The Rs 18,000-crore corrugated box industry, which is in dire straits due to rising kraft paper prices and supply disruptions, has urged the FMCG industry to absorb the 23 per cent spike in raw material cost.
The corrugated box industry has around 300 automatic units and over 12,000 semi-automatic ones. Both these segments are facing imminent closure after kraft paper prices shot over the roof in the US (the main sourcing market) following rising local demand there, Indian Corrugated Case Manufacturers Association president Kirit Modi told PTI.
The industry has urged the box users, including large FMCG companies, to allow then to pass on a minimum of 23 per cent price increase quickly to just cover the increased raw material cost, Modi said.
The industry normally gets into annual supply and pricing agreements with the end-customers and mid-year or arbitrary price hikes are thus ruled out, he said, explaining why the end-user permission is needed to hike the prices.
Trade sources said kraft paper prices are at the highest in many quarter, trading at Rs 26-27 a kg. On average the kraft paper prices jumped by Rs 7 a kg across all varieties since January and Rs 2-3 a kg in March alone.
This sharp spike in 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.
The industry is staring at huge losses due to this and even staring at extinction on account of the frequent price increases in last one month by paper mills. To make the matters worse, kraft mills are shutting down plants without prior notice, creating massive supply disruptions, Modi said.
Kraft paper mills in the western region suspended production for five days in January and another four days in early February.
In fact, it is not just the kraft paper prices that are running amok, all other inputs such as manpower cost, ink, starch, stitching wire, freight and other overheads costs have also seen a huge increase in the last few years, leading to a total cost escalation of 50 per cent, he said.
"We requested all government agencies to come to our help by prevailing upon kraft paper mills associations to maintain supply, Federation of Corrugated Box Manufacturers of India president GK Sardana said.
The industry, which employs over 6 lakh people, plays a pivotal role in the economy by producing almost 52,00,000 tpa boxes worth Rs 18,000 crore per annum.
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