Indore footwear units cut production by 50% as rising costs, weak demand squeeze margins

Indore: Footwear manufacturers in Indore have slashed production by nearly 50 percent as rising raw material costs, higher logistics expenses following recent diesel price hikes, and sluggish demand from key markets put the Rs 250-300 crore industry under severe pressure.

The city, home to more than 60 footwear manufacturing units, is witnessing one of its toughest business phases in recent years. Industry representatives said factories are operating well below installed capacity, resulting in higher per-unit production costs and shrinking profitability.

Manufacturers said the impact of increased diesel prices has pushed up freight rates, making transportation of finished goods to major markets costlier. At the same time, orders from traditional markets have weakened as distributors and retailers remain cautious amid uncertain demand conditions.

Indore Footwear Manufacturers Association said, the city’s footwear industry primarily manufactures products using recycled material and supplies them to markets across Chhattisgarh, Punjab, Haryana, Rajasthan, Assam and several northeastern states.

“Most units are operating far below their installed capacities. Production has been reduced by close to 50 percent in most factories because demand is weak and market conditions remain uncertain. When factories run at lower capacities, the cost of production increases substantially, affecting profitability,” the association president Girish Punjabi said.

The industry, which relies heavily on petrochemical-derived raw material such as polyurethane (PU), PVC resin, plasticizers and EVA, has been hit hard by recent price volatility. Manufacturers said input costs have risen sharply since the West Asia conflict disrupted supply chains and impacted global petrochemical markets, forcing many units to curtail production and absorb higher costs amid weak demand.

Delayed payments from buyers have further strained working capital, making it difficult for manufacturers to maintain normal production schedules. Manufacturers are also reporting slower offtake from their traditional markets as higher transportation costs and cautious consumer spending weigh on fresh orders.

“Raw material prices have increased, labour costs are higher, logistics has become more expensive and payment cycles have become longer. Under these conditions, many units are either operating at break-even levels or facing losses,” the association secretary and a footwear manufacturer Amit Sancheti said.