Plastics Processing Machinery (PPM) Overview

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Milo Owens
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1 Plastics Processing Machinery (PPM) Overview Plastics Machinery Market is Approx Rs. 4,000 Crores. Domestic production is Approx Rs. 2,400 Crores. Sector employs approx 1.20 Lakh (Direct + Indirect) people 14 manufacturers in organized sector. Approx 200+ manufacturers in small & medium sector Main products include Injection Moulding Machine, Extruders, Blow Moulding Machine, Thermoforming & Roto Moulding. Injection Moulding Machine accounts for 70% of total Indian Plastics Processing Machinery Industry Plastics machineries are exported to Africa, Middle East, South East Asia, North & South America and Russia. Exports value Approx Rs. 700 Crores Machinery produced in India are of current technologies of global leading brands, hence holds high potential for the sector to be a global player

2 Plastics Processing Machinery Issues being Faced High imports and dumping despite industry having sufficient or significant surplus capacities Fresh dumping by other countries, apart from China Decline in Demand Capacities remain under utilized Imports of used plastics processing machineries- not only causing damage to Industry s market share, but also inducing processer inefficiencies Machinery manufacturers Imports around 30% of their parts required in construction of machine which are not produced in India leads to high cost of production

3 Plastics Processing Machinery Issues being Faced Inverted Duty Structure India has entered FTA where Some Plastics machinery are allowed to import at zero customs duty, but, parts attract 7.5% to 10% import duties Limited export benefit under Foreign Trade Policy Unavailability of Technology Development Fund Skilled manpower in short supply

4 Plastics Processing Machinery Requests under Make in India ideology Pre Budget Proposal Impose restriction on used machinery imports Reduce customs duty on parts & components Introduce GST Include products under Focus Product Scheme & Focus Market Scheme for export benefits Give loans at Subsidized interest rate to processors for investment in technology machines Create Technology Development Fund for machinery manufacturers

5 Plastics Processing Machinery Requests Made- Any Relief? Union Budget Impose restriction on used machinery imports No Reduce customs duty on parts & components No Introduce GST - Yes (to be implemented next year) Include products under Focus Product Scheme & Focus Market Scheme for export benefits - FTP to be announced Give loans at Subsidized interest rate to processors for investment in technology machines - No Create Technology Development Fund for machinery manufacturers - No

6 Plastics Processing Machinery IDS Request, Pre Budget Union Budget Import duties on Plastics Processing Machineries due to trade agreements have been reduced considerably, in most cases to 0% Import duties on parts and components however is in the range- 7.5% to 10% Request Made pre p e budget: Inverted ed Duty y StructureS u e anomaly y too be corrected ed by reducing import duties on certain a n partss and components based on recommendations ons made by Tariff Commission on who had conducted a study and determinede m that IDS existss s inn plastics processing machinery ysector NoRelief to Plastics Processing Machinery sector in this regard has been announced in Union Budget

7 Inverted Duty Facts & Concerns

8 Input materials & imports of finished goods Major Supplying Countries Plastic Processing Machinery industry gets its major supply of input materials from Germany, Austria, USA, Switzerland, Japan, South Korea, Taiwan and China Around 45% of its finished goods (Plastics machinery) imports are from China, Japan, South Korea and ASEAN- with which India has operational trade agreements Therefore, essentially all its input materials supply come from countries with which India does not have trade agreement, except Japan (India - Japan CEPA), South Korea (India - Korea CEPA & APTA) and China (APTA), which command only 20% of industry s total input material requirement

9 China, Japan & South Korea Duty Structure under Trade Agreements SN Trade Agreement 1 India- Japan CEPA 2 India- Korea CEPA 3 APTA (covering China) 2014, Preferential Duty on Input Materials 2014, Preferential Duty on Finished Goods 4.8% to 6.4% 2.5% on injection moulding machines. No concession on imports of extrusion machines. 4.8% on other machines for working plastic 4.69% to 7.81% No preferential duty on imports of injection moulding machines. 4.69% to 7.81% on other machines for working plastic No concession on imports on majority of the input materials No preferential duty on imports of machines for working plastic, except extrusion machines (15% concessions on basic import duty)

