CHAPTER 1 INTRODUCTION

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1 CHAPTER 1 INTRODUCTION 1.1 Introduction Over the years, India has made significant progress in the industrial world with healthy economic growth. On purchase power parity basis, it is one of the top five global economics and is expected to be the third largest by the turn of this decade. Plastics are one of the fastest growing industries in India. Indian Plastics Industry is expanding at a phenomenal pace. Major international companies from various sectors such as automobiles, electronics, telecommunications, food processing, packing, healthcare etc. have set-up large manufacturing bases in India. Therefore, demand for plastics is rapidly increasing and soon India will emerge as one of the fastest growing markets in the world. The next two decades are expected to offer unprecedented opportunities for the plastic industry in India. This would necessitate industry initiatives to foster investments, expand the market, upgrade quality standards, enhance global participation, encourage Indian industry, to adopt and adapt to world class technology and manufacturing practices. 1.2 Meaning of Plastic The word plastic has originally been derived from the Greek word Plastikos which means fit for moulding. Now - a - days the use of plastic is so common that the current age can be called as Plastic age. Plastic have replaced a number of traditionally used materials like metals, ceramic etc. Recently, plastic has attained a great importance in every walk of our life, due to their certain unique properties. Therefore, plastics are widely used in manufacturing a large variety of articles like bowls, polythene bags, buckets, pipes, wrappers, insulators and electronics etc. are basically dependent on plastics. Plastics are basically, synthetic organic materials of high molecular weight, which can be moulded into any desired shape by the application of heat and pressure in the presence of a catalyst. 1

2 1.2.1 Definition of Plastic A material consisting of very large molecules characterized by light weight, high corrosion resistance, high strength-to-weight ratios and low melting points. Most plastics are easily shaped or formed Meaning of Plastic Industry The petrochemicals and plastics industry is composed of petroleum refineries and petrochemical plants which produce gasoline, chemical feedstock for finished products, and a variety of chemicals, products, and services for virtually every manufacturing industry in the world. In addition, the industry includes plastic resin manufacturers, which are closely tied to petrochemicals manufacturers, and plastics product manufacturers who utilize plastics to create common consumer products. Much of the plastics business lies in producing commodity plastics and chemical products which are shipped in pellet or liquid forms Meaning of Plastics Manufacturing Industries This industry group comprises establishments primarily engaged in manufacturing intermediate or final products from plastics resins, using such processes as compression moulding, extrusion moulding, injection moulding, blow moulding and casting. The production process in most of these industries is such that a wide variety of products can be produced. The plastics resins used by these establishments may be new or recycled. 1.3 Growth of Plastic Industry Global Scenario Last few years have been tumultuous for plastics and petrochemical sector due to steep rise in oil prices, which has adversely affected the global economies. However, considering the feed stock advantage and abundance of oil reserves newer petrochemical complexes are being established in Middle-east countries i.e. Oman, Saudi Arabia, UAE, etc. It is projected that, Ethylene capacity in Middle-East would reach to about 35 million tons per annum and Polypropylene (PP) capacity to touch about 7 million tonnes per annum. The US Petrochemical sector may lose Export competitiveness as most of the Ethylene capacities in USA are Ethane based, which are not cost competitive and are capable to produce only Polyethylene (PE). Similarly, 2

3 the revamping of European Petrochemical Complexes would be imperative as they are based on old and expensive technology and are not cost competitive with the Middle-East companies having the biggest advantage of raw material at their doorstep. China, Middle-East and India would be the major global players, where expansion and augmentation of existing petrochemical capacity would take place in the next 5 years. Worldwide Plastics Industry witnessed a steady growth in the last decade which is reflected in the increased consumption figures of all types of plastics materials. Asia has been world s largest plastics consumer for several years, accounting for about 30% of the global consumption excluding Japan, which has share of about 6.5%. Next to Asia is North America with 26% share, then Western Europe with 23% share in the global market. The key growth segment remains Packaging which accounted for over 35% of the global consumption. Amongst the individual Plastics Materials, Polyolefin accounted for 53% of the total consumption, (PE with 33.5%, PP with 19.5%) followed by PVC 16.5%, PS-8.5%, PET & PU - 5.5%, Styrene copolymers (ABS, SAN, etc) 3.5% other engineering & high performance & speciality plastics, blends, alloys, thermosetting plastics 13%. In recent years, significant aspect of plastics material growth globally has been the innovation of newer application areas for plastics such as increasing plastics applications in automotive field, rail, transport, defence & aerospace, medical and healthcare, electrical & electronics, telecommunication, building & infrastructure, furniture, etc. Plastics have become the key drivers of innovations & application development. Polymer-Electronics is one such area which has opened up new avenues for plastics; from organic light emitting diodes to electro-optical and bio-electrical complements, from low-cost plastic chips to flexible solar cells. New plastics can conduct electricity and emit light. While polymers will not replace silicon as semiconductors, they do offer completely new opportunities for low-priced mass-manufactured products. Radio-frequency identification (RFID) tags in smartcards for identification and access control, payment and ticket systems, price labels, product tracking systems in the 3

