will
be
10% of current year sales volume = 46060.31 * 0.10
= Rs.4606.03
Therefore budgeted sales volume = 46060.31+4606.03
= Rs.50666.31lakhs
Therefore operating profit = (50666.31 – 36332) * .54
43
= Rs.7741lakhs
(iii) Additional Sales Volume Required Offsetting a Reduction in Selling Price
Suppose that TNPL reduce its selling price at 10%, the additional sales volume
Desired Profit + Fixed Expenses
= (4.6)
Revised P/V Ratio
Desired Profit = Rs.5340
Current Year Selling Price = Rs.27442/ Mt.
Decrease of 10% = Rs.24697.80
Therefore revised P/V Ratio = New Selling Price – Variable Cost (4.7)
New Selling Price
= 24697 - 12520
24697
= 0.49%
5340 + 19756.17
Additional Sales Volume =
0.49
= Rs.51216.67lakhs
Effect of Changes in Fixed Costs
44
The effect of increase in fixed costs will be to raise the BEP of the firm.
Assume the management of TNPL decides a major expansion programmed of its
existing production capacity. It is estimated that it will result in extract fixed costs of
Rs.1000lakhs.
The Relative BEP Will Be
Current BEP = Rs.36332lakhs
BEP for proposed (Present Fixed Cost + Additional Fixed Cost)
Facilities = (4.8)
P/V Ratio
19756.17 + 1000
=
0.54
Therefore the relative BEP = Rs.38437.35lakhs
a) The Required Sales Volume to Earn the Present Profit
= (Present Fixed Cost + Additional Fixed Cost
+ Present Profit) * P/V Ratio (4.9)
= (19756.17 + 1000 + 6657.04) * 0.54
= Rs.50765.20lakhs
(v) Effect of Changes in Variable Cost
45
Assuming an increase of variable cost by 10% per tone.
The new contribution will be
Current Variable Cost = Rs.12520
Increase of 10% = Rs.13772
Contribution Margin = Selling Price – New Variable Cost
= 27442 – 13772
= Rs.13670
Revised P/V Ratio = Revised Contribution * 100 (10)
Selling Price
13772
= * 100
27442
= 50%
Revised BEP = Fixed Cost
P/V Ratio (11)
19756.17
=
0.50
= Rs.39512lakhs
46
Target Costing
Target costing is a customer-oriented technique. In which cost will be reduced based on
target selling price. Target selling price is a price which is preferred by customer in the market.
Target costing involves the following stages.
1. Determine the target price
2. Deduct a target profit margin from target price to determine the target cost.
3. Estimate the actual cost of the product.
4. If the estimated actual cost exceeds the target cost investigate ways of driving down the
actual cost to the target cost.
In this study the data have analyzed based above steps. The following table shows the
data which are required for target costing for 10 years.
TABLE 2.1.12
Excess of Actual Cost/MT over Target Cost
Years
Target
Selling
Price/Mt
Target
Profit
Margin
Target
Cost/Mt
Actual
Cost/Mt
Excess of
Actual
Cost/Mt
1993-94 18640 15% 15844 16339 495
1994-95 21495 20% 17196 17041 Nil
1995-96 24695 12% 20250 21456 276
1996-97 25220 11% 22446 22559 113
1997-98 25400 5% 24130 24728 598
1998-99 25714 7% 23914 24108 194
1999-00 25054 5% 23802 24194 392
2000-01 25960 7% 24143 24495 352
2001-02 26540 9% 24151 24539 388
2002-03 26616 10.45% 23835 24288 453
47
Interpretation
As per the above table, the management has to reduce excess of actual cost on order to
earn profit according to target selling prices & profit margin have determined based on market
situation. During the year 1994-95 there was no excess of actual cost and at the same time the
profit margin during that year was also high. During that period P/V ratio and margin of safety
was also high.
2.3 NEED FOR CHANGE IN THE SYSTEM
Though papermaking in Europe had begun around the 11th century, up until the beginning of
16th century vellum and paper were produced congruent to one another, vellum being the more
expensive and durable option. Printers or publishers would often issue the same publication on
both materials, to cater to more than one market.
Paper was first made in China, as early as 200 B.C., and reached Europe through Muslim
territories. At first made of rags, the industrial revolution changed paper-making practices,
allowing for paper to be made out of wood pulp.
Paper made from wood pulp was introduced in the early-19th century, because it was cheaper
than linen or abaca cloth-based papers. Pulp-based paper made books less expensive to the
general public. This paved the way for huge leaps in the rate of literacy in industrialized nations,
and enabled the spread of information during the Second Industrial Revolution.
48
However pulp paper contained acid that eventually destroys the paper from within. Earlier
techniques for making paper used limestone rollers, which neutralized the acid in the pulp.
Books printed between 1850 and 1950 are at risk; more recent books are often printed on acid-
free or alkaline paper. Libraries today have to consider mass deacidification of their older
collections.
Stability of the climate is critical to the long-term preservation of paper and book material. Good
air circulation is important to keep fluctuation in climate stable. The HVAC system should be up
to date and functioning efficiently. Light is detrimental to collections.
Therefore, care should be given to the collections by implementing light control. General
housekeeping issues can be addressed, including pest control. In addition to these helpful
solutions, a library must also make an effort to be prepared if a disaster occurs, one that they
cannot control.
Time and effort should be given to create a concise and effective disaster plan to counteract any
damage incurred through “acts of god” therefore a emergency management plan should be in
place.
The proper care of books takes into account the possibility of physical and chemical damage to
the cover and text. Books are best stored out of direct sunlight, in reduced lighting, at cool
temperatures, and at moderate humidity. They need the support of surrounding volumes to
maintain their shape, so it is desirable to shelve them by size.
2.4 PROPOSED SYSTEM
Absorption Costing
Absorption costing technique is also termed as Traditional or Full Cost method.
According to this method, the cost of a product is determined after considering both fixed and
variable costs. The variable costs are direct material, direct labor etc., directly charged to the
49
products while the fixed costs are apportioned on a suitable basis over different products
manufactured during a period. In absorption costing all costs are identified with the
manufactured products. Under absorption costing, the management is interested in knowing
whether or not a product can produce an adequate return on investment after absorbing its share
of the overall cost whether fixed or variable or direct or indirect.
Absorption costing is familiar, since many firms still follow the approach for pricing
decisions in terms of adding something on a total cost. In absorption costing the difference in the
magnitude of opening and closing stock affects the unit cost of production due to the impact of
related fixed overheads. The assigning of a fair share of indirect costs, along with direct costs, to
cost units is the main principle of absorption costing.
Marginal Costing
Marginal costing is a technique where only the variable costs are considered while
contributing the cost of a product. The fixed costs are met against the total fund arising out of
excess of selling price over total variable cost. This fund is known as ‘contribution’ in marginal
costing.
According to the Institute of Cost and Management Accountants, London, Marginal
costing is a technique where “only the variable costs are charged to cost units, the fixed cost
attributable being written off in full against the contribution for that period”.
Accordingly
Marginal Cost = Variable Cost = Direct material + Direct Labor +
Direct Expenses + Variable Overhead
Similarly
50
Sales – Marginal Cost = Contribution
Again
Contribution – Fixed Costs = Profit
This technique assists the management in making prediction about the future in relation
to choice of the best course of action to achieve the desired objective.
Comparison of Absorption Costing and Marginal Costing
Marginal costing and Absorption costing are not systems of costing such as process,
operating, batch or job costing. Both are costing techniques in order to make decision for profit
maximization.
When comparison of marginal and absorption costing, which makes some differences
between them. There are
Recovery of Overheads
In case of absorption costing both fixed and variable overheads are charged to
production. In marginal costing only variable overheads are charged to production while fixed
overheads are transferred in full to the costing and profit and loss account. Thus, in case o
marginal costing, there is under recovery of overheads since only variable overheads are charged
to production.
Valuation of Stocks
In absorption costing stocks of work-in-progress and total cost of production, the works
cost or cost of production includes fixed overhead also. In marginal costing only variable costs
are considered while computing the value of work-in-progress of finished goods; thus, the
closing stock in marginal costing is under valued as compared to absorption costing.
51
While comparing both techniques marginal costing is more reliable than absorption
costing. Since the fixed costs are reduced from contribution. It is true. Because fixed costs will
be always constant, through the volume of production will be increased. Therefore fixed cost
dose not based on volume of production. So that it will be deducted from contribution in
marginal costing.
Cost-Volume-Profit Analysis
The CVP analysis is a management accounting tool to show the relationship between
the selling price of a unit of a product, the variable cost of making and selling the product, the
volume of product units sold, and, in the case of multi-product companies, sales mix and the total
fixed costs for profit planning.
CVP analysis furnishes a picture of the profit at various levels of activity. This enables
management to distinguish between the effect of sales volume fluctuations and the results of
price or cost charges upon profit. A widely used technique to study CVP relationship is “Break-
Even Analysis”.
Break –Even Analysis
Break-Even Analysis is concerned with the study of revenues and costs in relation to
sales volume and particularly, the determination of that volume of sales at which the firm’s
revenues and total costs will be exactly equal. The Break-Even point may be defined as a point at
which the firm’s total revenues are exactly equal to total costs, yielding zero income. The ‘no-
profit, no-loss’ point is a break-even point at which losses cease and profits begin.
CVP analysis can be answered for the following questions
1. What would be the effect on profits if we reduce our selling price and sell more units?
52
2. What sales volume is required to meet the additional fixed charges arising from an
advertisement campaign?
3. Should we pay our sales people on the basis of salary only, or by a combination of the
two?
Target Costing
Target costing is a mechanism for determining selling price. It is one of the recent trends
in costing techniques. To maximize the profit margin every effort is taken by every organization.
To increase the profit the selling price should be increased. This is one of the options available to
any organization. But every time it is not possible to increase the selling price. But the
organization would like to earn the ear marked profit. So the alternative is to reduce the cost of
production. In this the target costing is very useful, as it is a technique where the limiting factor
is the selling price. With this limiting factor the organization has to achieve the ear marked
profit.
Instead of using cost plus pricing whereby cost is used as the starting point to determine
the selling price, target costing is the reverse of this process. With target costing the starting
point is the determination of the target selling price. Next a standard or desired profit margin is
deducted to determine that the future cost will not be higher than the target cost.
The stages involved in target costing can be summarized as follows
Step 1: Determine the target price which customers will be prepared to
pay for the product.
Step 2: Deduct a target profit margin from the target price to determine the target cost.
Step 3: Estimate the actual cost of the product.
Step 4: If estimated actual cost exceeds the target cost investigate ways of driving down the
actual cost to the target cost
53
CHAPTER 3
54
Present conditions with special reference to the organization
3.1 PAPER MANUFACTURING
A paper mill is a factory devoted to making paper from wood pulp and other ingredients using a
Fourdrinier Machine or similar apparatus. It is a common misconception that paper mills are
sources of odors. Pulp mills, not paper mills can be a source of malodorous air emissions.
In 105 AD, the first papermaking process in China, by the Han Dynasty Chinese court eunuch
Tsai Lun in the early 2nd century AD. The technology spread from East Asia to the Islamic
world after the Battle of Talas.
The earliest known paper mill is known to have operated in Baghdad, modern-day Iraq, as early
as 794. After Baghdad, the paper-making process spread to Damascus, Egypt, and Morocco, and
by the 10th century, it had replaced papyrus, wood, silk and parchment as the cheapest and most
widespread writing medium in the Islamic world.
