SUSTAINABLE INFRASTRUCTURE WITH PLASTICS

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3 National Conference on

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SUSTAINABLE INFRASTRUCTURE WITH PLASTICS

Knowledge and Strategic Partner

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3 National Conference on

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SUSTAINABLE

INFRASTRUCTURE

WITH PLASTICS

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Message

The plastics industry continues to break into newer spheres of industry, thereby enabling Indian industry churn out products that are lighter and cost-effective. This industry has been one of the of the fastest growing industries in the Indian economy. The sector has huge unrealized potential, as indicated by the present very low per capita consumption levels of polymers in India which is ~11 kg vis-à-vis 38 kg in China, 65 kg in Europe and the global average of ~28 kg

I am pleased to know that FICCI, jointly with OPPI and Department of Chemicals &

Petrochemicals, Government of India is organising a conference on the sector with the theme

“Sustainable infrastructure with Plastics”. Indeed the plastics industry is becoming

Mr. Vinay Mathur

Deputy Secretary General

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Mr. Prabh Das

Chairman-FICCI National Petrochemicals Committee Managing Director & CEO

HPCL-Mittal Energy Limited

The plastic Industry is making significant contribution to the economic developments and growth of various key sectors in the country, be it Infrastructure, Agriculture, Horticulture, Healthcare, Automotive or construction industry, to name a few. Infrastructure is a key driver for the Indian economy. Good transport modes, roads, ports and allied infrastructure are pre- requisites for the sustained growth of the country. The Government of India is taking every possible initiative to boost the sector. The effort is being well supported by the Indian Plastic Industry.

The Indian plastics industry has huge unrealized potential of growth given the presently very low usage levels compared to the global standards. At the same time, this industry in the coming decades has to promote sustainable development by investing in technologies that

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Table of Figures

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1. Preface

This report attempts to provide the reader an overview of the Indian plastic processing industry, its growth prospects, challenges faced, emerging applications of plastics in the market and the growth of plastic usage in infrastructure.

The Indian Plastic Industry gained momentum in the early 1990's. Further impetus was added with investments in raw material production from mid 1990's onwards, which fuelled investments in plastic processing industry as well as downstream machinery sector.

In the last decade, a number of emerging applications of plastics have been developed in many industries, such as Automotive, Packaging, Agriculture and Infrastructure, which have changed the day to day lives of the people. The industry has produced better and improved quality of plastics with the help of new technologies, especially in the packaging industry leading to replacement of several materials such as wood, metals and glass.

With the government's support, a tremendous growth in the plastic processing sector is envisaged.

Infrastructure is one of the key drivers for the Indian economy. The Government of India is taking every possible initiative to boost the infrastructure sector with investments of INR 25 lakh crore over the next 3 years in roads, railways and shipping infrastructure. Plastics play an important role in these sectors through usage in various products like pipes, wires & cables, water proofing membranes and wood PVC composites. Consequently, higher investments in these sectors will drive the demand for plastics.

We sincerely thank industry leaders, experts and all other participants whose valuable inputs have helped in developing this report. As always, it was an insightful experience for the team to materialize this report.

Charu Kapoor Principal – Chemicals Tata Strategic Management Group

charu.kapoor@tsmg.com

P S Singh

Head - Chemicals & Petrochemicals FICCI

prabhsharan.singh@ficci.com Manish Panchal

Sr. Practice Head – Chemical & SCM Tata Strategic Management Group

manish.panchal@tsmg.com

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2. Executive Summary

The Indian plastic industry is making significant contribution to the economic development and growth of various key sectors in the country which includes Automotive, Construction, Electronics, Healthcare, Textiles, and FMCG. The developments in the plastic machinery sector are coupled with developments in the petrochemical sector, both of which support the plastic processing sector. This has facilitated plastic processors to build capacities for the service of both the domestic market and the markets overseas.

Today, the plastic processing sector comprises over 30,000 units involved in producing a variety of items, gaining notable importance in different spheres of activity with per capita consumption increasing. The plastic processing industry has the potential to contribute in bringing foreign investments and thus India’s vision of becoming a manufacturing hub.

Our study indicates that plastics processing industry has grown at a CAGR of 10% in volume terms from 8.3 MMTPA in FY10 to 13.4 MMTPA in FY15 and is expected to grow at a CAGR of 10.5% from FY15 to FY20 to reach 22 MMTPA.

In value terms, the plastic processing industry has grown at a CAGR of 11% from INR 35,000 Cr. in FY ’05 to INR 100,000 Cr. in FY15.

Current low levels of per capita consumption (11 Kg), increased growth in end use industries, higher penetration of plastics in various existing applications and ever growing range of new applications could further propel the growth of plastics in India.

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Moreover, in the last decade, several new applications of plastic products have emerged in several sectors boosting the industry further. For example, long fiber reinforced thermoplastic for automotive industry, fibers that can trap infra-red radiations, packaging that can increase the shelf life of products etc. have created demand for plastics which were in their nascent stage in India.

However, despite having a good growth potential, the plastic processing industry faces many challenges in terms of environmental myths, lack of advanced technology, limited infrastructure, & high volatility in feedstock prices. To overcome these challenges, significant efforts will have to be made by all the stakeholders to realize the real potential of this industry.

