One of India's biggest challenges to economic growth is apparent as soon as you try to move around the country: the poor state of infrastructure like roads, rails and ports. Plastic companies there are taking a look at a new government policy of special economic zones designed to combat that and provide tax breaks to boost exports.
The new program, launched in late 2006, aims to overcome some of the bureaucratic problems in the country's previous export zones, first launched in 1965, said Lalit Singhal, director general of the Export Promotion Council of the Indian Ministry of Commerce and Industry. Singhal spoke at a Feb. 5 conference connected to the PlastIndia trade show in New Delhi.
He said the new zones, including one by Nokia Corp. to make mobile phone handsets, have attracted about US$22 billion in investment since they started and now account for about 10 percent of Indian exports, double the figure of two years ago.
The programs are seen by some as a way to help India address weaknesses and become a more export-oriented economy, similar to China. But they also remain in their infancy.
Indian resin giant Reliance Industries Ltd. in Mumbai, for example, only started production last month at its SEZ refinery complex in Jamnagar, the first in the petrochemicals sector.
One large Indian plastics company, Supreme Petrochem Ltd., plans to start an SEZ catering to plastics processors. The company has received preliminary government approval but is still acquiring land, Singhal said.
SPL, the Mumbai-based parent company whose holdings include one of India's largest processors, Supreme Industries Ltd. and also one of India's largest styrenics manufacturing complexes, said an SEZ can help India boost exports of plastics products.
India lags far behind in terms of export of value-added products, i.e., processed plastic, SPL Executive Director Rakesh Nayyar said in an e-mail to Plastics News. SPL believes there exists a business opportunity to promote export of processed plastics and retain the value addition in the country itself and also promote large-scale employment.
About 70 percent of Indian plastics exports at the moment are raw resin, but he said many of the company's processor customers are very interested in setting up in an export zone.
He said they expect medium- and large-scale extrusion and molding firms to set up there, and he listed a wide range of potential products: polypropylene and high density polyethylene woven sacks; biaxially oriented PP, linear low density PE and HDPE films; injection molded products like housewares, auto components and stationery items; and plastic pipe and conduit.
The 450 acre zone, to be built 50 miles from Mumbai on the Mumbai-Pune Expressway and 34 miles from the India's largest container port, is expected to process 1.7 billion pounds of products a year when completed, he said.
That's more than 10 percent of India's current total plastics consumption. SPL believes those projections are realistic, based on India's rapid growth and the zone's location. If business conditions improve, the company could open it by 2011 and believes it would take three years to fill up, Nayyar said.
Other industry officials said they were taking a close look at SEZs.
The new SEZ policy is a good one because it can be the best way for dealing with India's multiple levels of government and bureaucracy, said Arvind Mehta, president of the PlastIndia Foundation, India's umbrella industry trade group and organizer of PlastIndia, held Feb. 4-9 in New Delhi.
The bureaucracy is nil, it is easy to implement, he said.
Mehta, speaking at a Feb. 6 interview in his office, said the SEZ policy is designed to provide better infrastructure like power and roads and more flexibility with labor rules.
SEZ rules, for example, allow the zones to have their own power plants, with tax advantages for costs of construction and fuel.
Mehta predicted more plastics firms would set up in SEZs.
Another of India's plastics conglomerates, the Kolsite Group, said it also was considering setting up a facility in one of the new special economic zones.
Kolsite's Plastiblends India Ltd. masterbatch unit is seriously evaluating setting up a factory in a SEZ for its export business, said director Anand Kabra. The SEZs have better infrastructure, tax benefits and smoother customs procedures, he said.
Kolsite also owns one of India's largest extruder machinery makers, Kabra Extrusiontechnik Ltd.
Singhal said several of the 87 operating SEZs contain plastics processing companies, even if they are under other industry categories.
The government has given tentative approval to 552 SEZs, and if all became operational, would have investment totaling another US$50 billion, he said.