55
In Europe, the first mention of rag-paper is in the tract of Peter, abbot of Cluny (1112 - 1150
AD), while the oldest recorded document on paper in Christian Europe is the 11th century Missal
of Silos, whose paper was probably made in Islamic Spain. One of the first known paper mills in
Europe was in Xativa near Valencia, Catalan Countries, established around 1151 AD by the
Muslim Moors.
Characteristics
Paper mills can be fully-integrated mills or non-integrated mills. Integrated mills consist of a
pulp mill and a paper mill on the same site. Such mills receive logs or wood chips and produce
paper. It is the pulping section of the mill, particularly if it uses the kraft process, which is
responsible for the odor commonly associated with these mills. Non-integrated mills purchase
wood pulp, usually as dried baled, known as market pulp and produce little, if any, odor.
The modern paper mill uses large amounts of energy, water, and wood pulp in a highly efficient
and extremely complex series of processes, using modern and sophisticated controls technology
to produce a sheet of paper that can be used in incredibly diverse ways. Modern paper machines
are very large and can be 500 feet (~150 m) in length, produce a sheet 400 inches (~10 m) wide,
and operate at speeds of over 60 mph (100 km/h). The two main suppliers of paper machines are
Metso and Voith.
Pulp mill
A pulp mill is a manufacturing facility that converts wood chips or other plant fiber source into a
thick fiber board which can be shipped to a paper mill for further processing. Pulp can be
manufactured using mechanical, semi-chemical or fully chemical methods (kraft and sulfite
processes). The finished product may be either bleached or non-bleached, depending on the
customer requirements.
56
Wood and other plant materials used to make pulp contain three main components (apart from
water): cellulose fibers (desired for papermaking), lignin (a three-dimensional polymer that binds
the cellulose fibers together) and hemicelluloses, (shorter branched carbohydrate polymers). The
aim of pulping is to break down the bulk structure of the fiber source, be it chips, stems or other
plant parts, into the constituent fibers.
Chemical pulping achieves this by degrading the lignin and hemicelluloses into small, water-
soluble molecules which can be washed away from the cellulose fibers without depolymerizing
the cellulose fibers (chemically depolymerizing the cellulose weakens the fibers). The various
mechanical pulping methods, such as ground wood (GW) and refiner mechanical (RMP) pulping
physically tear the cellulose fibers one from another. Much of the lignin remains adhering to the
fibers. Strength is impaired because the fibers may be cut.
There are a number of related hybrid pulping methods that use a combination of chemical and
thermal treatment to begin an abbreviated chemical pulping process, followed immediately by a
mechanical treatment to separate the fibers.
These hybrid methods include thermo mechanical pulping (TMP) and chemithermomechanical
pulping (CTMP). The chemical and thermal treatments reduce the amount of energy
subsequently required by the mechanical treatment, and also reduce the amount of strength loss
suffered by the fibers.
The mill
The first step in mills using trees as the fiber source is to remove the bark. Bark contains
relatively few usable fibers and is burned, along with other unusable plant material, to generate
steam to run the mill.
Much of the information about the technology in following subsections is from the book by C.J.
Biermann.. The chemistry of the various pulping processes can be found in Sjöström's book.
Chemical pulp mills
57
Chemical pulping processes such as the kraft (or sulfate) process and the sulfite process remove
much of the hemicelluloses and lignin. The kraft process does less damage to the cellulose fibers
than the sulphite process, thereby producing stronger fibers, but the sulfite process makes pulp
that is easier to bleach. The chemical pulping processes use a combination of high temperature
and alkaline (kraft) or acidic (sulphite) chemicals to break the chemical bonds of the lignin.
The material fed into the digester must be small enough to allow the pulping liquor to penetrate
the pieces completely. In the case of wood, the logs are chipped and the chips screened so that
what is fed to the digester is a uniform size. The oversize chips are rechipped or used as fuel,
sawdust is burned. The screened chips or cut plant material (bamboo, kenaf, etc) goes to the
digester where it is mixed an aqueous solution of the pulping chemicals, then heated with steam.
In the kraft process the pulping chemicals are sodium hydroxide and sodium sulfide and the
solution is known as white liquor. In the sulfite process the pulping chemical is a mixture of
metal (sodium, magnesium, potassium or calcium) or ammonium sulfite or bisulfite.
After several hours in the digester, the chips or cut plant material breaks down into a thick
porridge-like consistency and is "blown" or squeezed from the outlet of the digester through an
airlock. The sudden change in pressure results in a rapid expansion of the fibers, separating the
fibers even more. The resulting fiber suspension in water solution is called "brown stock".
Brown stock washers, using countercurrent flow, remove the spent cooking chemicals and
degraded lignin and hemicelluloses. The extracted liquid, known as black liquor in the kraft
process, and red or brown liquor in the sulfite processes, is concentrated, burned and the sodium
and sulfur compounds recycled in the recovery process. Lignosulfonates are a useful byproduct
recovered from the spent liquor in the sulfite process.
The clean pulp (stock) can be bleached in the bleach plant or left unbleached, depending on the
end use. The stock is sprayed onto the pulp machine wire, water drains off, more water is
removed by pressing the sheet of fibers, and the sheet is then dried. At this point the sheets of
pulp are several millimeters thick and have a coarse surface: it is not yet paper. The dried pulp is
cut, stacked, bailed and shipped to another facility for whatever further process is needed.
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Bleached kraft pulp and bleached sulfite pulp are used to make high quality, white printing
paper. One of the most visible uses for unbleached kraft pulp is to make brown paper shopping
bags and wrapping paper where strength is particularly important. A special grade of bleached
sulfite pulp, known as dissolving pulp, is used to make cellulose derivatives such as
methylcellulose which are used in a wide range of everyday products from laxatives to baked
goods to wallpaper paste.
Mechanical pulp mills
The earliest mills used sandstone grinding rollers to break up small wood logs called "bolts", but
the use of natural stone ended in the 1940s with the introduction of manufactured stones with
embedded silicon carbide or aluminum oxide. The pulp made by this process is known as "stone
ground wood" pulp (SGW). If the wood is ground in a pressurized, sealed grinder the pulp is
classified as "pressure ground wood" (PGW) pulp.
Most modern mills use chips rather than logs and ridged metal discs called refiner plates instead
of grindstones. If the chips are just ground up with the plates, the pulp is called "refiner
mechanical" pulp (RMP), if the chips are steamed while being refined the pulp is called "thermo
mechanical" pulp (TMP). Steam treatment significantly reduces the total energy needed to make
the pulp and decreases the damage (cutting) to fibers. Mechanical pulp mills use large amounts
of energy, mostly electricity to power motors which turn the grinders. A rough estimate of the
electrical energy needed is 10,000 mega joules (MJ) per tone of pulp (2,750 kW·h per tone)
Chemi-mechanical pulp mills
Some mills pretreat wood chips or other plant material like straw with sodium carbonate, sodium
hydroxide, sodium sulfite and other chemical prior to refining with equipment similar to a
mechanical mill. The conditions of the chemical treatment are much less vigorous (lower
temperature, shorter time, less extreme pH) than in a chemical pulping process, since the goal is
to make the fibers easier to refine, not to remove lignin as in a fully chemical process. Pulps
made using these hybrid processes are known as chemi-thermomechanical pulps (CTMP).
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Sometimes a CTMP mill is located on the same site as a kraft mill so that the effluent from the
CTMP mill can be treated in the kraft recovery process to regenerate the inorganic pulping
chemicals.
Environmental issues
The United Nations Environmental Program (UNEP) has approved only two processes for
making the chemical bleach chlorine dioxide, which produce 99.8% chlorine dioxide and contain
only 0.2% elemental chlorine. Contamination of the chlorine dioxide with elemental chlorine is
considered undesirable, and may lead to environmental pollution. While properly treated effluent
may be safe to discharge into water catchments areas, mills which discharge untreated effluent
pollute water ways with persistent organic pollutants (organ chlorides and dioxins), and may
breach the Stockholm Convention.
Pulp (paper)
Pulp is a dry fibrous material prepared by chemically or mechanically separating fibers from
wood or fiber crops.
Pulp can be either fluffy or formed into thick sheets. The latter form is used if the pulp must be
transported from the pulp mill to a paper mill. Pulp which is shipped and sold as pulp (not
processed into paper in the same facility) is referred to as market pulp. When suspended in water
the fibers disperse and become more pliable. This pulp suspension can be laid down on a screen
to form a sheet of paper, and this is the primary use for wood pulp. Wood pulp is the most
common material used to make paper. The timber resources used to make wood pulp are referred
to as pulpwood. Wood pulp comes from softwood trees such as spruce, pine, fir, larch and
hemlock, and hardwoods such as eucalyptus, aspen and birch.
Using wood to make paper is a fairly recent innovation. In the 1800s, fiber crops such as linen
fibers were the primary material source, and paper was a relatively expensive commodity. The
use of wood to make pulp for paper began with the development of mechanical pulping in
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Germany by F.G. Keller in the 1840s, and by the Canadian inventor Charles Fenerty in Nova
Scotia. Chemical processes quickly followed, first with J. Roth's use of sulfurous acid to treat
wood, followed by B. Tilghman's US patent on the use of calcium bisulfite, Ca(HSO3)2, to pulp
wood in 1867. Almost a decade later the first commercial sulfite pulp mill was built in Sweden.
It used magnesium as the counter ion and was based on work by Carl Daniel Ekman. By 1900
sulfite pulping had become the dominant means of producing wood pulp, surpassing mechanical
pulping methods. The competing chemical pulping process, the sulfate or kraft process was
developed by Carl F. Dahl in 1879 and the first kraft mill started (in Sweden) in 1890. The
invention of the recovery boiler by G.H. Tomlinson in the early 1930s allowed kraft mills to
recycle almost all of their pulping chemicals. This, along with the ability of the kraft process to
accept a wider variety of types of wood and produce stronger fibers made the kraft process the
dominant pulping process starting in the 1940s.
Global production of wood pulp in 2006 was 160 million tones (175 million tons). In the
previous year, 57 million tones (63 million tons) of market pulp (not made into paper in the same
facility) was sold, with Canada being the largest source at 21% of the total, followed by the US
at 16%. Chemical pulp made up 93% of market pulp.
Manufacture of wood pulp
Harvesting trees
Most pulp mills use good forest management practices in harvesting trees to ensure that they
have a sustainable source of raw materials. One of the major complaints about harvesting wood
for pulp mills is that it reduces the biodiversity of the harvested forest. Trees raised specifically
for pulp production account for 16 percent of world pulp production, old growth forests account
for 9 percent, and second- and third- and more generation forests account for the rest.
Reforestation is practiced in most areas, so trees are a renewable resource. The FSC (Forest
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Stewardship Council) certifies paper made from trees harvested according to guidelines meant to
ensure good forestry practices.
The number of trees consumed depends whether mechanical processes or chemical processes are
used. It has been estimated that based on a mixture of softwoods and hardwoods 12 meters
(40 ft) tall and 15-20 centimeters (6-8 in) in diameter, it would take an average of 24 trees to
produce 0.9 tone (1 ton) of printing and writing paper, using the kraft process (chemical
pulping). Mechanical pulping is about twice as efficient in using trees since almost all of the
wood is used to make fiber therefore it takes about 12 trees to make 0.9 tone (1 ton) of
mechanical pulp or newsprint.