The Government of India is taking every possible initiative to boost the infrastructure sector with investments of INR 25 lakh crore over the next 3 years in roads, railways and shipping infrastructure.

Investments in water and sanitation management, irrigation, building & construction, power, transport and retail have been encouraged. Plastics play an important role in these sectors through various products like pipes, wires & cables, water proofing membranes, wood PVC composites and other sectors.

Consequently, higher investments in these sectors will drive the demand for plastics.

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3. | Introduction

Since independence, the plastic industry in India has been playing a predominant role in shaping our lives. The plastic industry in India has made significant achievements since its beginning by commencing production of polystyrene in 1957. In

the last decade, with the advent of new and improved products, the industry has gained greater importance with the production of better and improved quality of plastic products.

The plastic industry caters to the entire spectrum of daily use items and covers almost every sphere of life such as clothing, housing, construction, furniture, automobiles, household items, agriculture, horticulture, irrigation, packaging, medical appliances, electronics and electrical items.

The figure below represents the key applications of products of plastic processing.

Packaging

Agriculture Textile Fibers

Infrastructure

Automotive Electronics Applications ^Plastic

Figure 1: Applications of Plastic processing industry

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As described in Figure 2, the entire chain in the Plastic industry can be classified into:

(A) Upstream sector: Manufacturing of polymers and

(B) Downstream sector: Conversion of polymers into plastic articles

The upstream polymer manufacturers have commissioned globally competitive size plants with imported state-of-art technology from the world leaders. The upstream petrochemical industries have also witnessed consolidation to remain globally competitive.

The downstream plastic processing industry is highly fragmented and consists of micro, small and medium units. There are over 30,000 registered plastic processing units of which about 75% are in the small-scale sector. The small-scale sector, however, accounts for only about 25% of polymer consumption. The industry also consumes recycled plastic, which constitutes about 30% of total consumption.

Figure 2: Structure of the Indian Plastic Industry

End- User Industries

Polymer Manufacturers

Equipment Manufacturers

Plastics Processors

Recycling Players

Fragmented with

~30,000 units

mostly operated by small players

Dominated by ~15 large industrial groups

Dominated by

~200 players

~4,000 unorganized units

~3,500 organized units High

Low

Flow of equipment Flow of virgin polymers

Flow of processed plastics Flow of recycled plastics

Concentration

Source: CRISIL, Plastindia Foundation, Kanvic, TSMG Analysis

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There is a good scope for innovative products which will further contribute to growth of the sector in years to come. The packaging industry has witnessed a complete replacement of old age products with the new ones.

With India's population similar to China's, but polymer demand at only one-fifth of China's, the Indian subcontinent's plastics industry has a good potential for growth. Improving standards of living have led to an increase in consumption of a wide range of consumer goods from packaged foods to automobiles.

Investments in infrastructure and agriculture are also further fueling the demand of plastics and related products in India.

While the outlook for plastics processing in the Indian subcontinent is positive, the industry still faces many challenges in terms of inadequate infrastructure & environmental myths.

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4. | Market overview

The plastics processing industry has grown at a CAGR of 10% in volume terms from 8.3 MMTPA in FY10 to 13.4 MMTPA in FY15 and is expected to grow at a CAGR of approximately 10.5% from FY15 to FY20 to reach 22 MMTPA (Refer Figure 3).

In value terms, the plastic processing industry has grown at a CAGR of 11% from INR 35,000 Cr. in FY05 to INR 100,000 Cr. in FY15.

8.3

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FY10 FY15 FY20

10%

10.5%

Source: Industry reports, TATA Strategic Analysis

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Figure 3: Plastic Processing in India (MMTPA)

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Snapshot of the Indian Plastics Processing Industry Estimated size of plastic processing in value (FY15) ~INR 1 lakh crore

Market size in volume (FY15) 13.4 MMTPA

Processing Units > 30,000

Technical manpower ( as per CIPET) 11 lakh employees

Growth Rate 10-11%

Per Capita Plastic Consumption 11 kg (World: 28kg)

Plastics are gradually becoming the material of choice for extensive usage due to their unique and diverse set of properties. With the government policies and initiatives stressing on manufacturing in the country, competitive rivalry in the sector is bound to grow considerably.

However, due to low penetration levels of plastic products in the Indian market, especially rural segment, the per capita consumption of plastics is low. As shown in Figure 4, with current per capita consumption of plastics in the U.S. at 109 kg and in China at 38 kg, India at 11 kg has a long way to go.

The low consumption level indicates an enormous growth potential for the plastics sector.

Figure 4: Per capita plastic products consumption (Kg/person)

109

65

38

32

11

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USA Europe China Brazil India World

Source: AIPMA and Plastindia, TATA Strategic Analysis

Due to increasing domestic consumption and high potential, India is emerging as one of the focus destinations for plastics and downstream players worldwide.

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To manufacture finished products, polymers are processed through various types of techniques namely extrusion, injection moulding, blow moulding and roto moulding. Extrusion process is the most commonly used process in India and accounts for ~64% of total consumption by downstream plastic processing industries. Various products manufactured through these processes are highlighted in Figure 5.

