Mysore Paper Mill takes a curtain call

The countdown has begun for the closure of 82-year old state-owned paper and sugar factory, Mysore Paper Mills (MPM). The Labour Department accepted the MPM management’s application for closure and issued an order on June 28 this year giving permission to shut down the company under Section 25-O (2) of the Industrial Disputes Act, 1947.

However, the formal closure of the factory is subject to the outcome of the court cases pending in the Karnataka High Court filed by some of the employees who are seeking a better VRS package, according to sources close to the development. Some have even contested the closure of the factory.

The company had stopped production in November 2015 citing losses and the Karnataka government had allocated Rs 345 crore towards the voluntary retirement scheme (VRS) in August 2017 and severance package for the workers. Out of 1,035 workers, 811 have accepted VRS and the remaining 224 workers have been deputed to various other departments of the government.

Earlier, in April this year, the management of Mysore Paper Mills Ltd had sought approval from the Karnataka Labour Department to wind up its manufacturing activities citing net losses. The accumulated losses of the company stood at Rs 1,159 crore as on March 2018.

The move came after a decision by the government to lease out operations of sugar and paper divisions of the company to a private entity.

MPM was founded by Krishnaraja Wodeyar Bahadur, the Maharaja of Mysore in 1936 at Bhadravati in Shivamogga district. Later, in 1977, it became a government company. Currently, the state government owns 64.74% stake in the company, while the rest lies with the public including IDBI Bank and LIC. The company’s shares are listed on the Bombay Stock Exchange. However, trading in its stock was suspended in June 2017 due to penal reasons.

The government has now initiated steps to lease out the mill’s units to private parties. With bare minimum staff operating on a contract basis, waiting for the closure of pending court cases, the company is now counting its days before the curtains go down formally.

In 1981, MPM tried to raise money through equity. About 1/5th of the shares were held by the Karnataka government, while the rest was owned by the public. MPM established a sugar mill with 2,500 tonnes per day (TPD) in the same year. This doubled up as a provider of bagasse, which formed the raw material for its paper mill. The company manufactured newsprint primarily.

The Mill also had a co-generation power plant, which used up pith and coal as the fuel, and produced power, up to 41 MW. The steam from this was used to dry the newsprint.

Modernisation

By the end of March 1983, the plant underwent a modernisation exercise, with new machinery being fully installed. Financial assistance from Overseas Economic Cooperation Fund (OECF), Japan, (now replaced by Japanese Bank of International Cooperation (JBIC)) enabled this project, spearheaded by the Government of India and the Government of Karnataka.

The company, in 1984, decided to integrate the sugar mill with the paper plant. The overall production of paper and newsprint declined to 91,356 tonnes in 1990, due to poor quality and inadequate supply of coal and loss due to industrial unrest.

In 1991, another effort to streamline the bleaching process and pulp cleaning system helped improve the quality of the paper. A new pith-fired boiler was also installed.

In 1997, the company set up an additional 10 MW bagasse-based cogeneration plant. Another ambitious expansion-cum-modernisation plan for the sugar factory with an initial investment of Rs 80 crore was planned.

By this time, the project became capital-intensive and unviable. Investment Information and Credit Rating Agency of India Limited (IICRA India), in 1998, downgraded the fixed-deposit (FD) programme of Mysore Paper Mills Ltd from MA - to MB+, citing ‘inadequate safety’.

The power plant and sugar mill were never economically viable. Any sugar mill that is less than 5,000 TPD wasn’t viable, as the scale reduced margins. The company operated with full capacity only once in its history in the mid-90s when sugar mills in Shikaripura area stopped functioning.

The disruptive changes brought in by the information era in the 2000s propelled MPM into deep loss. The technology wasn’t enough to improve the quality and quantity of the output. When the government opened the newsprint import for all under Open General Licence, in 2002, the MPM suffered due to competition from cheaper options, mainly newspapers that went for imported newsprint.

MPM then converted the existing business to writing and printing papers. It became famous for Bison brand Azure Laid Paper or Ledger paper. However, the government was no longer interested in modernising the machinery. 

MPM closed its functioning partially in 2014. A multitude of pleas in National Green Tribunals and expert-monitored trial operations didn’t help in regaining the lost licence to operate the paper and sugar mills.

The paper mill stopped totally in 2015, though the sugar crushing and manufacturing continued till 2016, monitored by the court, and finally stopped.

With its network eroded completely, Board of Industrial and Financial Reconstruction (BIFR) listed it as a sick company. Subsequently, all attempts to revive the company failed leading to a decision by the management to close down.

According to employees, who are contesting the proposed closure of the company, there were enough grounds for the revival of the company as it has good assets and linkage to raw materials. The company holds around 800 acres of land that includes acacia and Nilgiri plantations, office and factories.

(With inputs from Mahesh Kulkarni)