Waste paper is not “waste” after all. It is a flourishing business that is now attracting big players

Be it newspapers, magazines, bills, memos, diaries or notebooks, they all land with the scrap dealer after being used. But what happens after that?

Well, after that the waste paper changes several hands before reaching the recycling mills. The paper is then de-inked, made into pulp and again into paper, before it reaches the market as recycled paper. In this story, DARE tracks down the route that waste paper takes before reaching the paper recycling mills, which could be a lucrative business opportunity.

The industry landscape
The operating capacity of the Indian pulp and paper industry has been estimated to be 8.5 million tons by the Indian Agro and Recycling Paper Mills Association (IARPMA). Paper mills can be broadly divided into three types—wood-pulp-based mills, agro-residue-based mills (non-wood-based segment) and waste-paper-based mills. According to the IARPMA, waste-paper-based mills account for almost one third of the industry at approximately 40 percent, whereas the wood-based mills account for 29 percent and the agro-residue-based mills comprise 31 percent of the total industry pie. Despite the fact that more than one third of the industry is dependent on waste paper, waste paper recovery is very low. In fact, according to available figures, only 2 million tons of the paper finally finds its way to the recycle mills. This means that nearly 6.5 million tons of paper reaches landfills and is lost forever.

It has been estimated that the recovery rate of paper in India is only 26 percent, compared to Thailand’s 45 percent, China’s 38 percent, and Germany’s 80 percent. This is mainly due to low awareness among people as well as the unorganized nature of the business. In India, waste paper collection is mainly done by rag pickers and kabariwallahs (scrap dealers), who collect waste in a crude manner. This makes India highly dependent on waste paper imports from countries like Canada, the USA, the European Union and Middle East. Within India, waste paper is mostly collected from the western region that comprises 39 percent, followed by northern region at 28 percent, southern region at 23 percent and eastern region at just 10 percent.

The business model
As mentioned above, waste paper collection in India is very low compared to other countries, and whatever paper is collected passes through several hands before reaching the paper mill. Briefly, it passes through three middle men—the scrap dealer, the local area dealer and the wholesaler—before it is converted back to reusable paper. Nitin Goel of GreenOBin, an organized player in this sector says, “A street raddiwala cannot directly go and sell to the recycler due to the limitation on the collection amount. Any paper mill based on waste paper as their raw material has got a daily requirements in tons and the street raddiwala cannot cater the same daily.” The cost escalation during this process is twice the amount when compared from a street scrap dealer to the paper recycler.

The first link to the chain starts with the scrap dealer, also known as the kabariwallah, who collects waste from homes. The scrap dealer’s major cost heads are a cycle, a weighing scale and some sacks. This dealer collects all kinds of waste from homes like old newspapers, magazines, loose paper, old bottles, metal waste, and so on. He does a basic level segregation and sells his goods to the local dealer. In terms of paper waste, newspapers are what hold the key to his profits because of large quantity compared to magazines, old books and loose paper. A scrap dealer tells us that these days a number of households generally get at least two papers and moreover, the weight of the newspaper is also more because a number of add-on supplement papers and content. He buys the newspaper at approximately Rs 5.50 per kg from the households and sells it to the local dealer at Rs 7, whereas magazines go at approximately a rupee less because of the glossy paper used. Ultimately, his profits depend on his negotiating skills—the better his negotiating power the more profit he earns.

After collecting all the waste, the scrap dealer sells his goods to the local area dealer. The major cost heads of this local area dealer is space to store different kinds of waste, a weighing scale, and manpower to segregate the waste. This local dealer has several scrap dealers working for him. For example, Mohammad Irfan, a local area scrap dealer in Delhi, has 25 scrap dealers working for him. These scrap dealers sell all their waste, be it paper, bottles, or metal, at the end of each day. After collecting the waste from the dealers, another level of basic segregation happens at this level. In case of newspaper waste, each newspaper has to be straightened, sorted and bundled neatly before it can be sold further. These dealers work with different wholesalers—there are separate wholesalers for different kinds of waste. In the case of newspaper waste, he buys it from the scrap dealer at Rs 7 (the current rate) and sells it to the wholesaler at approximately Rs 7.20 (a ballpark figure). This is when the transportation is taken care of by the wholesaler. This price fluctuates and depends on the demand and supply of paper in the market.