Figure 5: Processes in Plastic Industry

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1

Classification of plastic products by type

of process Extrusion

• Films & Sheets, Fibres &

Filments Pipe, Conduits &

profiles, other applications

Roto moulding

• Large circular thanks such as water tanks 4

Injection moulding

• Industrial Household Injection mouiding Thermo-ware/Moulded luggage

2

3 Blow moulding

• Bottles, containers, Toys and Housewares

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5. | Key growth drivers

A favorable cost benefit ratio and a versatile range of applications encourages the growth of plastics.

The properties of these materials can be customized to meet specific demands by varying the chemical properties like molecular weight & side chain branching or by making copolymers and polymer blends.

Major reasons for the growth of the plastic processing industry are growth in the end use segments and higher penetration of plastics in various industry segments. The following figure illustrates major growth drivers for various industries-

Figure 6: Plastic products demand growth drivers Agriculture

• Advanced Agricultural technology

• Distribution channels

• Refrigerated storage

Other growth areas

•

• Automotive/Appliances

• Medical/personal care Industrial/rigid packaging Plastic

demand growth drivers

Packaging Industry

•

• FMCG items

Food/Processed food Infrastructure

•

• Public utilities services

• Mega highway projects Building & Construction

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5.1. Agriculture

5.2. Packaging Industry

India supports nearly 18% of world's population with 2.4% land resource and 4% water resource, and lately the dwindling quality and the vagaries of the availability of these resources are raising serious questions on the sustainability of the agricultural practice. To counter the problem, efforts need to be redirected to improve the productivity of the land, efficiency of the supply chain while reducing the carbon footprint as a result of agricultural practice. Plasticulture, which is use of plastic in agricultural practice, is an answer to this rallying cry. Plasticulture is a scientific way of carrying out agriculture, which not only improves the productivity, but optimizes the input resources as well, thereby reducing the cost.

There has been significant progress in the adoption of Plasticulture techniques in the last decade, however the low penetration levels suggest it needs to grow at a rapid pace from now. On the demand side, awareness of the available options and subsidies, its relevance and applicability could improve the adoption rate. From the supply side, industry needs to take efforts to bring down the capital cost, work on creating an environment where Plasticulture culture is a norm than exception. Concentrated efforts in direction of demonstration, spreading Word of mouth, and building credibility by performance &

after-sales services could help shape the industry.

The packaging industry in India is one of the fastest growing industries with influence on all industries, directly or indirectly. Indian packaging industry has registered a CAGR of 15% in the last five years. The spending on packaged foods is increasing due to increase in per capita income, urbanization and growing numbers of working women. There is great growth potential since India's per capita consumption of packaging is only 4.3 kg whereas neighbouring Asian countries such as China and Taiwan is about 6 kg and 19 kg respectively. This clearly indicates that the market is under penetrated and offers a great business opportunity for the Indian plastics packaging industry.

The following factors have played a vital role in the growth of the packaging industry in India over the years.

A. Retail Growth: Increased presence of global multinational companies has boosted the demand in the processed food, beverages, cosmetics, consumer products, toiletries and pharmaceutical space. The manufacturing units, especially the fast moving consumer goods (FMCG) manufacturers are exploring new markets continuously through newer retail models. This has widened the market and also increased the demand of packaging of the products.

B. Growth of Smaller Packaging: The current middle class population in India is approximately 30 Cr. which indicate that from affordability point of view, the demand for smaller packaging is huge. This population is rapidly growing and hence this will drive the growth for packaging industry. Smaller packaging caters to even the rural population and lower income groups.

C. Changing Lifestyle: Since the concept of globalization has penetrated the Indian market, significant cultural changes have been witnessed. People today are buying more of branded

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products and thus packaging is playing an important role in creating and sustaining the brand equity. With a higher per capita income, the demand of personal hygiene products and convenience products has increased leading to increased demand for plastics.

The Indian auto industry is one the largest in the world and has grown at about 10-11% in the last five years from 14 million units in FY10 to 23 million units in FY15. The automobile industry accounts for 7.1% of the country's gross domestic product (GDP). An expanding middle class, a young population, and an increasing interest of companies in exploring rural markets have made the two wheelers segment (with 81% market share) the leader of the Indian automobile market. With growing population, increasing per capita income and aspirations to own a vehicle, various auto segments have experienced aggressive growth in the past five years. Given the positive outlook for the automobile industry, there is high potential for plastic usage to rise in the auto segment.

The Indian electronics market is one of the largest in the world. The main drivers for demand for the usage of Indian electronic products abroad are technological improvements and cost competitiveness.

The demand for electronics has grown at an estimated 16% in the past five years. In FY15, the demand stood at USD 136 billion, up from USD 65 billion in FY10. On the other hand, supply is lagging behind at USD 44 billion in FY15. It has grown at 16% during the same period up from USD 41 billion in FY10. The growing customer base and the increasing penetration of electronic products in consumer durables segment have provided enough scope for the growth of plastics in the Indian electronics sector.

Infrastructure is a key driver for the Indian economy. This segment is highly responsible for pushing India's overall development and enjoys focus from government for policies, ensuring timely creation of world class infrastructure. India's focus on infrastructure over the last decade made the country the second fastest growing economy in the world. As per the 12th Five Year Plan, India had committed USD 1 trillion in upgrading its ageing infrastructure like Power, Telecom, Roads, Irrigation, Railways, Oil& Gas and others. The Reserve Bank of India (RBI) has notified 100% foreign direct investment (FDI) under automatic route in the construction development sector. The new limit came into effect in December 2014. The Government of India has relaxed rules for FDI in the construction sector by reducing minimum built-up area as well as capital requirement. It has also liberalised the exit norms. In fact, the Cabinet has also approved the proposal to amend the FDI policy.

