India Inc has flagged concerns about surging costs of packaging and related raw materials, triggered by the West Asia conflict. The volatility in crude oil prices and higher logistics costs, coupled with rupee depreciation is impacting the packaging supply chain, used by a wide range of sectors. At the same time, rationalisation of commercial LPG has impacted production of glass bottles used by the beverage sector.
Sources said in recent meetings with government officials, industry bodies have sought several measures to mitigate the impact, especially in view of the impact on smaller players. Suggestions include expediting release of input tax credit, which locks down working capital, especially for MSMEs, and removal of anti-dumping duties on certain materials to allow companies to import from diverse sources, among others.
“With costs of some raw materials up by almost 50 per cent, margins of businesses are getting severely impacted. In fact, MSMEs are facing difficulties in managing working capital. For instance: landed cost of PET resin has surged to ₹133.50 as of April 8, from ₹90,” a senior executive with a leading consumer goods company said.
Industry executives said prices of polymers are up by 50-60 per cent, ink, varnish & adhesive prices are up 30 per cent and sulphur, naphtha and glycols are up by 30-40 per cent. With India having limited manufacturing capacities for many crude derivative materials, concerns about shortages have also emerged.
While the ceasefire talks offer some respite, players pointed out that supply chains do not normalise overnight. Suraj Mehta, Chief Strategy Officer, Hindusthan National Glass & Industries Ltd said, “We are currently operating with up to 50 per cent cuts in commercial LPG supplies across our six plants. While we have increased the reliance on alternatives such as LNG, capacity utilisation across our plants is in the range of 40-60 per cent. This is beginning to impact high-demand sectors such as beer and soft beverages, especially with the summer season approaching, when demand is strong but supply remains constrained, leading to shortages of container glass bottles.”
Mayank Shah, VP, Parle Products, said packaging costs for the FMCG industry have increased by 15-20 per cent.
Thimmaiah NP, MD & CEO, Alternicq noted, “The packaging industry is experiencing tighter supply conditions, with longer lead times and more allocation-driven supply. The impact is more pronounced for smaller players with limited access to working capital and supplier relationships. For end-markets, if the current conditions persist, part of these cost pressures may gradually flow through into product pricing,” he added.