West Asia conflict: Plastic units face closure as polymer costs rise 70%

Plastic units across India face shutdowns as polymer prices surge up to 70 per cent, disrupting production and threatening MSMEs, jobs and supply chains

The conflict in West Asia has begun to affect India’s supply chain of petrochemicals, pushing up prices of polymers to record highs and triggering a near collapse of the plastic-processing sector in several states, including Odisha, with more than 50 per cent of the units halting production.

 

According to industry sources, prices of key polymers like polypropylene (PP), high-density polyethylene (HDPE), linear low-density polyethylene (LLDPE), polyvinyl chloride (PVC), and PET resins have increased up to 70 per cent, while the availability of raw materials is uncertain.

 

The prices of HDPE rose from around ₹91,452 per tonne on February 28 to more than ₹1.47 lakh by March 15 (60.6 per cent), followed by LLDPE from ₹90,952 to almost ₹1.51 lakh (66 per cent), LDPE from  ₹ 1 lakh to  ₹ 1.63 lakh (63 per cent), PVC from ₹89,000 to ₹1.2 lakh (34.8 per cent) and PP from more than ₹1 lakh to more than ₹1.7 lakh (70 per cent). 

The plastic-processing sector comprises nearly 50,000 enterprises in the country. Of those 85 per cent are micro, small, and medium enterprises (MSMEs). 

The industry provides direct employment to around five million people and contributes about $12.5 billion in exports.

 

“Such a quick increase in prices is unprecedented. Thousands of MSMEs are struggling to sustain operations because the costs of raw materials have gone up sharply, leading to the suspension of production in more than 50 per cent of the small processing units across the country. Many manufacturers are unable to pass on the increase in raw material costs due to existing supply contracts,” said Chandra Prakash Bhartia, managing director, Jagdamba Polymers.

 

Sangram Das, president, Odisha Plastic Pipes Manufacturers Association, said over 75 per cent of the operational units in the state had stopped production.

 

“Production has become unviable. Even if we want to run our units, raw material is either unavailable or priced beyond our capacity,” said Das, who is also managing director (MD) of Hari Plast.

 

MSMEs with a production capacity of around 100 tonnes per month have reduced output to as low as 20 tonnes.

 

“In my unit, one of the five machines is now running and producing less than one tonne a day. The raw materials we have will last a couple of days. I will have to shut down my unit then,” said Sovendra Prasad Dash, MD, Neo Pipes, Balasore.  

 

Some units have been forced into complete shutdown. “We are not producing for the past couple of days. There is no clarity on prices and no assurance of supply,” said Nikunja Chhotray, MD, Valentina Pipes, Bhubaneswar. 

Larger manufacturers are also under stress. Production has dropped 50-70 per cent in bigger units such as Ori Plast and Hari Plast, which have capacities of around 1,200 tonnes and 650 tonnes, respectively.

 

 “We have rationalised production to minimise losses. Although we have slightly increased the cost of products, the demand has come down. The situation is volatile,” said P K Dave, chief operating officer of Kolkata-headquartered Ori Plast.

Industry players pointed out that the cost of finished products had gone up by only 10-15 per cent against the 70 per cent hike in raw material costs, making operations financially unsustainable.

 

The plastic-processing industry is a critical supplier to a wide range of sectors including packaging (41 per cent of total consumption), fast-moving consumer goods, health care, automobiles, agriculture, infrastructure, consumer durables and white goods, industrial and engineering components. According to industry leaders, any prolonged disruption is expected to have cascading effects on supply chains, inflation and industrial output.

 

“The sector is under unprecedented stress. Without immediate support, many units may not survive this phase,” Bhartia said.

 

Amid the deepening crisis, the All India Plastics Manufacturers Association (Aipma) has urged the Centre to step in with immediate relief measures, warning that the sector is on the brink of large-scale shutdowns.

 

In a letter to the Ministry of Chemicals and Fertilizers, Aipma said polymer prices had been revised five times between March 1 and March 11.

 

MSMEs are neither in a position to absorb the costs nor transfer them downstream. The hike is unreasonable and the closure of units could trigger widespread unemployment, it warned.