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Plastics sector urgently needs technology up-gradation fund scheme

February 26, 2016 10:42 IST

PlasticsBudget Expectations

Current Status

Polymer is an important segment of Indian industry with usage in packaging,agriculture as also auto, medical and other segments as they replace items such as wood, metal etc.

The sector has huge unrealized potential, going by the present very low levels of consumption in the country. Per capita usage is only about 10 kg in India as compared toabout 100 kg in USA and 40 kg in China. Central Excise Duty on Plastic Polymers and Articles of Plastics Plastic products have replaced wooden products substantially:-

The organised Plastic Industry is today hamstrung by the grey market –- estimated to be as high as 40% -- on the one hand and under-invoiced,smuggled imports from China on the other.

Reducing the central excise duty to 8% will bring down the cost spreads between organised segment and the grey market and correspondingly boost Government revenues both through better compliance and increased turnover.

It is requested that Central Excise duty on plastic polymers and articles of plastics be reduced from 12.5% to 8%.

Imports of articles of plastic are taking place at low and unjustified prices. Articles of plastics are also imported under Chapters 42, 56, 63, 67, 90, 94, 95and 96, the volumes whereof are also growing.

It has been recommended by the subgroup on the Plastic Processing Industry constituted by the Department of Chemicals and Petrochemicals that Customs Duty on differential between Plastic Polymers and Processed Plastics Goods should be 10%.

Keeping these factors in view, it is essential that import duty structure on imports of articles of plastics is re-calibrated to increase import duty on plastic goods from current10 % to 15%. It may be noted that import duties in many of countries in the region are in the range of 15-20%.

Polymer constitutes a very important segment of world chemicals market, with a share of nearly 40 percent.

The industry is important as it has several linkages with other sectors of the economy. Polymer has backward linkages with other industries in petroleum refining,natural gas processing and forward linkages with industries that deal in a variety of downstream products.

Also, the industry offers alternatives, which serve as substitutes for natural products and hence, has the capacity to meet the constantly growing demand that would otherwise strain the natural resources.

The Polymer industry is facing financial difficulty with pressure on prices and margins, this has discouraged capacity expansion, investment in the sector is severely lagging demand growth.

This is making the “Make in India” campaign infructuous. There are already large imports and huge outflow of foreign exchange. The situation would get aggravated with burgeoning trade gap.

Analysts Expectation

Domestic Polymer industry needs Govt support, however the industry may not get any of its demand fulfilled due to fiscal constraints.

Stock to watch

Supreme Industries, Jain irrigation, Astral Poly, Sintex Industries, Time Technoplast, DCW

Outlook

Polymer consumption in the country has witnessed a growth of 8% between July2014 to June 2015.

The per capita consumption of plastics in India is10 kgs, compared to 50 kg in China.

This shows that there is a huge potential to grow business not only for catering to domestic demand but also for catering to global demand of plastics products.

As polymers rapidly replace the traditional materials for packaging,other key long-term factors fuelling the growth of the sector include the recent surge in the annual car production that is predicted to grow to 9.3 million vehicles by 2020 will further aid its growth,given that the automobile sector is one of the biggest users of polymer.

Given the rising demand, the Indian government is also planning to increase its spend to about $1 trillion on the infrastructure requirements of the industry.

This will inevitably cause the manufacturing sector to grow manifold, further boosting the domestic polymer industry.

The image is used for representational purpose only. Photograph: Reuters

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