Apparently, the industry is slipping into a depression, despite the buoyant first half as admitted by Berger Paints CEO, Subir Bose at a paint association forum. If the large companies are beginning to feel the pinch, smaller companies despite lower overheads are facing severe pressures on margins due to rising raw material costs and cartelisation of the same.

And now Asian Paints has fired a new salvo in reducing prices in south India to capture the paint market for the festival season here. Unlike Diwali season, in Tamil Nadu, people like to give a new look to their houses during the pongal or harvest festival.

In a bid to get back some of the market here, Asian Paints, which had increased prices in October,have cut prices for oil based paints by four per cent, waterbase paints by two per cent and primers by four per cent. With Asian Paints being the trend setter, all other companies would have to follow suit in lowering prices. The situation is more taxing for SSIs in the state. Previously there were three price revisions, all instances wherein prices were increased on account of a rise in raw material prices. However, small scale industries could not increase prices simultaneously as they had to retain local markets. Margins were squeezed then, but a further downward revision is not going to augur well for the industry here.

For the large industries, most of the raw material is available through captive units - or they have the facility to buy and store in bulk at competitive rates. But smaller companies have no such solutions. In case of titanium dioxide (rutile) and titanium dioxide (anatase), the large units import in bulk and are therefore not at the mercy of the monopolistic local manufacturers.Titanium Dioxide is manufactured by Kerala Metal and Minerals Company Ltd, which does not supply small quantities to the industry.

They are therefore forced to purchase through agents who mark the prices up 25 per cent. In the case of titanium dioxide (anatase) after the import duty was increased, local units (Kilburn Chemicals, Kerala Minerals and metals, and Kolman) have increased their prices by about 25 per cent in four months.

Another major raw material is mineral turpentine. Here again petroleum companies do not supply this material directly to SSIs, and have to be purchased from agents. Apparently an explosives license is required to store the material, and agents have this. But agents finally unload the material into the barrels anyway once the material is purchased by the user.

Therefore SSIs feel that this meaningless stipulation could be done away with, as it does not serve any purpose.