Courtesy of www.hindubusinessline.com

Despite the boom created by the retail and FMCG sectors, the packaging industry is reeling under margin pressures essentially caused by a rise in raw material prices. Industry players note that India can become the outsourcing hub for packaging if global standards are adopted.
      "The rising cost of paper, which is the basic raw material for the packaging industry, is eating into the margins. There has to be a cut in the excise duty imposed on the finished goods from 12 per cent to eight per cent. The Government, in the budget, had reduced the excise duty on paper mills from 12 per cent to 8 per cent, which the paper manufacturers have not passed on to the customers. Rather they have increased the prices. This is showing in the bottomlines," said Amila Singhvi, President, Indian Carton Manufacturing Association (ICMA).
      Noting that India can become an outsourcing hub for the packaging industry, Rajiv Dhar, Director, Indian Institute of Packaging, said "If the Government were to make changes in its policies, and rationalize tax structure then the industry can show whopping growth."
      The highly fragmented industry is estimated with a growth rate of 22-25 percent per annum. It has been witnessing a stream of investments with leading players such as Reliance and Jindals foraying into the industry .
No defined norms
      Industry players said a lot of countries are looking to source from India but with lack of defined guidelines it might take a backseat. While major components such as cartons, cans and laminates, which are Bureau of Indian Standards (BIS) certified, are of global standards, the glass bottles and outer cartons are areas that need to be upgraded.
      Players such as the National Dairy Development Board-promoted IDMC observe that the rising costs have been slowing down investment into new technologies. Observing that the packaging for retail sales is still governed by obsolete laws, Satybrata Mishra, AGM, Sales and Marketing, IDMC, said there is a need for defined legislation in areas such as food labellings.
      Sanjay Sachdeva, Director, Marketing and Product Management India and South Asia Markets, Tetra Pak, said, "Once considered an appendage to the manufacturing value chain and not a core activity, packaging increasingly is being acknowledged as a crucial segment of any economy in proportion to the growth."
      On whether legislation will streamline the industry, he said the Government is planning to initiate some concrete steps in the area of food safety standards. For instance, the phased implementation of the food Safety & Standards Act 2006 will bring in better competitive standards and make the sector more competitive and usher in better packaging standards and norms, ultimately passing on the valuable benefits to the end consumer. With better legislation India will be able to make its presence felt in developed countries through better and higher export potential.
      "Packaging is a capital intensive function. The industry has to also operate taking into consideration environment related problems. Legislation needs to be brought in areas such as printing and labelling segment," he added.
      It is estimated that more than 80 per cent of the total packaging in India constitutes rigid packaging. The remaining 20 per cent comprises flexible packaging.

Wed Aug 13 12:38:00 CDT 2008