Small plastics processors face closure

Industry insiders feel that some 30% of the MSMEs in plastics processing would be forced to shut shop over the coming months

With raw material prices witnessing a steep increase in the last few months, plastics processors in the country have raised concerns about facing the risk of closure.

Processors fear an erosion of 7-8 per cent in their profit margins. Moreover, industry insiders feel that around 30 per cent of the micro and small processing units across the country would have to shut shop temporarily due to a working capital crunch.

Raw material prices have risen by 15-25 per cent in the last three months, claim processors, and this has significantly increased the pressure on working capital. Pinakin Shah, president, GSPMA (Gujarat State Plastics Manufacturers Association), said that the plastics processing industry in the country is in trouble due to a sustained price increase in the last three months.

"All manufacturers have raised prices of polypropylene and polyethylene, and that is causing serious trouble for the processors," he claimed.

Harshit Shah, a Gujarat-based plastics processor and past vice-president of GSPMA, said, "Our profit margins would be hit by at least around 7-8 per cent. The major impact will be felt by small-scale players who would face a severe working capital crunch."

He further explained, "A lot of processors supply to fertiliser companies, and the rate at which the packaging material is supplied is usually fixed for three to six months. Hence, processors cannot raise prices all of a sudden, and margins will be squeezed."

The GSPMA said in a statement here, "Following the situation, plastics products used in various industrial sectors and products being used by the common man will be costlier. Plastics industry is facing cut-throat competition and this price hike will put processors in trouble, resulting in closure of units and more unemployment."

Industry insiders feel that some 30 per cent of the MSMEs in plastics processing would be forced to shut shop over the coming months. The Indian Plastics Federation (IPF) has said in a memorandum submitted to the Centre, "There are approximately 55,000 plastic processing units in the country employing more than 40 lakh workers. Most of these units are in the MSME sector. Due to various problems…many units have closed down and many more are on the verge of closure. Most of these units are working at less than 70 per cent of their installed capacity."

K K Seksaria, past president of the IPF and a leading plastics processor based in the eastern region, claimed that the local processing industry is also facing stiff competition in the wake of cheap imports of finished goods from Bangladesh. "If units do not run at 80 per cent capacity utilisation, they will not be viable. Therefore, they will shut shop," he added.