There are roughly 2 short tons in a cord of wood.
Preparation for pulping
Only the heartwood and sapwood are useful for making pulp. Bark contains relatively few useful
fibers and is removed and used as fuel to provide steam for use in the pulp mill. Most pulping
processes require that the wood be chipped and screened to provide uniform sized chips.
Pulping
There are a number of different processes which can be used to separate the wood fibers:
Mechanical pulp
Manufactured grindstones with embedded silicon carbide or aluminum oxide can be used to
grind small wood logs called "bolts" to make "stone ground wood" pulp (SGW). If the wood is
steamed prior to grinding it is known as "pressure ground wood" pulp (PGW). Most modern
mills use chips rather than logs and ridged metal discs called refiner plates instead of
grindstones. If the chips are just ground up with the plates, the pulp is called "refiner
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mechanical" pulp (RMP) and if the chips are steamed while being refined the pulp is called
"thermo mechanical" pulp (TMP). Steam treatment significantly reduces the total energy needed
to make the pulp and decreases the damage (cutting) to fibers. Mechanical pulps are used for
products that require less strength, such as newsprint and paperboards.
Chemithermomechanical pulp
Wood chips can be pretreated with sodium carbonate, sodium hydroxide, sodium sulfite and
other chemical prior to refining with equipment similar to a mechanical mill. The conditions of
the chemical treatment are much less vigorous (lower temperature, shorter time, less extreme
pH) than in a chemical pulping process since the goal is to make the fibers easier to refine, not to
remove lignin as in a fully chemical process. Pulps made using these hybrid processes are known
as chemithermomechanical pulps (CTMP).
Chemical pulp
Chemical pulp is produced by combining wood chips and chemicals in large vessels known as
digesters where heat and the chemicals break down the lignin, which binds the cellulose fibers
together, without seriously degrading the cellulose fibers. Chemical pulp is used for materials
that need to be stronger or combined with mechanical pulps to give product different
characteristics. The kraft process is the dominant chemical pulping method, with sulfite process
being second. Historically soda pulping was the first successful chemical pulping method.
Recycled pulp
Recycled pulp is also called deinked pulp (DIP). DIP is recycled paper which has been processed
by chemicals, thus removing printing inks and other unwanted elements and freed the paper
fibers. The process is called deinking.
DIP is used as raw material in papermaking. Many newsprint, toilet paper and facial tissue
grades commonly contain 100% deinked pulp and in many other grades, such as lightweight
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coated for offset and printing and writing papers for office and home use, DIP makes up a
substantial proportion of the furnish.
Bleaching
The pulp produced up to this point in the process can be bleached to produce a white paper
product. The chemicals used to bleach pulp have been a source of environmental concern, and
recently the pulp industry has been using alternatives to chlorine, such as chlorine dioxide,
oxygen, ozone and hydrogen peroxide.
Alternatives to wood pulp
Today, some people and groups advocate using field crop fiber or agricultural residues instead of
wood fiber as being more sustainable.
However, wood is also a renewable resource, with about 90% of pulp coming from plantations or
reforested areas. Non-wood fiber sources account for about 5-10% of global pulp production, for
a variety of reasons, includes seasonal availability, problems with chemical recovery, brightness
of the pulp etc.
Nonwovens are in some applications alternatives to paper made from wood pulp, like filter paper
or tea bags.
Research is under way to develop biological pulping, similar to chemical pulping but using
certain species of fungi that are able to break down the unwanted lignin, but not the cellulose
fibers. This could have major environmental benefits in reducing the pollution associated with
chemical pulping.
Environmental concerns
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The major environmental impacts of producing wood pulp come from its impact on forest
sources and from its waste products.
Forest resources
The impact of logging to provide the raw material for wood pulp is an area of intense debate.
Modern logging practices, using forest management seeks to provide a reliable, renewable source
of raw materials for pulp mills. The practice of clear cutting is a particularly sensitive issue since
it is a very visible effect of logging.
Reforestation, the planting of tree seedlings on logged areas, has also been criticized for
decreasing biodiversity because reforested areas are monocultures. Logging of old growth forests
accounts for less than 10% of wood pulp, but is one of the most controversial issues.
Effluents from pulp mills
The process effluents are treated in a biological effluent treatment plant, which guarantees that
the effluents are not toxic in the recipient.
Mechanical pulp is not a major cause for environmental concern since most of the organic
material is retained in the pulp, and the chemicals used (hydrogen peroxide and sodium
dithionite) produce benign byproducts (water and sodium sulfate (finally), respectively).
Chemical pulp mills, especially kraft mills, are energy self-sufficient and very nearly closed
cycle with respect to inorganic chemicals.
Bleaching with chlorine produces large amounts of organochlorine compounds, including
dioxins.
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Odor problems
The kraft pulping reaction in particular releases foul-smelling compounds. The hydrogen sulfide
reagent that degrades lignin structure also causes some demethylation to produce methanethiol,
dimethyl sulfide and dimethyl disulfide. These compounds have extremely low odor thresholds
and disagreeable smells. The same compounds are released in microbial decay, or into e.g.
Camembert cheese, although the kraft process is a chemical one and does not involve any
microbial degradation.
Paper production
The Fourdrinier Machine is the basis for most modern papermaking, and it has been used in
some variation since its conception. It accomplishes all the steps needed to transform a source of
wood pulp into a final paper product.
Paper stability
Much of the early paper made from wood pulp contained significant amounts of alum, a variety
of aluminum sulfate salts that are significantly acidic. Alum was added to paper to assist in
sizing the paper, making it somewhat water resistant so that inks did not "run" or spread
uncontrollably. The early papermakers did not realize that the alum they added liberally to cure
almost every problem encountered in making their product would eventually be detrimental. The
cellulose fibers which make up paper are hydrolyzed by acid, and the presence of alum would
eventually degrade the fibers until the paper disintegrated in a process which has come to be
known as "slow fire". Documents written on rag paper were significantly more stable. The use of
non-acidic additives to make paper is becoming more prevalent and the stability of these papers
is less of an issue.
Paper made from mechanical pulp contains significant amounts of lignin, a major component in
wood. In the presence of light and oxygen lignin reacts to give yellow materials, which is why
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newsprint and other mechanical paper yellows with age. Paper made from bleached kraft or
sulfite pulps does not contain significant amounts of lignin and is therefore better suited for
books, documents and other applications where whiteness of the paper is essential.
It is important to note that just because a paper is made of wood pulp, does not necessarily mean
it is any less durable than a rag paper. The factor that determines the ageing behavior of a paper
is how it was manufactured, not the original source of the fibers. Furthermore, tests sponsored by
the Library of Congress prove that all paper is at risk of acid decay, because cellulose itself
produces formic, acetic, lactic and oxalic acids.
Mechanical pulping yields almost a tone of pulp per tone of dry wood used (which is why
mechanical pulps are sometimes referred to as "high yield" pulps), which is about twice as much
as chemical pulping. Consequently, paper made with mechanical pulps is often cheaper than that
made with bleached chemical pulps. Mass-market paperback books and newspapers use these
mechanical papers. Book publishers tend to use acid-free paper, made from fully bleached
chemical pulps for hardback and trade paperback books.
Fourdrinier machine
The Fourdrinier Machine is the basis for most modern papermaking, and it has been used in
some variation since its conception. The Fourdrinier accomplishes all the steps needed to
transform a source of wood pulp into a final paper product.
Nicholas Louis Robert of Essonnes, France, was granted a patent for a continuous paper making
machine in 1799. At the time he was working for Leger Didot with whom he quarrelled over the
ownership of the invention. Didot thought England was a better place to develop the machine,
but, these being troubled times, he could not go there himself so sent his brother in law, John
Gamble, an Englishman living in Paris. Through a chain of acquaintances, Gamble was
introduced to the brothers Sealy and Henry Fourdrinier, stationers of London, who agreed to
finance the project.
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Gamble was granted British patent 2487 on 20 October 1801. With the help particularly of Bryan
Donkin, a skilled and ingenious mechanic, an improved version of the Robert original was
installed at Frogmore, Hertfordshire, in 1803, followed by another in 1804. A third machine was
installed at the Fourdriniers' own mill at Two Waters. The Fourdriniers also bought a mill at St
Neots intending to install two machines there and the process and machines continued to
develop.
In the USA the first recorded paper machine was Gilpin's at Brandywine Creek, Delaware in
1817. This machine was also developed in England, but it was a cylinder mould machine, the
Fourdrinier machine not being introduced into the USA until 1827.
Pulp preparations
Harvested tree trunks are cut into logs of four to eight foot lengths, then sent to a very large
horizontal debarking drum, which rotates and strips the logs bare. The freshly debarked logs are
then fed into a chipper, which reduces the logs to handheld-sized chips.
The chips are then passed along to a digester where they are cooked for a number of hours, a
process that softens the wood to a large degree. The digester can be one of two types: sulfite or
sulfate. In a sulfite digester, the principle chemical constituent is calcium acid sulfite and the
method is referred to as the acid process. The sulfate, or Kraft, process is the younger of the two,
and uses an alkaline system that reduces cooking time.
After the cooking is complete and the lignin content has been removed, the softened chips are
fed at high pressure into refiners where the chips are forced between rotating steel plates. The
refiner plates shatter the chips into a soup of brown fibers. Chlorine is used to bleach brown
fibers to a brighter white color, and calcium hypochlorite (sulfite process) or chlorine dioxide
(sulfate process) also used for whitening. Caustic soda (sodium hydroxide NaOH) (lye) is used to
wash the pulp of any impurities, and the steps are repeated in order to obtain the desired
brightness.
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Sections of the paper machine
There are four main sections to the Fourdrinier.
Wet end
The first section is typically known as the wet end. Pulp may be delivered to the Fourdrinier
machine in a slurry form (a mixture of fiber and water) directly from the pulping process.
Alternatively, pulp may be supplied in dried sheets which are then broken down in water to
produce similar slurry, before being fed to the refiners in the wet end where the fibers are
subjected to high pressure pulses between bars on rotating refiner discs. This action causes the
fibrils of the fibers to partially detach and bloom outward. After refining the pulp is mixed with
some of the following: sizing, fillers, colors, retention aid and waste paper called broke to a
stock, and passed on. Washing is done in pressurized screens and hydocyclones and also
deaeration is done.
The stock then enters the head box, a unit that disperses the stock and loads it onto a moving
wire mesh conveyor with a jet from an opening called the slice. The streaming in the jet makes
some fibers align. This alignment can partly be taken away by adjusting the speed difference
between the jet and the wire. The wire revolves around the Fourdrinier table, from breast roll
under the head box over the couch to the forward drive roll, foils under the wire are creating low
pressure pulses that will vibrate and partly deflocculated the fibers while water is removed. Later
on Suction boxes below the wire gently remove water from the pulp with a slight vacuum and
near the end of the wire section the couch will remove water with higher vacuum.
Press section
The second section of the Fourdrinier machine (or any modern paper machine) is the press
section, which removes the most water via a system of nips formed by rolls pressing against each
other aided by press felts. This is the most efficient method of dewatering the sheet as only
mechanical pressing is required. Press felts historically were made from cotton. However, today
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they are nearly 100% synthetic. They are made up of a polyester woven fabric with thick bat
applied in a specific design to maximize water absorption.
