• The highly fragmented packaging industry is estimated at Rs 8,000 crore.
• The industry is growing at the rate of 22-25 per cent per annum.
• In the next five years, the sector is expected to triple to around $ 60 bn.
• The net profit of the packaging industry spurted 104.5 percent during Q3 FY08, against a growth of 29.5 percent in the December '06 quarter.
• The large growing middle class, liberalisation and organised retail sector are the catalysts to growth in packaging.
• More than 80 percent of the total packaging in India constitutes rigid packaging. The remaining 20 percent comprises flexible packaging.
• There are about 600-700 packaging machinery manufacturers, 95percent of which are in the small and medium sector located all over India.
• Indian packaging machinery imports are $ 125 million.
• The import (customs) duty for packaging machinery is 25.58 percent for 2007-08.
• Germany and Italy are the latest suppliers of packaging machinery to India but focus is now shifting on Taiwan, Korea and China.
• Indian packaging machinery exports are rapidly growing.
• India's per capita packaging consumption is less than $ 15 against world wide average of nearly $ 100.
• The total demand for paper is estimated to be around 6 mn tones, of which about 40 percent is consumed by the packaging industry.
• Laminated products including form-fill-seal pouches, laminated tubes and tetra packs are growing at around 30 percent p.a.
  

Convert To Gain

The Indian economy is growing and so is the Packaging industry. As growth rides on increased industrial production and international trade, demands on package converters has become more demanding and sophisticated. There are close to 5,000 box plants scattered throughout the subcontinent in classic developing-country industry fashion: mostly fragmented and family-owned. So how does the country meet this ever increasing demand?

The larger Indian converters have been adopting the latest technologies and several high-end machines have been installed in the country in the past few years. These machines are largely imported from the western countries, with Germany and Italy accounting for almost 45% of the total packaging machinery imports. However, as the need to upgrade is felt by the smaller converters and corrugators and many commercial printers diversify into package printing, there is an increasing focus on machines made in Taiwan, Korea and also China. Meantime, the Indian machinery manufacturers have also geared up and are today making machines that are lapped up by the growing industry in India. Some of these machinery manufacturers are also making inroads in the export markets and are moving beyond the traditional Asian neighbors and the countries in the Gulf to South Africa, East Europe and even South America.

However, the present per capita consumption of packaging in the country is dramatically lower than the global averages. All the pointers indicate that the packaging industry is set to move to a higher level of growth between 20-25% from the present level of around 12-15 percent. The potential of growth is much larger and unrealized.

World over, Flexography has become the pre-dominant medium for package printing. The use of flexo has also been growing in India. Several sophisticated CI flexo presses have been installed in the past six months. The booming label industry is riding a narrow web flexo invasion as folding carton manufacturers also take a look at this technology. The Indian corrugators have been increasingly adopting flexo printing with water-based inks. The coming years should see a larger share of printing going to flexo in the converting and corrugating industries.

Technologies to improve business efficiencies and competitiveness…
The globalisation of the Indian economy has exposed the domestic companies to the free market dynamics. With no protection from the state, these companies are learning to be more efficient and are re-engineering the business processes to compete with the global businesses. Among other things, deployment of IT has been extensive in the better-managed companies and the one field where it is being successfully deployed is the management of the supply chain. This has brought the focus on the Automatic Identification and Data Capture technologies, which in several companies is integrated with the ERP/ EDI applications.

The entry of MNCs and the retailing shifts have also contributed to a higher use of barcoding and auto id technologies. The killer application for these technologies, however, is expected to be in the field of e-governance with not only the central and state governments adopting the technologies in ID projects and driving licenses etc., but also local administrations like municipal corporations and village panchayats expected to use the technologies to stream line administration.

The AIDC industry that includes Barcodes, smart cards, RFID, biometrics and EAS is probably the fastest growing segments of the economy anywhere in the world. Though the base is still small in our country, the over 40 percent growth that is taking place year on year is increasingly becoming significant. The incremental growth is large enough already to catch the eyes of the largest global players. The factors that drive the domestic requirements all indicate that the demand itself will ensure the present rate of growth in the years to come. If the Indian industry can leverage its IT strengths and grab the opportunities that are coming its way, it is not inconceivable that India can be a major hub to provide the software, integrated solutions and finished products in these fields to the entire world.

Barcodes
The barcode industry is around Rs. 2.5 billion and is growing at over 30- 35 percent every year. The hardware- Printers and scanners contribute equally to the 50% of this turnover while the consumables- tags, labels and ribbons contribute 35% and the services account for the rest. The industry has around 50 players with 5 large players having a turnover of over Rs. 100 million. There are other 10 companies that have turnovers of between 50 - 100 million. The major international suppliers- Symbol , PSC, Metrologic & Unitech for bar code scanners and Zebra, Intermec, Printronix, Sato, Toshiba & Datamax for barcode printers have their presence in India. Ean India, an affiliate of Ean International has played a large role in creating awareness about barcodes while developing and implementing standards across the industry. AIDC Technology Association has helped organize the industry by forming this association of all stakeholders of this technology.

Courier and logistic industries are the active user of barcodes. The auto industry uses barcoding for auto data capture of information about its materials and supplies during receipt, storage, Work in progress (WIP), dispatch and sales operations. In retail sales of auto parts spares and accessories, this is used to facilitate stock control, track and trace, consumption forecasting, etc. Pharma and healthcare are another large user of barcodes. They are used effectively to track distribution of the drugs in the market place and to recall them if necessary. They are also used provide quality service by tracking expiry dates of medical supplies, patient identification and billing, hospital stock management and order replenishment etc. The largest growth segment is however, organised retail. The use of barcodes is already well established in major retail sales institutions. The proliferation of malls and food bazaars is driving the growth in this segment. Logistics contributes around 10% of the barcode industry. Retail contributes around 40% and nearly 50% comes from all other industries like auto, pharma etc.

Smart Cards
Over the last few years, the awareness of smart cards and its applications have gradually increased among the potential users in India. Significant growth has taken place in wireless cellular applications, retail loyalty applications, healthcare applications and driving license and vehicle registration applications. Several pilot projects have also been implemented for multi-application campus cards, banking, ID, automatic fare collection, toll, healthcare, etc. With the smart card market expected to grow from the current base of 40 million cards to 400 million cards in the next few years, both Indian as well as foreign smart card companies are showing keen interest in this market.
Schlumberger, Gemplus, G&D, Obethur, VCT and Orga are the globally recognized card manufacturers who also dominate the Indian market. Shonkh, Rolta, Smartchip, CMS, Siemens (SISI), CA Satyam and E-Cube are the major system integrators. STMicroelectronics, Philips, Infineon, Reneseas and Atmel are the chip manufacturers who are already present in the the country.

Though the SIM card market has driven the growth in the last 5 years, the rate of growth in banking and retail sector is expected to be larger in the coming years. The usage in the transport and health care sectors is also expected to increase. However, the industry is looking at the government usage and the much-touted national ID project for a spiraling growth in the next few years.

Logistics: Attracting investments