High input prices hit India's corrugated box makers

India's corrugated box manufacturers that supply packaging boxes to FMCG, pharma and e-commerce players are severely hit by the coal crisis, which has inflated costs for paper companies.

“Paper mills with captive power plants consume about 1 tonne of coal to produce 1 tonne of paper,” said Sandeep Wadhwa, President of Indian Corrugated Case Manufacturers Association (ICCMA). “Mills without captive power plants consume around 450-500 kgs of coal per tonne for other processes. There is a coal price hike of almost Rs.10,000 per metric tonne.”

The cost of raw materials, meanwhile, has gone up by 70%-75% to around $340 a tonne within 3 months as paper mills are facing an acute shortage of coal and high power and fuel prices, Wadhwa said.

“Paper mills can increase the prices on a daily basis over a phone call, but we don’t have that luxury. We are dealing with corporate consumers in the pharma, FMCG and e-commerce sectors where any change in prices are not implemented promptly,” said Kirit Modi - President Emeritus of ICCMA.

He owns a corrugated box company, Horizon Packs.

Apart from the rising input costs, the goods and services taxes (GST) on corrugated boxes have also gone up from 12% - 18% from October.

“We are hit from all corners, the recent revision of GST to 18% has added to our troubles and we are not able to raise additional working capital funds as the paper continues to be at 12%,” said Sanjay Rajgarhia, who owns Perfectpac.

One of the paper mills ET spoke to said that the company has no other choice but to increase paper prices.

“The coal crisis is something that has affected everyone and the prices are changing every week; we have no other option but to hike prices for our survival,” said an executive at a paper mill.

This comes at a time when the festive season is around the corner and there is going to be a jump in demand.

“As of date, there is no issue in terms of supply, but if this continues, there are many box makers that will shut down and that may cause a disruption in the supply chain, ultimately affecting the festive season sales,” said ICCMA’S Modi.