4 logistics chain or packaging that monitors product quality are in offing. Growthtrend of plastics has proved that there has been a quiet Plastics revolution taking place in the material sector. World-wide, the plastics and polymer consumption will have an average growth rate of 5% and it will touch a figure of 227 million tons by Globally, it is projected that PET (Bottle grade) will have the highest growth rate of about 11% AAGR. The following Table provides data on Per capita consumption of Plastics in the world and some countries in the world. Table no Global Per capita consumption of Plastics is (in Kgs) World Average 26 North America 90 West Europe 65 East Europe 10 China 12 India 5.0 South East Asia 10 L. America 18 [Source: 4

5 Chart no The Global Polyethylene Demand in terms of 1000 tons per year up to 2020 is projected in chart: [Source: Chart no Polymer demand by Application [Source: Industry Reports 5

6 1.4 Indian Plastic Industry The plastic processing sector in India comprises about 55,000 units employing around 3.6 million people directly and indirectly; Gujarat contributes about one-fifth of the total number of units in the country. They are involved in producing variety of items through injection moulding, blow moulding, extrusion and calendaring. The country in general and Gujarat in particular possess necessary technical skills to produce high quality plastic goods, required machinery, efficient moulds and dyes. In view of the versatility of operations and low cost of production, the state has been ideally suited to serve as a sourcing base. Major international companies from various segments of industry including automobiles, electronics and communication, food processing and packaging have set up large manufacturing plants in the country and have helped to develop the market. India is emerging as one of the fastest growing markets and is expected to grow annually by 12 to 15% in the coming years. Indian Plastics Industry gained momentum in early 90 s when the economy opened up with liberal industrial policies. Since , virgin polymer consumption in the country increased from 3.3 MMT to 7.5 MMT in with annual growth of 9.4%. Plastics Industries contribution to India s manufacturing GDP touched around 10% in Polymer demand is expected to touch 16.2 MMT by and 20 MMT by The Plastics Industry in Gujarat is one of the oldest in India and among the earliest initiatives towards polymer raw material manufacturing. Majority of India s plastics business revolves around packaging, and as Gujarat contributes % to the country s plastics industry, it is home to many small and medium packaging industries. The Plastics Industry in Gujarat contributes 2.17% of India s total exports and is worth $3513 millions. Thus, so far as growth of Indian economy is concerned, the plastic industry of Gujarat and therefore that of India is making considerable contribution. Therefore, the present study has got motivation from these aspects. 6

7 Table no Current Indian Petrochemicals Capacities (in KT) Producer & Location PP HDPE LDPE HD/LL PTA PS PVC RIL, Hazira RIL, Jamnagar RIL Patalganga IPCL, Nagothane IPCL, Vadodara IPCL, Gandhar GAIL, Auriya HPL, Haldia BRPL, Bongaigaon Finolex, Pisranpar LG Poly, Vizag Supreme, Mumbai Chem Plast, Metturdam DCW, Sahupuram DCM, Shriram, Kota RPRL, Abu BASF Styrenics, Bharuch Mitsubishi, Haldia TOTAL [Source: 7

8 Table no Typical Polymer consumption pattern of different polymers. Polymer KT LDPE/EVA 275 LLDPE HDPE 920 PP 1300 PVC 1000 PS 225 PET Film 135 Bottle SAN/ABS 90 Polyamide 35 Polycarbonate 72 Polyacetal PET/PBT 7 Others 3 Thermoset 100 Total 4820 [Source: To manufacture finished products, polymers are processed through various types of techniques namely extrusion, injection moulding, blow moulding and rotomoulding. Various products manufactured through these processes are highlighted in the following exhibit. Table no Classification of Plastic Products by type of process used. Process Extrusion Injection Moulding Blow Moulding Roto moulding Plastic Products Films and Sheets, Fibre and Filaments Pipes, Conduits and profiles, Miscellaneous applications Industrial Injection Moulding, Household Injection Moulding and Thermo-ware/ Moulded luggage Bottles, containers, Toys and Housewares Large circular tanks such as water tanks 8

9 Table no The polymer consumption in India according to various processes is provided as follows: Process (%) Share in Total consumption in India Extrusion 60.0 Injection Moulding 25.0 Blow Moulding / Stretch Moulding 06.0 Rotomoulding 01.0 Other Processes [Source: The Indian plastic processing industry is highly fragmented and comprises 25,000 firms. Barring 10% - 15% of the firms, which can be classified as medium scale operations, all the units operate on a small-scale basis. The top 100 players account for just 20% of the industry turnover. The total number of players in the sector is more than 25,000. However, the degree of fragmentation, worldwide, is large and despite the small size of operations of the players, they are able to operate profitably. Further, the high growth in demand ensures that the market is able to absorb the excess capacity in quick time. Overall, the degree of competition can be considered high in the Indian plastic processing industry. The sector has a significant presence of the unorganized sector, which accounts for more than 70% of the industry turnover. More than 95% of the firms in the industry are partnership, proprietorship or private limited companies. Further, these small companies get significant advantages in taxes. These firms thus provide significant level of competition to the organized sector companies. 1.5 Statistics of Plastics Industries in India: Table no Current Status Major Raw Material Producers Processing Units Turnover (Processing Industry) Capital Asset (Polymer Industry) Raw Material Produced approx Raw Material Consumed approx Employed Direct/Indirect Export Value approx Revenue to Government approx. 15 Nos. 25,000 Nos. Rs.85,000 Crores Rs.55,000 Crores 5.3 MMT 5.1 MMT 3.3 Million US $ 1.90 Billion Rs.7300 Crores 9

