REPORT OF THE WORKING GROUP ON CHEMICALS AND PETROCHEMICALSplanningcommission.nic.in/aboutus/committee/wrkgrp11/wg11_petroch… · Subject- Constitution of a Working Group on Chemicals

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REPORT OF THE WORKING GROUP ON

CHEMICALS AND PETROCHEMICALS

11TH FIVE YEAR PLAN (2007-08 TO 2011-12)

(PETROCHEMICALS SECTOR)

Volume I Main Report

DEPARTMENT OF CHEMICALS & PETROCHEMICALS FEBRUARY, 2007

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CONTENTS

Chapters Description Page No

I Preface 3 II Appendix I – Letter of Planning Commission

constituting Working Group. 7

III Appendix II – Letters of Department of Chemicals & Petrochemicals Constituting Sub-Groups

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IV Executive Summary 16 1 Introduction 37 2 To review the performance, present status and

growth of domestic and global Chemicals and Petrochemical Industry keeping in view the emerging trends, strength and weakness and changing economic scenario in the country.

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3 To review the status of the domestic industry in terms of Tenth Plan targets vis-à-vis achievements.

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4 To review the feedstock availability and pricing related issues including availability of industrial alcohol

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5 To review and assess the global business strategy and domestic preparation for international competitiveness and to realize potential of emerging areas including specialty chemicals in the light of the new IPR regime, identify specific key products having potential for growth and suggest measures for putting the indigenous industry on sound footing.

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6 To suggest ways and means of strengthening R&D in the sector.

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7 To assess the present status of domestic Good Manufacturing Practice with the bench mark of international practice and suggest measures for compliance by manufacturers of chemicals and petrochemicals products in the country.

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8 To assess the present employment and likely employment that will be created ruing the 11th Plan period and in the perspective of 15 years.

9 To assess the human resource development need of the industry to recommend strategy to meet the same.

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10 To assess the need for sector specific investment regions for the chemicals and petrochemicals industry and to suggest measures including institutional mechanisms to strengthen it including investment and sources of investment.

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11 To make such other recommendations as are considered by the working group appropriate, to make the Chemicals & Petrochemicals industry internationally competitive at the earliest.

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PREFACE

In the context of formulation of the Eleventh Five Year Plan (2007-12), the Planning Commission has constituted Working Group for 11th Plan on Chemicals & Petrochemicals in May, 2006 (Appendix I). Subsequently, the Department of Chemicals & Petrochemicals constituted three sub-groups namely (i) Sub Group on Petrochemicals; (ii) Sub-Group on Synthetic fibre and fibre intermediates and (iii) Sub-Group on Research and Development and Human Resource Development (Appendix II) on the Terms of References of Working Group.

2. The three sub-groups were chaired by Shri B.P.Pandey, Joint Secretary (Petrochemicals) and Shri Surjit Bhujabal, Director (Petrochemicals) as Member Secretary.

3. Sub_Group 1 – Covered all the terms of references relating to building blocks, intermediates, polymers, elastomers, surfactant intermediates, other petrochemicals and plastic processing industry.

4. Sub-Group 2 – covered all the terms of references relating to Synthetic fibre and fibre intermediates.

5. Sub- Group 3 – The Group specifically addressed the Terms of References on strengthening R& D in the sector, Good Manufacturing Practices, human resource development and to recommend strategy to meet the same and other relevant issues with regards to petrochemicals industry .

6. Secretary (Chemicals & Petrochemicals) Chaired the Main Working Group meeting on 2nd August, 2006 thereafter the three sub-Groups deliberated the terms of references under the Chairmanship of Joint secretary during meetings as follows:

A. Subgroup 1- Petrochemicals and Sub-Group 2 – Synthetic Fibre and fibre Intermediates had a joint meeting on 4th August, 2006.

B. Sub Group 1 Petrochemicals and Sub-Group 2 held its meeting on 22nd August, 2006 separately.

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C. Technical Textile portion of the Sub-Group on Synthetic Fibre

met on 1st September, 2006 to discus , and D. Sub Group on Research and Development and Human resource

Development met on 8th September, 2006

7. The draft sub-Group reports were deliberated in the joint meeting held on 27th October, 2006 under the Chairpersonship of Secretary (Chemicals & Petrochemicals)

8. The sub-group reports details have been compiled as Volume 1 of the Working group report. The three sub-group reports have been compiled as Volume 2 of the working group reports. The presentations made by the various members are complied as volume 3 of the Working group report.

