“China’s slowdown will benefit India” March 2018 issue

“China’s slowdown will benefit India”

While the government anticipates exports from chemicals, plastics, construction materials and allied products to reach $42 billion by 2020, the Plastics Export Promotion Council (PLEXCONCIL) believes that plastic products can contribute more significantly in the months ahead to help the nation’s foreign trade revenues exceed expectations. Pradip Thakkar, Chairman, PLEXCONCIL, explains how.

Interview by Niladri S. Nath | November 2017 Issue | The Dollar Business

TDB: The government expects annual exports from chemicals, plastics, construction materials and allied products sector to touch the $42-billion-mark by 2020. What is the Council doing to help achieve this target?

Pradip Thakkar (PT): The Council has undertaken several measures to boost exports from the sector. We are looking beyond our traditional markets of EU, US and UAE, and are exploring opportunities in relatively nascent markets in Latin America and Caribbean (LAC), Africa and ASEAN regions.

The Council is also facilitating the participation of plastics and plastic products exporters in international plastics exhibitions in countries in the LAC region like Mexico, Brazil, Panama – alongside holding buyer-seller meets in Ecuador, Colombia, Nicaragua, El Salvador, etc. In Africa, we are participating in exhibitions held in countries like Kenya, Ethiopia, Ghana and Sudan and in buyer-seller meets in countries like Algeria, Tunisia, Uganda, Mozambique, etc. Similarly, in the ASEAN region, the Council has also been participating in exhibitions in countries such as Myanmar and Vietnam, and in buyer-seller meets in Indonesia, Cambodia and Philippines. Such trade facilitations are happening on a regular basis to ensure renewal of the old trade contacts, development of new business contacts and exposure for a wider section of the Indian exporters.

The Council also invites foreign companies to participate in buyer-seller meets in India. In exchange, the overseas participants also invite us to visit their production units to get a first-hand experience of their requirements.

Simultaneously, the Council is seeking greater access to various overseas markets by asking for a reduction in tariffs in those markets that currently have FTAs with India such as South Korea, Mercosur, ASEAN countries, etc.

TDB: How have India’s plastic exports fared over the last couple of years?

PT: Over the last two financial years, because of the sharp decline in crude oil production, the global exports of plastics have been flat. The situation is the same in India. In FY2016, India’s export of plastics and plastics products was $7.63 billion. However, in FY2017, despite a 10% increase in volume, the value dropped by 0.5%. We want to export $10 billion worth of plastics by FY2020.

TDB: How diverse is India’s export basket when it comes to your sector?

PT: The export basket is quite rich. It has various categories such as moulded and extruded goods, medical disposables, plastic films, plastic sheets, plastic plates, packaging materials, stationery and much more. However, the growth drivers in exports will be categories that can service volume-based export orders and are internationally competitive in terms of quality and price – for instance, plastic films, woven sacks and writing instruments. Custom-made moulded and extruded goods for automotive and white good sectors also have good growth potential. So does packaging, which has been the major growth driver of India’s plastic products exports.

TDB: Do you think moving towards more value-added products will help boost exports from the sector?

PT: Of course, it will. In fact, in the last four financial years, the share of the value-added plastic products has grown to 68% from 62%. Credit should go to the exporters for diversifying applications of plastics and their continuous efforts to tap new markets. By FY2022, we want to increase the share to 75%.

The export of plastic raw material (predominantly polypropylene and polyethylene terephthalate) is based on the surplus volume after meeting the domestic demand. Also, only some companies control the lion’s share in manufacturing these products. So, we have been trying to reduce our dependency on raw material and increase our focus on value-added plastic products.

Alongside, the industry is doing its bit to create an enabling environment to promote value-added product exports. For instance, PlastIndia Foundation in partnership with The University of Massachusetts, Lowell, has set up PlastIndia International University in Vapi, Gujarat to facilitate skill development. But that said, the value-added sector isn’t a volume game. Hence, raw materials also remain an area of focus.

TDB: Has the slowdown in China opened up new opportunities for Indian exporters?

PT: Going forward, China will not remain as competitive and aggressive. It is restructuring its labour laws, manufacturing guidelines, etc., and, there lies the opportunity for India to grab a larger market share in global trade. However, since China is India’s largest sourcing country, the slowdown may affect exports of plastic raw material from India too. The outlook is undoubtedly positive for India because India is looked at as a reliable supplier with cost-effective pricing in the international market. China’s slowdown is India’s opportunity.

TDB: PLEXCONCIL has been demanding a level-playing field for Indian manufacturers. What is the progress on that front?

PT: So far, we have had a mixed result. On one hand, the government has been imposing anti-dumping duties on certain plastic imports. On the other hand, FTAs have resulted in an inverted duty structure, which has made import duties on finished products lower than that on raw materials. This is the reason why India-made products often become uncompetitive and unviable, globally.

The Council has been demanding an effective mechanism to curb dumping. The Council is now also working towards developing quality standards in association with the Department of Chemicals and Petrochemicals. So, if the manufacturers can adhere to those quality standards, the confidence of foreign buyers on our products will go up. It will be mandatory for manufacturers in countries like China and Vietnam to meet these standards to be able to export their products to India.

TDB: The Council has demanded the government incentivise exports of plastic components to OEMs. What’s the latest development on this front?

PT: We have been urging the Commerce Ministry to offer incentives to encourage exports of plastic components, but so far we haven’t received a positive response. However, the Council is working towards getting more plastic component exporters on board to attract the attention of the original equipment manufacturers (OEMs) from foreign shores.

Also, we have been requesting the government to build manufacturing capacity in this sector through technology upgradation by setting up a Technology Upgradation Fund (TUF), similar to that in the textiles sector. However, nothing has happened on this front too.

TDB: What’s the sector’s take on the ‘Make in India’ programme?

PT: Our export schemes are such that manufacturers receive the maximum benefit only when they import raw materials for manufacturing inputs. This puts domestic raw material manufacturers in a disadvantageous position. The export schemes should incentivise indigenous procurement of manufacturing inputs and that way, the core essence of ‘Make in India’ will resonate better.


"The Council has been demanding an effective mechanism to curb dumping"


TDB: What’s the Council’s vision for the future?

PT: The Council aims to expand its membership base by encouraging a majority of the 30,000 Indian plastic processors to get into exports. Currently, the membership is around 2,400 which is only 8% of the total industry. We have been organising a number of seminars to create awareness of our huge export potential in various Indian cities. Also, the Council will work towards increasing participation at various international trade shows by collaborating with other trade promotion bodies, in order to have a bigger impact. The council will also continue pushing the government for a favourable policy to improve manufacturing capacity.