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)

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 :

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 datas and information in completing this satisfactory Project.

Study on Profit Maximization

Chapter - 1 INTRODUCTION 1.1 Organization Profile 1.2 Concepts 1.3 Need for this study 1.4 Problem 1.5 Objectives 1.6 Procedure methodology Chapter 2 2.1 Analysis of the situation 2.2 Existing of the system 2.3 Need for the change in system 2.4 Proposed system Chapter 3 3.1 Present conditions with special reference to the organization Chapter 4 Summary, Conclusion and Suggestion 4.1 summary of the system 4.2 scope of the system 4.3 Suggestion

Page 8 16 17 18 19 19 20

23 41 47 48

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101 103 103

LIST OF FIGURES FIGURE

2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 2.1.6 Level of Variable Cost Level of Fixed Cost Profit and Loss under Absorption Costing Contribution of NP and PWP Profit and Loss under Marginal Costing Comparison Of BEP and Actual Sales

PAGE NO
27 27 30 37 37 41

LIST OF TABLES
TABLES 2.1.1 Variable Cost, Fixed Cost and Sales From 1993-94 to 1997-98 2.1.2 Absorption Costing From 1993-94 to 1997-98 2.1.3 Analysis of Profit & Loss from 1993-94 to 1997-98 2.1.4 Variable Cost, Fixed Cost and Sales From 1998-99 to 2002-03 2.1.5 Absorption Costing for the Year 1998-99 2.1.6 Analysis of Profit & Loss from 1998-99 to 2002-03 2.1.7 Analysis of Contribution and Profit & Loss from 1993-94 to 1997-98 2.1.8 Marginal costing for the Year 1998-99 2.1.9 Analysis of Contribution and Profit & Loss from 1998-99 to 2002-03 2.1.10 Analysis of Break Even Sales from 1993-94 to 2002-2003 (Rs.in lakhs) 2.1.11 Excess of Actual Cost/MT over Target Cost 3.1.1 Targets and Achievements of Indian Paper Industry Under Various Five-Year Plans 103 41 PAGENO 23 24 25 26 28 29 31 32 33 36

CHAPTER 1 INTRODUCTION

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.

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 Akbars 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.

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

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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, 4050% 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.

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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

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pre-consumer (recycled material that has been printed but did not reach its intended end use, such as waste from printers and unsold publications).

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 200F (93C) 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.

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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

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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.

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-mch, 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

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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. 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, 8 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.

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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.

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 expansions capital outlay was Rs.585crores. The commercial operation of expanded capacity started on 31/1/1996.

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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. 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.

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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 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-adays 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

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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. 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

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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 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

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In this study, there are four costing techniques have employed. There are 1. Absorption costing 2. Marginal costing 3. Cost-Volume-Profit Analysis

CHAPTER 2 ANALYSIS

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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 200203. 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

Variable Cost Year NP 1993-94 1994-95 1995-96 1996-97 1997-98 3195 2780 2210 5083 7283 PWP 5702 6134 9013 16061 16427

Fixed Cost NP 2357 2154 2065 3240 5677 PWP 4208 4840 8423 10236 12805 NP

Sales PWP 12005 13583 22277 28157 29348

7113 6299 5665 9248 10745

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TABLE 2.1.2 Absorption Costing From 1993-94 to 1997-98

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Particulars

1993-94 NP PWP 5702 4208

1994-95 NP 2730 2154 PWP 6134 4840

1995-96 NP 2210 2065 PWP 9013 8423

1996-97 NP 5083 3240 PWP 16061 10236

1997-98 NP 7283 5677 PWP 16427 12805

Variable cost

3195 2357

Add: Fixed cost Total Cost 5552 9910 4884 10974 4275 17436 8323 26297 12960 29232

Profit Loss

or 1561 2095 1415 2609 1390 4841 925 1840 (2215) 116

Sales

7113

12005

6299

13583

5665

22277

9248

28157

10745

28348

TABLE 2.1.3

Analysis of Profit & Loss from 1993-94 to 1997-98

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Profit & Loss Year NP 1993-94 1994-95 Interpretation As per 1995-96 1996-97 1997-98 1561 1415 1390 925 (2215) PWP 2095 2609 4841 1860 116

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. 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) Variable Cost Year Fixed Cost Sales

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NP 1998-99 1999-00 2000-01 2001-02 2002-03 8352.90 4999.82 8883.09 4742.08 2566.12

