Industrial Climate of Plastic Sector

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1 Government of India Ministry of MSME Industrial Climate of Plastic Sector Prepared by MSME-DEVELOPMENT INSTITUTE Ministry of MSME, Govt of India Narsapur Cross Roads, Balanagar, Hyderabad Ph: , 132, 133, Telefax: Website:

2 Industrial Climate on Plastic Industries in A.P. & Telangana States The economic reforms initiated in 1991 brought major changes in the structure of the domestic petrochemical industry. De-licensing and deregulation allowed the market forces to determine growth and investment. Liberalisation of trade policies and lowering of tariffs enabled the domestic industry to compete with the global petrochemicals industry. As a result, major international companies from various sectors such as automobiles, electronics, telecommunications, food processing, packing, healthcare etc. have set up large manufacturing bases in India. Joint ventures, foreign investments, easier access to technology from developed countries have opened up new vistas to further facilitate the growth of this industry. The Indian Plastic industry is about 0.5% of India's GDP. The export of plastic products also yields about 1% of the country's exports. The sector has a large presence of small scale companies in the industry, which account for more than 50% turnover of the industry and provides employment to an estimated 0.4 million people in the country. Approximately Rs.100 billion is invested in the form of fixed assets in the plastic processing industry. As of now the Indian Plastic industry has enormous potential for growth as polymer use in India is far below the world level. With increasing competition in the global market and the constant drive to improve our living standards, the scope for use of plastics is bound to increase manifold and make the production double in the coming years. India s plastics industry has tremendous potential to add muscle to the nation s economic development. A bird s-eye view reveals some encouraging facts - India is presently the third largest consumer of polymers in the world after the US and China, with a 6 percent global share. The industry employs about 40 lakh people directly and indirectly and has more than 30,000 processing entities. (Consumption of Plastics in Different Segments)

3 Consumer Products Infrastructure Automobile Industry Agriculture Healthcare Telecom New & Renewable Energy Other minor sectors including water management, electronics, defence and aerospace, computers and power transmissions. Various sectors such as agriculture, packaging, automobiles, electronics, telecom, healthcare, infrastructure, transportation and consumer durables, have been major drivers of growth in plastic consumption. A large investment in telecom, ports, roads, power, and railways, has ensured that this sector continues to grow at more than 10% p.a., for several years to come. The focus on plastic-culture in the agricultural sector envisaged coverage of 17 mn hectares under micro-irrigation schemes, will further boost the prospects of the plastics industry. The plastics processing industry is a source of great potential for global businesses. There is tremendous scope for innovative technological upgradations and thus rapid growth of the sector. The plastic industry chain can be classified into two primary segments, viz., the upstream which is the manufacturing of polymers and the downstream which is the conversion of polymers into plastic articles. The upstream polymer manufacturers have commissioned globally competitive size plants with imported state-of-art technology from the world leaders. The upstream petrochemicals industries have also witnessed consolidation to remain globally competitive. The downstream plastic processing industry is highly fragmented and consists of micro, small and medium units. Presently, 75% are in the small-scale sector. The small-scale sector, however, accounts for only about 25% of polymer consumption. The industry also consumes recycled plastic, which constitutes about 30% of total consumption. Plastic processed articles which were earlier exclusively reserved for small scale sector has now been de-reserved. The micro small and medium enterprise (MSME) act 2006 increased the investment in plant and machinery to Rs 5 crore and the current exemption on excise duty is Rs 1 crore. This initiative helped the industry to increase competitiveness and meet the global challenges. The domestic downstream industry comprises of three broad segments viz. injection moulding, blow moulding and extrusion and caters to the requirements of a wide array of applications like packaging, automobile, consumer durables, healthcare, etc

