Plastics Industry Representation to Governemnt of India

09-Apr-20

Major plastics industry associations have been jointly working on a proposal which has been submitted to the Secretary, Department of Chemicals & Petrochemicals, Government of India. The associations have  strongly recommended ‘NO CHANGE’ in Custom Duty on Polymers and argued against fixing of any minimum import price on polymers. Details of the representation made are given below

Proposal to Department of Chemicals & Petrochemicals, Government of India on Behalf of the Following Associations: -

S. No. Name Name of the Association
1 Mr. Jagat Killawala, President All India Plastics Manufacturers Association (AIPMA)
2 Mr. Dharmendra Gandhi, President Organisation Of Plastics Processors Of India (OPPI)
3 Mr. Shailesh Patel, President Gujarat State Plastic Manufacturers Association (GSPMA)
4 Mr. Ramesh Kr. Rateria, President Indian Plastics Federation (IPF)
5 Mr. Rakkappan S, President The Tamil Nadu Plastics Manufacturers Association (TAPMA)
6 Mr. Vijay Kumar V, President Karnataka State Plastic Association (KSPA)
7 Mr. Balakrishna Bhat Kakunje, President Kerala Plastic Manufacturers' Association (KPMA)
8 Mr. Vimalesh Gupta, President Telangana And Andhra Plastics Manufacturers Association (TAAPMA)

The following recommendations are part of the Business continuity plan and would help the plastics processing industry to ultimately grow in midst of a ‘New Normal’ post lockdown. Consideration of the following would also help the Plastics processing industry in playing an important role in ‘Make in India’.

S. No. M Major Issue  Suggestions / Recommendations
TRADE

1

Custom Duty on Polymer































Minimum Import Price on Polymer

a. After going through the presentation made in the FICCI meeting on 7th April by CPMA President and subsequent discussions with processors, all Plastic Associations are of the opinion that status quo should be maintained w.r.t custom duty on polymer (No change in the import duty). Due to the current global crisis leading to recession, consumer demand is going to be suppressed. However, lower price of polymer and therefore affordable plastics finished products could drive up the demand and hence could help to retain 4.5 million jobs in plastics processing sector. This could also to some extent compensate for the dip in the consumption due to recession. This could also drive up the demand and hence could create huge number of jobs in plastics processing sector. Lower polymer prices could help more than 50,000 plastics processing units in managing their working capital and liquidity issues and therefore will ease their stress and problems to some extent.

b. The Excess stock of Polymers with the Indian Polymer Producers (between March 2020 and July 2019) Is just about 0.386 million tons vis-à-vis total polymer production in the country of about 12.65 million tons for PP/PE & PVC which is equivalent to only 11 days of production. This is quite natural as the polymer production continued during the lock down while most of the processing industries are closed. Thus, the stock of polymers with the Polymer Producers cannot be termed as excess stock.

c. Petroleum prices & dollar rates are volatile and at most 3 months’ average should be considered. 3 months’ data shows only 6% downward rates. This does not warrant any policy change with respect to Custom duty at this challenging time. Moreover, for eventual V shape recovery predicted for India, integration to global pricing is highly recommended.

d. Processing industry is already facing the problem of cost management due to appreciation of Dollar by about 7 percent in last few weeks leading to increase in import price of polymers.

e. Due to the current global crisis leading to recession, consumer demand is going to be suppressed. However, lower price of polymer and therefore affordable plastics finished products could drive up the demand and hence could help to retain 4.5 million jobs in plastics processing sector. This could also to some extent compensate for the dip in the consumption due to recession. This could also drive up the demand and hence could create additional number of jobs in plastics processing sector. Lower polymer prices could help more than 50,000 plastics processing units in managing their working capital and liquidity issues and therefore will ease their stress and problems to some extent.

f. Minimum Import Price on Polymer will hurt Plastics processing industry which is already reeling under severe crisis. MIP will lead to increase in price for all the products which constitute downstream of the value chain. This will have a severe impact on domestic plastics processing industry catering to local demand.