PWP 14457.10 18754.42 18436.05 20983.90 18452.43

NP 7251.60 4109.09 6338.9 8592.82 2412

PWP 12246.43 15413.27 13155.83 15898.39 17344.17

NP 14923.73 8102.86 16847.71 8980.58 4255.77

PWP 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 11125 = Rs.274.46

FIGURE 2.1.1

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25000
FIGURE 2.1.2

20000

ariable cost

20000 15000 18000 16000 10000

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TABLE 2.1.5

Absorption Costing for the Year 1998-99

(Rs.in lakhs) Particulars Variable cost Add: Fixed cost NP 8352.90 7251.60 PWP 14457.10 12446.43

Total cost Add: cost of opening stock

15604.50

26905.53

Nil

274.46

Total cost Profit or Loss

15604.50 (680.77)

27177.99 40.75

Sales

14923.73

27218.74

Table 2.5

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Profit & Loss (Rs.in lakhs) Year NP 1998-99 1999-00 2000-01 2001-02 2002-03 (650.77) (1006.05) 1625.72 645.68 (722.35) PWP 40.75 2424.92 5099.57 4800.37 6007.94

TABLE 2.1.6 Analysis of Profit & Loss from 1998-99 to 2002-03

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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. 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

7000
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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 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) Contribution Year NP 1993-94 1994-95 3918 3569 PWP 6303 7449 3658 4024 Profit

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1995-96 1996-97 1997-98

3455 4165 4982

13264 12096 9392

6231 2785 161

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 199697 & 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)

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Particulars Sales Less: Variable cost

NP 14923.73 8352.90 6570.83

PWP 27218.74 14457.10 12761.64 147.49

Total 42142.47 22810 19332.47 147.49

Less:

cost

of

Nil

opening stock Contribution Less: Fixed cost Profit or Loss 6570.83 12614.15 19184.98 19637.63

(425.65)

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TABLE 2.1.9 Analysis of Contribution and Profit & Loss from 1998-99 to 2002-03 (Rs.in lakhs) Contribution Year NP 1998-99 1999-00 2000-01 2001-02 2002-03 6570.83 3103.04 7964.62 4238.50 1689.65 PWP 12614.15 17838.19 18255.41 20698.76 23352.11 (452.65) 1418.87 6725.39 5446.05 5285.59 Profit

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Interpretation 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 200102 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

25000
FIGURE 2.1.5

20000
36

7000 6000 5000 4000 3000

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

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

it and Loss

I. Pricing Decision

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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 Sales Less: Variable Cost (1000 * 12520) Contribution Less: Fixed cost Profit

NP 277 125.20

151.80 117.68 34.12

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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 The contribution/Mt The contribution of PWP The contribution /Mt = Rs.1689.65lakhs = Rs.8243 = Rs.23352lakhs = Rs.15845

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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.

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Fixed Cost BEP in units = (4.1) Selling price Per unit BEP amount = Variable cost per unit

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 = Sales * 100 (4.2)

(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.

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Actual Sales - BE Sales Margin of Safety = Actual Sales * 100 (4.3)

TABLE 2.1.11 Analysis of Break Even Sales from 1993-94 to 2002-2003 (Rs.in lakhs)

Year 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02

BEP Sales 11916 12343 17197 32722 34411 43062 42694 39793 39748

Actual Sales 19805 20447 28705 39671 40093 42142 44695 53539 50466

Margin of Safety 39.83% 39.63% 40% 17.5% 14.17% Nil 4.47% 26% 21%

( P/V Ratio) 55% 57% 61% 41% 41% 45.56% 47% 50% 49%

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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

60000
Break Even Chart 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

50000

43

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) Fixed Expenses + Desired Operating Profit The required sales volume = P/V Ratio Fixed Expense for 44

the Year 2002-03 P/V Ratio

= 19756.17 = 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 = Rs.7741lakhs (iii) Additional Sales Volume Required Offsetting a Reduction in Selling Price

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Suppose that TNPL reduce its selling price at 10%, the additional sales volume

Desired Profit + Fixed Expenses = Revised P/V Ratio Desired Profit Current Year Selling Price = Rs.5340 = Rs.27442/ Mt. (4.6)

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 The effect of increase in fixed costs will be to raise the BEP of the firm.

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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 BEP for proposed Facilities = P/V Ratio = Rs.36332lakhs (Present Fixed Cost + Additional Fixed Cost) (4.8)

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 = (19756.17 + 1000 + 6657.04) * 0.54 = Rs.50765.20lakhs (v) Effect of Changes in Variable Cost Assuming an increase of variable cost by 10% per tone. (4.9)

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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 Selling Price 13772 = 27442 = 50% Revised BEP = Fixed Cost P/V Ratio (11) * 100 * 100 (10)

19756.17 = 0.50 = Rs.39512lakhs Target Costing

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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 Target Years 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 Selling Price/Mt 18640 21495 24695 25220 25400 25714 25054 25960 26540 26616 Target Profit Margin 15% 20% 12% 11% 5% 7% 5% 7% 9% 10.45% Target Cost/Mt 15844 17196 20250 22446 24130 23914 23802 24143 24151 23835 Actual Cost/Mt 16339 17041 21456 22559 24728 24108 24194 24495 24539 24288 Excess of Actual Cost/Mt 495 Nil 276 113 598 194 392 352 388 453

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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.

