Has the diesel price rise sent shivers down print street? - The Noel D'Cunha Sunday Column

Prashant Atre, managing director at Toyo Ink Arets sums up the present day economic scenario succinctly. He says, “Sadly but true, Indian economy, its performance and its perception are largely governed by oil and dollar.”

The rupee has been depreciating and the price of crude oil has been continuously rising. These factors not only affect the direct cost but also affects the overall sentiments thus makes the consumer change to saving mode from spending mode. “This has a larger and detrimental effect on business and economy,” says Atre.

Rising cost of the dollar has had its impact on the cost of raw materials like ink, paper and chemicals. Further, those in the transport business are passing on the rise in diesel prices to the end-users.

According to a report by the Indian Foundation of Transport Research and Training, the freight rates in the last few months have actually outpaced the rising cost of diesel. Some of the reasons cited for this rising trend by the report were a steady flow of fruits, vegetables, agri-produce along with constant deployment of trucks for infrastructure and construction activity have kept the rentals high.

Both, the printers and suppliers have reported a hike in their transportation cost by 10-25%.

Global5 Technologiess is one of the suppliers of machinery and consumables to the Pune and surrounding print hubs and with many of its customers requiring their supplies perhaps on a daily basis.

Prashant Khomne, managing director at Global5, says, “We have delivery boys in major cities who deliver consumables to our customer. Here, our delivery cost has increased by almost 15% to 20%.”

For customer outside Pune, into the interior of Maharashtra, central Gujarat and Madhya Pradesh, Global5 uses either the courier services or truck rentals. Cost of both has increased and Global 5 has absorbed it. “Depending upon the availability of the vehicle to a particular location, the increase in truck rentals is up by 20% to 25%,” says Khomne, adding, “In our case, we always give machine delivery to our customer’s doorstep, and we have to bear the transportation cost. It is directly impacting our profits.”

Kamal Chopra, managing director of Foil Printers, and an active member of the Offset Printers Association (OPA) in Ludhiana, says, the matter came up for discussion during one of its recent meetings.

Chopra flags an issue. He says, it is becoming difficult to stay competitive while serving customers who are at a distance. “The transportation cost will be much lesser for the local printer to deliver printed goods than someone who is far away Hence a printer away from its customer will have to bear the additional transport cost.” He adds, “It is not only trunk rentals that have increased by almost 20% but the fuel charges of our own vehicles are also gone up.”

PrintWeek India spoke to a few more printers and suppliers, and here’s what they had to say.

PRINTER
Rohan Rai, director business, Shree Pack Containers, Vasai

“We have been in the print business since the last 25 years and have seen the ups and downs of it. But the current market situation has definitely set the alarm bells ringing. The hike is not only in the transport expenses but also paper and other inputs. As for the transport cost, normally the prices are borne by our customers. But in the last couple of years, our competitors in the market had started to offer prices including delivery, which made us change our pricing as well. But this time, we have to pass on the rentals to our customers, as I don’t see an end to it.”

SUPPLIER
Sachin Kala, managing partner, Ample Graphics

“Hike in diesel prices is really tough on both suppliers and manufacturers. We see an increment of 10-15% in transportation cost due to this hike. None of the customers is ready to understand and pay the additional amount. Most of the deals take place with delivery charges. Ultimately it is an additional cost for us. Being a high price sensitive market, profit margins are already tight – and the hike in diesel price has squeezed the margins, even further.”

PRINTER
Dr Vipul Pandya, director, Ratna Offset, Ahmedabad

“As we have always seen, whenever oil prices are hiked, it has affected the transportation cost. It’s become a routine now. We operate in Ahmedabad and Varanasi, and the transporters in the two places have hiked fares by 20%. Earlier clients used to agree to accept delivery charges, which were charged separately. But this time they seem to be taking a confrontational stand, demanding quotes including transportation. This is going to be tricky because once decided, any further hike will make it difficult for us to absorb. Tough times ahead.”

SUPPLIER
Taral Shroff, director, Shreejee Corporation/Pradeep Shroff & Co

Part-load transporters have increased the cost by about 10%, however, if we hire full truck we can save little. Hence, we are ordering in a big quantity such that our principles can hire a full truck for direct supplies, and help in managing the transport cost. In some cases, our principles have fixed the product cost, which includes freight and insurance, which is around 3.3%. We have not passed on this price hike in diesel to our customers, though we have been hit by it. So you know how thin our margins have gone.

PRINTER
Bharat Gupta, director, Shuban Prints, Jaipur

“Yes, the hike in diesel prices is hurting as the transporters are taking undue advantage of this hike. With a squeeze in printed cartons rates, which now includes delivery charges, this hike is creating pressure on margins. Besides, paper prices have shot up by 10-15%, and now transportation cost by around 4-5%. The print market has declined by 25-27% due to overcapacity. So overall it’s getting tough day by day to manage the supplies. If the situation continues to remain the same, industry growth will be negative and many people will suffer huge losses.”

SUPPLIER
Prashant Khomne, managing director, Global5 Technologiess

“We are also suppliers of machines for the wide-format segment. In our case, there’s one more challenge. If the cost of input raw material increases our customer will not hesitate to opt for third party inks from Chinese manufacturers, which are of much more economical then original ink or shift their jobs to other technology which has low running cost. Hence, we cannot increase prices, until and unless our principals don’t do it. Ours is a helpless case. It is one of the major challenges for businesses in the branded wide-format print segment.

PRINTER

Kamal Chopra, managing director, Foil Printers, Ludhiana

“We, especially the packaging industry, are already playing with a narrow margin. Due to the bulk, it is not possible to load the vehicle to its optimum weight. Just take the example of the cardboard box. How many of these can be accommodated in a vehicle, but we have to bear the full charges even for less weight. We suggested that our members concentrate on the nearby area for their suppliers to remain competitive.”