Presses can be single or double felted. A single felted press has a press felt on one side of the
press, the sheet being exposed to a felt on one side and a smooth roll on the other. Double felted
is where both sides of the sheet are in contact with a press felt. Single felted nips are useful when
mated against a smooth top roll, which adds a two-sidedness—making the top side appear
smoother than the bottom. Double felted nips increase roughness, as generally, press felts.
Conventional roll presses are configured with one of the press rolls is in a fixed position, with a
mating roll being loaded against this fixed roll. The felts run through the nips of the press rolls
and continue around a felt run, normally consisting of several felt rolls. During the dwell time in
the nip, the moisture from the sheet is transferred to the press felt. When the press felt exits the
nip and continues around, a vacuum box known as an Uhle Box applies vacuum (normally -60
kPa) to the press felt to remove the moisture so that when the felt returns to the nip on the next
cycle, it does not add moisture to the sheet.
Pickup roll presses are vacuum assisted rolls loaded against plain press rolls (usually a roll in a
centre position). While out of favor, these are generally found in machines built in the 1970s–
1980s. Pickup roll presses normally have a vacuum box that has two vacuum zones (low vacuum
and high vacuum). These rolls have a large number of drilled holes in the cover to allow the
vacuum to pass from the stationary vacuum box through the rotating roll covering.
The low vacuum zone picks up the sheet and transfers, while the high vacuum zone attempts to
remove moisture. Unfortunately, centrifugal force usually flings out vacuumed water—making
this less effective for dewatering. Pickup presses also have standard felt runs with Uhle boxes.
However, pickup press design is quite different, as air movement is important for the pickup and
dewatering facets of its role.
Crown Controlled Rolls (also known as CC Rolls) are usually the mating roll in a press
arrangement. They have hydraulic cylinders in the press rolls that ensure that the roll does not
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bow. The cylinders connect to a shoe or multiple shoes to keep the crown on the roll flat, to
counteract the natural "bend" in the roll shape due to applying load to the edges.
Extended Nip Presses (or ENP) are a relatively modern alternative to conventional roll presses.
The top roll is usually a standard roll, while the bottom roll is actually a large CC roll with an
extended shoe curved to the shape of the top roll, surrounded by a rotating rubber belt rather than
a standard roll cover.
The goal of the ENP is to extend the dwell time of the sheet between the two rolls thereby
maximizing the dewatering. Compared to a standard roll press that achieves up to 35% solids
after pressing, an ENP brings this up to 45% and higher—delivering significant steam savings or
speed increases.
Dryer section
The dryer section of the Fourdrinier machine, as its name suggests, dries the pulp by way of a
series of steam-heated rollers that stretch the web somewhat, removing the moisture. Additional
sizing agents, including resins, glue, or starch, can be added to the web to alter its characteristics.
Sizing improves the paper's water resistance, decreases its ability to fuzz, reduces abrasiveness,
and improves its printing properties and surface bond strength. Some paper machines also make
use of a 'coater' to apply a coating of fillers such as calcium carbonate or china clay.
Calendar section
The calendar stack is a series of rollers that the web is run between in order to further smooth it
out, which also gives it a more uniform thickness. The pressure applied to the web by the rollers
determines the finish of the paper, and there are three types of finish that the paper can have. The
first is machine finish, and can range from a rough antique look to a smooth high quality finish.
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The second is called a supercalendered finish and is a higher degree for fine-screened halftone
printing.
The third type of finish is called a plater finish, and whereas the first two types of finish are
accomplished by the calender stack itself, a plater finish is obtained by placing cut sheets of
paper between zinc or copper plates that are stacked together, then put under pressure and
perhaps heating.
A special finish such as a linen finish would be achieved by placing a piece of linen between the
plate and the sheet of paper, or else an embossed steel roll might be used. The web is then wound
onto a roll after calendering, with a moisture content of about 6%, and stored for final cutting
and / or shipping.
Papermaking
The Diamond Sutra of the Chinese Tang Dynasty, the oldest dated printed book in the world,
found at Dunhuang, from 868 CE.
Papermaking is the process of making paper, a substance which is used ubiquitously today for
writing and packaging.
In papermaking a dilute suspension of fibers in water is drained through a screen, so that a mat of
randomly interwoven fibers is laid down. Water is removed from this mat of fibers by pressing
and drying to make paper. Most paper is made from wood pulp, but other fiber sources such as
cotton and textiles may be used.
Papermaking is known to have been traced back to China about 105 CE, when Cai Lun, an
official attached to the Imperial court during the Han Dynasty (202 BCE-220 CE), created a
sheet of paper using mulberry and other bast fibers along with fishnets, old rags, and hemp
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waste. However a recent archaeological discovery has been reported from near Dunhuang of
paper with writing on it dating from 8 BCE, while paper had been used in China for wrapping
and padding since the 2nd century BCE.
Paper used as a writing medium became widespread by the 3rd century, and by the 6th century
toilet paper was starting to be used in China as well. During the Tang Dynasty (618-907 CE)
paper was folded and sewn into square bags to preserve the flavor of tea, while the later Song
Dynasty (960-1279 CE) was the first government on Earth to issue paper-printed money.
Modern papermaking began in the early 1800s in Europe with the development of the
Fourdrinier machine, which produces a continuous roll of paper rather than individual sheets.
These machines have become very large, up to 500 feet (~150 m) in length, producing a sheet
400 inches (~10 m) wide, and operating at speeds of over 60 mph (100 km/h). In 1844, both
Canadian inventor Charles Fenerty and German inventor F.G. Keller had invented the machine
and process for pulping wood for the use in paper making.
This would end the nearly 2000-year use of pulped rags and start a new era for the production of
newsprint and eventually all paper out of pulped wood.
Industrial papermaking
A modern paper mill is divided into several sections, roughly corresponding to the processes
involved in making hand-made paper. Pulp is refined and mixed in water with other additives to
make a pulp slurry, the head box of the paper machine (Fourdrinier machine) distributes the
slurry onto a moving continuous screen, water drains from the slurry (by gravity or under
vacuum), the wet paper sheet goes through presses and driers and is finally rolled into large rolls,
often weighing several tons.
Another type of paper machine makes use of a cylinder mold that rotates while partially
immersed in a vat of dilute pulp. The pulp is picked up by the wire and covers the mold as it rises
out of the vat. A couch roller is pressed against the mold to smooth out the pulp, and picks the
wet sheet off of the mold
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History of paper sheet production
Folio - In the beginning of Western papermaking, paper size was fairly standard. A page of paper
is referred to as a leaf. When a leaf was printed on without being folded, the size was referred to
as folio (meaning leaf). It was roughly equal to the size of a (small!) newspaper sheet. ("Folio"
can also refer to other sizes - see paper sizes.)
Quarto - A Folio folded once produces two leaves (or four pages), and the size of these leaves
was referred to as quarto (4to) (about 230 x 280 mm).
Octavo - If the original sheet was folded in half again, the result was eight pages, referred to as
octavo (8vo), which is roughly the size of an average modern novel. An octavo folding produces
four leaves; the first two and the second two will be joined at the top by the first fold.
The top edge is usually trimmed to make it possible to look freely at each side of the leaf.
Sometimes books are found that have not been trimmed on the top, and these pages are referred
to as unopened.
An octavo book produces a printing puzzle. The paper is first printed before folding and thus
pages 8 and 1 are printed right-side-up on the bottom of the sheet, and pages 4 and 5 are printed
upside-down on the top of the same side of the paper. On the opposite side, pages 2 and 7 are
printed right-side-up on the bottom of the sheet, and pages 6 and 3 are printed upside-down on
the top of the sheet. When the paper is folded twice and the folds trimmed, the pages fall into
proper order.
Sixteen-mo - Smaller books are produced by folding the leaves again to produce 16 pages,
known as a sixteen-mo (16mo) (originally sextodecimo). Other folding arrangements produce yet
smaller books such as the thirty-two-mo (32mo) (duo ettricensimo).
Octavo bookbinding - When a standard-sized octavo book is produced by twice folding a large
leaf, two leaves joined at the top will be contained in the resulting fold (which ends up in the
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gulley between the pages). This group of eight numerable pages is called a signature or a
gathering. Traditionally, printed signatures were stacked on top of each other in a sewing frame
and each signature was sewn through the inner fold to the signature on top of it.
The sewing ran around leather bands or fabric tapes along the backs of the signatures to stabilize
the pile of signatures. The leather bands originally used in the West to stabilize the backs of sewn
books appear as a number of ridges under the leather on the spine of leather books. The ends of
the leather strips or fabric bands were sewn or glued onto the cover boards and reinforced the
hinging of the book in its covers.
Standardization ISO sizes - While opinions and speculation abound on exact reasons for
standardized paper sizes, the most revealing feature of popular sizes (such as Letter and ISO 216
sizes) is that they conform not to some arbitrary device dimension, but that the length of the
paper is chosen to be the width of the page times the square root of 2.
This feature allowed for a large page to be cut in half and the resulting 2 pages to have the same
aspect ratio as the original piece (just with half the size). Repeated cuts can be made to reduce
the entire sheet to one size of pages without wasted paper. This format was formalized by ISO
216 however such logic dictated efficient paper sizes long before the ISO was created. For
example, traditional 8.5"x11" Letter paper is within a few millimeters of A4 paper (ISO 216)
dimensions. While paper sizes "may" have been chosen based on the size of original frames, the
frames themselves were chosen to make page reduction efficient without distorting the aspect
ratio of the pages regardless of final size chosen. That said, there are paper sizes that do not
conform to this idea when specific applications are needed.
Vatmen paper - Vatmen Paper was a type of paper made in The Netherlands that was 17 inches
(~43 cm) wide and 44 inches (~112 cm) long. 44 inches was (reputedly) chosen because that is
how far the papermaker could stretch his arm. A single vatman can generally handle a mold and
deckle which produce up to a 25" wide sheet
Bleaching of wood pulp
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Bleaching of wood pulp is the chemical processing carried out on various types of wood pulp to
decrease the color of the pulp, so that it becomes whiter. The main use of wood pulp is to make
paper where whiteness (similar to but not exactly the same as "brightness") is an important
characteristic. The processes and chemistry described in this article are also applicable to the
bleaching of non-wood pulps, such as those made from bamboo or kenaf.
Paper brightness
Brightness is a measure of how much light is reflected by paper under specified conditions and is
usually reported as a percentage of how much light is reflected, so a higher number represents a
brighter or whiter paper. In the US, the TAPPI T 452 or T 525 standards are used. The
international community uses ISO standards. The following table shows how the two systems
rate high brightness papers, but there is no simple way to convert between the two systems
because the test methods are so different.
Note that the ISO rating is higher and can go above 100. This is because today’s white paper
manufacturing uses fluorescent whitening agents (FWA). Because the ISO standard only
measures a narrow range of blue light, it is not an adequate measure for the actual whiteness or
brightness.
TAPPI Brightness ISO Brightness
84 88
92 104
96 108
97 109+
Newsprint ranges from 55-75 ISO brightness. Chemical pulps contain very little lignin while
mechanical pulps contain most of the lignin which was present in the wood used to make the
pulp. Lignin is the main source of color in pulp due to the presence of a variety of chromophores
naturally present in the wood or created in the pulp mill.
