India’s balloon making industry and the units in Dahanu, the balloon manufacturing hub near Mumbai, are on the verge of a collapse consequent on Government neglect, surging input costs and cheaper imports.

Meet Giridharlal Khanna. There won’t be a single person the Indian rubber industry who does not know his name. He has been in balloon business for over four decades. Respectfully called Giridharbhai, he has been a mentor of the balloon manufacturers of Dahanu, India’s balloon manufacturing centre, near Mumbai, India.Says Khanna: “Around 50 years ago, there were very few balloon manufacturing factories in Goregaon, Malad, Borivali and Thane. I established my first small balloon factory in Goregaon called Bombay Balloons.”
And he continues: “Then I bought another balloon manufacturing unit near Balsar. But the intense labour problems there forced me to shut down the unit. I decided to shift to Dahanu and on January 17, 1970, I set up my first factory, in Dahanu named ‘Indian Balloons’, on a 5000-sq ft land.”
The response was unbelievable, he says. First, he made Holi balloons (for use during the festival of ‘Holi’).  Demand for his balloons was increasing day by day and he was hardly able to meet consumers’ orders. So he expanded the balloon factory in Dahanu.
He set an example by making quality products. He united the balloon manufacturers of Dahanu for all the good causes of the industry and soon became their leader.
These are, however, indeed dismal days for the balloon making units in Dahanu, Khanna says. The current situation in almost all balloon manufacturing units of this small city, boasting a legacy of more than four decades in balloon making, is very gloomy. Around 50 small and medium-size units in and around Dahanu producing rubber balloons of various colours, sizes and shapes are virtually struggling for existence.

Departing glory

The period from June to February used to be the peak season for the balloon industry in India when balloon producers were found extremely busy meeting the festive demand. But this has not been the case for the last two years.
“Whatever we are earning from our units is just enough for a hand-to-mouth existence,” said Vipul Gala, Secretary of Dahanu Rubber Balloon and Dipped Goods Manufacturers Association.
Rubber balloon producers, who are mostly of the second generation in this business in Dahanu, are not much optimistic about the future of this industry. “We don’t see any more future for this business. We don’t think this balloon industry will be able to survive over the next five or six years,” say most of the balloon producers. The units’ compound spaces, which used to be fully utilised for drying balloons, are now hardly half occupied with balloon mouldings even in this festive season.
“If you had come this season three or four years back, we would not have any time to meet you. We used to be so busy with orders in this period. But now we are quite free to entertain anyone,” a 40-year old balloon producer said himself relaxing on a wooden chair.

Main causes

Most of the balloon producers blame surging input cost and imports of cheaper balloons from China for their present hard times. “Prices of raw materials, mainly latex, are increasing almost everyday, coupled with the growing threats of imported Chinese balloons which are forcing us to shutdown our plants,” said Fahim Maniar of Raj Trading Company.
Even a bigger player such as the Kerala-based Rubek Balloons Pvt. Ltd, which produces rubber balloons by automation, is facing the heat of rising input costs and the Chinese import.
“Balloon is a value-added product as far as the rubber industry is concerned. The cost of latex has been going up steadily from March 2009 onwards. The price, which remained well below Rs 90 per kg, has been varying between Rs 125 and Rs 150 for the past two years. This has been affecting the sales volume of the product, “said S. Ratnakumaran, Managing Director, Rubek Balloons Pvt. Ltd.
If the Rubber Board could exercise some control over the spiralling natural rubber and latex prices, it will enable the balloon industry to sustain its operations continuously, by maintaining its price. At present, it is not possible for the industry to maintain a steady price due to the above problem. This is affecting the business adversely, he added.
The price of balloon is dependent on the import of cheaper balloons available from Malaysia, Singapore, Thailand, Sri Lanka which are being sold in the country free of any restrictions. If the Government could either impose a higher rate of import duty or impose restrictions on the import, the domestic industry will be able to survive. Further, the price charged in the bills
for such import should also be monitored for the purpose of assessment of import duty. The Rubber Board has to examine the possibilities of extending financial and technical supports for value-added rubber products’ manufacturing industries, according to Ratnakumaran.

Changing preferences

Though rubber balloons have never been an essential product, they had always been a preferred amusement object for kids till some years back. But today, the preference of the entertainment has changed in favour of the Internet, electronic games and soft toys which take away most of their time. The rubber balloons have become only a choice for special occasions and events such as birthday parties. Though the balloon producers are experimenting with their products to attract consumers, they fail in the competition with imported products. Neither can they produce balloons as cheap as their Chinese or Sri Lankan counterparts nor can they take a toll on their profit for a longer period. As a result, around two to three units have already been closed down and the rest are running with under-utilised production capacity.
“Most of these units have cut down production between 30% and 40% as they can not afford to run the units in full swing in these tough conditions,” said Gala. Some producers even say that they have slashed production by 60% to 70%. These producers are not in a position to increase the price of balloons in tandem with the rise in latex prices as buyers already have cheaper options in the market in the form of the Chinese and Sri Lankan balloons.