9. Petrochemicals played an important role in the economic development and it is one of the fastest growing sectors of the Indian economy. Petrochemical not only supplemented but have substituted conventional materials. Energy efficiency, competitive alternate sources in packaging, consumer durable and non-durable applications, advance materials in hi-tech applications, etc. are some of the reasons for substitution. The petrochemical products have penetrated all sectors and have become essential in the day-to-day applications.

10. Globally the focus of growth and the development in petrochemical is shifting to Asia, with a large population is emerging as a major market. Among the countries in Asia, China and India are emerging as the dominant economies. India needs to utilize the potential and increase the investments in petrochemicals for a sustained development. Our strengths lie in a qualified and technically trained man power, a transparent policy and legal framework, competitively placed labour force, etc.

11. The Working Group has identified the demand potential in Commodity Polymers to go up from 5.3 million tons in 2006-07 to 12.5 million tons as level I with a Compounded Annual Rate of Growth (CARG) of 18 % during the 11th five year Plan suggesting certain change in policy environment to remove the structural constraints and a lower demand growth to 7.8 million tons as Level II with a CARG of 9 % with the prevailing policy environment. In Synthetic fibers demand potential from 2.4 million tons in 2006-07 to 5.8 million tons by 11th Five Year plan end with a growth rate of 8.5 % CARG.

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12. The above mentioned projection will result in an investment potential of US $ 8 Billion (Rs. 40,000 cr) in upstream cracker complexes and polymer plants and about US $ 6 billion (Rs. 30,000 crore) in downstream plastic processing sector. Investment potential in synthetic fibers and fibre intermediates is estimated as US $ 4 billion (Rs 20,000 cr).

13. The focus areas are in facilitating creation of world class infrastructure through policy initiatives as Petroleum Chemicals and petrochemicals investment regions (PCPIR), adaptation of cluster approach, development and promoting plastic parks, Petrochemical export processing zones. Investments in R & D and Human Resource Development, Modernization and technology upgradation to adopt new generation technology, improved scales of operation, facilitating promotional measurers for adopting environmental friendly and recycling technologies, removing structural constraints for a sustained growth of industry in order to remain globally competitive and achieve desired rate of growth.

14. I would like to place on record the sincere efforts and contributions made by the Chairman and Member of the three Sub-Groups for completing the task. The recommendations of the Working Group would go long way in paving way and rode map for the sustained development of the Petrochemicals sector (Satwant Reddy) Secretary, Department of Chemicals & Petrochemicals

Chairperson, Working group on Chemicals & Petrochemicals for 11th Five Year Plan (2007-12)

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Appendix I

No I & M - 3(4)1/2006 Government of India Planning commission (Industry Division)

Yojana Bhawan, Sansad Marg New Delhi the 22nd May, 2006

Subject- Constitution of a Working Group on Chemicals and Petrochemicals.

In the context of formulation of the Eleventh Five Year Plan (2007-12), it has been decided to set up a working group on Chemicals & Petrochemicals. The terms of reference and composition of the working Group will be as follows: I. Terms of reference.

1. To review the performance, present status and growth of domestic

and global Chemicals and Petrochemical Industry keeping in view the emerging trends, strength and weakness and changing economic scenario in the country.

2. To review the status of the domestic industry in terms of Tenth Plan targets vis-à-vis achievements.

3. To review the feedstock availability and pricing related issues including availability of industrial alcohol

4. To review and assess the global business strategy and domestic preparation for international competitiveness and to realize potential of emerging areas including specialty chemicals in the light of the new IPR regime, identify specific key products having potential for growth and suggest measures for putting the indigenous industry on sound footing.

5. To suggest ways and means of strengthening R&D in the sector. 6. To assess the present status of domestic Good Manufacturing

Practice with the bench mark of international practice and suggest measures for compliance by manufacturers of chemicals and petrochemicals products in the country.

7. To assess the present employment and likely employment that will be created druing the 11th Plan period and in the perspective of 15 years.

8. To assess the human resource development need of the industry to recommend strategy to meet the same.

9. To assess the need for sector specific investment regions for the chemicals and petrochemicals industry and to suggest measures including institutional mechanisms to strengthen it including investment and sources of investment.

10.To make such other recommendations as are considered by the working group appropriate, to make the Chemicals & Petrochemicals industry internationally competitive at the earliest.

