The Hindu Business Line : Kraft paper units in South India cut down output, increase prices

KRAFT Paper Manufacturers of South India, an association of South Indian Kraft paper mills, will continue to shut shop four days a month to cut down production to buoy kraft paper prices and rein in raw material cost.

At a meeting of the manufacturers' association today they decided that all units in Tamil Nadu, Andhra Pradesh, Kerala, Karnataka and Pondicherry would hike price of kraft paper - used to make corrugated boxes for packaging - by Rs 1,000 a tonne.

Meanwhile, the South India Corrugated Box Manufacturers' Association has protested the move and urged the Centre to permit import of kraft paper at zero rate of import duty.

The Kraft paper manufacturers association's president, Mr S.R. Rabindar, said that units in Maharashtra and Gujarat have decided to close their units for six days a month to manage a glut. The idea was also to control input costs including that of raw material, imported waste paper, freight and chemicals.

Though demand for the kraft paper was buoyant because of the general up trend in the manufacturing sector, margins were being eroded by high input costs and oversupply of kraft paper in the market. Units in other States were also opting for similar mechanisms with manufacturers in Uttar Pradesh hiking prices by Rs 1,500 a tonne.

In the South they had fixed the price of a tonne of kraft paper with a burst factor - a measure of strength - of 12 at Rs 1,475 to Rs 1,575; 14 at Rs 1,575 to Rs 1,625; 16 at Rs 1,650 to Rs 1,700; and 18 at Rs 1,800 to Rs 1,850.

According to Mr Nanthikeswaran, Secretary, Tamil Nadu Kraft Paper Mills Association, manufacturing units in Tamil Nadu were at a particular disadvantage because other States had shifted over to Value-Added Tax system where there was a set off provision on input costs.

So a hike of Rs 1,000 actually means that the end user elsewhere only pays about Rs 500. But the buyer in Tamil Nadu has to bear the entire hike.

According to a press release from the corrugated box manufacturers, the hike in prices was not justified and the move to control supply amounted to cartelisation. The Centre should permit imports of kraft paper free of import duties by the box manufacturers to enable them to supply import quality boxes at competitive prices.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page