Plastic manufacturers face threat of closure

Tag : Cosmetics Material

Plastics have perhaps the widest possible application in day-to-daylife. When international crude prices zoom and the prices ofpetroleum products get revised, little do people realise thatdozens of other smaller and much bigger products also get affected.All of them are made from petrochemical products and the price risehits them too.
The plastic manufacturers and converters depend for their rawmaterials on just three petrochemical plants — Reliance,Haldia, and GAIL. Between December 2007 and May 2008, there was a20 per cent increase in price. But between May 1 and June 15, theprices have skyrocketed, with the major producers jacking up thecost five times in six weeks. As a result, there has been a 60 percent increase in input costs to the manufacturers. Low margins

Says Madan Surana, President, Tamilnadu PlasticManufacturers’ Association (TAPMA): “Our industry hasto absorb something like Rs. 20,000 crore in the increased cost ofabout 50 lakh tonnes of virgin material. We basically convert thematerial into goods. There is very little value addition and ourmargins are very low. We cannot be marking up our prices every weekwhen the producers of petrochemical products revise their price.That is the whole problem.”
From cosmetics and fertilizers, to automobiles and ordinary plasticproducts, hundreds of goods depend on the petrochemical industriesfor raw materials. Mr. Surana says the domestic producers have asurplus in most supplies, but conveniently link it to internationalprices. There is also an anti-dumping duty on imports.“Unfortunately, they do not bring down prices wheninternational rates come down. When we try to import the materials,they manipulate the domestic price and market and kill us with justone import.” But the convenience with the local suppliers isthat they can cater to the limited demands of medium, small andtiny industries. India’s per capita plastic consumption isonly 4.8 kg and this could easily go up to 10 kg. Virtual cartelisation

TAPMA Secretary Karthikeyan Swami regrets the absence of anyappellate forum or even a ministry that can intervene on theirbehalf. The continuing increase in the price of plastic productswill also fuel inflation, he warns. The virtual cartelisation amongthe domestic players has played havoc with the small-scaleindustry. He insists that the situation was not so bad till thepublic sector IPCL was in the scene. With its sale to Reliance, amonopolistic situation arose, with Haldia and GAIL only followingthe lead given by Reliance in pricing materials.
Other than Tamil Nadu, Maharashtra, Gujarat, and Delhi also havemany plastic manufacturers. But they do not seem to be in the kindof crisis that the small and tiny units in Tamil Nadu findthemselves in right now. With direct employment to about 1.5 lakhpeople and indirect employment to, may be, three lakh, TAPMA thinksthat the Central and State governments must also look at thesocio-economic angle to its problem.
The association wants a regulatory authority to take charge ofprice and deal with a near monopolistic trade. The promisedCompetition Council can also look at the possibility of‘undue profiteering.’ As polymer prices contributesignificantly to inflation, it could also be given duty exemption.
Another suggestion is to set up a tripartite monitoring committeeconsisting of representatives from manufacturing/ convertingindustries bodies, government agencies and petro-productsmanufacturers to evolve a transparent pricing and distributionpolicy. Working capital

Right now, working capital becomes the critical issue because noneof them can afford to buy and store raw material at this cost.Without revising prices every week, the producers must go back tothe monthly review of prices so that the manufacturers can alsoplan and programme their production and supply schedule on thatbasis.
After an earlier crisis sparked by the charge of pollution causedby plastics, the industry got some comfort from the Stategovernment, which agreed to lower the VAT to 4 per cent and bringdown the costs to an extent. Now, the manufacturers look to theCentre to provide some breathing space to survive.