Besides developing business opportunities for leather workers, the Rs 2,000-crore footwear industry of Agra has given rise to a number of ancillary industries ranging from footwear designing to accessories and finally, packaging.
Though it remained dependent on the footwear industry for its survival in the early days, the packaging industry has long since developed its independent standing, catering to the packaging needs of diverse sectors like handicrafts, FMCG, electronics etc.
But despite these advances made by the industry, it still leans heavily on the footwear industry to contribute a major share in its Rs 300 crore turnover.
Lately, the industry, which comprises about 85-90 cottage and small-scale to mid-level units, is facing issues like rise in prices of paper, adhesives, corrugated cardboard sheets etc., which has dramatically reduced the profits of packaging units to a bare minimum in less than a year and some units are reporting losses in export deals.
However, instead of resorting to extreme measures like the All-India strike called by the Packaging Box Industries Federation, the local packaging units have decided to raise prices after taking their clients into confidence over the necessity of this hike.
Talking to Business Standard, KG Sharma, managing director, Royal Packers, said that of late, the prices of raw material used in the packaging industry had risen by 25-30 per cent, of which paper and cardboard costs alone contributed nearly 20 per cent. So far, he said, the industry had been absorbing the price hike by lowering its profit margins to honour prior commitments.
"A major part of the total business generated by the packaging industry here was through the manufacture of shoe boxes and other associated packaging materials for footwear, but since most of the supply orders were received months in advance, it is hard to get a revised price of boxes from the client," he said.
He added the packaging unit owners of Agra were not resorting to measures like strikes as a platform to justify a price hike.
He claimed the principal factor for the increase in the cost of paper was an abrupt reduction in the import of paper pulp from south-east Asian countries.
The proposed strike of paper mills was also increasing market speculation over paper prices. Since export quality orders also required superior quality of paper to be used in packaging, such boxes had become costly to manufacture.
He added since the units were mainly dependent on manual labour, the rise in labour costs over the past few years had also adversely affected the profit margins of the packaging units.
Asked if there were any hopes of the industry making a recovery of the lost profits, he said that some units had already begun the process of raising the prices of future deliveries by about 25 per cent after mutual agreement with their clients, but most units dealing with footwear exporters were still trying to arrive on an agreement with the exporters who were not ready to accept such a major increase in packaging prices as it could affect their overall product costs.
He said that since there were no hopes of any significant roll back in this price hike, the only solution left for the Agra packaging unit owners was to increase box prices by at least 30-35 per cent, otherwise, a lot of SMEs will have to shut down, while the mid-level units could cut down production to reduce operational expenses.