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II. Composition of Working Group 1 Secretary, Department of Chemicals &

Petrochemicals (DCPC) Chairperson

2 Additional Secretary & Financial Adviser Member 3 Principle Adviser (PP Division), Planning

Commission Member

4 Principle Adviser (PP Division), Planning Commission

Member

5 Adviser (I & VSE), Planning Commission Member 6 Joint Secretary (Chemicals), DCPC Member Secretary 7 Joint secretary (Petrochemicals), DCPC Member Secretary 8 Representative from Department of Scientific

and industrial Research Member

9 Representative from Department of Science and Technology

Member

10 Representative of Department Industrial Policy And promotion

Member

11 Representative from Ministry of petroleum & Natural Gas

Member

12 Representative from Department of Commerce

Member

13 Representative from Ministry of Environment & Forest

Member

14 Representative of Indian Chemicals Manufacturers Association

Member

15 Representative of Indian Plastic manufacturers Association

Member

16 Representative of Petrochemicals Manufacturers Association

Member

17 Chairman, Chemexil Member 18 Excecutive Director, Capexil Member 19 Representative from IIT, Delhi Member 20 Economic Adviser, Department of Chemicals &

Petrochemicals Member

21 Dr. Ahmad Massod, Former adviser (PAMD), Planning Commission

Member

2. The Chairman of the Working group may included additional terms of reference in consultation with Member (Industry), Planning Commission, who is the Chairman of th4e concerned Steering Committee. 3. The Working group may co-opt any other Expert member of the Working group, if considered necessary. 4. The Working Group will submit its report within three months to the Chairman of the Steering Committee. The Department of Chemicals & petrochemicals will provide Secretarial assistance for the working group.

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5. The expenditure on TA/DA of official members in connection with the meetings of the committee will be born by the parent Department / Ministry to which the officials belongs. The non-official members of the committee will be entitled to TA/DA as permissible to Grade I officers of the Government of India under SR190 (a) and this expenditure will be born by the planning Commission. 6. Shri D Banerjee, Dy. Adviser (CI), Room No 319A Yojana Bhawan (Ph 2309 6710) will act as Nodal officer and any further Communication in this regard may be made with the Nodal Officer. Sd/- (K.K.Chhabra) Under Secretary to the Government of India To Chairman and all Members (including Convenor) of the Working group Copy to

1 PS to DCH/ MOS (Planning) / members/ Member-Secretary, Planning Commission.

2 All Principle Advisers / Advisers/ HODs in Planning Commission. 3 Prime Minister’s Office, South block, New delhi 4 Cabinet Secretariat, Rashtrapati Bhawan, New Delhi. 5 Information officer, Planning commission. 6 Joint secretary (Administration), Department of Chemicals &

petrochemicals 7 Controller of Accounts, Department of Chemicals &

Petrochemicals Sd/- (K.K.Chhabra) Under Secretary to the Government of India

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Appendix II

No. 28016/10 /2006-PC.II

Government of India Ministry of Chemicals & Fertilizers

Department of Chemicals & Petrochemicals -.-

Shastri Bhavan, New Delhi-110 001.

Dated, the 24th July, 2006

OFFICE MEMORANDUM

Subject : Constitution of Sub-Group on Petrochemical. The undersigned is directed to say that a Sub-Group has been constituted in the context of Preparation of 11th Five Year Plan, 2007-2012. The Sub-Group will cover building blocks, intermediates, polymers, elastomers, surfactant intermediates, other petrochemicals and plastic processing industry. The Members and the Terms of Reference of the Sub-Group will be as follows : 1. Shri B.P. Pandey, Joint Secretary (PC),

Department of Chemicals & Petrochemicals

Chairman

2.

President, Chemicals & Petrochemicals Manufacturers Association (CPMA), New Delhi

Member

3.

President, The All India Plastic Manufacturers Association (AIPMA), Mumbai

Member

4.

President, Organization of Plastic Processors of India (OPPI), Mumbai

Member

5.

President, All India Flat Tape Manufacturers Association (AIFTMA), New Delhi

Member

6.

President, Polystyrene Producers Association, Mumbai

Member

7 Chairman, Plastic Export Promotion Council, Mumbai

Member

8.

Representative from Indian Institute of Technology, New Delhi

Member

9. Shri Surjit, Bhujabal, Director (PC) Member Secretary

Terms of Reference

1. To review the performance, present status and growth of domestic and global Chemicals and Petrochemical Industry keeping in view the emerging trends, strength and weakness and changing economic scenario in the country.

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2. To review the status of the domestic industry in terms of Tenth Plan targets vis-à-vis achievements.

3. To review the feedstock availability and pricing related issues including availability of industrial alcohol

4. To review and assess the global business strategy and domestic preparation for international competitiveness and to realize potential of emerging areas including specialty chemicals in the light of the new IPR regime, identify specific key products having potential for growth and suggest measures for putting the indigenous industry on sound footing.

