The Rs 15,000-crore corrugated box industry is reeling under tremendous margin pressure due to rising input costs and the industry's failure to raise prices. Manufacturers said that that in the last three or four months, paper mills had raised the prices of kraft paper - the main raw material for the industry - by Rs 2,000-4,000 per tonne, but the final consumers (buyers of corrugated boxes) are refusing to pay higher prices despite repeated requests.
The industry intends to increase the prices of corrugated boxes by 18-20 per cent in the northern region and by 15-16 per cent in the western and southern regions. They also want the import duty on kraft and waste paper to be abolished.
There are over 10,000 corrugators spread across India, with average tonnage conversion of 45 lakh tonnes per annum. The industry is fragmented and dominated by micro, small and medium enterprises (MSMEs), and employs more than five lakh workers directly and indirectly.
Ramchand H Arora, the president of the Federation of Corrugated Box Manufacturers of India (FCBM), told Business Standard, "The margin for the packaging industry has shrunk almost to nil because of the price rise in almost all raw materials, mainly kraft paper, which accounts for 70-75 per cent of the total input cost. In the last two to three months, paper mills have hiked their prices by Rs 3,000-4,000 per tonne in the northern region, and by Rs 2,000-2,500 per tonne in the western and southern regions. Apart from this, the cost of raw material like glue and stitching wire has gone up steeply, and the prices of petroleum products and frequent power cuts and shortage of manpower have worsened the situation."
"Despite all these adverse conditions, customers are in no mood to agree to an adequate price increase. Due to this the box industry is suffering huge losses. If the paper mills keep increasing their prices often and if box users resist a price increase, then many manufactures will have no option but to shut operations," he added.
Industrialists added that the shutdown of this industry would have a drastic effect on the industry as a whole as packaging material is one of the most significant parts of the supply chain.
According to a FCBM member, the prices of raw materials like adhesives, stitching wires, and ink have increased by 15-20 per cent in the last two to three months. Besides, transport costs have also gone up, due to hikes in diesel prices. Industry members added that the industry, which comprises thousands of small players, are not united, and therefore are always dominated by buyers.
Industrialists mentioned that the corrugated packaging industry has been adequately meeting the packaging requirements of the country by successfully substituting wooden and plywood boxes, thereby contributing to environmental protection and the ecological balance. They expect the government to intervene to resolve their problems.
Mukesh Jain, president of the Himachal Pradesh Corrugated Box Manufacturers Association (HPCBMA, a regional association that is a member of FCBM), said, "The government should intervene in accordance with the Competition Act, which would help corrugators to procure materials in time and save the industry."
Arora demanded, "We request box users to give minimum 18-20 per cent increase in Northern region and 15-16 per cent increase in Western and Southern region to save the box manufacturing industry. Further, we want the government to save the industry by bringing down the import duty on craft paper and waste paper to zero per cent."
