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Plastics, petrochemicals should be included in the PLI scheme: Arvind Goenka, Chairman, Plexconcil


India’s plastics sector plays a catalytic role in the economic development of the country. Unsurprisingly, the country currently ranks among the top five consumers of polymers in the world, has over 30,000 plastics processing units, employing over four million people across the country. India’s plastics goods are exported to over 200 countries and plastics formed 3.3% of the country’s overall merchandise exports in 2018-19. However, the sector, with almost 65% of exports from MSMEs, is faced with many structural challenges too. With the Union Budget 2021 around the corner,
Arvind Goenka, Chairman, the Plastics Export Promotion Council (Plexconcil), outlines the sector’s key expectations. Edited excerpts:

ET: The first Budget, post a pandemic ridden phase, is around the corner. What are Plexconcil’s key recommendations for it?
Arvind Goenka (AG):
We have presented a number of recommendations to the government, the first of which relates to the Remission of Duties or Taxes on Export Products (RoDTEP) scheme. Plexconcil believes that RoDTEP rates for plastics products should be fixed in line with the Merchandise Exports from India Scheme (MEIS) rates. Indian processors are not at a level playing field when compared the cost of production to those enjoyed by our competitors in the ASEAN region. For example, electricity is freely available in power exchanges within India at around 3.50 Rs/KVaH whereas DISCOMS supply to the industry at 6.50 Rs/KVaH. The government levies “cross subsidy” on power supplied to the industry as it, in turn, supplies subsidised power to farmers.

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ET: What do you expect from this Budget for the logistics sector?
AG:
Plexconcil has been requesting the government to appoint a shipping regulatory body for a while now. Presently, the average logistics cost in India is estimated at 14% of GDP against the global average of 8%. Plastic processors are based all over India and inland haulage and other miscellaneous costs charged by shipping lines are arbitrary. Logistics form an integral part of the export cost to processors and this must be reduced in line with the global average to boost our competitiveness. We also need better infrastructure including better roadways, access to seaports from remote parts of the country for raw material movement.

ET: Experts believe that most Free Trade Agreements (FTAs) that India has signed have not resulted in the desired outcome for exporters. What is your view on this?
AG:
I believe that FTAs need to be renegotiated for plastic goods. Despite India having an FTA with ASEAN and SAARC, the export of value added plastic goods to ASEAN countries is lesser than our share in trade with the USA, UK and WANA (West Asia and North Africa) regions.

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Earlier, negotiations for preferential duties favouring export of plastic goods were not prioritised. While textiles, pharma, footwear etc, were considered, value added plastics was left out. Similarly, in the SAARC region, despite India being a manufacturing giant, its share of exports in plastic value added goods is extremely low. These FTAs allow the import of value added plastic goods within India at zero to 5% import duty, thereby affecting the MSME processors greatly.

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India’s plastics are mainly exported to Europe (24%), North America (16%) and WANA region (14%). However, as India does not have any trade agreements with any of these regions, our plastics exporters are unable to realise their full potential. If the government can forge a trade agreement with these regions, we would be able to increase exports as opportunities and recognition for Indian manufactured products in these regions is immense.

Plexconcil has also suggested that:

  • The government should reduce the lead time for refunds (MEIS/GST) for exporters
  • Reinstate GSP and sign an FTA with major export destinations particularly the United States
  • Increase the rate of drawback
  • Simplify manufacturing and customs laws
  • Improve the import clearance assessment systems
  • Work towards improving the Ease of Doing Business in India

The main challenge is the availability of polymers at competitive prices in India. As rates are almost 5% higher in comparison with those in NEA (North East Asia) countries, domestic processors of value added plastic goods face competition from cheap imports within India and cut-throat competition in foreign markets. The only way out to solve this is to boost the domestic production of polymers, and ensuring availability its to processors at competitive rates. This can be possible if new petrochemical complexes are established by state PSU’s and conglomerates in the yet to take off Petrochemical Investment Region (PCPIR). Plexconcil also advocates the inclusion of petrochemicals in the Production-Linked Incentive (PLI) scheme.





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