Devastating fire at Khanna Paper Mills, Amritsar

Insurance offers protection against sudden unforeseen losses – Fire Insurance is one of the primary insurance coverages offered – in India, it is the Standard Fire & Special Perils Policy, which besides Fire specifies the perils of : Lightning; Explosion/Implosion; Aircraft damage; Riot, strike & Malicious damage; Storm, Cyclone, typhoon, tempest, hurricane, tornado, flood & inundation; Impact damage; Subsidence and landslide including rockslide; Bursting and/or overflowing of water tanks, apparatus and pipes; missile testing operations, leakage from automatic sprinkler installations and bush fire. 

The rates are charged per mille that is x rate for Rs.1000 of sum insured. After de-tariffing, rates have gone down abysmally and the Insurers have been suffering losses on this portfolio which had hitherto been good.  Now there is some sad news for the industry – a  massive fire has engulfed the country’s largest paper mill, Khanna Paper Mill in Punjab, around 1pm on 12^th June 2012 putting the entire 100-acre facility under flames. No casualties have been reported so far.

There have been conflicting reports on the magnitude of the loss – with some estimates putting the loss at Rs.250 crore + - which sure would affect the portfolio of the Insurer, who sure would provide indemnity to the Insured. Depending on their reinsurance arrangement and extent of retention, this loss sure would rankle, more if this had been underwritten by any Private player, who would start viewing ‘paper mills’ as bad risks.

Paper products are among the top happening industries and the  Indian Paper Industry is  reportedly among the top 15 global players today, with an output of more than 6 millions tones annually. Paper Industry in India is riding on a strong demand and on an expanding mood to meet the projected demand of 8 million tons by 2010 & 13 million tons by 2020. Demand for paper as well as paper board has increased considerably since independence thus resulting in the set up of a few major paper mills across the country.

One of the major players in this industry is  Khanna  Paper Mills Private Limited.   It is  an ISO 9001:2000 certified company, manufacturing quality paper and board by recycling of waste paper as the feedstock  for domestic consumption for a little over 4 decades.  Although paper is traditionally identified with reading and writing, communication has now been replaced by packaging as the single largest category of paper use at 41% of all paper used.  Their web claims that Khanna Paper Mills is the largest paper mill production house of its kind and is among the top ten in paper production in India.  According to the website information, Khanna today produces around 3,30,000 MT of board and writing and printing paper. Khanna has also become the first paper mill in India to produce high quality writing and printing board from 100% deinked woodfree recovered paper. Khanna Paper Mills distribution network of 100+ dealers has a reach not only over the length and breadth of India but across the globe with a focus on demand markets and exporting their products to the SAARC countries, Africa and the Middle East.

The paper mills segment needs big workspace and this particular unit is stated to occupy sprawling 100 acres of mill campus in Amritsar, Punjab,  around 15 Km away from the International Rajasansi Airport. 

A massive fire which has engulfed the country’s largest paper mill, Khanna Paper Mill in Punjab, is being heard with concern in the industry circles.  The intensity of the fire was so high that Army had been called for help as around 40 fire tenders struggled to douse the fire.  Going by the stock position, there could have been 70,000 tonnes of newsprint, [which is highly combustible], when the fire started.  The mill came into limelight recently for exporting newsprint to Pakistan via the Wagah border.  Quoting Fire officials newspaper reports suggest that  it may take two to three days to put out the fire completely.  The exact cause of the fire has not been ascertained yet.

Reports suggest that the  engineering wing of the Army has joined the fire services to douse the fire, but they have not been able to reach the epicenter of the fire, which is spreading at a rapid pace. The affected area has been cordoned off. The nearby colonies are also being evacuated.

Sad that the factory has sustained such a major loss – a loss to everyone.

With regards – S. Sampathkumar.