NEW DELHI: The Indian plastic manufacturers need level playing field in the current global scenario, as cheap Chinese products have flooded the market, feels Jayesh Rambhia, president of All India Plastics Manufacturers’ Association (AIPMA).
He also added that plastic packaging increases not just shelf life of food but also prevents wastage. India consumes nearly 12 kg plastic per person every year as compared to the global average of 28 kg. Although, the consumption is rising at 25% in India but manufacturing is witnessing 5% growth rate. Here are few excerpts from the Interview…
What is the role that AIPMA aims to play in India’s SME sector?
Jayesh Rambhia: AIPMA has got constant analysis done identifying bottlenecks to growth of SME in plastic sector. It also got strategy study done to work out how we can lead growth into future. Having done this we created master plan for inclusive growth. All above three together form vision for inclusive growth document which is long term plan.
What are the current projects being undertaken by AIPMA?
Jayesh Rambhia: Based on above vision for inclusive growth, we started working on factor which need to be addressed to rejuvenate industry. AIPMA is instrumental to get about 1000 acres of industrial land with good infrastructure with single window clearance at affordable rates direct from state governments in Gujarat , Karnataka, MP and UP. We have also worked out a deal with SIDBI to finance our members. We have signed MoU with major plastic associations worldwide, including US, UK, Italy , European Union to make global opportunities available to Indian plastic manufacturers. To promote export, AIPMA has launched Plastivsion Arabia in UAE & Kenyaplast in Africa.
To make latest technology available to Indian entrepreneurs, we have Plastivsion India now in world’s top 10 plastic shows. AIPMA partnered with UNIDO to improve competitive ness of Indian plastic industry. Group purchase agreements from insurance, mobile companies save a bundle for members. We have sent 14 members for training to Italy fully sponsored by Italian government. We also sent 29 members to visit trade fair in Italy.
How do you think that the Indian SMEs engaged in plastic sector are performing in the present global meltdown?
Jayesh Rambhia: Indian market share in US and EU is less than 1% of their total demand. So, global meltdown is not directly responsible for slowdown. Due to taxation with retrospective effect & uncertainty in decision making is preventing large investments to come into India. Many of Indian corporates have declared more projects abroad than in India. This is more responsible for slowdown. Indian growth in consumption is being captured by cheap Chinese imports. They have 25% of market and is growing faster.
Much of this import is under invoiced. Result is shelves in Indian chain shops have been captured by Chinese goods. India consumes about 12 kg plastic per head per year against international average of 28 kg. Our consumption is growing at 25% but our manufacturing is growing below 5%. We need to support growth of manufacturing to cater to fast rising Indian consumption.
What are the key challenges faced by the Indian SMEs in plastic sector?
Jayesh Rambhia: Free Trade Agreements signed by government makes it cheaper to import finished goods compared to industrial inputs. Government has not generated enough trust and hence they do not get data from SMEs. With no data, SMEs does not get help it needs & deserves. Fragmented short term thinking by government is creating challenge to growth. MNREGA scheme has made availability of workers a major issue in Industry. Power shortage is making it difficult to sustain industry in several states if India. Government has made it compulsory to use jute packaging in agriculture. Such skewed favors does not allow better product to win market.
Do you think that the plastic SMEs are aptly placed for exports?
Jayesh Rambhia: In globalised economy, we need level playing field for Indian manufacturers. Price for land, capital, power are much higher in India as compared to China. In India, industry is forced to finance cheaper power to agriculture and consumers. Our tax structure is also higher and we do not get refund of all taxes by export incentives. We are forced to export taxes affecting our export growth. Export of finished goods are losing market share in export basket.
However, government does not give more incentives to add value in India. Hence, raw material export is rising. India is behaving like a colony as it is exporting raw material and importing finished goods.
Do you feel that government policies (both Centre and state) are working in favour of the SMEs? Are they assisting these companies in alleviating the pertinent issues?
Jayesh Rambhia: Progressive state governments are active to attract industry. More is desired from Center. We have presented several key policy changes which if adopted can change future of our industry. So far, we have not seen any positive action from central administration.
Analysts feel that technology adoption and marketing are key challenges for SMEs. How far do you think it is correct?
Jayesh Rambhia: Low spend on R & D is not generating enough intellectual property rights for industry. Commoditised products do not generate enough margins to support fresh investment. This bears major impact on the functioning of industry.
RBI’s move to leave interest rates unchanged in the recent policy review has been criticised by India Inc. How do you think it will impact the growth of SMEs?
Jayesh Rambhia: India is importing more than it is exporting. So devaluation of Dollar is increasing our fuel bill and leading to jump in inflation. Devaluation has not helped our export to the extent it is envisioned since prices of many inputs for export are linked to Dollar price. So, plastic raw material becomes expensive when Dollar goes up. So, plastic exporters do not benefit from devaluation.
But due to inflation our wages and input costs go up. That is affecting competitiveness of India as an investment destination. Vietnam, Bangladesh are emerging as new low cost destination for manufacturing.vDue to high interest rates, cost of finance goes up further making us non competitive against China.
Kindly share the roadmap of AIPMA for the ongoing financial year 2012-13.
Jayesh Rambhia: We will continue to work on vision for growth master plan since its a long term plan. AIPMA will keep supporting member each step on the way to growth. We would keep our efforts on areas such as strategy, planning, land, finance, marketing, operations, learning, exports, purchase, training, etc.
We will continue to build bridges between Indian industry and global opportunities. We also bring all stakeholders in plastic industry together for making strengthening India’s presence.