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Bleaching mechanical pulps
Mechanical pulps retain most of the lignin present in the wood used to make the pulp and thus
contain almost as much lignin as they do cellulose and hemicelluloses. It would be impractical to
remove this much lignin by bleaching, and undesirable since one of the big advantages of
mechanical pulp is the high yield of pulp based on wood used. Therefore the objective of
bleaching mechanical pulp (also referred to as brightening) is to remove only the chromophores
(color-causing groups). This is possible because the structures responsible for color are also more
susceptible to oxidation or reduction.
Alkaline hydrogen peroxide is the most commonly used bleaching agent for mechanical pulp.
The amount of base such as sodium hydroxide is less than that used in bleaching chemical pulps
and the temperatures are lower. These conditions allow alkaline peroxide to selectively oxidize
non-aromatic conjugated groups responsible for absorbing visible light.
The decomposition of hydrogen peroxide is catalyzed by transition metals, and iron, manganese
and copper are of particular importance in pulp bleaching. The use of chelating agents like
EDTA to remove some of these metal ions from the pulp prior to adding peroxide allows the
peroxide to be used more efficiently. Magnesium salts and sodium silicate are also added to
improve bleaching with alkaline peroxide
Sodium dithionite (Na2S2O4), also known as sodium hydrosulfite, is the other main reagent used
to brighten mechanical pulps. In contrast to hydrogen peroxide, which oxidizes the
chromophores, dithionite reduces these color-causing groups. Dithionite reacts with oxygen, so
efficient use of dithionite requires that oxygen exposure be minimized during its use.
Chelating agents can contribute to brightness gain by sequestering iron ions, for example as
EDTA complexes, which are less colored than the complexes formed between iron and lignin.
The brightness gains achieved in bleaching mechanical pulps are temporary since almost all of
the lignin present in the wood is still present in the pulp. Exposure to air and light can produce
new chromophores from this residual lignin. This is why newspaper yellows as it ages.
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Bleaching of recycled pulp
Hydrogen peroxide and sodium dithionite are used to increase the brightness of deinked pulp.
The bleaching methods are similar for mechanical pulp in which the goal is to make the fibers
brighter.
Bleaching chemical pulps
Chemical pulps, such as those from the kraft process or sulfite pulping, contain much less lignin
than mechanical pulps, (<5% compared to approximately 40%). The goal in bleaching chemical
pulps is to remove essentially all of the residual lignin, hence the process is often referred to as
dezincification.
Sodium hypochlorite (household bleach) was initially used to bleach chemical pulps, but was
largely replaced in the 1930s by chlorine. Concerns about the release of organ chlorine
compounds into the environment prompted the development of Elemental Chlorine Free (ECF)
and Totally Chlorine Free (TCF) bleaching processes.
Dezincification of chemical pulps is rarely a single step process and is frequently composed of
four or more discrete steps. These steps are given a letter designation, and these are given in the
following table:
Chemical or process used Letter designation
Chlorine C
Sodium hypochlorite H
Chlorine dioxide D
Extraction with sodium hydroxide E
Oxygen O
Alkaline hydrogen peroxide P
Ozone Z
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Chelation to remove metals Q
Enzymes (especially xylanase) X
Peracids (peroxy acids) Paa
Sodium dithionite (sodium hydrosulfite) Y
A bleaching sequence from the 1950s could look like: CEHEH . The pulp would have been
exposed to chlorine, extracted (washed) with a sodium hydroxide solution to remove lignin
fragmented by the chlorination, treated with sodium hypochlorite, washed with sodium
hydroxide again and given a final treatment with hypochlorite. An example of a modern totally
chlorine-free (TCF) sequence is OZEPY where the pulp would be treated with oxygen, then
ozone, washed with sodium hydroxide then treated in sequence with alkaline peroxide and
sodium dithionite.
Chlorine and hypochlorite
Chlorine replaces hydrogen on the aromatic rings of lignin via aromatic substitution, oxidizes
pendant groups to carboxylic acids and adds across carbon double bonds in the lignin side
chains. Chlorine also attacks cellulose, but this reaction occurs predominantely at pH 7, where
un-ionized hypochlorous acid, HClO, is the main chlorine species in solution. To avoid excessive
cellulose degradation, chlorination is carried out at pH <1.5.
Cl2 + H2O ⇌ H+ + Cl- + HClO
At pH >8 the dominant species is hypochlorite, ClO-, which is also useful for lignin removal.
Sodium hypochlorite can be purchased or generated in situ by reacting chlorine with sodium
hydroxide.
2 NaOH + Cl2 ⇌ NaOCl + NaCl + H2O
The main objection to the use of chlorine for bleaching pulp is the large amounts of soluble
organochlorine compounds produced and released into the environment.
Chlorine dioxide
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Chlorine dioxide, ClO2 is an unstable gas with moderate solubility in water. It is usually
generated in an aqueous solution and used immediately because it decomposes and is explosive
in higher concentrations. It is produced by reacting sodium chlorate with a reducing agent like
sulfur dioxide.
2 NaClO3 + H2SO4 + SO2 → 2 ClO2 + 2 NaHSO4
Chlorine dioxide is sometimes used in combination with chlorine, but it is used alone in ECF
(elemental chlorine-free) bleaching sequences. It is used at moderately acidic pH (3.5 to 6). The
use of chlorine dioxide minimizes the amount of organochlorine compounds produced.
Extraction or washing
All bleaching agents used to delignify chemical pulp, with the exception of sodium dithionite,
break lignin down into smaller, oxygen-containing molecules. These breakdown products are
generally soluble in water, especially if the pH is greater than 7 (many of the products are
carboxylic acids). These materials must be removed between bleaching stages to avoid excessive
use of bleaching chemicals since many of these smaller molecules are still susceptible to
oxidation. The need to minimize water use in modern pulp mills has driven the development of
equipment and techniques for the efficient use of available water.
Oxygen
Oxygen exists as a ground state triplet state which is relatively unreactive and needs free radicals
or very electron-rich substrates such as deprotonated lignin phenolic groups. The production of
these phenoxide groups requires that delignification with oxygen be carried out under very basic
conditions (pH >12). The reactions involved are primarily single electron (radical) reactions.
Oxygen opens rings and cleaves side chains giving a complex mixture of small oxygenated
molecules. Transition metal compounds, particularly those of iron, manganese and copper, which
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have multiple oxidation states, facilitate many radical reactions and impact oxygen
delignification.
While the radical reactions are largely responsible for delignification, they are detrimental to
cellulose. Oxygen-based radicals, especially hydroxyl radicals, HO•, can oxidize hydroxyl
groups in the cellulose chains to ketones, and under the strongly basic conditions used in oxygen
delignification, these compounds undergo reverse aldol reactions leading to cleavage of cellulose
chains. Magnesium salts are added to oxygen delignification to help preserve the cellulose
chains, but mechanism of this protection has not been confirmed.
Hydrogen peroxide
Using hydrogen peroxide to delignify chemical pulp requires more vigorous conditions than for
brightening mechanical pulp. Both pH and temperature are higher when treating chemical pulp.
The chemistry is very similar to that involved in oxygen delignification, in terms of the radical
species involved and the products produced. Hydrogen peroxide is sometimes used with oxygen
in the same bleaching stage and this is give the letter designation Op in bleaching sequences.
Metal ions, particularly manganese catalyze the decomposition of hydrogen peroxide, so some
improvement in the efficiency of peroxide bleaching can be achieved if the metal levels are
controlled.
Ozone
Ozone is a very powerful oxidizing agent and the biggest challenge in using it to bleach wood
pulp is to get sufficient selectivity so that the desirable cellulose is not degraded. Ozone reacts
with the carbon double bonds in lignin, including those within aromatic rings. In the 1990s ozone
was touted as good reagent to allow pulp to be bleached without any chlorine-containing
chemicals (totally chlorine-free, TCF). The emphasis has changed and ozone is seen as an
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adjunct to chlorine dioxide in bleaching sequences not using any elemental chlorine (elemental
chlorine-free, ECF). Over twenty-five pulp mills worldwide have installed equipment to generate
and use ozone.
Chelant wash
The effect of transition metals on some of the bleaching stages has already been mentioned.
Sometimes it is beneficial to remove some of these metal ions from the pulp by washing the pulp
with a chelating agent such as EDTA or DTPA. This is more common in TCF bleaching
sequences for two reasons: the acidic chlorine or chlorine dioxide stages tend to remove metal
ions (metal ions usually being more soluble at lower pH) and TCF stages rely more heavily on
oxygen-based bleaching agents which are more susceptible to the detrimental effects of these
metal ions.
Chelan washes are usually carried out at or near pH 7. Lower pH solutions are more effective at
removing transition metals, but also remove more of the beneficial metal ions, especially
magnesium
Other bleaching agents
A variety of more exotic bleaching agents have been used on chemical pulps. They include
peroxyacetic acid, peroxyformic acid[18], potassium peroxymonosulfate (Oxone),
dimethyldioxirane, which is generated in situ from acetone and potassium peroxymonosulfate,
and peroxymonophosphoric acid
Enzymes like xylanase have been used in pulp bleaching to increase the efficiency of other
bleaching chemicals. It is believed that xylanase does this by cleaving lignin-xylan bonds to
make lignin more accessible to other reagents. It is possible that other enzymes such as those
found in fungi that degrade lignin may be useful in pulp bleaching.
Environmental considerations
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Bleaching mechanical pulp is not a major cause for environmental concern since most of the
organic material is retained in the pulp, and the chemicals used (hydrogen peroxide and sodium
dithionite) produce benign byproducts (water and sodium sulfate (finally), respectively).
Delignification of chemical pulps releases considerable amounts of organic material into the
environment, particularly into rivers or lakes. Pulp mills are almost always located near large
bodies of water because of they require substantial quantites of water for their processes.
Bleaching with chlorine produced large amounts of organochlorine compounds, including
dioxins. Increased public awareness of environmental issues, as evidenced by the formation of
organizations like Greenpeace, influenced the pulping industry and governments to address the
release of these materials into the environment. The amount of dioxin has been reduced by
replacing some or all of the chlorine with chlorine dioxide.
The use of elemental chlorine has declined significantly and as of 2005 was used to bleach 19-
20% of all kraft pulp. ECF (elemental chlorine-free) pulping using chlorine dioxide is now the
dominant technology worldwide (with the exception of Finland and Sweden), accounting for
75% of bleached kraft pulp globally.
The promise of complete removal of chlorine chemistry from bleaching processes to give a TCF
(totally chlorine-free) process, which peaked in the mid-1990s, did not become reality. The
economic disadvantages of TCF, the lack of stricter government regulation and consumer
demand meant that EFC has not been replaced by TCF. As of 2005 only 5-6% of bleached kraft
is made using TCF sequences, mainly in Finland and Sweden. This pulp and paper goes to the
German market, where regulations and consumer demand for TCF pulp and paper makes it
viable.
A study based on EPA data demonstrated that TCF processes reduce the amount of chlorinated
material released into the environment, relative to ECF bleaching processes which do not use
oxygen delignification. The same study concluded that "Studies of effluents from mills that use
oxygen delignification and extended delignification to produce ECF and TCF pulps suggest that
the environmental effects of these processes are low and similar." The energy needed to produce
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the bleaching chemicals for an ECF process not using oxygen delignification is about twice that
needed for ECF with oxygen delignification or ECF processes.
The environmental impact differences between TCF and ECF process however are not fully
understood. Some recent studies have pointed out that no difference in acute or chronic toxicity
is to be found when comparing well-treated ECF and TCF effluents breaking the paradigm that
TCF is the most environmental friendly process. In fact some relevant analysis in field have been
pointing out that mills which previously ran with TCF and migrated to ECF have reduced
significantly their NOx air emissions.