Conclusion:
-->  We strongly recommend ‘NO CHANGE’ in Custom Duty on Polymers
-->  MIP should ‘NOT’ be fixed for Polymers

2 Export Incentives In order to be viable in global market, government must declare very attractive export incentives. MEIS of around 2-3 percent is likely to be withdrawn and will be replaced by Remission of Duties or Taxes. However, this is not sufficient. China has recently increased its declared incentive from 9 to 14 percent.
Operations
3 Forward Contracts Many companies have entered into forward contracts against their export order with respective bank for supply of goods to their overseas customers. Due to the current situation, there are chances of delayed shipments or may be cancellation of orders. In view of the same, we seek extension of time limit for such contracts for the further period of three months from their due dates if orders are not canceled. If orders are canceled, forward contract may be canceled without any charges to exporters. This will enable the exporters to come out from this critical situation
4 Salary and Wages of workers The industry has gone ahead and paid wages to workers and salaries to staff for the month of March 2020. However, the industry and specially MSMEs may not be able to cope up with the same for the month of April 2020 onwards. Therefore, we request the Government do its bit. Many countries like Bangladesh and Canada have already shown the way. ESIC has got a huge reserve to the tune of Rs. 91000 crores. Similar, there is a huge fund lying in PPF fund. Govt. should at least pay 50% of the wages and salaries for next 3 months starting April 2020 from the ESIC and PPF funds
5 Electricity Charges

a. Allow to make payment up to 30.6.2020 for the electricity bills issued during the period from 1.3.2020 to 30.4.2020 without levy of delayed payment surcharge and without effecting disconnections by Distribution licensees in the State.


b. Waive the minimum charges i.e. Demand / Fixed Charges from the electricity bill for the month of March and April 2020 for all Industrial consumers. Only consumption charges should be recovered from all such consumers during the month of March and April-2020.


c. Extend subsidy of Rs. 2/- per unit on consumption charges from 1.3.2020 to 30.9.2020. This will help the industrial establishments in achieving normalcy after the lock down is lifted.

6 GST

a. GST to be paid quarterly and not monthly.
b. GST should become due only when the payment has been received.

7 Export under essential services Export should be considered under essential services.
8 Plastics Pipes Agriculture implements and other items of agriculture are considered as Essential goods. Plastic piping systems, Micro irrigation systems and Submersible cables are for agriculture use and potable water supply. Government is requested to treat the PVC/ HDPE (Plastic piping systems), Micro irrigation systems and Submersible Cables manufacturing activity for agriculture purpose and Water supply purpose along with its Supply Chain activities, as Essential Commodities.
9 Banking
a. Additional Working Capital: RBI announced additional funds to the extent of 10% of fund based working capital limits. However, this is inadequate. RBI should direct banks to reduce margins on existing Working Capital Limit and provide additional liquidity. If they do this it will free up valuable cash for the companies. This can be done for 1 year and then again reset to original levels as per sanction letters.
 
b. The industry will face massive cash flow and working capital issue once the lock down is over. Therefore, to ease out the finance related pain, RBI should ask Banks to automatically enhance the credit limit (Working Capital loan, CC, BC, LC etc.) of MSMEs by 25% without any additional collaterals.
 
c. RBI announced a lower Repo Rate but interest rates on CC limits are MCLR linked and reduction is not being passed on immediately as all working capital limits sanctioned have a “reset clause “. The rate is reset only when the limits are renewed or after one year of the original sanction. So this reduction offered by RBI will not be available immediately in normal course to existing loans. Banks should be asked to pass it on immediately to borrowers in view of this pandemic.
 
d. Inland & foreign LC’s are getting due and banks are debiting the CC accounts. As no collections are being received, accounts are getting overdrawn. Factories will not have finances to start when lockdown will be lifted. Banks should finance the LC which become due between 20th March & April month and not debit the CC accounts. They should be repaid in instalments over a 12-month period. This will ensure some liquidity with business.
 
e. Bank Guarantees: Wherever the banks have taken Fixed Deposits as margin for issuing BG, they should free at least 50% from that fixed deposit or they can give loan up to 50% of the fixed deposit to enhance liquidity.
 
f. “Buyer’s Credit”: Several banks are not extending the buyer credit facility from last year. RBI should direct them to do so which will help industry import raw materials at competitive prices.
 
g. One of the ways that Govt. can help is to ask banks to defer collection of term loans by one year without NPA provisions. That means a moratorium on repayments for one year. Will greatly improve cash flow at least to leveraged companies.
 
h. Delink interest rates to credit ratings for the time being.
Logistics
10 Clearance at customs and cargo movement by Road Difficulty in clearance of goods due to shortage of staff and labour at Customs.
Shortage of Truck drivers as most are migrants from other states and have left due to the fear.
No support of truck service centers, cranes, etc., due to lockdown also discourages transports to ply.

 

 

 

 

 

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