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Reservations are bound to go eventually and SSIs must plan for this
eventuality from now : V K Taparia, President, Organisation of Plastic Processors
V K Taparia,
Director, Supreme Industries Ltd, and President, Organisation of Plastic
Processors of India (OPP), spoke to indiamarkets on his views about
the status of plastic industry in India.
indiamarkets: What is the
present situation facing the plastic processing industry?
Taparia: Presently, the plastic
processing industry is highly fragmented. Though the industry turnover
is around Rs 25,000 crore, with over 12,000 players in the industry, the
processing capacity is very small compared on a global scale. In all, 3.4
million tonnes of plastic are processed in India. Currently, the Northern
and Western regions account for 70 per cent of all processed capacity followed
by South and then the East. The industry’s growth has fallen during the
last two years from double digit to a single digit figure ranging from
8-10 per cent.
The industry has great potential
but its growth is stunted by many factors. Also the per capita plastic
consumption in India is low at 3.4 kg per person per annum, which is less
than many Asian countries like China, which has a per capita consumption
of 14-15 kg per annum. The world average is around 22 kg.
indiamarkets: What are the
factors hindering the growth of this industry?
Taparia: In the past, plastic
was considered a rich man’s item in India and raw materials were heavily
taxed. As a result, the growth of the industry has been slow and India
took 30 years to reach the 1-million tonne consumption mark. Goods
from China are seeping into the country and have started to affect this
industry. Goods from Nepal attract no import duty at all and consequently
these goods are 7-15 per cent cheaper than domestically produced goods.
Many companies prefer to import rather than produce. Further the SSI reservations
disallow large Indian companies to enter the arena but imports in these
categories are permitted. In effect the government is promoting large plastic
facilities outside India at the cost of Indian companies.
indiamarkets: How should the
SSI industry deal with the WTO challenge?
Taparia: Reservations are
not a solution to the challenges facing the SSI industry. SSIs are very
crucial for any economy. SSIs have to start planning for their future
now by redefining their core business values. SSIs must understand that
they cannot exist in any activity that can be done better by a larger unit.
Let’s consider a simple example. Many shops/outlets require plastic bags
with their name and logo. The tubing for the bag can be produced on a 10
kgs per hour or a 200 kgs per hour machine. The power consumption on a
10 kgs machines is higher. So a big unit should produce cost-effective
tubing while the smaller unit should produce customised plastic bags instead
of producing everything from the tubing to the final plastic bag.
Reservations are bound to go eventually
and SSIs must plan for this eventuality from now. They must identify
and operate in niche markets, which are not lucrative for larger companies.
They can excel in labour-intensive areas. SSIs can position themselves
as a sourcing or a sub-contracting point.
indiamarkets: What are the
observations of the OPP-led delegation to China?
Taparia: The delegation was
impressed with the excellent infrastructure and the government’s long term
planning and vision. In 1995, the government forecast the power requirements
of the country in 2010 and implementation of the infrastructure is in progress.
Chinese have a single-minded focus to remove poverty. They work in 12-hour
shifts and have a ‘no work no pay’ policy. They have 5 holidays in a year.
The productivity of the Chinese workers is 1.5 times more than that of
Indians. There are many companies in China, which run their plants with
zero inventories. Timely delivery is a norm.
Chinese companies have uninterrupted
power supply, are not burdened with unproductive labour and even small
companies export aggressively. As a result, China has been able to capture
a large market for plastic products in the US/ Western countries. China’s
plastic exports are around $ 10 billion.
Indiamarkets: What are the
future prospects for the plastic processed industry?
Taparia: If the hindrances
are removed, the industry can grow at a double-digit figure. Many sectors
also have a great scope for growth. Worldwide packaging is undergoing a
sea change and plastic is becoming the preferred material. There will be
growth in use of plastic in the consumer durables, automobiles and consumer
electronics.
Per capita consumption is expected
to rise to 8-10 kgs per annum. Currently only USD 600 million or 13.6 per
cent of the total processed plastics are exported. There is a tremendous
potential for exports and the industry should target the West European/
US markets more actively.
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