It’s a common sight in our industrial, commercial and even personal lives. Plastics. What’s unfortunate though is that India’s share of it in global trade is less than 3% – insignificant! Last year, India’s exports of it to US was 5% of that of China’s. The Dollar Business caught up with Pradip Thakkar, Vice-Chairman, PLEXCONCIL to figure out what’s ailing Indian plastics

Sachin Manawaria | @TheDollarBiz

TDB: The plastics industry has long been demanding that the government should create a level-playing field for Indian manufacturers. Where do you stand on this issue?

PT: As regards to a level-playing field, which would help us compete against cheaper imports, I won’t be able to comment at this stage. This issue was contained in the Interim Budget. So, we will have to wait for the new Budget from the new government. One aspect we were certainly expecting was the continuation of interest subvention scheme which expired on March 31, 2014. I hope this is taken care of by the new government in the upcoming Budget.

TDB: What are the main demands of the plastic industry?

PT: In the short run, PLEXCONCIL has recommended that plastic processors be encouraged through policy initiatives like duty-free scrips. This will enable the holder of such duty scrips to import inputs that go into manufacturing of the products that are exported, or, machinery used for producing such goods without paying duties equivalent to the printed value. For example, if a plastic processor has a duty-free scrip valued at Rs.10 lakhs, then the holder can use it to import such goods without paying duties up to Rs.10 lakhs.

TDB: Why this emphasis on plastics processors? And how does it contribute to exports growth?

PT: Plastics processors must be encouraged to export plastic components to OEMs. PLEXCONCIL estimates this export potential to be over $3 billion and currently, India’s share is negligible. High technology plastic items must also get a similar treatment. For Micro, Small and Medium Enterprises (MSMEs) that dominate the plastics processing sector, service centres should be created to offer basic services like product designing, prototyping, and tooling in order to achieve economies of scale. All such quick services will help a small plastic player to think beyond the domestic market, which he presently doesn’t.

TDB: The Reserve Bank of India has plans to introduce currency notes made of polymers like we have in Australia, Singapore and Canada. What would be the impact on the plastics industry if this is implemented?

PT: It is difficult to say anything about this right now. But, this can certainly help the plastics industry as a new application. This will definitely help in improving the image of plastics industry apart from boosting production. It will also help bring in new technologies and skills to the industry along with increasing our knowledge base.

TDB: What other policy initiatives are sought by PLEXCONCIL from the new government?

PT: From a long-term perspective, PLEXCONCIL has recommended policy initiatives to set up dedicated plastics processing parks and creation of a Technology Upgradation Fund (TUF). This will address the primary issue of lack of economies of scale in plastics processing, which is of utmost importance to the entire sector.

TDB: Does India lose out to other countries because of incentives provided by their respective governments? If yes, which country according to you provides the best incentives?

PT: Generally one talks only about China when it comes to subsidies. But, we do not know the minute details of their subsidy system. However, despite this, India has made a name for itself in few segments like polymers, woven bags/FIBCs, PET film, etc. I don’t see any reason why other segments cannot achieve the same.

TDB: Is subsidy the only solution to the plastics industry’s problems?

PT: It is not always necessary to have very high subsidies. But the system to provide such benefits should be very simple and should be available upfront with minimal conditions attached. No country in the world, including the most developed economies, taxes input materials or services used for exports. Why should there be so many strings attached and cumbersome refund procedures or licensing procedures? All such hurdles have to go if we seriously want to promote exports and compete globally. And this should happen across all sectors and not only in plastics.

TDB: US is one of the main consumers of plastic products. Reports suggest that it imports nearly 29% of its requirements from China but merely 1.5% from India. What is PLEXCONCIL doing to reverse this trend?

PT: As I have already said, achieving economies of scales is the key factor. Our scale of production is very low as compared to China’s. Moreover, the domestic market also has a high potential. Therefore, dedicated plastics processing parks and a Technology Upgradation Fund have to be put in place if we actually want to attain anything close to what China has managed to achieve over the last few years.

TDB: A vast majority of plastics manufacturers are against FTAs? What are the specific reasons for such a stance?

PT: There is no evidence indicating any discomfort. In my view, they are protesting against the inclusion of raw materials and some semi-finished items in FTAs. However, we have not really gone into the details of whether there are any opportunities because of FTAs. We intend to do a detailed study and only after that will I be able to make a comment.