Faced with the opaque pricing system of raw materials that make the corrugated box industry uncertain, the Western India Corrugated Box Manufacturers Association (Wicma) has tied up with Crisil, a leading rating firm, to develop CoDex, an index for tracking input cost movement in western India.
Manufacturers of corrugated boxes have long felt the need for an accurate, scientific and credible mechanism for tracking the costs of key raw materials which will help them present a fair and accurate idea of the cost.
Given the strong presence of the unorganised players in the corrugated box industry and its major feeder industries like paper and adhesives, such a mechanism would deliver a much-needed transparency to the whole chain.
The western region accounts for 30-35 per cent of corrugated box output in India. “CoDex will be of enormous value not only to corrugated box manufacturers but also to suppliers and consumers of the corrugated box industry. It will enable these players to track movements in cost of corrugated boxes in an accurate, scientific and credible manner, especially as CoDex will use data collected independently by Crisil Research,” says Nagarajan Narasimhan, director, Crisil Research.
According to Pankaj Shah, chairman, Wicma, R & D Center, who spearheaded this project, “CoDex will bring in much needed transparency and authenticity to measure the cost movements. It is hoped that CoDex will provide credible information tool for all stakeholders in the corrugated box industry and create a better platform to react to such cost movements. CoDex uses a rigorous model for computing the total input cost of a corrugated box. Wicma and Crisil Research have together defined the usage norms as the relative proportion of each input consumed for making a corrugated box. Besides paper, which is the main raw material, the usage norms also take into account the cost of adhesives, power, fuel, labour and other inputs.
Together, these inputs cover the full cost of regularly used corrugated boxes. Prices of these inputs are independently collected by Crisil Research from suppliers in Maharashtra, Goa, Daman, Silvassa and border areas of Vapi. Based on these prices, the model computes the CoDex value. Specialty and infrequent used materials such binding cloth, multi colour printing, partitions/fitments, lamination and coatings etc. are not included.
Crisil Research has completed the first update of CoDex by compiling raw material prices between January 17-21, 2011 versus the same period last year. The CoDex value as on January 22, 2011 was 122.9, an increase from its base value of 100 as on January 22, 2010. This change in the index value shows that the cost of making a corrugated box has gone up by almost 23 per cent in western India in the last one year.
