Rising input costs cripple packaging industry

The domestic packaging industry has begun to feel the heat of inflation on their already slim profit margins. Corrugated box manufacturers are incurring heavy losses as they struggle to keep prices low in spite of the steady increase in raw material and manufacturing costs.

Prices of the main raw material, craft paper, have risen by more than 45 per cent over the past four months. Paper mills have increased rates twice in the last two months by Rs 2,000 a tonne, due to lesser availability and higher demand.

COUNTING THE COSTS

Prices of the main raw material, craft paper, has risen by more than 45 per cent over the past four months

 

Paper mills have increased prices twice in the last two months by Rs 2,000 a tonne

 

The soaring fuel prices have pushed up transportation costs

 

Cost of starch, used in manufacturing, has gone up by 50 per cent in the last year

 

Prices of galvanized iron wire have also rose by almost 35 per cent

The soaring fuel prices have pushed up transportation costs and the cost of starch, used in manufacturing, has gone up by 50 per cent in the last one year. Prices of galvanized iron wire, used for stitching the boxes, have also appreciated by almost 35 per cent, added to the costlier adhesives.

The country has about 35,000 box-makers, who consume about 3.5 million tonnes of paper everyday. The industry, which conducts business of more than Rs one lakh crore annually, employs more than 7 million people.

Kanpur alone has about 300 corrugated box-manufacturing units, employing more than 3,000 people. About 300 tonnes of paper is consumed here daily.

The Federation of Corrugated Box Manufacturers’ Association (FCBMA) President, Sanjeev Dhingra, told Business Standard that the prime reason for the present crisis was the imposition of 30 per cent duty tax on imported paper.

“The paper mill owners have indiscriminately hiked prices and we are compelled to buy low-quality paper at the prices dictated by them,” he added.

He said traders are being forced to manufacture and sell their products at a loss to honour prior agreements with customers. “Agreements are signed in March every year to supply boxes at the prevailing rates throughout the year. We had not expected such a meteoric rise in manufacturing costs. We have already lost 30 per cent of our business in the last two months,” he said.

The Uttar Pradesh Corrugated Box Manufacturers Association President Navin Jain said that the price of paper used for manufacturing has risen by more than Rs 8 a kg, bringing the present cost to Rs 27 from the previous Rs 18 a kg in the last four months.

“If the present condition prevails, the industry is heading for big trouble and may become sick in no time,” he said.

Corrugated boxes are used in packaging and transportation of goods such as toothpaste, fruits and other FMCG and electrical products. It provides economical, flexible and high-strength means for packaging. The emergence of corrugated packaging machines from neighbouring China and Taiwan is also giving serious competition to local manufacturers.

The FCBMA has decided to go on strike from 5th to 10th of this month demanding quick relief measures to ameliorate the ailing industry. “If our demands are not met, we may be forced to go on strike sine die,” said Dhingra.

According to traders, demand for these boxes is increasing at the rate of 25-30 per cent annually.

“The short supply of these boxes will cripple our business,” says Hari Om Gupta, a wholesaler in Kanpur.