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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.

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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”.

12.2 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.

1.2.3 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

1.3.1 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,

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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 door-

step. 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

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logistics chain or packaging that monitors product quality –are in offing. Growth-

trend 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 2015. 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. – 1.3.1

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: http://cipet.gov.in/plastics_statics.html]

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Chart no. - 1.3.2

The Global Polyethylene Demand in terms of 1000 tons per year up to 2020 is

projected in chart:

[Source: http://cipet.gov.in/plastics_statics.html]

Chart no. – 1.3.3

Polymer demand by Application

[Source: Industry Reports www.investshoppe.com]

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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 2000-01, virgin polymer consumption in the

country increased from 3.3 MMT to 7.5 MMT in 2009-10 with annual growth of 9.4%.

Plastics Industries’ contribution to India’s manufacturing GDP touched around 10% in

2009-10. Polymer demand is expected to touch 16.2 MMT by 2015-16 and 20 MMT

by 2020.

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 65-70 % 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.

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Table no. -1.4.1

Current Indian Petrochemicals Capacities (in KT)

Producer & Location PP HDPE LDPE HD/LL PTA PS PVC

RIL, Hazira 350 - - 400 - - 300

RIL, Jamnagar 600 - - - 800 - -

RIL Patalganga 60 - - - 300 - -

IPCL, Nagothane 60 - 80 220 - - -

IPCL, Vadodara 75 - 80 - - - 55

IPCL, Gandhar - 160 - - - - -

GAIL, Auriya - 100 - 160 - - 150

HPL, Haldia 210 200 - 260 - - -

BRPL, Bongaigaon - - - - - - -

Finolex, Pisranpar - - - - - - 130

LG Poly, Vizag - - - - - 80 -

Supreme, Mumbai - - - - - 240 -

Chem Plast, Metturdam - - - - - - 60

DCW, Sahupuram - - - - - - 60

DCM, Shriram, Kota - - - - 400 - 35

RPRL, Abu - - - - - 16 -

BASF Styrenics, Bharuch - - - - - 60 -

Mitsubishi, Haldia - - - - - - -

TOTAL 1355 460 160 1040 1500 360 790 [Source: http://cipet.gov.in/plastics_statics.html]

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Table no. – 1.4.2

Typical Polymer consumption pattern of different polymers.

Polymer KT

LDPE/EVA 275

LLDPE 550 1745

HDPE 920

PP 1300

PVC 1000

PS 225

PET Film 135

Bottle 100 235

SAN/ABS 90

Polyamide 35

Polycarbonate 72

Polyacetal 8 125

PET/PBT 7

Others 3

Thermoset 100

Total 4820 [Source: http://cipet.gov.in/plastics_statics.html]

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. – 1.4.3

Classification of Plastic Products by type of process used.

Process Plastic Products

Extrusion Films and Sheets, Fibre and Filaments Pipes, Conduits and profiles, Miscellaneous applications

Injection Moulding Industrial Injection Moulding, Household Injection Moulding and Thermo-ware/

Moulded luggage

Blow Moulding Bottles, containers, Toys and Housewares

Roto moulding Large circular tanks such as water tanks

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Table no. – 1.4.4 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 08.00

[Source: http://cipet.gov.in/plastics_statics.html]

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. – 1.5.1 Current Status

Major Raw Material Producers 15 Nos. Processing Units 25,000 Nos. Turnover (Processing Industry) Rs.85,000 Crores Capital Asset (Polymer Industry) Rs.55,000 Crores Raw Material Produced approx 5.3 MMT Raw Material Consumed approx 5.1 MMT Employed Direct/Indirect 3.3 Million Export Value approx US $ 1.90 Billion Revenue to Government approx. Rs.7300 Crores

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Chart no. – 1.5.2

Imports and Exports of Polymer (in crore Rs)

[Source: Industry Reports, www.investshoppe.com]

Chart no. – 1.5.3

Additional machines & capacity in plastic processing sector.

[Source: Industry Reports, www.investshoppe.com]

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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 1.7.1 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.

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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 2020. 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 2016. 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 long-

fibre 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. – 1.7.1

[Source: Industry Reports, www.investshoppe.com]

1.8 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.

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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.