10 Preferential Duty (%) as against Basic Duty of 7.5% Finished Goods SN Trade Agreement 1 India- ASEAN FTA 2 India- Japan CEPA Comments All Finished Goods Avg All Finished Goods except Extrusion Machines 3 India- Korea CEPA Avg All Finished Goods except Injection Moulding Machines 4 China Only Extrusion Machines

11 Effect of Inverted Duty There is absolute percentage difference in certain cases, like Japan, as regards preferential duty on input material and finished goods (preferential duty on input material > finished goods) Around 80% of industry s input material come from countries with which India does not have any trade agreements, and hence, no cost advantage Around 45% of industry finished good imports come from countries with which India has trade agreements, and hence, price incompetitiveness Import duty on all finished machinery for working plastic and almost all input material is zero under India- ASEAN FTA; however, no significant supply of input material from ASEANposing a threat to domestic industry

12 Imports of Plastics Processing Machinery from ASEAN (0% current import duty) Source: DGCI&S

13 Ease of Doing of Business Presented by: Plastics Machinery Manufacturing Association of India

14 Policy Change for Ease of Doing Business Make Land Acquisition easy & Hassle free, Best options is Government createlandbankandthenallocatetoindustryonneedbasis After allocation if Industrial unit is not set up in 2/3 years, then that land should be taken back by Government. This will help in maximum productive utilization of land. Self declaration form should be introduced for all requirements for factory setup, Industry is responsible for following all norms and compliances. Labour laws should be industry& worker friendly Skill development Industry & Institute participation for industry ready manpower development program should be launched Government should make mandatory for industry to train certain number of ITI s and the burden shall be shared by Government & Industry

15 Policy Change for Ease of Doing Business Judicial reforms: Quick & Time bound disposal of cases in all areas of departmental litigation such as Income Tax, Excise, Customs and Sales Tax. If previous court decision for the similar matter available, then no further litigation should be allowed. Disposal of all the cases in courts in time bound mannerandfixedthetimelimitfordisposingofthecases. Accountability of Government Officials should be clearly defined. Dishonour of Cheque: Benefits of Post dated cheques (PDC) is taken away by the Supreme court decision under section 138 of negotiable instrument act. The place of filing the complaint should be the place of beneficiaries of the negotiable instrument. Timelyissueof C formsbyallstatesorabolitionof C forms 24X7CustomClearanceonalltheports Easy process for Advance license application and claiming benefits Direct credit of export benefit, duty on EEPC and duty rebates

16 Policy Change for Ease of Doing Business TDS on technical services received from abroad (25% new budget proposal is 10%) tobeabolished No Restriction on input tax credit for interstate sales for state VAT Maintenance of records in soft forms for Government statutory data needs Uninterrupted Power supply for industry Abolish ESI and replace it with Medical Insurance Infrastructure support for approach roads in industrial area, water, electricity &Sewagebylocalbody Remove Inverted duties: Plastics machineries are imported at reduced customs duty under FTA, whereas Parts are imported at full customs duty. Current budget has given relief for certain parts, but this benefit is applicable for Machine Tools industry only.

17 Policy Change for Ease of Doing Business Government should prepare data bank of all sick/closed units inthestate Government should help convert these closed units to operative units by, Selling property to prospective buyer who is interested in setting up unit Property bought by new buyer should be free from all the encumbrances such as Old dues pending for Municipal Corporation, Electricity company etc. Power, Water & any permission under the local body should be given under priority and delay under any pretext should attract the legal action against the service provider

18 On the letter head Date: 25 th March 2015 To, Shri Sushil Lakra Industrial Adviser, Department of Heavy Industries Ministry of Commerce & Industry, Government of India New Delhi Subject: - inputs ref. DRPSC meeting held on 24 th March, 2015 Dear Sir, We the Plastics Machinery Manufacturers Association of India is an industry-body representing all plastics machinery manufacturing organisations in India. PMMAI was formed with the objective to promote the advancement of plastics machinery manufacturing industry and also to promote common interest of constituents of plastics machinery manufacturing industry comprising of primary processing machinery, post forming processing machinery and auxiliary equipment used in pre and post forming operations etc. in the fields of economy, technology and science through cooperation and coordination at national and international level and train people for the industry with required skills. This is with reference to the communication received in the matter of inputs required based on the Department Related Parliament Standing Committee meeting held on 24 th March, Following, we wish to bring to your notice industry potential, the issues being faced by this industry and proposals for ease of doing business as per enclosed Annexure I and Annexure II. A. Industry Potential Sno. Question Response Facts 1 Strength Large number of manufacturers 14 in organized and 200+ in small and medium sector 2 Technology High potential to be a global player Machines produced are at par with current global standards 3 Main Products Injection Moulding Machine, Injection Moulding Extrusion Machine, Blow Machine accounts for Moulding Machine, around 70% of total Thermoforming & Roto Plastics Processing Moulding Machinery sector 4 Industry Exports Huge potential Export earnings of $100 million+ 5 Major Export Africa, Middle East, South East Exports value Approx. 700 Destinations Asia, North & South America crores

