By Pushan Sharma and Elizabeth Master
Ease of Doing Business for MSMEs: The ban on single-use plastic in India effective July 1, 2022, is expected to hit small and medium enterprises (SMEs) especially hard. That’s because single-use plastic accounts for a third of the Rs 1,250-1,350 billion plastic industry in India and SMEs have a share of 70-75% in this segment. The latest notification bans the manufacture, import, stocking, distribution, sale, and use of identified single-use plastic items that have low utility and high littering potential.
The list of banned items includes plastic straws, earbuds with plastic sticks, plastic sticks for balloons, plastic flags, plastic candy sticks, plastic ice-cream sticks, polystyrene (thermocol) for decoration, plastic plates, cups, glasses, cutlery such as forks, spoons, knives, straw, trays, plastic wrapping or packing films for sweet boxes, invitation cards, cigarette packets, and plastic or PVC banners less than 100 microns.
This is a step in the right direction to curb pollution caused by littered and unmanaged plastic waste and supports India’s environmental, social, and governance drive.
Indeed, the benefits are visible already. An average Indian now generates around 2,500 gm of plastic waste annually, which is equivalent to 125 one-litre PET bottles. While this figure is still sizeable, it is half of what was five years ago. For the record, in India, the maximum quantity of plastic waste is generated in Maharashtra, followed by Tamil Nadu and Gujarat.
That said, the ban will have a cascading impact on the value chain. Indeed, the comprehensive list of banned items will affect three-fourths of the end-user segments in terms of cost increases. That is because alternatives for plastic are costly, and, thereby, likely to affect the end price of the product. For instance, plastic straw costs 10 paise vis-à-vis 40 paise per unit of paper straw.
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To be fair to India, even other countries are struggling to tackle this challenge. As many as 80 countries have fully/ partially implemented the ban on single-use plastic, with Africa being the leading continent.
The industry was already reeling under a ban on the manufacture, import, stocking, distribution, sale and use of plastic carry bags having a thickness less than 75 microns, which came into effect on September 30, 2021.
Piling on the woes further will be a ban on plastic carry bags having a thickness less than 120 microns that will come into effect from December 31, 2022. As per CRISIL Research’s interactions with market participants, progressive bans have already shuttered 10-15% of the units that were 100% single-use plastic manufacturers.
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Exports, which comprise around 15% share of the SME plastic industry, are unlikely to provide any respite to manufacturers owing to headwinds emanating from the risk of recession in some major economies. Given this, effective implementation of the plastic ban, with proper alternatives in place, is the need of the hour.
Pushan Sharma is Director and Elizabeth Master is Associate Director at CRISIL Research. Views expressed are the authors’ own.