Paper pollution
The production, use and recycling of paper has a number of adverse effects on the environment
which are known collectively as paper pollution. Pulp mills contribute to air, water and land
pollution. Discarded paper is a major component of many landfill sites, accounting for about
35% by weight of municipal solid waste (before recycling).. Even recycling paper can be a
source of pollution due to the sludge produced during deinking.
"People need paper products and we need sustainable, environmentally safe production." The
amount of paper and paper products is enormous, so the environmental impact is also very
significant. It has been estimated that by 2020 paper mills will produce almost 500,000,000 tons
of paper and paperboard per year, so great efforts are needed to ensure that the environment is
protected during the production, use and recycling/disposal of this enormous volume of material.
Pulp and paper is the third largest industrial polluter to air, water, and land in both Canada and
the United States, and releases well over 100 million kg of toxic pollution each year (National
Pollutant Release Inventory, 1996).
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Worldwide, the pulp and paper industry is the fifth largest consumer of energy, accounting for 4
percent of the entire world's energy use. The pulp and paper industry uses more water to produce
a ton of product than any other industry.
Sources of pulp mill related pollution
Chlorine and chlorine-based materials
Chlorine and compounds of chlorine are used in the bleaching of wood pulp, especially chemical
pulps produced by the kraft process or sulfite process. Plants using elemental chlorine produced
significant quantities of dioxins. Dioxins are persistent organic pollutants that are generally
recognized among the most toxic human-released pollutants in existence. Elemental chlorine has
largely been replaced by chlorine dioxide and dioxin production very significantly reduced.
The promise of complete removal of chlorine chemistry from bleaching processes to give a TCF
(totally chlorine-free) process, which peaked in the mid-1990s, did not become reality. The
economic disadvantages of TCF, the lack of stricter government regulation and consumer
demand meant as of 2005 only 5-6% of kraft pulp is bleached without chlorine chemicals. A
study based on U.S. Environmental Protection Agency (EPA) data concluded that "Studies of
effluents from mills that use oxygen delignification and extended delignification to produce ECF
(elemental chlorine free) and TCF pulps suggest that the environmental effects of these processes
are low and similar."
The used process water from a pulp mill contains a lot of organic material such as lignin and
other organic material from the trees (including chlorinated organic material) resulting in high
biological oxygen demand (BOD) and dissolved organic carbon (DOC). It also contains alcohols,
and chelating agents and inorganic materials like chlorates and transition metal compounds.
Recycling the effluent (see black liquor) and burning it, using bioremediation ponds and
employing less damaging agents in the pulping and bleaching processes can help reduce water
pollution.
Sulfur, hydrogen sulfide, and sulfur dioxide
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Sulfur-based compounds are used in both the kraft process and the sulfite process for making
wood pulp. Sulfur is generally recovered, with the exception of ammonia-based sulfite processes,
but some is released as sulfur dioxide during combustion of black liquor, a byproduct of the kraft
process, or "red liquor" from the sulfite process. Sulfur dioxide is of particular concern because it
is water soluble and is a major cause of acid rain. In 2006 the pulp and paper industry in Canada
released about 60,000 tones of sulfur oxides (SOx) into the atmosphere, accounting for just over
4% of the total SOx emission from all Canadian industries.
A modern kraft pulp mill is more than self-sufficient in its electrical generation and normally
will provide a net flow of energy to the local electrical grid. Additionally, bark and wood
residues are often burned in a separate power boiler to generate steam.
If the harvested trees are replanted a kraft mill can be carbon-neutral, but reforestation has been
criticized for reducing biodiversity.
Air emissions of hydrogen sulfide, methyl mercaptan, dimethyl sulfide, dimethyl disulfide, and
other volatile sulfur compounds are the cause of the odor characteristic of pulp mills utilizing the
kraft process. Other chemicals that are released into the air and water from most paper mills
include the following:
carbon monoxide
ammonia
nitrogen oxide
mercury
nitrates
methanol
benzene
Volatile organic compounds, chloroform.
Mechanical pulp mills
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Wood pulp produced primarily by grinding wood is known as "mechanical pulp" and is used
mainly for newsprint. These mechanical processes use fewer chemicals than either kraft or sulfite
mills. The primary source of pollution from these mills is organic material such as resin acids
released from the wood when it is processed. Mechanical wood pulp is "brightened" as opposed
to bleached using less toxic chemicals than are needed for chemical pulps.
Paper mill pollution
It is a common misconception that all mills are "pulp and paper" mills. This is true only for
"integrated mills" that consist of both a pulp mill and a paper mill on the same site. While pulp
mills are often conspicuous by their size and odor, paper mills are often indistinguishable from
factories seen in most communities.
The major effluent from a paper mill is a suspension of paper fibers in water and it is in the mill's
best interest to keep such fiber loss to a minimum since any lost fiber translates to lower paper
production.
PAPER MILLS IN INDIA
TNPL Pugalur
TNPL Pugalur is a panchayat town in Karur district in the Indian state of Tamil Nadu.
Demographics
As of 2001 India census, TNPL Pugalur had a population of 5880. Males constitute 51% of the
population and females 49%. TNPL Pugalur has an average literacy rate of 72%, higher than the
national average of 59.5%: male literacy is 79%, and female literacy is 64%. In TNPL Pugalur,
8% of the population is under 6 years of age. Its surface area is around 8 square kilometre.
Pugalur is the place where TNPL, a large paper mill is located. The other small towns/villages
located in this panchayat are Pugalur, Moolimangalam, Velayuthampalayam, Pandipalayam,
Sokkankadu, The big town close to Pugalur TNPL is Karur. Pughazhi malai is a temple situated
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on a mount Aarunaatan malai in the centre of the village. This temple is devoted to Lord
Muruga. and famously Temple in Eswar temple available in Pugalur, Eswar at see west side, it is
called Megabaliswar(West Eswar)
TNPL
Introduction
Pugalur TNPL stands for Tamil Nadu Newsprint and Papers Limited. TNPL was formed by the
Government of Tamil Nadu in April 1979 as a Public Limited Company under the provisions of
the Companies Act, 1956 with loan assistance from the World Bank. The factory is situated at
Pugalur(Kagithapuram) in Karur District of Tamil Nadu. The Corporate Office of the company is
situated at 67, Mount Road, Guindy, Chennai – 600 032.
Eco-friendly
Today TNPL is the largest producer of bagasse (sugarcane waste from Sugar mills) based paper
in the world and the 2nd largest paper producer in India. TNPL produces 230,000 tons of
Printing & writing paper and consumes 1 million tones of bagasse every year.The largest eco-
friendly paper producer in the world. Symbolic of TNPL’s commitment to the environment, the
World Wide Fund for nature (WWF) has entered into a pact with TNPL to use the ‘Panda’ logo
in TNPL’s branded products.
Employment
TNPL provides direct employment to 1725 people and indirect employment to around 5000
people.
Product
The broad product range of TNPL is given below:
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NEWSPRINT, PRINTING & WRITING PAPER, Creamwove, Superprinting, Hitech Maplitho,
Excel Maplitho, Ultawhite Maplitho, Magazine Printing, COPIER PAPER, TNPL Copier, TNPL
OS 2000 & TNPL Eco-Friendly Note Books.
Newsprint is normally manufactured in 49 g/m² reels and directly sold by the company to the
various newspaper establishments such as The Hindu, Malayala Manorama, Ananda Bazaar
Patrika and so on.
Awards & Honours
TNPL has obtained the ISO 9001 - 2000 certification from RWTUV of Germany for
development, manufacture and supply of Newsprint and Printing & Writing Paper.
The Business World, a leading business weekly, which conducted an employees’ involvement
and motivation survey in India jointly with Grow Talent Company Ltd, New Delhi and the Great
Places to work Institute of USA has selected TNPL as one of the top 25 Great Places to work in
India. TNPL is the only one company from Tamil Nadu to get this coveted ranking.
Best Paper Mill 2007-08
TNPL has bagged the prestigious "Paper Mill of the year 2007-08" award. The award is given in
recognition of the Indian paper mill which sets an example in the areas of productivity, quality,
human resource development, research & development, developing export markets, community
services etc. besides striving to attain global competitiveness by the Indian Paper Manufacturers
Association (IPMA), New Delhi.
Earlier, the Company received the award for 2001-02 for TNPL's overall performance,
approaches for meeting social obligations, ensuring global competitiveness and sustainable
development & technology options.
Waste Management
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TNPL is a socially responsible company. It has formed a society to grow sugarcane on
1,600 acres (6 km2) near the plant. That gives employment to the people and raw material to
TNPL. Also, water from the effluent treatment plant is provided to the farmers (TEWLIS
Project). That apart, TNPL uses tankers to provide water to 25 villages surrounding the plant.The
villages greatly benefited by this project is Moolimangalam, Pandipalayam and Palamapuram.
Exports
Today, TNPL is exporting paper to Australia, U.K, Indonesia, Singapore, Philippines, Taiwan,
Greece, Turkey, UAE, Jordan, Yemen, Egypt, South Africa, Sri Lanka, Tanzania, Nigeria and
Malaysia.
TNPL Arakkodai
The company has set up a Trust called “TNPL ARAKKODAI” with a corpus of Rs.1 Crore. The
main objective of the Trust is to extend financial assistance to the residents of nearby villages in
the fields of education and other social welfare. The Trust also contributes to other needy cases
on merits.
BSNL, Aircel, Airtel, Reliance, Vodafone are the communication providers to this town
Panchayat. The well penetrated landline connections are provided by BSNL again. The
availability of internet is also very good (Mostly dial-up connections). Now BSNL has provided
very good broadband internet connection.
Transport
The town has very good transport facilities in the form of Private Mini Bus, Government run
buses, Autorickshaws.Private run Omni bus operate from the nearby town Velayuthampalayam
to Chennai daily.
The pugalur(Code:PGR) has a railway station which is well connected to Erode, Coimbatore,
Trichy, Chennai and cochin. Both passenger trains and express trains pass through this station.
TNPL Pugalur Railway station takes pride in the fact that all the express trains passing this
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station have a stop in this station except the Shathabdi Express. TNPL has its own separate track
diverting from main line which facilitates its freight services.
The nearest airport is in Trichy (87 km). Major Airport is located at Coimbatore (115 km). The
nearest major sea port is at Chennai (450 km).
Governance
It is governed by Directorate of Town panchayat which has chairperson, Vice-chair and 12 ward
councillors. They are the elected representatives of the town. Elections are conducted once in 5
years.
Education
The town Panchayat has three primary Tamil-medium schools one each in Moolimangalam,
Masagoundanpudur and Kurukkapalayam. The most famous school in the town is TNPL
Matriculation & Higher Secondary School, accredited with Five Star Status by Bharathidasan
University, Trichy was established in 1984. This school is located within the TNPL Housing
colony. Its students have entered the top medical and engineering colleges of the country. Many
of its students are employed in big firms located in USA, UK, Australia and other countries of
the world.The school will be completing 25 years this year (2009).A grand Silver Jubilee
celebration is planned for it.
Talent-Expo
Recognizing the fact that today’s youth are the future of India, TNPL conducts “TALENT-
EXPO” providing a platform to the students from rural and semi urban areas to exhibit their
multifarious talents. In the TALENT EXPO 2008-09, over 1200 students from 55 schools
participated in 23 competitions.
