MNCs Loom Over Plastic Processing SSI Units

Mumbai, Aug 25: | Updated: Aug 26 2002, 05:30am hrs
The Rs 35,000 crore domestic small scale plastic processing sector is being slowly taken over by some of the leading international brands like Sun Ace of Singapore. Even names like Tupperware and Houseware of the US, Delphi and Samsonite among others from the US have their own arrangements either through direct manufacturing or through contract manufacturing of their plastic products in Indian market.

Industry players said the ongoing developments in this sector could drastically change the composition of this industry which has over 22,000 plastic processing units spread over the country.

Last week, the Singapore-based Sun Ace Kakoh picked up 49 per cent stake in Hyderabad-based Vinyl Chemicals Pvt Ltd, manufacturer of plastic additives and speciality chemicals. Sun Ace Kakoh invested Rs one crore in the Vinyls capital, taking the total equity to Rs two crore.

Earlier, Samsonite, Delphi, two leading names in moulded luggage, too had set up their own units. General Motors too gets its auto components manufactured through its division Delphi and not through Indian plastic processors. Ford Motors too has its own auto components manufacturing unit in Chennai.

These are a few names which have set up their own plastic processing units in India and if industry sources are to be believed, more are on the way to set up their manufacturing base in India. This could permanently change the plastic processing sector which till recently remained in the unorganised sector and is fragmented and given the general lack of funds, almost closed to the developments in the international markets.

A source from the All India Plastic Manufacturers Association (AIPMA) said, Armed with latest technology and financial power, the new overseas entrants are slowly capturing segments of Indias vast untapped market for quality plastic products. This could destabilise a number of domestic players, the source said.

However, plastemart.com marketing head Kavita Shah said, The entry of foreign names would increase efficiency, productivity and quality of products from the Indian players, but only after fresh investments in machines and moulds are made by the latter.

One of the main reasons for the entry of foreign plastic products makers is Indias cheap land and labour (as is in China). Even the reservation policy, for the SSI sector, is the other attractive proposition for the new entrants. However, the SSI tag is seen as being as hindrance and therefore, a section of players has been demanding dereservation of the plastic processing sector which could lead to cost-effective production and bring in the required competition. The Organisation of Plastic Processors of India (OPPI) president JM Gandhi said, We have been demanding from the government for the total dereservation of the SSI for plastic industry. If allowed, dereservation could improve Indias market potential. And the economies of scale can be brought in which will help us compete with international players.

Mr Gandhi said some of the items reserved for SSI are described in generic term. Since then there has been a considerable technological advancement which could be utilised only if the sector is dereserved, he added.

Currently, internationally reputed processing machinery manufacturers, such as Starlinger, Windmoeller-Holsher, Reifenhauser, Battenfeld, Brampton Engineering etc, have established their presence in India.

On domestic front, currently around 60 per cent of plastic units in the SSI sector are fighting their battle against the surging imports of plastic goods. And due to restrictions on investment in plant and machinery for SSI, Various plastic players have been compelled to set up their manufacturing units in Nepal and other countries, Mr Gandhi said. Because of the small Rs one crore limit for the SSI sector, the industry is fragmented with players not wanting to invest in R&D and with little innovation the domestic market is saturated with low quality and low priced goods.