China deflates India's balloon industry
ERJ staff report (TP)
Kochi − The Indian balloon industry is on the verge of bursting, pricked by the twin threats of cheaper Chinese imports and high import duty of rubber latex. Already, many units located in Maharashtra and Gujarat have either fallen on hard times or folded up, reported PK Krishnakumar from the Economic Times.
Although correct estimates are not available, the trade says the domestic balloon industry could be worth Rs 2,000 crore (€236.3m) with most of the units in the SME sector. Around 60 to 70 percent of the balloon sales is currently dominated by the Chinese products, according to the producers. As a result, the industry has been surviving on wafer thin margins.
"Most of the Chinese units are automated and are able to produce on a mass scale and sell cheaper. Our units are mostly labour intensive,'' said Vipul U Gala, partner of Rashmi Latex. Though the domestic rubber latex prices have come down, the availability and quality have been a problem. Those using the domestic latex are finding it difficult to manage the thickness of balloons, he added.
The inverted duty structure of the latex and balloons has been blamed for the crisis in the balloon industry. "The import duty on rubber latex is 70 percent while that on balloons is just 10 percent. As a result the market is flooded with Chinese balloons,'' pointed out Niraj Thakker, president of the All India Rubber Industries Association. The industry has to depend on imported latex as the demand outstrips the local production.
The Indian balloons are sold at a rate of Rs 400 (€4.72) to Rs 500 (€5.90) per kg while the Chinese balloon prices are 25 percent cheaper or more. "With the decline in latex price, the production cost has come down from Rs 350 (€4.13) to Rs 250 (€2.95). But still we find it difficult to match the prices of Chinese balloons," said Praful Shah, MD of Deepak Rubbers. The majority of the balloons produced in the country come from the units spread over Dahanu in Maharashtra, which employ thousands of workers.
Though the demand for balloons is growing, the length of the peak season has come down. "Earlier we used to have demand for almost 11 months in a year. Now it has reduced to six to eight months," Shah said.
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Full story from Economic Times