19 Sno. Question Response Facts 6 Employment Significant 1.20 Lakh (Direct + Indirect) B. Industry Issues Sno. Issue Facts 1 High imports Industry has significant surplus capacities 2 Dumping China is attracting ADD; investigation underway as regards dumping from Malaysia, Philippines, Taiwan and Vietnam 3 Decline in Demand - 4 Imports of used machines More than 30% of imported machines are second hand 5 Unavailability of parts and Industry imports around 30% of parts and components components 6 Inverted Duty Structure Machines attracting 0% import duty under major operational trade agreements, whereas, parts and components (which come mainly from non FTA countries) attracting 7.5% to 10% import duty 7 Unavailability of Technology Development Fund 8 Skilled Manpower in short supply C. Proposals to rectify Industry issues Plastics processing machinery global industry is fast growing in terms of technology. India needs to keep up with this growing technology trend Lack of training institutes and institutes with facilities meeting global standards Plastics Processing Industry as earlier proposed, once again proposes following for rectification of the issues being faced by this industry. i. Import restriction on used machines: Used machines should be banned. Or at least, Indian Tariff Classification should be modified to accommodate separate codes for used machines on which tariff (customs duty) should be of the order of 70%+ of original machinery price ii. Reduce custom duties on parts and components: Around 45%+ imports of finished goods (machines) are from China, Japan, South Korea and ASEAN with which India has trade agreements. In most cases import duties on machines are either 0% or too low. Whereas, around 80% parts and components (inputs materials) for manufacturing of machines come from countries with which India does not have trade agreements. The situation as explained above has created inverted duty structure in this sector.

20 iii. Other proposals: a) Fast Track anti dumping investigations b) Give loan at subsidized interest rates to processors for investment in technology machines c) Create or help industry to create Technology Development Fund D. Proposals for Ease of doing Business Plastics Processing Industry proposes following for an environment which is conducive and at the same time makes the business activities easy. i. Creation of land bank: This will make land acquisition easy and hassle free. Government can create land bank and then allocate to industry on need basis. After allocation of land, if industrial unit is not set up in a stipulated time frame, then that land should be taken back. This will ensure maximum productive utilization of land ii. iii. iv. Labour and industry friendly labour laws and Judicial reforms: For the purpose of judicial reforms, it is requested that there should be a provision for quick and time bound disposal of cases in all areas of department litigation Skill Development: Industry and institute shall together work towards creation of ready manpower. Government should work with the industry to create training centres, and make mandatory for the industry to train certain number of ITIs Other Proposals: a) Accountability of Government Officials should be clearly defined b) Timely issue of C forms by all states or abolition of C forms c) 24X7 customs clearance on all the ports d) Easy process for Advance License application and claiming benefits e) Direct credit of export benefit, duty on EEPC and duty rebates f) TDS on technical services received to be abolished g) No restriction on input tax credit for interstate sales for state VAT h) Maintenance of records in soft forms for Government statutory data needs i) Infrastructure support, including transport modes, water, electricity, etc E. Request: This industry has approached the Govt. at various levels and have earlier also brought these critical issues to their notice and in discussions at various occasions. We hope that Govt. considers major issues being faced by this

21 young but globally recognized Indian Industry, and help in reaching its potential, more importantly under Make in India ideology Yours Truly, With Regards,

Plastics Machinery Manufacturers Association of India (PMMAI) Welcomes Hon ble Min. DHI 29 th May, 2015

Plastics Machinery Manufacturers Association of India (PMMAI) Welcomes Hon ble Min. DHI 29 th May, 2015 Indian Industry Size Over 200 Plastics Machinery Manufacturers. 14 in organized sector No. of plastics