5. To suggest ways and means of strengthening R&D in the sector. 6. To assess the present status of domestic Good Manufacturing


7. To assess the present employment and likely employment that will be created ruing the 11th Plan period and in the perspective of 15 years.

8. To assess the human resource development need of the industry to recommend strategy to meet the same.

9. To assess the need for sector specific investment regions for the chemicals and petrochemicals industry and to suggest measures including institutional mechanisms to strengthen it including investment and sources of investment.

10.Export Promotional Measurers 11.To make such other recommendations as are considered by the

working group appropriate, to make the Chemicals & Petrochemicals industry internationally competitive.

The Sub-Group will prepare the Report by 1st week of August, 2006 for discussion and finalization by middle of August.

Sd/- (VED SINGH)

Section Officer. Tel.:2338 2575.

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No. 28016/10 /2006-PC.II Government of India

Ministry of Chemicals & Fertilizers Department of Chemicals & Petrochemicals

-.- Shastri Bhavan,

New Delhi-110 001. Dated, the 24th July, 2006

OFFICE MEMORANDUM

Subject : Constitution of Sub-Group on Synthetic Fiber and Fiber

Intermediates. The undersigned is directed to say that a Sub-Group has been constituted in the context of Preparation of 11th Five Year Plan, 2007-2012. The Sub-Group will cover Synthetic Fiber and Fiber Intermediates. The Members and the Terms of Reference of the Sub-Group will be as follows : 1. Shri B.P. Pandey, Joint Secretary (PC) Chairman

2. Association of Synthetic Fiber Industry,

Mumbai.

Member 3. President, Forum of Acrylic Fiber

Manufacturers, New Delhi

Member 4. President, Small & Medium Polyester POY

Manufacturers Association, New Delhi

Member 5. Chairman, The Synthetic & Rayon

Textiles Export Promotion Council, Mumbai

Member

6. Representative from Indian Institute of Technology, New Delhi

Member

7. Shri Surjit, Bhujabal, Director (PC), Dept of Chemicals & Petrochemicals

Member Secretary

Terms of Reference

12.To review the performance, present status and growth of domestic and global Chemicals and Petrochemical Industry keeping in view the emerging trends, strength and weakness and changing economic scenario in the country.

13.To review the status of the domestic industry in terms of Tenth Plan targets vis-à-vis achievements.

14.To review the feedstock availability and pricing related issues including availability of industrial alcohol.

15.To review and assess the global business strategy and domestic preparation for international competitiveness and to realize potential of emerging areas including specialty chemicals in the light of the new IPR regime, identify specific key products having potential for growth and suggest measures for putting the indigenous industry on sound footing.

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16.To suggest ways and means of strengthening R&D in the sector. 17.To assess the present status of domestic Good Manufacturing


18.To assess the present employment and likely employment that will be created ruing the 11th Plan period and in the perspective of 15 years.

19.To assess the human resource development need of the industry to recommend strategy to meet the same.

20.To assess the need for sector specific investment regions for the chemicals and petrochemicals industry and to suggest measures including institutional mechanisms to strengthen it including investment and sources of investment.

21. Export Promotion Measure 22.To make such other recommendations as are considered by the

working group appropriate, to make the Chemicals & Petrochemicals industry internationally competitive.

The Sub-Group will prepare the Report by 1st week of August, 2006 for discussion and finalization by middle of August. Sd/-

(VED SINGH) Section Officer.

Tel.:2338 2575

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No. 28016/10/2006-PC.II

Government of India Ministry of Chemicals & Fertilizers

Department of Chemicals & Petrochemicals -.-

Shastri Bhavan, New Delhi-110 001.

Dated, the 1st September, 2006

OFFICE MEMORANDUM

Subject : Constitution of Sub-Group on Research & Development and Human Resource Development. The undersigned is directed to say that a Sub-Group has been constituted in the context of preparation of XI Five Year Plan (2007-2012). The Members of the Sub-Groups will be as follows: 1. Shri B.P. Pandey, Joint Secretary (PC) Chairman 2. Representative from Department of Scientific &

Industrial Research Member

3. Representative from National Chemical Laboratories, Pune Maharashtra.

Member

4. Representative from Indian Institute of Technology, New Delhi

Member

5. Representative from CIPET, Chennai Member 6. Representative from Shriram Institute for

Industrial Research, New Delhi Member

7. Representative from Indian Oil Corporation Ltd. Member 8. Representative from GAIL India Ltd. Member 9. Representative from Indian Institute of

