Corrugated box industry facing pressure on margins

The Rs 5000 crore Indian corrugated box industry, primarily belonging to the small scale sector, is reeling under tremendous margin pressures owing to spiralling input costs and the failure to raise products prices. The situation has opened the entry door for substitutes, including plywood boxes.

"As end-users are not ready to pay higher rates for corrugated boxes, we cannot raise our prices ," said Kirit B Doshi, president, Federation of Corrugated Box Manufacturers of India.

About 5,000 corrugated box manufacturers both from the organised and unorganised sectors have slowed down their activities despite customer demand. The industry provides direct employment to about 2 lakhs, besides indirect engagements to many more.

About 19 lakh tonnes kraft paper is consumed annually. The prices of kraft paper, the major raw material of corrugated boxes, have increased by up to Rs 3000 a tonne based on the quality of paper. This comprises around 8-10 per cent of the total raw material cost increases. The frequent rise in kraft paper is jeopardising the functioning of corrugated box manufacturers, Doshi claimed.

Aggravating the situation further, the prices of other critical inputs have shot up in the last couple of months. Stitching wire, adhesives, ink, power and so on have gone up primarily owing to the hike in the costs of steel and other commodities. Moreover, an increase of 4 per cent in adhesives and ink prices adds to the total accumulative effect of the 10-12 per cent increase in the raw material costs.

The corrugated packaging industry has been adequately meeting the packaging requirements of the nation by successfully substituting wooden boxes and plywood boxes and thereby contributing to environmental protection and ecological balance.

The present state of the industry may however result in the use of alternative packaging materials which may not be eco-friendly and against the National Policy of Conservation of Forest Resources, an industry source cautioned.

The excise duty and custom duty of 16 per cent and 10 per cent respectively is also hampering the industry badly. Hence, the Federation has appealed to the government to consider the long standing issue of excise duty and import duty reductions to 8 per cent and 5 per cent respectively.

Corrugated boxes are packaging materials used to pack medicines and diary products.

They are also used by food processing units, educational instrument manufacturers, fruits, vegetables, hosiery manufacturers and the alcohol industry.