Paper cone, tube manufacturers in dire straits

The paper cone and tube manufacturing sector has been in trouble since the end of 2019.

KS Balamurugan, Managing Director, KU Sodalamuthu and Co Pvt Ltd, attributes this to economic slowdown and falling demand for paper cones from the consuming industry (spinning mills).

The slowdown, followed by the lockdown since end-March, has further triggered the woes of paper cone and tube manufacturing units. The sector is now in dire straits, he said.

Numbering around 250-plus, a majority of these units are MSMEs located in and around Coimbatore, Tirupur, Erode, Salem, Namakkal, Dindigul, Madurai and Hosur. Industry insiders have voiced anxiety about their revival.

“We re-started operations on May 4, but have no order till date. Unless the spinning mills place order, we have nothing to do, yet will have to pay the workers. Our workers are paid on a weekly basis. I have settled the payment for March, paid 50 per cent of the wage due for April and am now looking to sell some property to tide over this crisis. Most of us have pledged all our belongings. There’s hardly any left,” said Dindigul-based Lotus Cones owner G Vikram.

The plight of most players in this sector is similarly precarious.

Various issues

The industry is plagued by a host of issues. Raw material price has sky-rocketed, the demand from the consuming industry has nose-dived, there is huge paucity of working capital, unit owners have no capacity to repay their debt or pay the workers and above all, the price realisation is not commensurate with the rising cost of inputs, said Vikram.

It is learnt that the paper mills had recently notified the paper cone manufacturing units of an upward revision of around ₹3,000 a tonne, in the price of kraft paper.

The consumption of kraft paper by the units has fallen by more than half from 700 tonnes a day to less than 300 tonnes.

“Though the spinning mills have commenced operations, they are running at 50 per cent capacity only. Mills in general maintain 1-1.5 months’ stock of paper-cones. This has in turn impacted our production cycle,” Vikram said.

The per day production of paper cones, which used to hover around 60 lakh-plus, has slipped by more than half, while that of tubes and cones from 275 tonnes has dropped to less than 150 tonnes.

Interest rates

R Rangappa, Managing Director of Hosur-headquartered Southern Hi-Q Paper Cones and Tubes Ltd, said the cash-loss has been heavy post the pandemic. “Interest waiver is crucial and salary loss should be made good to the workers at this juncture,” he said.

Meanwhile, a cross-section of unit owners that BusinessLine spoke to said the government’s stimulus package would not help the sector as the package announcements were loan-based; the units do not have much leeway to borrow further — over and above the present outstanding — due to the slump in sales from the start of 2020.

“Banks do not pass on the rate cut. On the other hand, when there is an announcement of a hike in interest rate, they do not fail to collect it from us,” said an entrepreneur, preferring anonymity.