Packaging / Advertising & Office

As the price of its main raw material kraft paper has risen sharply in the past few days, India's corrugated packaging industry is in trouble. Within 10 days, the price of kraft paper rose sharply by 5,000 rupees per ton. The Federation of Indian Corrugated Box Manufacturers (FCBM) said in a press release issued on Monday, "This is not over yet, and it is expected to increase further in the next few days."

The Federation of Indian Corrugated Box Manufacturers pointed out the reasons for the price surge. Coal, the main source of energy for paper mills, has increased from 5,000 rupees per ton to 15,000 rupees per ton. This increases the production cost of the paper mill by about 3500-4000 rupees per ton.

As China faces severe power shortages, the demand for finished paper in India and the rest of the world has begun to become stronger. This creates a relatively optimistic mood in the Indian market because it can meet the available capacity. Due to continuous domestic consumption, imported waste paper is hitting a record high every day. Global container freight has risen nearly seven times, which will only fuel the soaring price of imported waste paper.

In the past 30 days, the price of starch has also risen by about 4,000 rupees per ton. The cost of strapping has increased by 15-20%... In addition, due to rising diesel prices, all inbound and outbound freight costs have increased. The situation is so severe that a new situation has been created due to the shortage of coal. Paper mills that previously purchased coal with a credit period of 90 days now need to pay in advance, and the price of local waste paper has risen, which completely disrupted their cash flow.

In turn, the paper mills have also cut all credit terms for corrugated packaging manufacturers, resulting in a domino effect. As the cost of coal, starch, freight, labor, and other spare parts and consumables increased, the processing cost of tile wire increased by 1,500-2,000 rupees per ton.

On the one hand, members of the Federation of Indian Corrugated Box Manufacturers (FCBM) have been working hard to improve the quality standards of Indian corrugated packaging to meet the needs of the global supply chain. This spiral growth of input costs will be difficult in their work. In line with global trends, India has also witnessed widespread awareness of the effects of climate change and the harmful sequelae of single-use plastic products. Most of the consumption of single-use plastics is in the unorganized retail sector, the hotel sector, and the agriculture/horticulture sector. In these sectors, end users/farmers cannot obtain credit for the goods and services tax charged on environmentally friendly corrugated packaging.

The center’s recent move to increase the consumption tax on corrugated boxes from 12% to 18% has irreversibly prevented the gradual conversion of the above-mentioned industries from plastic to paper. The government needs to encourage the use of environmentally friendly packaging and the substitution of plastics by reducing the goods and service taxes in these sectors, so as to provide impetus for the shift of thinking to paper packaging. The Federation of Corrugated Box Manufacturers of India (FCBM) pointed out, “This has had a serious impact on the working capital needs of our members mainly in the MSME sector. The additional 6% and rising RM costs are eroding our inherent very Meager profits. We ask the government to take immediate measures to at least roll back the growth affected at the beginning of this month even if the goods and services tax on corrugated packaging in these industries is not reduced."

The press release added that industry experts believe this volatility will continue. Therefore, FCBM calls on all stakeholders, including the government, to take the necessary measures to help the industry get rid of this crisis and enable it to survive.