Trade sources said that kraft paper prices are likely to have surged the highest in any quarter. Trading currently at Rs 31 a kg, kraft paper prices have risen by Rs 7 a kg across all varieties since January and Rs 2-3 a kg in March alone.
The sharp increase in the cost of this critical raw material has put a question mark on the financial viability of corrugated box making units, as there is no substitute for kraft paper. This is why corrugated box manufactures have sought a proportionate hike in the prices of the packing material from consumer industries, including large companies.
"Unless box users, including large fast moving consumer goods (FMCG) companies grant a minimum 23 per cent price increase quickly, units in this industry will face closure shortly. At the same time, paper mills are being requested not to shut operations to avoid stock-out situations of boxes. Maintaining the price of corrugated boxes at the current level would force closure of production lines," said Kirit Modi, President, Indian Corrugated Case Manufacturers Association (ICCMA), a pan-India body that represents over 200 large producers contributing around 40 per cent of India's total corrugated box output.
Over 12,000 existing corrugated box making units produce nearly 5.2 million tonnes a year of boxes with an estimated market value of Rs 18,000 crore. While 200 automated manufacturing units contribute nearly 40 per cent, about 2,200 semi-automated and partly organised units contribute another 40 per cent. Over 9,500 units in the unorganised sector contribute the rest.
"There is stiff competition among corrugated box manufacturers. If one producer seeks a price increase from the consumer, another one becomes ready to supply at the price decided earlier or even lower. This competition from within the industry, therefore, prevents manufacturers from seeking high prices from user industries," said Modi.
"We request all concerned government agencies to rescue box manufacturers from possible closure. Artificial scarcity created by such closures by kraft paper mills would jeopardize the entire trade. That would also result in displacement of workmen employed in this industry, which would be inevitable unless all stakeholders come to the rescue of box units," said G K Sardana, President, Federation of Corrugated Box Manufacturers of India (FCBM), representing over 2200 mills across the country.
Corrugated box manufacturers will soon write to the Ministries of Industry, Small and Medium Enterprises and the Prime Minister's Office seeking their intervention in this matter.