4 Classification of plastic products by type of process used Plastic Products Extrusion Injection Blow Roto moulding Films and Sheets, Fibre and Filaments Pipes, Conduits and profiles, Miscellaneous applications Industrial Injection, Household Injection and Thermo-ware/ Moulded luggage Bottles, containers, Toys and Housewares Large circular tanks such as water tanks Polymer Consumption in India according to various processes Process (%) Share in Total consumption in India Extrusion 60 Injection 25 Blow / Stretch 6 Rotomoulding 1 Other Processes 8

5 PO Pipes 1% PPTQ Film 2% Multilayer Film Monolayer 1% Film 6% No of Machines Installed PVC Pipes 4% Raffia BOPP 1% 0% Extrusion Total 22% Others 7% Injection 50% Blow 6% PO Pipes 3% PPTQ Film Raffia 1% 6% PVC Pipes 11% Multilayer Film Monolayer BOPP 2% Film 1% 3% Installed Capacity in KT Others 11% Extrusion Total 40% Injection 19% Blow 3% STATE SCENARIO: Telangana & Andhra Pradesh The South India that too Hyderabad, identified has great growth potentiality for plastic industry. Presently, there are about 8,000 plastic units in Andhra Pradesh and Telangana states, of which over 6,000 located in and around Hyderabad city with a turnover of Rs. 600 Crores. It is expected to have growth potentiality of about 20 per cent per year. South India's business potential is put at US $ 2.6 billion. The projected consumption of plastic is put at 2.5 million per annum. The growth of polymer consumption is per cent in Telangana and Andhra Pradesh states alone. The present processing capacities is put at 1.2 million Tonnes per annum and there is a scope for additional processing capacity of 1.3 million Tonnes per annum. That shows almost more than double of the present capacity The positive market indicators of South India are it is growing faster than India. All major automobile manufacturing companies are based here. Even their ancillary units auto components manufacturers are also located here. Creation of a new industrial corridor Chennai Bangalore, abundant capacities of new Petrochemical and Polymer can be found in South India only. Discussion with different representatives of the plastic products manufacture association reveals that there is good growth of plastic industry in the State amidst challenges faced by them. Details of the fact about plastic sector are given as under:

6 1. No. of existing units manufacturing Plastic : 6000 products about Micro 28%; Small-55%; Medium-15%; Large-2% 2. Total production capacity about : 9 lakh MTS per month 3. Film/sheets, Bags and thermo formed articles and : 25-30% other extruded items 4. Bottloes, containers and other Blow moulded : 15-20% items 5. Household/domestic injection moulded articles : 20-25% 6. Pipes, profiles etc. : 20-25% 7. Furniture, baskets, automobile industrial parts : 10-15% 8. Electrical appliances, parts coated wires, cables : 5-10% etc. & miscellaneous items 9 Sales Indigenous Export : : 90% 5% 10. Plastics goods are consumed by packaging : About 45% industry 11. Average growth : 30 40% per annum 12. Sickness of plastic industry is : About 2 to 5% Hundred percent growths of Plastic industries have been noted in the past 15 years, mostly because of growth of Packaging Industry. Challenges: 1. Competition from China. China is providing power subsidy and good encouragement by the Government. Plastic articles are being imported at lower cost. 2. Continuous supply of quality power to plastic industry is needed because power is second raw material/consumable after plastic granules. 3. There is lack of R&D in Plastic industry, modernisation/technology upgradation is needed for plastic industry. 4. Plastic parks may be established in the State. 5. Favourable policy may be framed making better conducive environment for the growth of plastic industries in cluster. 6. Acute shortage of availability of skilled personnel i n plastic industry. 7. Encouragement for the export is needed by the Government Plastic industries develop co-industries such as Printing units, Reprocessing industry, Manufacture of Master batches, Pigments, Repairs and maintenance industries, mould, jigs & fixture manufacturing industry and so on. Thus, the development of more number of plastic industries develops ancillary industry also. Conclusion: Hence, favourable climate for growth of Plastic Industry in A.P. and Telangana in spite of challenges present.

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