Large investments in sectors such as water and sanitation management, irrigation, building &

construction, power, transport, retail etc. continue to been made. PVC and CPVC plays important role in the sustainable management of these sectors through various products like pipes, wires & cables, water proofing membranes, wood PVC composites, food and medicinal packaging.

5.3. Automotive

5.4. Electronics

5.5. Infrastructure

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6. | Modern applications of plastics

The Indian plastic processing sector caters to the requirements of a wide array of applications like packaging, automobile, consumer durables, healthcare, among others. Following are some of the key emerging applications that have been noticed.

Plastics replaced many traditionally used packaging materials thereby transforming packaging industry.

Flexible packaging is a sub segment of packaging industry and it is producing revolutionary products.

These products, as shown in Figure 7, focus on enhancing the shelf life of products by keeping intact the nutritional value of the enclosed product. For example, modified atmospheric packaging (MAP) has also reduced the cost of old style packaging considerably.

6.1. Flexible packaging

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Figure 7: Emerging trends in packaging industry

Secondary Packs

Active packaging (MAP)

Vacuum Packaging

• Saves storage space

• Ease of handling

Jute substitution

• Toughest packaging bags widely used to pack materials for grain, milling and sugar industry

• Enhanced storage life

Packaged Crates

• Saves storage space

• Ease of handling

• Disposable

Glass substitution

• Laminated jars have replaced glass

containers

• Cost effective solution-lesser packaging &

transportation costs

• PE laminated pouch provides barrier properties during products shelf life

• Maintains freshness by simultaneous respiration &

permeation

• Equilibrium packaging atmosphere is created with appropriate % oxygen and carbon dioxide

• Multilayered 5- 7 layer films are used

• Lack of oxygen eliminates use of

pesticides/fum igation

• Shelf life of almost 3-4 years

6.2. Automotive

6.3. Textile fibers

Long fiber reinforced thermoplastic (LFRT) is a new product which is used in making automotive products. It has benefits such as 1) Greater design freedom, 2) Potential for parts consolidation, 3) Weight reduction, 4) Extreme toughness/Durability, 5) Dimensional stability, 6) Corrosion & chemical resistance, 7) Elimination of secondary operations like painting and welding and 8) Lower total system cost.

A new kind of fibers have been introduced which trap Infra-red rays and keeps the body warm. It can be used to make woolen clothes for extremely cold weather.

Another category of fibers is used to make health care fabrics which can regulate the temperature & O2 levels in the body or provide protection against bacteria or are flame retardant.

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7. | Challenges faced by Plastic processing industry

Key challenges faced by the plastic processing industry in India are:

The Indian plastics processing industry is highly fragmented and small and micro players constitute majority of the units. Indian Petrochemical Industry is facing intense competition from the Middle East countries where price of feedstock ranges between one-fifth to one-tenth the prices prevailing in international markets.

India's plastics market depends on labor intensive equipment which has adversely impacted the productivity. Unreliable power and high energy costs in India as compared with other countries are also constraints which hamper capacity utilization.

While the usage and benefits of plastics are manifold, it invariably gets branded as a polluting material.

Plastics, being a polymer derived from crude, are made up of long chains of carbon. It takes years for them to decompose completely. Improper disposal of plastics leads to ground water pollution, disturbance in soil microbial activity along with releasing of carcinogenic chemicals in the atmosphere leading to health issues among people. The other life forms also get affected due to this imbalance in value chain, with stray cattle feeding on thrown-away plastics. These adverse impacts are alarming the society and industry to ensure proper disposal of plastics. Both government as well as industry needs to

7.1. Highly fragmented plastic processing industry

7.2. Environmental hazards

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come forward to cater to this issue and sensitize the general mass to follow the ritual of recycling waste plastic products. If plastics can be collected and disposed of or recycled as per laid down guidelines/rules then the issue of plastic waste can be suitably addressed. There is wide scope for industries based on re-cycling of plastics waste. This will not only address the issue of environmental degradation but will also generate capital.

The Indian Plastic processing industry has seen a shift from low output/low technology machines to high output, high technology machines. There has been some major technological advancement of global standards leading to achievements. Focus to develop a state-of-the-art R&D is dying down with more focus on increasing the capacity utilization. Domestic machinery is manufactured as per the current technology to improve productivity and energy efficiency, in order to enable the processors to compete globally. Key machineries are imported from Europe, the U.S. and Japan which invite a 7.5%

customs duty resulting in huge losses. India's technical needs are acute in areas like high production and automatic blow moulding machines, multilayer blow moulding, stretch/blow moulding machines, specific projects involving high capital expenditure like PVC calendaring; multilayer film plants for barrier films, multilayer cast lines, BOPP and non-woven depend exclusively on imported technology/machinery.

Cost of plastic processing is largely correlated to crude oil price which is a major determining factor for polymer raw materials. It is worthy of note that crude oil prices have experienced a heightened degree of volatility in the recent past, wherein prices have plummeted to around USD 50/bbl in 2016 from USD 100/ bbl in 2014. Further, with a large number of raw materials being imported into India, currency volatility also poses as a significant challenge to plastic processors.

