Scope For Mncs Role In Plastics

Business Standard: What is the present status of the plastics industry?

V Merchant: The plastics industry has been witnessing remarkable growth in consumption and production of almost 15 per cent annually since the last 10 years. This was primarily due to the fact that the use of plastics was very much restricted in India between 1960 and 1990 owing to the perception in the minds of our planners that plastics meant `luxury'.

During this period, all the developed nations of the West and even the Asian Tigers realised the versatility of the wonder product and promoted its use to the benefit of their people. Since the early 1990s, along with liberalisation, the consumer has been allowed to demand and get an alternative if he so desired.

The result is evident on two fronts: better quality and competitive prices.

The effect of this is that to survive, the plastic manufacturer has to per force improve his product. Besides, enterprising people are bringing in the best technologies to India so that they can reduce their cost and compete with better products.

The charm of 'imported quality' is disappearing in plastic furniture, plastic wall paper, plastic household goods, plastic decorative goods and novelties.

Now all the famous international brands such as Samsonite for luggage, Tupperware for kitchen containers, Showaplas for industrial components, Pentaplast for films, tetrapack for packaging etc, have already entered the market since last two years.

BS: What is the plastics sector growth prospects like?

VM: The present growth is quite remarkable. There still are innumerable items which can be substituted with plastics in India. The per capita consumption in the country is quite low. With overall industrialisation, plastics will be used more extensively to save precious wood and minerals apart from time and energy.

There is a good scope for multinationals to play in India. With Suzuki setting up shop at Maruti Udyog, the Japanese invited a dozen parts manufacturers to set up ventures to produce seats, batteries, steering, door panels etc., in the country. Similar is the case of irrigation systems. World leaders in sprinklers, pipes for gas, telephone lines, telephones, cellular phones etc., have entered the Indian market.

Their long experience in the West is being leveraged to capture the local market since 1992.

Western giants who have not set up their plants in India have started `licensing' their technologies such as Mausser for L-ring drums, Van Leer for their oil cans and pails, the Israelis for their special irrigation pipes, Mattel & Lego for toys etc.

BS: What is the status of government's policy vis-a-vis your industry?

VM: With liberalisation, the message from the government is very clear: Don't come to us; do your own bit and learn to survive. After the tariff barriers come down, if an Indian manufacturer does not supply quality, then buyers have a right to shop any where. This will spur the locals to do better.

However, backward area concessions have skewed the expansion of the industry which is an quite alarming occurrence. Since Daman, Silvassa and Pondicherry are offered sales tax rebates, 50 to 70 per cent cheaper power tariffs and inexpensive land, the industrialists have shifted their units from Mumbai, Pune, Ahmedabad, Baroda and Delhi to the above places.

This has created congestion in these pockets. This has hurt many who couldn't shift due to lack of managerial strength or limited funds.

Only the large-and medium-scale companies can reap the full benefits of moving to such backward areas.

BS: What has been the impact of the `high-thrust' sector tag?

VM: The `high thrust' status was finally assigned to plastics since the policy makers realised that several vibrant sectors could not progress without the use of plastic parts.

Advancement in teletronics, cables and fibre optics, automobiles, communications, healthcare and aerospace in the West was possible only with intelligent use of polymer chemistry.

So also, it was only due to plastics that despite limited water, crop yields could be remarkably improved. Use of drip irrigation, mulching and sprinkler systems have helped the nation to multiply supply of foodstuff so important for feeding the masses at reasonable costs despite water constraints.

BS: As we are going global in plastics? How do you see the post-GATT scenario with regard to this industry?

VM: The post-GATT scenario means a global village sans tariff and non-tariff barriers where products are easily available at reasonable cost whether the buyer is in India, Pakistan, Turkey or Brazil.

The country offering good quality products at lower rates will capture the market.

This will, of course, take time as after 40 years of license raj, altering the mindset and bringing about a global focus could entail a change in the innards. In the case of the plastic industry, it seems such changes will be more rapid than in traditional industries such as textiles, leather, mining or metalware.

BS: What is the present price and emerging trend in polymers?

VM: The prices of polymers are still quite high in India compared with the West.

This situation cannot last for more than two or three years. World-scale plants have already been put up by Reliance, IPCL and Finolex, and GAIL is entering the markets by 1998/99.

This will lead to abundant supply of all commodity polymers and prices should as a consequence become more reasonable.

The temporary protection with 32 per cent duties on imports in the latest Union budget was only due to pleadings by the two petrochem giants who wanted some more time to stabilise operations.

They have assured the government that they would be strong enough after a year to face international competition by 1998 when there will be lowering of duties leading to lower prices.