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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. 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 acidfree 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.

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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 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.

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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 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

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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. 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 BreakEven Analysis.

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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 firms revenues and total costs will be exactly equal. The Break-Even point may be defined as a point at which the firms total revenues are exactly equal to total costs, yielding zero income. The noprofit, 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? 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.

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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

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CHAPTER 3 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.

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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. 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.

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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. 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, watersoluble 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

59

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 Sjstrm's book.

Chemical pulp mills 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

60

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. 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 kWh per tone)

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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). 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 62

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 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

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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 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

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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 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.

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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 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.

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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 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.

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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.

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

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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 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

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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. 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 70

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.

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 71

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 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-sidednessmaking 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.

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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 watermaking 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 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 higherdelivering significant steam savings or speed increases.

Dryer section 73

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. 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

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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 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.

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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

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. 76

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 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

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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 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 todays white paper manufacturing uses fluorescent whitening agents (FWA). Because the ISO standard only

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measures a narrow range of blue light, it is not an adequate measure for the actual whiteness or brightness. TAPPI Brightness 84 92 96 97 ISO Brightness 88 104 108 109+

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.

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

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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.

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 80

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 Chlorine Sodium hypochlorite Chlorine dioxide Extraction with sodium hydroxide Oxygen Alkaline hydrogen peroxide Ozone Chelation to remove metals Enzymes (especially xylanase) Peracids (peroxy acids) Sodium dithionite (sodium hydrosulfite) Letter designation C H D E O P Z Q X Paa 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.

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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 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

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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 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. 83

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 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

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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 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 1920% 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.

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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 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

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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). 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 87

(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 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:

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carbon monoxide ammonia nitrogen oxide mercury nitrates methanol benzene Volatile organic compounds, chloroform.

Mechanical pulp mills 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.

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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 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

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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 ecofriendly paper producer in the world. Symbolic of TNPLs commitment to the environment, the World Wide Fund for nature (WWF) has entered into a pact with TNPL to use the Panda logo in TNPLs 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: 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/m 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

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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 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

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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 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

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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 todays youth are the future of India, TNPL conducts TALENTEXPO 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 The company produces different variety of products. They can be divided into two categories. 1. Newsprint 2. Printing and Writing Paper The consumers of TNPLs 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

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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; 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 manufactures Association (IPMA) for its overall performance in the year.

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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 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.

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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 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%.

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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-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. 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

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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 Manufacturing facility in Sirpur-Kaghaznagar (Andhra Pradesh) Registered office in Hyderabad, India Corporate office in Gurgaon, India Listed on the Mumbai and National Stock Exchanges (India)

Where we are located

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.

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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 Companys wide range of products are marketed in India and internationally in Sri Lanka, Malaysia, Bangladesh, Nepal, UAE, South Africa, Singapore, Nigeria and Mauritius.

The Companys 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; 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 Sirpurs 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.

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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 companys interest. * abide by all applicable laws and regulations including the companys 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. * 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 companys legitimate interest in mind and being aware of the companys responsibility towards its stakeholders is an essential element of the companys long term excellence.

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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 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).

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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)

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.

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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 societys 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 Surplus/ Targe t Achievemen t 2.14 4.30 6.69 7.30 9.92 11.37 18.16 30.14 36.70 0 -0.27 -1.64 -0.20 0 -1.63 1.66 3.14 -1.80 2.03 3.56 7.11 6.35 8.50 9.50 12.50 18.00 32.00 32.00 Short fall

Production Surplus/ Target Achieveme nt 1.09 3.50 5.58 6.58 8.25 9.00 12.36 18.08 34.80 fall -0.94 -0.06 -1.53 0.23 -0.25 -0.50 -0.14 0.14 2.80 Short

First Plan (1951-56) Second Plan (1956-61) Third Plan (1961-66)

2.14 4.57 8.33 7.50 ** 13.00 16.50 27.00 38.50 38.50

Annual Plan (1966-69) Fourth Plan (1969-74) Fifth Plan Sixth Plan (1974-78) (1978-83)

Seventh Plan(1985-90) Eighth Plan (1992-97) Ninth Plan (1997-02)

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CHAPTER 4 Summary, Conclusion and Suggestion

4.1 SUMMARY OF THE SYSTEM

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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. 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.

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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. 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.

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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 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.

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(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 informations 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 informations 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.

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 competitors 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.

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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 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.

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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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