Declining margins

Margins have plunged 5% to 7% in the recent times. “We used to earn around 15% to 20% margins in the business. But now margins have narrowed down and even as we speak, there are some units that are bleeding,” said Maniar. The situation has become so discouraging that these balloon producers are reluctant to put their kids in this business. Even the tribals, who are traditional workers in these units, are not ready to bring their children in this business. The number of these workers in the balloon units have come down by around 50% as they have switched over to working for other industries.

Stffening competition

Since the entry of the Chinese and Sri Lankan balloons, the domestic market dimension has changed. The plain balloons imported to India from Sri Lanka have already captured more than 50% domestic market of plain balloons. “Sri Lankan plain balloons are of superior quality and are cheaper than the Indian plain balloons. As they have already captured a large market of plain balloons. Most of India’s plain balloon producers have started shifting their focus onto colour balloons for survival in the market. It means, the competition is being stiffened by our people,” said a partner of a balloon unit.
The Indian balloon industry is far behind China in competition. The Chinese balloons, which are 60% to 80% cheaper than India-made ones, are being imported into the country by paying a nominal duty. Some Indian balloon producers say that the Chinese balloons may not be good in quality but come in attractive colours, while some claim that these balloons are good in quality too. In Dahanu, even today, rubber balloons are being made manually; while the Chinese balloons are completely machine-made.
As the Chinese balloon makers are well-equipped with the latest machinery, they are able to produce balloons in bulk quantity as well as with less latex. The machines also help them dry balloons at a high temperature and that gives them good strength. However, in order to give enough strength to the products, the Indian balloon producers have to dip balloon mouldings more than twice as per size. This requires more latex and, as these processes are done manually, there are limitations on production numbers. The cheaper balloons from China and Sri Lanka are preferred over the Indian balloons not only by the consumers but even by the wholesale buyers.
“If a packet of 100 Chinese rubber balloons is sold at Rs 20, our prices are two to three times more than this. Though our balloons are thick and have good quality, the Chinese balloons come in various designs and colours which attract the buyers,” said a Mumbai-based supplier of rubber balloons. “Even balloon hawkers are vanishing from the market due to a marginal income,” he added.
It is understood that Rubek Balloons is the only unit in India having capacity to produce 1.02 million balloons per day, by automatic process. Rubek Balloons has good scope of becoming a major industry player. However, this will ever remain to be a dream, as long as the price of latex is within control and the Government imposes some restrictions on import of balloons.
Says Ratnakumaran: “Rubek Balloons has developed its own technology since its inception over the past 5 years. The company is able to produce international quality balloons, and has won ISO certification. Regarding cost-competitiveness, as has already been stated, unless the price of latex is within limits, it would not be possible to attain cost competitiveness. Since Rubek is producing eco-friendly balloons, the colours, chemicals and other raw materials used are costly and naturally the input cost is higher compared with the locally manufactured balloons.”
“The production capacity of Rubek Balloons is 1.02 million balloons per day. Due to marketing constraints, its capacity utilisation remained at less than 25% all these years and hence viability of operations is seriously affected. However, we are trying to expand our international marketing network,” he told Rubber Asia.
The company so far has exported its products to Dubai, the UK, Germany, Malaysia, Spain etc. Its quality has been well accepted in the international market. The company has won EN 71 Certification, which is required for export to the European countries.
However, cost-wise the company has not been able to compete in the global market. Hence, the company so far has not been able to avail itself of all the opportunities for export.

Government neglect

Being a small and an unorganised sector, the balloon industry has always been ignored by the Government and the authorities concerned. The Chinese balloons are imported at a nominal duty, while the Government has put around 70% duty on latex imports and the monopoly of latex producers in Kerala greatly pushes up the domestic prices. Even worse, these balloon
producers are not allowed to set up another unit or expand the existent units as Dahanu comes under the green zone area.
“The price of balloon is dependent on the import of cheaper balloons from Malaysia, Singapore, Thailand and Sri Lanka which are being sold in the country free of all restrictions. The Government has to impose some restrictions on the import of these cheaper balloons, in order to save the domestic industry,” the Managing Director of Rubek Balloons told Rubber Asia.