India’s small plastic manufacturers are facing one of their toughest operating periods in recent years as geopolitical tensions involving Iran disrupt petrochemical supply chains, raise freight costs and squeeze already-thin margins.
Industry associations and executives say micro, small and medium enterprises (MSMEs), which form the backbone of India’s Rs 4-lakh-crore plastic processing sector, are seeing at least a 30-40% monthly revenue loss since the Iran war began. This has happened as many units cut production by half amid rising input costs and weak pricing power. Some units, on the other hand, have simply shut shop unable to cope with the disruption linked to the war.
The stress is visible across clusters in Gujarat, Maharashtra, Tamil Nadu and Delhi-NCR, where thousands of small factories manufacture packaging material, pipes, moulded products and consumer plastic goods. In Gujarat, for instance, which is home to over 8,000 plastic processing units, the revenue loss suffered by the local industry is to the tune of Rs 18,000 crore per month, according to the Gujarat State Plastic Manufacturers Association (GSPMA). “MSMEs have suffered the most. They barely have inventory buffers. It will last for a few days, not months,” Anish Patel, president, GSPMA, said.
Polymer Price Shock
In Tamil Nadu, industry executives fear that the Prime Minister’s austerity call could be used by polymer suppliers to hike prices. “We fear bulk raw material manufacturers may use this as a reason to further hike prices or stop supplies entirely,” G. Sankaran, president of the Tamil Nadu and Pondy Plastic Association (TANPPA), said.
For India’s plastic industry, the impact is immediate because polymers such as polypropylene (PP), polyethylene (PE) and PVC are closely linked to crude oil prices. When crude rises, these prices typically follow. In three months, raw material prices have surged by 40-70%, disrupting economic viability for small players.
“Many small plastic manufacturers depend on imported polymers and petrochemical derivatives linked to West Asian supply routes, which have been choked due to the Iran war,” Sunil Shah, president, All India Plastic Manufacturers’ Association (AIPMA), told FE.
“The other aspect is that local polymer suppliers are constantly revising rates given the current volatility, hurting small plastic players. Buyers at the same time are unwilling to pick up output at higher prices,” he said.
Though buyers such as fast-moving consumer goods companies and pharmaceutical firms have seen their plastic packaging costs increase sharply since the start of the war, Shah says that the price inflation they are seeing is lower than the supply shock plastic manufacturers are witnessing. While corporations like Alternicq, which is India’s largest rigid plastic packaging maker, have managed to pass some of the sharp raw material cost increase to FMCG clients, but MSMEs lack this leverage, industry experts said.
Call for Intervention
Shah says that the AIPMA has petitioned the government to help stabilise raw material prices, curb hoarding, and provide easier access to working capital loans, quicker GST refunds and temporary freight assistance. Some industry representatives have also sought intervention from domestic petrochemical producers to prevent steep price fluctuations.
Jigish Doshi, past president of Plastindia Foundation, says that it would take about six months for the plastic industry to normalise if the West Asia crisis were to come to an end any time soon.