West Asia war: Plastic factories face uncertainty as machines fall silent

The second of a six-part series analyses the impact of the West Asia crisis on the plastic industry, based on a ground report from Balasore, Odisha

“A month ago, we didn’t even get time to sit and relax. Now machines are idle, mostly,’’ laments Ratan Singh, a contractual worker at a plastic products manufacturing unit in Balasore, nearly 205 km from Bhubaneswar. There’s no raw material and therefore there’s no work, workers have been told.

 

Ratan Singh, like many others at the Ganeswarpur industrial estate, has been unemployed for 15 days already.

 

Spread over an area of around 70 acres, Ganeswarpur is among the seven main industrial estates and growth centres of the coastal district that houses plastics, polymers and allied clusters. Around 20 micro small and medium enterprises (MSME) units produce  polypropylene-based household products, bags, pipes and fittings here.

 

The impact of the West Asia war is unfolding on factory floors in the industrial belt. The number of workers engaged in this estate has come down from over 1,500 on a normal day to less than 800 now.

 

“How long can we manage like this? My children will starve if the war continues for another week,” says Rabindra Sahu, who sits idle at a tea stall near his factory, waiting for a call to join back.

 

Inside Jagdamba Polymers Limited, a plastic housewares manufacturing unit at the centre of the  industrial cluster, the injection moulding machines have fallen silent one after another. Half-finished stacks of bath sets, casseroles, kids’ products and planters, that once rolled out in bulk, remain  scattered near the idle conveyor belts.

 

Rajendra Mondal, a worker at Jagdamba, which operates the largest injection moulding plant in Odisha, fears loss of job. ‘’We never thought this factory will face a situation like this,’’ says Mondal while stickering a jug at a production line.

 

Factory managers admit that contract labourers are the first casualty when production slows. “Production has reduced by nearly 70 per cent. Of the 10 production lines under one shed, only two are running,’’ says Kartik Chandra Kar, production in-charge. He points out that machines are being recalibrated according to the demand as products must not be piled up when the raw material cost is so high.

 

As Kar puts it, the uncertainty is more frightening than the immediate loss of income.

 

India, while having a significant domestic petrochemical production capacity, relies heavily on crude oil imports to meet its growing demand for polymers.

 

When global supply chains are disrupted, the manufacturers in India face both price shocks and supply shortages. Chandra Prakash Bhartia, managing director of Jagdamba Polymers Ltd, explains that the Indian plastics processing industry is extremely sensitive to global crude movements. “Polymers are directly linked to naphtha and other crude derivatives. When there is geopolitical instability, prices shoot up,’’ he says.

 

The prices of polymers and PET resins have increased by up to 75 per cent, according to Bhartia. ‘’We have no choice but to scale down the production.”

 

Production drops across board

 

A few kilometres away, the scale of disruption is even more visible inside Hari Plast, a plastic pipes and fittings manufacturing unit. Long extrusion lines, that once ran continuously, now stand cold. Of the 12 lines with an installed monthly capacity of 650 tonnes of polyvinyl chloride (PVC), chlorinated polyvinyl chloride (CPVC), high-density polyethylene (HDPE) and medium-density polyethylene (MDPE) pipes, only two are operational, producing a limited quantity of pipes used for irrigation, drinking water and infrastructure projects.

 

“The factory usually produces more than 300 types of pipes and fittings. Now it has come down to merely 10-12 types,’’ Tarun Ray, vice-president (technical) at Hari Plast, tells Business Standard.. Only around 60 workers are now engaged compared to over 350 in three shifts during normal days.

 

At Neo Tubes in Ganeswarpur, managing director Sovendra Prasad Dash walks through his facility, pointing to idle machines. “We have five extrusion lines; only one is running now. A month back, we produced around 100 tonnes per month; now it is down to less than 20 tonnes,’’ he says.

 

Some units are completely shut down. Nikunja Chhotray, managing director of Valentina Pipes Pvt Ltd, says his factory has been closed for several days. “There is no clarity on pricing or supply,’’ he points out.

 

Companies with higher capacities and better financial buffers have also reduced production by 50 to 70 per cent. “We have rationalised production to minimise losses. We have increased product prices slightly, but the demand has also fallen,’’ says P K Dave, chief operating officer of Kolkata-headquartered Ori Plast, which has an installed capacity of 1,200 tonnes per month at its Balasore facility.

 

Why plastic units are impacted

 

Plastic products are made from a chain of raw materials beginning with crude oil and natural gas, making the industry highly sensitive to global energy markets. At the base level, crude oil is refined to produce naphtha, while natural gas yields ethane and propane. These feedstocks are processed in petrochemical plants to generate key building blocks such as ethylene and propylene.

 

These products are then converted into polymers like HDPE, LLDPE, PP, PVC and PET resins that plastic manufacturers use to produce everything from pipes and containers to furniture and packaging. Besides, a range of additives such as plasticisers, stabilisers, pigments and fillers are also used to give plastics their desired strength, flexibility, colour and durability.

 

India’s dependence on imported petrochemical inputs amplifies the problem. The prices of HDPE rose from around Rs 91,452 per tonne on February 28 to Rs 1.6 lakh by April 1 (75 per cent), followed by LLDPE – from Rs 90,952 to almost Rs 1.61 lakh (77 per cent) and PVC – from Rs 89,000 to Rs 1.16 lakh (30 per cent).

 

Since raw materials account for nearly 70 per cent of the total cost of plastic products, such sharp increases have a direct and severe impact on manufacturers. Most micro, small and medium enterprises operate on thin margins and long-term supply contracts, which makes it difficult to pass on the sudden cost escalation to customers.

 

Large ecosystem at risk

 

The impact on production has been swift and severe. It has turned into a double whammy for plastic pipes and fittings manufacturers, who were already reeling under weak demand even before the surge in raw material prices. The sharp escalation in polymer costs has come at a time when government-led demand, one of the biggest drivers for the sector, has significantly dropped.

 

The budgetary allocation for FY26 under the Jal Jeevan Mission, a key programme that fuels demand for HDPE and PVC pipes used in rural water supply projects, has been drastically reduced from an initial estimate of Rs 67,000 crore to a revised estimate of Rs 17,000 crore owing to slow spending, implementation delays and reported irregularities in the project, prompting the government to pause funds for review.

 

For units like Hari Plast and Ohm Pipes that depend heavily on government contracts for large-scale pipe supply, the reduction in allocations has already led to cancelled contracts and delayed payments. “Earlier Jal Jeevan Mission ensured steady demand throughout the year. That cushion is gone now,’’ a manufacturer quips.

 

In Odisha alone, production has been drastically hit in 56 units dealing with plastic products. Industry associations estimated that more than 40 per cent of plastic products manufacturing units (smaller ones) have shut down while the remaining medium and large units have drastically curtailed operations.

 

Summing up the situation, Sangram Das, president of Odisha Plastic Pipes Manufacturers Association, says things have reached a breaking point.