Variety of Products in TNPL
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The company produces different variety of products. They can be divided into two
categories.
1. Newsprint
2. Printing and Writing Paper
The consumers of TNPL’s newsprint are The Hindu, Times of India, Hindustan Ties,
The Economic Times, Ananda Bazaar patrika, Daily Tanthi, Malayala Manorama, Deccan
Chronide etc... TNPL has been the first mill to introduce high bright and pink newsprint in
Indian market.
The company is a market leader in computer stationary and telephone directory paper including
yellow pages. The company also supplies of large quantities of paper to public issues, Tamilnadu
Text Books Corporation, Director of Stationary and Printing, Controller of Stationary of Kerala,
ballet paper for election etc.
Raw Material Procurement
a) Arrangement for Bagasse
TNPL has tie up arrangement with 6 sugar mills for getting required bagasse. By this
“steam substitution” TNPL is assured of getting their raw materials from sugar mils. Sugar mills
also get steam from TNPL fired boilers. This exchange process is beneficial for both the
companies.
b) Arrangement for Wood
TNPL has an ongoing arrangement with M/S.Tamilnadu Forest Plantation Corporation
(TAFCORN) for sustained supply of 70000 tones per annum of Eucalyptus Hybrid wood.
Besides the company is also procuring wood from open market sources;
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Awards and Accolades
The Government of India has accorded ‘Trading House’ status to TNPL for its
outstanding performance in Exports.
TNPL has been awarded the prestigious ISO 14001 certification by RWTUV, Germany
in February 2002 for successfully establishing and applying the environmental management
system for development, manufacture and supply of paper.
TNPL has been awarded the prestigious “paper mill of the year 2001-2002 award” by
Indian paper manufacture’s Association (IPMA) for its overall performance in the year.
Rotary club of Madras East and Earth Care have bestowed Dr.M.S.Swaminathan Award
for Environmental Protection 2002 in the meeting presided by honorable Justice Prabha
Sridevan.
TNPL has bagged the CAPEXIL Award for the fourth successive year for its
outstanding performance during 2001-2002.
Mysore Paper Mills Limited (MPM)
The Mysore Paper Mills Limited is an ISO 14001 Company engaged in the manufacture and
marketing of Newsprint, Writing, Printing and Packing Paper of different varieties and Sugar at
its plant at Bhadravati, Shimoga District with production capacity of 75000 MTA (Metric Tone
per Annum) of Newsprint, 30000 MTA of Writing, Printing and Packing Paper and 2500 TCD
(Tone Crushings per Day) of Sugar and with a total manpower of about 4800 employees.
It was incorporated on 20 May 1936 under the Mysore Companies Regulation, VIII of 1917 and
became a Government Company in November 1977 when the State Government acquired
controlling interest in the company increasing its share holding to more than 51% as required
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under Section 617 of the Companies Act, 1956. The Company has its Registered Office at
Chennai.
For the purpose of providing pulp wood for the manufacture of paper, the Government of Tamil
Nadu has leased 300 square kilometers of land to the company for raising its own captive
plantations. The sugarcane requirement of the company is procured from about 15000 families of
the cane growers who are directly dependent on this company.
The Mysore Paper Mills Limited, (MPM) founded by Sri.Krishnaraja Wodeyar Bahadur in 1937
the Maharaja of erstwhile Mysore State was incorporated on 20th May 1936 under the then
Mysore Companies Regulation, VIII of 1917. Later it became a Government Company in 1977
under Section 617 of the Companies Act, 1956. The Company has its Registered Office at
Chennai and its plant located at Bhadravati, Shimoga District, and Tamil Nadu State.
The Company has an Authorized Capital of 150Crs. and paid up capital of about 120Crs. The
shares of the company are listed in the Bombay Stock Exchange and there are about 17,000
shareholders.
While Government of Tamil Nadu holds 65% of the shareholding of the Company, IDBI and
other Financial Institutions hold 18% of the shares and shareholding by the General Public is
17%.
The company is managed by eminent Board of Directors consisting of IAS, IFS and other
professionals.
The Chairman & Managing Director of the Company is assisted by a team of professionals in
various fields who have expertise in production, finance, marketing etc., with a dedicated team
force.
MPM with 5000 employees has its own township. About 15000 families of the cane growers
who supply sugarcane to the company are directly dependant on this company and many more
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indirectly the direct and indirect contribution by MPM to the local economy is about Rs.200 Cr
P.A.
ISO CERTIFICATION
The Environmental Management System of the Company has been certified to conform to the
coveted ISO 14001 standard since August 2004. The Scope of certification covers manufacture
of Newsprint, Writing, Printing & Packaging Paper and Manufacture of Plantation White Sugar.
The per capita consumption of paper in our country has grown marginally to 7Kgs. against an
Asian average consumption of 28Kgs. and World average of 58Kgs. The growth in paper
consumption is directly related to GDP growth in the country. With expected growth of GDP of
8 to 9%, the demand for Newsprint is expected to grow at about 8% and Writing & Printing
Paper by 6%.
Considering the present level of per capita consumption of paper of 6Kgs. and the anticipated
growth in the population, the literacy level, living standards and growth in the printing,
packaging and publishing industries and the environmental restrictions on the use of plastic vis-
à-vis paper, there is substantial scope for increase in per capita consumption of paper in future.
The Company has an installed capacity of 30,000 tones per annum for production of writing &
Printing Paper, 75,000 tones per annum for production of Newsprint and Sugar Mill with a
capacity for crushing of sugarcane of 2,500 TCD. The water requirements of the Company are
met through adjoining Bhadra River 85% of the power requirements (41 MW capacities) are met
through captive power generation.
MPM is engaged in the manufacture of varieties of Cultural Paper, Standard and Pink Newsprint
and Sugar. MPM is the only company in India to have a sugar factory as an integrated part of the
Paper Mill wherein bagasse bye product of sugar is being used as raw material for manufacture
of WPP.
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The average turnover of the Company is about Rs.415Crs. Per annum of which 58% is from
Newsprint, 28% from Writing & Printing Paper and 17% from Sugar. The market share of
Newsprint is 11%.
The Sirpur Paper Mills Limited
The Sirpur Paper Mills Limited is one of the largest Indian integrated paper manufacturers,
specialising in the customisation of niche varieties right down to small volumes. Over the years,
Sirpur has also established itself as the most dependable and profitable paper brands in India.
Who we are
Integrated paper manufacturing Company founded in 1938
One of the largest manufacturers of variety and colour paper in India
Employer of more than 3000 people
Installed capacity of 83,550 TPA, now being raised to 1,38,300 TPA
Majority of sales in India; exports to neighbouring countries, South-East Asia, the Gulf
and Africa
What we market
Writing and printing paper
Creamwove and maplitho paper
Ledger, bank and account book paper
Specialty grade paper-bond, parchment, airmail, manila and pastel paper
Base for coated paper
Duplex board and triplex board
Laminating grade kraft
Where we are located
Manufacturing facility in Sirpur-Kaghaznagar (Andhra Pradesh)
Registered office in Hyderabad, India
Corporate office in Gurgaon, India
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Listed on the Mumbai and National Stock Exchanges (India)
ABOUT US
Incorporated in 1938, The Sirpur Paper Mills Ltd. is one of the largest manufacturers of
variety and color paper in India.
Its production commenced in 1942-43 with a capacity of 5000 TPA (under the
management of M/s Hyderabad Construction Company Limited)
In 1953, the government of Hyderabad entrusted M/s. Birla Brothers Private Ltd. with the
management of the Company as managing agent.·
The Company became Board-managed following the abolition of the managing agency
system in 1970.
Eventually, the management was taken over in 1994 by Shri Ranjan Kumar Poddar and
Shri Devashish Poddar.
Since then, the Company has embarked on capacity expansion and modernisation;
installed capacity will now increase from 83,550 TPA (paper and paperboard) to 1, 38,300 TPA
following the completion of an on-going expansion program.
The Company’s wide range of products are marketed in India and internationally in Sri
Lanka, Malaysia, Bangladesh, Nepal, UAE, South Africa, Singapore, Nigeria and Mauritius.
The Company’s registered office is in Hyderabad and corporate office is in Gurgaon.
CODE OF CONDUCT
Code of Conduct for Directors and Senior Management – Clause – 49 of the Listing Agreement;
This Code of Conduct is applicable to the:
1. Members of Board of directors of the Company.
2. Senior management which means
a) Executives who are in the grade of general manager and above;
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B) Company Secretary.
SPM commitment to ethical and lawful business conduct is a fundamental shared value of the
Board of directors and the senior management.
Consistent with its values and beliefs, Sirpur has formulated the following Code of Conduct as a
guide. The Code does not attempt to be comprehensive or cover all possible situations. It
encourages the Sirpur’s team to take positive actions, which are not only commensurate with the
values and beliefs, but are also perceived to be so. SPM expects its Board members and senior
management to implement the Code in its true spirit and in case of any doubt or confusion, to
consult his immediate superior or the executive director.
In performing their functions, the directors and senior management of the company shall:
* act honestly, diligently and in good faith and integrity in all their dealings with and for the
Company and are prohibited from engaging in any activity that interferes with their proper
discharge of responsibilities of the company or is in conflict with or prejudicial to the interests of
the Company.
* Act in a manner to enhance and maintain the reputation of the Company.
* not use any confidential information obtained by them in the course of their official duty,
whether from the company or otherwise, for personal gain, or use/allow the use of such
information for the financial benefit for any other person or in a manner that would be
detrimental to company’s interest.
* abide by all applicable laws and regulations including the company’s prevention of Insider
Trading code.
* Not to accept gifts in cash or kind in their capacity as member of Board of directors or senior
management. However, an exception to this may be made for non-cash gifts that can be
reciprocated such as tickets to events, business meals etc.
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* Not share any information regarding the company, its business and/or affairs with media
without the prior approval of the executive director.
* Not hold position of director/advisor with a competitor company/entity.
In addition, in performing their Board and Board Committee functions, the directors shall:
Disclose any personal interest in any person/entity and keep informing any changes in their
interests that may interfere with their ability to perform their duties or which may influence
decisions of Board, and in the case of “Independent Directors”, impact their independence as a
Board member.
This code embodies the belief that acting always with the company’s legitimate interest in mind
and being aware of the company’s responsibility towards its stakeholders is an essential element
of the company’s long term excellence.
SOCIAL DEVELOPMENT
The Sirpur Paper Mills Ltd. is convinced that sustainable growth can only be derived if each
constituent of the society is protected and nursed. Over the decades, the Company has been
strengthening its community support through a number of initiatives, emerging as a responsible
member of the society.
Rural infrastructure services
The Company took up pond formation in the downstream villages on the banks of the Peddavagu
River and undertook repairs of village wells. It refurbished the community hall and undertook
the construction of health care centers, veterinary hospitals, poultry units, aqua centres and
vocational training centers as part of its rural development program
.
Tribal upliftment
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The Company donated 15 DTH television sets to meet the entertainment needs of the tribal
community.
Water supply
The Company supplies water to the surrounding areas by pipelines and to distant places by
tankers to meet the daily needs of the local community.
Medical and healthcare
The Company aided a homoeopathy dispensary for the welfare of the community and was
associated with the Rotary Club and other voluntary organizations. Apart from this, the
Company also co-sponsored various medical camps (family planning and health checkup).