10 Chart no Imports and Exports of Polymer (in crore Rs) [Source: Industry Reports, Chart no Additional machines & capacity in plastic processing sector. [Source: Industry Reports, 10

11 1.6 Gujarat a hub of the Plastic industry The potential of the Plastic industry has motivated Gujarat entrepreneurs to acquire technical expertise, achieve high quality standards and build capacities in various facets of the booming plastic industry. Phenomenal developments in the plastic machinery sector coupled with matching developments in the petrochemical sector, both of which support the plastic processing sector, have facilitated plastic processors to build capacities to service both domestic and export markets. Some facts about Gujarat Gujarat contributes more than 60% of Indian petrochemical industry. 70 % of polymers are produced in Gujarat. Contributes one-fifth of the total number of SMEs in the plastic sector in the country. Gujarat plastic industry is witnessing an annual growth of more than 15 %. Gujarat s share in exports of plastic is around 15 %. Gujarat share in the production of plastic products is around 14 %. Gujarat has the highest plastic machinery manufacturers. 1.7 Emerging trends in the industry Plasticulture Plasticulture is the use of plastics in agriculture, horticulture, water-management, food grains storage and related areas. A variety of plastics materials and end products are deployed in plasticulture applications - for water conservation, irrigation efficiency, crop and environment protection, as well as end product storage and transportation. Applications of plastics in Indian agriculture are remarkably less than those in the developed countries. Globally the average usage rate of plastics in agriculture is 7%, but India is lagging behind at 1%. The country s water usage efficiency is only 38%, far lower than the international average of 65%. In the next three years, India s agriculture ministry plans to introduce micro irrigation system in 17 million hectares of land. Plastics will certainly play an important role and demand will increase consequently. 11

12 1.7.2 Booming Automotive sector Growth of the auto industry in hold s great significance for the plastic consumption in India. Automobiles have assumed a place of prominence in Indian industry, which is currently producing 2.2 million passenger cars. That figure is expected to reach 10 million vehicles by Indian OEMs (Original Equipment Manufactures) currently use about 155 pounds of plastic per car, and that amount is expected to climb significantly, and possibly double, by China and the U.S. use 286 and 330 pounds of plastic per car, respectively, which shows the huge opportunity in India plastic consumption in the rapidly growing automobile sector. Indian automobile manufacturers are focusing on innovations such as inline painting to match international standards. Certain techniques like thermoforming for exteriors and longfibre reinforced plastics for replacement of metals are yet to take off in India and have phenomenal potential. Following table shows the plastics per car (in pound) and car per thousand people. Chart no [Source: Industry Reports, Employment Generation Potential Considering both direct and indirect employment, the industry presently provides employment to 3.3 million people. Depending upon consumption growth within the country, the sector has the potential of generating 3 million additional employment opportunities. Emergence of India as a key exporter of value added plastic products like China, can hasten the process. 12

13 1.9 Problems of Plastic Industry 1. Raw material supply: Plastic industry faces a shortage of raw material. Due to the shortage of raw material they have to curtail the total production. 2. Rising prices of raw materials: This is also a major problems facing by the plastic industry. The fuel charges, transportation cost are the major factors in rising the prices of raw materials used by the plastics manufacturing companies. 3. Government ban on certain plastics product: Government ban on certain plastic products like micro thin plastic bags, plastic carry bags, plastic packaging materials, sachets, etc. as has created instability. 4. Plastic waste management problem: Plastic bags say Robert Edwards & Rachel Kellett are choking the life out of India. Non-degradable plastic bags are poisoning clogging up India s towns & cities. But solutions are hard to come by largely due to the political influence of India s plastics industry. Times of India reported that local cows were dying as a result of eating discarded plastic bags. The number of cow dying was estimated to be 100 a day. 5. Environmental hazardous: Material waste has only recently became a feature of India life and it was the advent of non-biogradable plastic that largely created it. Plastic litter has grown in proportion to the expansion of the plastics industry. The government of India sanctioned a huge increase in the national production of plastic so that India would become self sufficient in petrochemical products and be able to compete in the global plastic in India is used for percent market. Over 50 percent of all plastic produced in India is used for packaging. Most of this is discarded once used and in a country where traditionally waste was largely unknown, this has caused a massive environmental problem. 13

Industrial Climate of Plastic Sector

Government of India Ministry of MSME Industrial Climate of Plastic Sector 2015-16 Prepared by MSME-DEVELOPMENT INSTITUTE Ministry of MSME, Govt of India Narsapur Cross Roads, Balanagar, Hyderabad-500 037