7.3. Want of newer technologies

7.4 Price and Currency Volatility

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8. | Key Opportunities

8.1. Plasticulture

Plasticulture can play a key role in energy conservation. It essentially stresses on the use of plastics in agriculture, horticulture, water management, food grains storage and related areas. A multitude of plastic materials may be employed in plasticulture applications such as water conservation, irrigation efficiency, crop protection, including farm output practices like crop storage and transportation.

Growing population and decreasing size of arable lands has necessitated the need to employ clean, green and sustainable practices to save resources and enhance productivity. Usage of plastics in agriculture can lead to:

• Yield improvement upto 50-60%

• Water savings upto 60-70%

• Prevention of weeds growth

• Soil conservation

• Protection against adverse climatic conditions

• Fertilizer savings upto 30-40%

• Reduction in post-harvest losses

• Conversion – cold desert/wasteland for productive use

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8.2. Growth in key end-use industries

8.3. Growing interest in Bio-Plastics

8.4. Effective Waste Management

The industries which plastics cater to heavily are FMCG, Construction and Infrastructure and Agriculture.

Increasing population, growing urbanization and shift in lifestyle has pushed these sectors to gain a high growth in past decade. This has prompted a double-digit growth for plastics in India. With sectors like pharmaceuticals, personal and home care, etc. emerging in the rural areas and reinforced efforts in bringing out innovative plastic products, the industry is expecting further uplift in near future.

Growing interest in green products, healthier lifestyles and growing concern to protect environment is leading to a shift towards bio-plastics. Bio-plastics are plastics that contain bio-based content, are biodegradable or both. Many polymers like PLA (Poly Lactic Acid), PHA (Poly Hydroxyalkanoates), Bio PTT (Poly Trimethyl Terephthalate), Bio PDO (Propanediol) etc. are the part of this upcoming trend.

These plastics are significantly made of renewable materials like bio mass and save up to 40% energy in production as compared to their petrochemical counterparts. They play a crucial role in further advancement of the plastic industry and as result businesses are focusing on the adoption of such eco- friendly products. Large numbers of companies are now looking for the development of alternative feedstock and make use bio-based raw material for their production.

The market for this product is still in its infancy. High cost of bio-plastics, lack of clear understanding and infrastructure, limited amount of funding available are acting as constraint to the evolution of this segment. However, increasing stress on green chemistry is expected to bring down the cost, also increasing environmental awareness, positive attitude from government, continuous R&D efforts and shift in consumer preference towards environmental friendly option will lead to the evolution in demand of this industry.

Plastic has low energy requirements during production, hence considered to be energy efficient. It consumes ~25% less energy in production compared to other alternatives. It results in lower emission of CO . Thus when compared to glass or aluminium plastics results in lighter environmental footprint. ₂ However, plastic is a sustainable choice only if recycled and disposed of properly. This can be achieved mainly through segregation of waste at source, promotion of waste management infrastructure and the increased the use of bio-based plastics.

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9. | Opportunities in Infrastructure

Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India's overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the countr y.

The plastic industry plays a significant role in this endeavor.

The Indian pipes business has been growing rapidly in the past decade, largely due to increasing demand for pipes in the irrigation sector and construction industry. Among the several varieties of pipes available in the market, the demand for plastic pipes such as PVC, CPVC in particular, is on a rise largely due to

• Gaining popularity of plastic pipes over traditional/ galvanised iron (GI) pipes

• Huge replacement demand

• Flexibility in terms of transportation, less corrosive and long lasting life (25 years v/s 8-10 years of GI pipes)

• Easy installation and competitive price in nature (20-25% cheaper over GI pipes).

Other types of pipes, like steel pipes and ductile iron pipes also have major demand. Across the country, infrastructural development, urbanization, government's focus on real estate, irrigation is expected to drive the demand. Construction and agricultural growth have been identified as major factors facilitating the growth of the pipes industry in the country.

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9.1. PVC – Pipes & Fittings

Currently, in India, approximately 73% of the PVC is consumed by the Pipes & Fittings industries with the other sectors comprising only 27%. Globally, Pipes & Fittings account for only 43% of the PVC consumption, showing that PVC applications in India other than Pipes & Fittings are still in the early stages and are primed for growth. This, along with the relatively low per capita PVC consumption in India, shows that future prospects for the Indian PVC processing industry are bright. Although, CPVC pipes and fittings contributed just ~10% to the overall production capacity in FY15, it is the fastest growing segment of the PVC pipes and fittings industry in India.

Figure 8: Application break-up of PVC - India

Pipes &

Fittings 73%

Profiles 3%

Films &

Sheets 5%

Wires &

5%

Cables Flooring 8%

Others 6%

Figure 9: Application break-up of PVC - Global

Pipes &

Fittings 43%

Profiles 19%

Films &

Sheets 17%

Wires &

Cables 8%

Floorings 3%

Others 10%

Source: TATA Strategic Analysis Source: TATA Strategic Analysis

In the past few years, the government of India has initiated many new projects and investments in the irrigation sector. The government's focus is on rural water management, which will be fulfilled only with proper infrastructure for the transportation of water to the end-user. This factor will remain as one of the major drivers for the growth of PVC pipe industry in the country along with the expansion of housing sector and increasing replacement demand for CPVC.

