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Faced with a slower economy, India's plastics sector seeks more tariffs

By: Steve Toloken

January 23, 2014

India's plastics sector is increasingly asking for higher tariffs and more government support against imports, particularly from competitors in Southeast Asia and China, as it copes with the country's slowest economic growth rates in a decade.

One of the country's largest polymer trade associations, the All India Plastics Manufacturers' Association, for example, used public forums at the recent Plastivision 2013 show to repeatedly urge the government to impose 20 percent tariffs on imported plastics products from the ASEAN countries and China.

The trade show, held in mid-December in Mumbai, was full of executives talking about the long-term potential of India, which projects to double its polymer consumption to 20 million metric tons by 2020.

But alongside that optimism, executives from all segments of the industry, including materials, machinery and processors, stepped up their calls for higher tariffs to, in their words, level the playing field against unfairly priced imports.

The head of India's plastic machinery trade group, for example, said he expected the government to renew the steep antidumping duties on Chinese-made injection machines when they expire later this year.

As well, India's resin manufacturing industry recently secured an increase in tariffs on imported materials, from five percent to 7.5 percent, although other local groups, like Mumbai-based AIPMA, strongly opposed it saying it raised costs for the country's injection molders and other processors.

Smaller industry segments were also raising the call. Indian recycling equipment maker Vipul Plastic Machinery Pvt. Ltd., in an interview in the Plastivision show newspaper, said the government should put higher tariffs on Chinese-made recycling machinery.

Arvind Mehta, chairman of AIPMA's governing council, said that 90 percent of the Indian processing companies are small and medium-sized firms. In several speeches at Plastivision, he argued that free trade agreements with the Association of Southeast Asian Nations disadvantaged Indian firms with duty-free imports.

"Now, with the signing of the FTAs with ASEAN and like that, a lot of plastic goods are coming in and that is hurting our business," he told Plastics News. "We are paying the taxes to the government at the rate of 7.5 percent or 8 percent. That is the difference."

"We are not against imports," he said. "We are demanding a level playing field by which our industry can survive."

AIPMA first issued its call for tariffs on finished plastic products in September as part of a broad call for more government help, including rolling back tariffs on imported plastic resin. At the time, they said the weakening rupee had made imported materials much more expensive.

It's not clear how the Indian government would respond, but one minister speaking at Plastivision defended the free-trade deals.

Avinash Joshi, the joint secretary of the government's Department of Chemicals and Petrochemicals, said the ASEAN trade pacts have been very balanced in imports and exports for the country. That echoed recent interviews from more senior officials in Indian media that said the deals have boosted trade volumes.

He did not directly address the call to raise tariffs but said the Indian industry has problems like the small size of its companies and should to take action to improve itself: "R&D is one. We are hardly spending anything."

"At times we see from a very myopic view what is happening in our sectors," he told more than 100 association leaders at a conclave on the sidelines of Plastivision.

Other speakers at the meeting similarly urged Indian companies to improve the capital management or adopt a code of conduct similar to that of Germany's VDMA machinery industry trade association.

Joshi said the government, too, needed to do more to improve infrastructure, specifically noting complaints from the plastics sector about India's ports.

In spite of those government comments defending the trade deals, the head of the Plastics Machinery Manufacturers Association of India said he expected the government to renew the tariffs on Chinese-made injection molding machines first imposed in 2009.

"Absolutely," said Mahendra Patel, chairman of the New Delhi-based association and chairman of Mamata Machinery Pvt. Ltd., when asked if he expected renewal. "We know because we have reported very strongly and we have all positive signals."

Those tariffs, which for some companies are as high as 223 percent, had a significant impact on some Chinese producers.

Ningbo Haitai Machinery Manufacture Co. Ltd. sold several hundred machines a year in India before the tariffs but only about 15 a year now, said Kevin Shen, in an interview at the company's Plastivision booth. Still, it came to the show because it saw long-term potential, he said.

Some Indian materials companies were hailing the benefits of higher tariffs. Indian Oil Corp., for example, specifically noted in its annual report that the increase in raw material tariffs to 7.5 percent would increase its profitability.