In association with the Rotary Club and others, the Company organized eye camps, conducting
almost 600 cataract operations. The Company also maintained a self-sufficient unit and fully
equipped operation theatre to perform cataract operations. In 2005-06, the Company provided an
operation microscope to aid ophthalmic operations of intra ocular lens type.
Creating livelihoods
The Company organized the following fully subsidized training programs (under the aegis of the
Small Industries Service Institute, Govt. of India, Hyderabad) to facilitate the creation of
livelihoods:
Food processing training: 40 members trained
Beauty therapy and cosmetology: 40 girls and housewives trained
Servicing of two and three-wheelers: 24 unemployed youth trained
Call centre professional training: 40 graduates trained
Training imparted to unorganized vendors to manufacture bricks from fly ash (provided
by the Company)
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Education
The Company provided land and buildings to educational institutions. The Company provided
aid to one Telegu medium, two Urdu medium schools, one Hindi medium and one Tamil
medium school. The Company also distributes notebooks at subsidized rates to the children of
employees.
Co-operative credit society
The SPM Employees Co-operative Credit Society has more than 2500 members. The share
capital of the society comprised Rs.56.92lacs – thrift deposits were at Rs. 126.79lacs and loans
extended to members were Rs.254.10lacs as on 31st March 2006.
The Society declared a dividend of 16 per cent for the past ten years. For the past four years,
annual gifts, gifts for daughters’ marriages and scholarships for the children of the society’s
members pursuing professional courses were given. A death relief aid was also paid to the kin of
each deceased member.
Religious grants
The Company regularly contributes in the maintenance and development of various places of
worship. It also provided land and assistance for the construction of various temples as well as a
mosque, church and gurdwara. The Company also makes regular contributions to cater to the
needs of the weaker sections of the society and the people affected by natural calamities.
Sports activities
The Company provided financial assistance and infrastructure support for various tournaments
organized by the local youth; it hosted the Intra-Districts’ Sports and Cultural Meet organized by
the State Labor Department.
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Targets and Achievements of Indian Paper Industry
Under Various Five-Year Plans
Plan Periods
(At the end of)
Installed Capacity Production
Targe
t
Achievemen
t
Surplus/
Short fall Target Achieveme
nt
Surplus/
Short
fall
First Plan (1951-56) 2.14 2.14 0 2.03 1.09 -0.94
Second Plan (1956-61) 4.57 4.30 -0.27 3.56 3.50 -0.06
Third Plan (1961-66) 8.33 6.69 -1.64 7.11 5.58 -1.53
Annual Plan (1966-69) 7.50 7.30 -0.20 6.35 6.58 0.23
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Fourth Plan (1969-74) ** 9.92 0 8.50 8.25 -0.25
Fifth Plan (1974-78) 13.00 11.37 -1.63 9.50 9.00 -0.50
Sixth Plan (1978-83) 16.50 18.16 1.66 12.50 12.36 -0.14
Seventh Plan(1985-90) 27.00 30.14 3.14 18.00 18.08 0.14
Eighth Plan (1992-97) 38.50 36.70 -1.80 32.00 34.80 2.80
Ninth Plan (1997-02) 38.50 - - 32.00 - -
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CHAPTER 4
Summary, Conclusion and Suggestion
4.1 SUMMARY OF THE SYSTEM
In this study, the four costing techniques such as Absorption costing, Marginal costing,
Cost-Volume-Profit Analysis and Target costing have taken for the purpose of analyzing given
data. In this study the following aspects have found from the given data.
1. The capacity utilizations for last five years from 1998-99 to 2002-03 were more than
95%. During the year 1995 the production capacity has expanded from 90000 tones to 18000
tones. Due to expansion process the production was low for following two years. As per the table
total production means the production of both NP & PWP. In 2002-03 the production was lower
than the previous year. During that year the capacity utilization was 93% mainly due to stoppage
of paper machines for 53 machine days for rebuild and the teething problems encountered in the
machines during post rebuild stabilization phase.
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2. The company achieved zero stock of finished goods except in the year 1998-99 due
to low demand, cheaper imports, demand supply imbalances, stiff competition from domestic
companies and continued sluggish market.
3. The profits & losses of 9 years were equal in both absorption costing and marginal
costing. But in 1998-99 the loss values of both techniques were not equal. The important cause
of this difference is the stock in hand of PWP at the beginning of that year.
In absorption costing both variable and fixed costs will be considered while making
calculation of cost of stock in hand. In marginal costing only variable cost will be taken during
the time of calculation of cost of stock in hand. Therefore the cost of stock in hand will be
differed in both techniques.
In this study the cost of opening stock in the year 1998-99 have calculated in above
manner, So that the loss values were differed, In absorption costing the cost of stock was
Rs.274.46lakhs where as in marginal costing the cost was Rs.147.49lakhs. In absorption costing
the cost was over absorbed. But in marginal costing the cost was under absorbed.
4. The comparison between performance of Printing and Writing Paper and Newsprint
reveal that the company is performing well in respect of PWP whereas it is not so in the case of
NP. Therefore the company has been gradually decreased its NP production.
5. The production of NP has made loss to the company and the contribution in marginal
costing was also low. The reason was the sales revenue of NP was low. The only reason for the
loss incurred on account of this product is due to international prices. The domestic newsprint
prices came under heavy pressure due to cheaper import prices.
6. From the product decision analysis, it is found that the company can earn more profit
Rs.1558.10lakhs during the year 2002-03, if the company drops the NP production.
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7. It is found that using imported pulp instead of indigenous pulp as raw materials
leads to increase in the cost of production. Since the company is not going to make any
compromise in terms of quality by way using indigenous pulp.
8. Comparison of fixed costs for 10 years, the costs have been increased due to
increase of cost of repairs and maintenance charges, rates and taxes insurance charges and
transportation charges.
9. The selling price of PWP has been gradually increased due to better performance
where as the selling price of NP has been reduced due to reduction of NP production.
10. As per the BEP Analysis, the actual sales were higher than the BEP sales except in
the year 1998-99 due to some changes in market trend. The company achieved more contribution
in 2002-03 after 8 years. Since the P/V Ratio in 2002-03 was 54% similarly in 1993-94 the P/V
ratio was 55%. Though the low contribution of NP, the company earns profit de to better
performance of PWP. During the year 1998-99 there was no margin of safety. Since the actual
sales was lower than the BEP sales.
11. As per Target Costing analysis the actual costs were higher than the target cost for 9
years except in the year 1994-95. If the reduced its excess cost, it could maximize its profit
during those years.
4.2. Scope of the Study
A study on costing techniques for profit maximization will give an idea about the cost of
each product, as the allocation and apportionment overheads to various products. Since profit
planning can be done only when the management has the information about the cost of the
product both fixed and variable, and the selling price at which it will be in a position to sell
products of the company. The profit earned or loss incurred by each product will be helpful to
the management to determine whether the production of a particular product should continue or
not. For the purpose of calculating both the fixed and variable cost of each product in order to
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maximize the profit, various costing techniques have been followed by all the companies. In this
study four costing techniques have used for finding how to maximize the profit of TNPL.
4.3 SUGGESTIONS
1. While making comparison of both absorption and marginal costing, the marginal
costing is better than absorption costing. Since marginal costing having some special features,
the following are the important reasons for selecting marginal costing as best one.
(I) Fixed costs are period costs in nature and it should be charged to the concerned
period irrespective of the quantum or level of production or sale. In absorption costing, the fixed
cost is also considered as cost of production. But fixed cost will not change, though the volume
of production will change.
Marginal costing does not take fixed cost while calculating cost of production. Therefore the
result will arise from marginal costing is more accurate than absorption costing.
(II) In absorption costing we can judge only how much selling price will be charged for
one unit. But marginal costing helps the management with more appropriate information for
making important decisions i.e. profit planning.
2. Comparison of marginal and CVP analysis techniques, CVP is an advanced technique
of marginal costing. Though marginal costing helps to make decisions by way of some
applications, it does not give the information’s like how much the company has to produce, how
much sales has to meet by the company to prevent loss and when the company reach Break Even
Sales for achieving no loss and no profit positions etc. But CVP technique will give this
information’s which will help the company to maximize profit.
And also helps the management to decide or to predict what will be the changes in sales,
production, profit and costs if the company will meet various critical situations. Therefore, when
compare to marginal costing with CVP analysis, CVP is advanced technique. The company
should follow this technique in order to decide sales and cost level to maximize its profits.
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3. As per the data analysis the production of NP has made loss to the company and the
contribution was also low. So the main problem of the management is to make profitable
production in NP or to take any alternative decision for maximizing profit. This study has
already found that the company can earn more profit without NP production. So it is better to
drop the production of Newsprint.
4. The company has been increased its selling price every year due to increase of fixed
cost. In order to earn more profit the company fixed the selling price over the cost of production.
But it is not possible for every time to increase the selling price to make profit. Due to heavy
competition the company has to fix the price based on competitor’s product price or perceptions
of the customers.
Therefore the company should follow the alternative solution instead of fixing high price. The
alternative solution is to reduce the costs. For this purpose the company should follow the target
costing technique.
5. The TNPL dose not follows the target costing technique. Even though the company
is running profitably for last four years, it is not possible to say the same condition will prevail in
future. Since the high competition, changes in Government rules and economic conditions will
affect the profitability of the company. In order to avoid this problem the company should adopt
Target Costing technique.
6. The company has to reduce its costs. During the year 2002-03 the excess of actual
cost is Rs.453 per tone. As per the Appendix .8 the power consumption of TNPL was higher
than the other paper mills during the year 2002-03. It has to minimize the power consumption to
reduce cost of production. In order to minimize the power consumption the company should
increase the running speed of the machine. As the paper is manufactured in the machine, the
running speed of the machine plays a major role in deciding the cost of the paper. Since if the
running speed of the machine is slower than the normal rate, it will consume more power, So in
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the available running hours the production has to be increased in order to improve the
profitability or to attain the desired level of profit.
7. During the paper winding the machine should run without any break or stoppage. In
some variety of paper the breakage of paper either in the dryer or at dry end will be more which
will reduce the throughput. This will adversely affect the profit per hour of the product. So for a
company like TNPL which has attained the nearly 100% utilization of the installed capacity. It
would be a better choice to study the profit based on throughput.
8. Another aspect which affects the profit per product is the finishing loss, which also
has due impact on the profit margin of the product. Finishing loss is the loss, which is incurred at
the paper finishing stage. In other words it may be termed as trim loss or cutting loss. As the
paper enters the reel cutting stage the edges are trimmed to get the paper in the required size.
So when the paper is manufactured and it enters into the finishing stage there should be a proper
planning, the different sizes in which the paper are required studied proper and the method if
permutation and combination the best mix of the different reels in which the finishing loss will
be minimized. Similarly the profitability will increase by way of reducing cost.
9. For the manufacture of certain grade of paper the company is using imported pulp.
Since the imported pulp gives paper of better quality. This factor has definitely plays a
significant role in escalating the cost of the product. Therefore the company has to make
arrangements to get this type of pulp in local area for avoiding high import cost.
10. The company has the capacity to produce up to 192000 tones. But the production
volume for the year 2002-03 is 167878 tones. It was lower than the previous year production
volume mainly due to stoppage of paper machines for 53 machine days for rebuild and the
teething problems encountered in the machines during post rebuild stabilization phase. But
during the year excess cost was Rs.453 per tone. If the company would produce 174600 tones, it
could reduce the fixed cost.
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