The Indian agriculture piping industry is highly fragmented due to presence of large chunk of players, giving tough competition both on product offerings and pricing terms. Also, the main reason for low yield or margins in this segment is due to the less proportion of fittings in usage, compared to the plumbing segment. There are few organised players operating with significant presence through wide distribution network and a strong quality product portfolio.

9.2. Rigid Pipe segment / Agriculture

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• Plastics play a major role in managing water resources. The various applications of plastics in water management include plastic rain water collection tanks, pipes, profiles; waste water applications (waste water treatment plants) and plastic pipes for water transportation (PVC, HDPE, LLDPE, PP, FRP).

• Plastic products in water management are being used as compared to various alternate competitive materials like metal, cement, due to light and weight durability, rust free, smoother surface.

• The Ministry of Water Resources is responsible for laying down policy guidelines for water conservation. PVC pipes and fittings with BIS certification are being used in various water/sewerage transportation applications in various private/government supplies.

Shifting focus towards premium products: In recent years, the CPVC market has seen some traction of shifting preference towards branded premium products (in spite of price differentiation of 30-40%). Strong branding and regular product campaigning through various forums (educating stakeholders about the products along with small prizes, gifts to encourage them) and wide distribution network has helped a few players to pocket a large share and create a strong reputation in the customers' eyes.

9.3. Plastic moulded furniture segment:

India's growing economy of the country has encouraged the spending capacity of the people, which in turn has boosted the sales of branded furniture items in the market. The growing phase of infrastructure and real estate markets has also augmented the demand for furniture products in the country. In addition, the entry of international brands and increasing brand awareness amongst Indian inhabitants has led to the emergence of furniture retailing in India.

The plastic moulded furniture industry has been growing rapidly in the Indian market and from a stage of infancy the field has risen to almost 70 million in volume, consuming almost 170 kT of polypropylene material. The popularity of plastic furniture has grown since it offers features unavailable in conventional wooden and metal furniture, such as easy maintenance, light weight, durability and various attractive features (such as shapes, designs). Plastic furniture is essentially based on composition of polypropylene (PP) which contains polymers to provide rigidity and copolymer to lend impact. There exist around 30 producers of PP chairs in India though 30% of the top producers generate almost 75% of the market share.

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10. | Government initiatives supporting plastic usage in infrastructure

10.1. Government's programme of 'Housing for all by 2022'

10.2. Swachh Bharat Mission - Boost for plastic products

Growing urbanisation has led to issues such as land shortage, housing shortfall, congested transit and stressed existing basic amenities such as water, power and open spaces in towns and cities. To bridge the demand supply gap and acknowledge the importance of housing issue in the country, the government has launched a campaign of 'Housing for All by 2022'. Housing shortage coupled with lack of proper water management system (sewage/drainage) in slums creates ample opportunities for the piping industry in India. A major application of PVC pipes is in water management for the housing and agriculture sectors and this can thereby be a strong driver for growth.

Swachh Bharat Mission (SBM) is another flagship programme of the government aimed to stop open defecation through construction of individual household latrines (IHHL), cluster toilets and community toilets (especially via PPP mode). Solid and liquid waste management is also an important component of the programme. According to Census 2011, over 67% of rural households in India lack access to toilets.

In other words, more than 11 crore rural households do not have access to a toilet. Lack of sanitation and drinking water facilities creates a huge opportunity for PVC pipe manufacturers.

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10.3. AMRUT

The government has also launched its programme - Atal Mission for Rejuvenation and Urban Transformation (AMRUT) to provide basic services to household and build amenities in cities. The purpose of AMRUT is to: 1) Ensure that every household has access to a tap with assured supply of water and sewerage connections. 2) Increase the amenity value of cities by developing greenery and well maintained open spaces (e.g. parks). 3) Reduce pollution by switching to public transport or constructing facilities for non motorised transport (e.g. walking and cycling). AMRUT, a flagship programme to improve the infrastructure of the country could be a future growth driver of the plastic piping industry.

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11. | Way Forward

Plastics industry is assured to grow at a good rate with the major applications being in FMCG and consumer goods. There are several factors like low per-capita consumption, manufacturing focus, end use industry growth, availability of feedstock, increasing urbanization, changing lifestyle and demographic dividend, promoting growth of plastic across India.

The plastic processing industry has changed our lives in many aspects. It has the potential to continue to change the way we grow our crops, the way we build our roads, and the way we live everyday life. It has significant impact on our economy, generation of wealth and in job creation. Plastics processing industry will need to invest in modern equipment to reduce costs and improve performance and improve installed capacities to achieve economies of scale so that the Indian subcontinent can reach its full potential.

With Government's current campaign on 'Make in India' which has a special focus on the chemical industry and aims to turn the country into a global manufacturing hub, a tremendous growth in the plastic processing sector is expected especially in downstream industries. The government should not hesitate to provide better infrastructure and favorable policies. With a step already being take in that direction, plastics are bound to find tremendous use in the infrastructure space.

With adequate support from Government and growth in end use demand, our study indicates that the market for plastic processing industry in India is expected to grow at a CAGR of 10.5% from FY15 to reach 22 MMTPA by FY20.

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12. | References

1. CRISIL Research and reports

2. Indian Broadcasting Foundation articles 3. Business Standard articles

4. Indian Mirror's articles on “Indian Plastic Industry at a Glance”

5. Money Control's article on “Current Scenario & Way Forward for Indian plastic industry”

6. Nelive article on ”A competitive analysis of plastic industry”

7. Knowledge papers and Whitepapers on plastics and petrochemicals published by Federation of Indian Chambers of Commerce & Industry (FICCI) Chemicals & Petrochemicals statistics at a glance : 2016

8. Report on Indian Plastic Industry 2015 - 2016, Plastindia Foundation 9. Plastindia's report on plasti-culture and Indian plastic industry 10. IBEF website

11. Plasticnews article – “Plastic consumption to double in India by 2016”

12. Expansion of refineries may boost plastic processing units 13. AIPMA Plastic News 2015

14. IRR (Indian Retail Reports)

15. Central Institute of plastic Engineering report on growth of plastic industry 16. TATA Strategic Management Group's databases

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Plastics have permeated every facet of human life viz. agriculture and water consumption, building construction, communication, small and bulk packaging, education, medicine, transportation, defence, consumer durable to name a few. One of the reasons for great popularity of plastics is due to tremendous range of properties exhibited by them because of their ease of processing. Hence, the demand for plastics has been increasing in modern living.

Plastics In Construction

Plastics are widely used in construction, building and infrastructure. Construction and utility parts in buildings are often partly or completely polymeric . This can be as wall panels, roofing materials, piping systems, seals, coatings and a large number of other products.

To conserve wood, the Govt. of India in 1988 had issued a directive to promote wood substitutes, including plastics in all Government and institutional purchases for furniture, Door & Window frame and Shutters. China, faced with similar situation, issued a directive to the effect that Door & Window frames in all Government buildings should be of PVC plastic only.

Plastics In Transportation

Owing to their light weight, plastics reduce transportation costs and, therefore, atmospheric carbon dioxide emissions. Public and private transportation vehicles can now contain up to 23 per cent plastics typically as parcel shelves, door liners, steering wheels, electrics and electronics, and recent aircraft such as the Boeing Dreamliner is designed from up to 50 per cent plastics.

Plastic Tracks

Trains are vital to economies around the world. Rail Pads made of plastics and track systems withstand heavy loads and harsh conditions longer. The reliability of a rail system is only as good as the reliability of its tracks. Plastic sleepers are more durable and efficient when compared to the traditionally used sleepers made from wood and concrete.

Besides the rail pads and sleepers, many other plastic items like safety rail, ladder, advanced composite toilet module are used in Railways. Similarly a large number of FRP products are also used in Railway coaches.

Agriculture & Plasticulture

Plastics find applications in Agriculture / Horticulture as stated below:-

13. | Sustainable Infrastructure with Plastics

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• Prevention of Soil Erosion

• Plastic Film for Mulching

• Water Lifting

• Water Conveyance and Distribution

• Plastics As An Aid To Improve Cultural Practices of Crops

• Plantation/ Nursery Bags

• Seed Bed Cover

• Soil Sterilization

• Improvement in Ground Nut Crop Through Mulching

Agriculture and infrastructure to drive demand for plastic pipes in India

The PVC plastic pipes market is likely to experience the highest growth, supported by growing demand from sectors such as water supply, agriculture.

Potable water supply, wastewater treatment, agriculture and chemical sectors are expected to propel the demand for plastic pipes in India by manifold.

The Indian plastic pipe market is forecast to grow at a CAGR of 10.4 percent till 2021. The major growth drivers for this market are the growth of government infrastructural spending, increasing residential and commercial construction, industrial production, irrigation sector, and replacement of aging pipelines.

Polyvinyl chloride (PVC), polyethylene (PE) and polypropylene (PP) are the major raw materials used to manufacture pipe.

Within the Indian plastic pipe market, agriculture sector is expected to remain the largest application.

The growth of residential and commercial construction and the growth in infrastructure development especially in the agriculture sector in the country are expected to spur growth for this segment over the coming years.

According to the report, emerging trends, which have a direct impact on the dynamics of the market, are the usage of anti-microbial plastic pipes to improve hygiene, consumption of CPVC (chlorinated polyvinyl chloride) piping system in various applications of plastic pipes, and increasing consumption of multilayer plastic pipe in gas distribution in the Indian plastic pipe market.

Can Plastic Pave The Way to Greener Global Infrastructure?

The Dutch city of Rotterdam announced that it was considering a proposal to replace a stretch of its roads with what may become the world's first all-plastic avenue. Proposed by KWS Infra, a subdivision of the Dutch firm VolkerWessels, the project, simply dubbed “PlasticRoad,” will use entirely recycled materials reclaimed from ocean dumps and incineration plants. The raw materials will then be used to create Lego- like building blocks, which the company claims may prove cheaper, easier to work with, and more durable than the asphalt used in existing boulevards.

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Small, interlocking, and fully recycled plastic blocks have been on the mass construction market since the early 2000s, allowing almost anyone to incorporate such materials into their projects.

Multiple companies had developed several variations on plastic bricks--some of which poured like concrete and others that stacked like it--often for use in low-cost and emergency housing. In China, Malaysia, and Taiwan, experimentation with these bricks proved that they cost up to 30 percent less than traditional construction materials, providing greater insulation, resiliency in the face of disasters, and reusability if a building was torn down.

Recently Welsh company Affresol launched a line of affordable homes and modular buildings that utilized recycled plastic as raw material.

Yet while people have long made things like manhole covers out of recycled plastics, it appears that no one had made a wholly plastic road. Many companies, especially out of India, had started adding shredded plastic to asphalt to help local roads withstand the wear and tear of erosion in the early 2000s.

But even partially plastic asphalt only recently became cost-effective, possibly helping to limit experimentation in plastic road technologies versus other construction uses.

Recycled plastic materials have proven up to three times more durable than asphalt. They should be able to withstand temperatures from -40 to 176 degrees Fahrenheit without cracking, preventing erosion.

Instead--as the roads will be hollow--they will provide space for safe water retention. All told, this should allow a plastic road to last three times as long as a normal road (surviving 50 years at least rather than at the outside). Since the roads will be constructed out of pre-existing plastics, their construction will put far less carbon into the air than asphalt and require less polluting maintenance in the long run.

As they can be recycled again into a new road when they break down, the environmental cost of replacing them will be minimal.

Thus, Plastics enable Sustainable Infrastructure.

The article is authored by:

Mr. Deepak Lawale Secretary General

Organization of Plastics Processors of India

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Founded in 1991 as a division of Tata Industries Ltd, Tata Strategic Management Group is the largest Indian own management consulting firm. It has a 50 member strong consulting team supported by a panel of domain experts. Tata Strategic has undertaken 500+ engagements, with over 100 clients, across countries and sectors.

It has a growing client base outside India with increasing presence outside the Tata Group. A majority of revenues now come from outside the group and more than 20% revenues from clients outside India.

Tata Strategic offers a comprehensive range of solutions covering Direction Setting, Driving Strategic Initiatives and Implementation Support

14. | About Tata Strategic

Our Offerings: We offer End to End Solutions …with tangible Results / Benefits

Strategy Revenue Enhancement

• Competitive Strategy:

Entry/Growth

• M & A Support

• New Biz Models

• Profit Enhancement

• Adjacent Products

• Underserved Segments

• Sales Effectiveness

• Customer Journey

• Route to Market

• Supply Chain Optimization

• Workforce Productivity

• Thoughput Service Levels

• Strategy-Culture Alignment

• Change Management

• Family Governance

• Talent Management

• Revenue

• Term sheet

• Market Share

• Profit

• Voluem

• Key Milestones

• Cycle Time

• Service level

• Costs Drive Implementation & Change to derive Benefits

Operational Efficiencey Organization

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Manish Panchal

Sr. Practice Head – Chemicals & SCM E-mail: manish.panchal@tsmg.com Phone: +91 22 6637 6713

15. | Tata Strategic Contacts

Charu Kapoor Principal – Chemicals

E-mail: charu.kapoor@tsmg.com Phone: +91 22 6637 6756

Report co-authored by Nihaal Jelkie (nihaal.jelkie@tsmg.com), TATA Strategic Management Group.

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NOTES

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NOTES

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NOTES

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Established in 1927, FICCI is the largest and oldest apex business organisation in India. Its history is closely interwoven with India's struggle for independence, its industrialization, and its emergence as one of the most rapidly growing global economies.

A non-government, not-for-profit organisation, FICCI is the voice of India's business and industry. From influencing policy to encouraging debate, engaging with policy makers and civil society, FICCI articulates the views and concerns of industry. It serves its members from the Indian private and public corporate sectors and multinational companies, drawing its strength from diverse regional chambers of commerce and industry across states, reaching out to over 2,50,000 companies.

FICCI provides a platform for networking and consensus building within and across sectors and is the first port of call for Indian industry, policy makers and the international business community.

Federation of Indian Chambers of Commerce & Industry

Industry’s Voice for Policy Change

Mr. P. S. Singh Head-Chemicals &

Petrochemicals Division FICCI

Federation House, 1 Tansen Marg New Delhi-110001 Tel: +91-11-23316540 (Dir) Email: prabhsharan.singh@ficci.com

Ms. Rinky Sharma Research Associate Chemicals & Petrochemicals

FICCI

Federation House, 1 Tansen Marg New Delhi -110001 T: 011-23487473 (Ext: 473) Email:rinky.sharma@ficci.com

Contacts

Organization of Plastics Processors of India (OPPI) was established in 1984 to promote healthy growth of plastics in India. The members of OPPI form the backbone of Indian Plastic Processing Industry, contributing more than 40% of the total plastics processed in India. OPPI is involved in evolving policies with the government for growth of Indian Plastics Industry.

Organization of Plastics Processors of India (OPPI) has entered into MoUs with all leading Plastic Associations in the world. Organization of Plastics Processors of India conducts member-centric activities / programmes. The basic objective of all such activities is to help the members in their lines of production and also help them in business development.

Organization of Plastics Processors of India

Mr. Deepak Lawale Secretary General

Organization of Plastics Processors of India 404/405, Golden Chambers,

New Link Road,

Andheri (West), Mumbai - 400053. INDIA Tel.: +91-22-66923131/32

Fax: +91-22-26736736 Email: oppi@vsnl.com

SUSTAINABLE INFRASTRUCTURE WITH PLASTICS

3 National Conference on