Petroleum, Dehradun Member

10 Representative from Reliance Industries Limited, Mumbai

Member

11 Representative from Haldia Petrochemicals Ltd. Kolkata

Member

12 Representative from Plastic Export Promotion Council, Mumbai

Member

13 Representative from Planning Commission, Yojana Bhawan, New Delhi

Member

14 Representative from DSM Engineering Plastics (India) Pvt Ltd., Pune

Member

15 Representative from SRF, Ltd., Gurgaon Member 16 Representative from GE Plastics, Gurgaon Member 17 Representative from ICPE, Mumbai Member 18 Shri Surjit Bhujabal, Director (PC) Member

Secretary

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The Group will address the following Terms of References with reference to technology needs for polymers, synthetic fibers, synthetic rubbers, surfactants intermediates and plastic processing industry including Specialty polymers, etc. The Group will also examine the establishment of Centers of Excellence in the areas of newer application development Plastic processed articles recycling process technology, development of bio-polymers and biodegradable polymers, engineering polymers, composites, process improvements extending life cycle of the product development etc. The Group will also address the emerging areas and the frontiers technology development in Petrochemicals, alternate feed stocks, etc.

The Terms of Reference for the Sub-Group will be as follows:

1. To suggest ways & means of strengthening R& D in the sector 2. To assess the present status of domestic “Good Manufacturing

Practices” with the benchmark of international practices and suggest measures for compliance by the manufacturers in the country

3. To assess the present employment and likely employment that will be created during the 11th Plan period and the perspective for 15 years

4. To assess the human resource development needs of the industry to recommend strategy to meet the same.

5. Any other relevant issues

Sd/-

(Ved Singh) Section Officer Tel: 2338 2575 Fax 2307 3157

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EXECUTIVE SUMMARY I. Petrochemicals 1. Petrochemicals are derived from various chemical compounds,

mainly from hydrocarbons. These hydrocarbons are derived from crude oil

and natural gas. Among the various fractions produced by distillation of

crude oil, petroleum gases, naphtha, kerosene and gas oil are the main

feed-stocks for the petrochemical industry. Ethane and natural gas liquids

obtained from natural gas are the other important feedstocks used in the

petrochemical industry. Olefins (Ethylene, Propylene & Butadiene) and

Aromatics (Benzene, Toluene & Xylenes) are the major building blocks

from which most petrochemicals are produced.

2. Petrochemical manufacturing involves manufacture of building

blocks by cracking or reforming operation; conversion of building blocks

into intermediates such as fibre intermediates (Acrylonitrile, Caprolactum,

Dimethyl Terephthalate/Purified Terephthalic Acid, Mono Ethylene Glycol);

precursors (Styrene, Ethylene Dichloride, Vinyl Chloride Monomer etc.)

and other chemical intermediates; production of synthetic fibres, plastics,

elastomers, other chemicals and processing of plastics to produce

consumer and industrial products.

3. Petrochemical products namely synthetic fibers cater to the clothing

needs of mankind and are used in both apparel and non-apparel

applications. Polymers find major applications in packaging for

preservation of food articles, moulded industrial and home appliances,

furniture, extruded pipes etc. Synthetic rubbers are used for making

various types of tyres and non-tyre rubber goods and supplement natural

rubber. Surfactant intermediates are used in the manufacture of

detergnents.

4. Petrochemical downstream processing units are major contributors

to employment generation and entrepreneurial development, thereby

serving a vital need of the economy. Starting from the raw material

production to conversion into finished products, the employment potential

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(both direct and indirect) is generated in a cascading manner, which is

currently estimated at over one million.

5. The Value addition in the petrochemicals industry is higher than

most of the other industry sector. In the manufacture of petrochemical

products from crude oil the value addition is about 17 times in comparison

to production of fuel from the same unit of crude oil.

6. The petrochemical industry is technology driven industry and for

operation of sophisticated and modern petrochemical plants, skilled

manpower is required. Some of the major units are having R & D facilities

and the expenditure towards R & D is very low. There is a need for

investing about 1 to 2 % of the total turnover in R & D. To meet the

growing need of skilled man power, emphasis is required to be given on

training and human resource development.

7. Petrochemical industry plays a vital role in economic growth &

development of Indian petrochemical industry which has been one of

fastest growing sectors in the country.

II. Approach to Eleventh Five Year Plan: 8. The Draft Approach Paper of Planning Commission envisioned for

the 11th Five Plan to achieve a new vision growth that will be much

broader based and inclusive, bringing about a faster reduction in poverty

and helping bridge the divide that is currently the focus of attention. A

rapidly growing economy will raise the incomes of the population

sufficiently to bring about a general improvement in living condition.

9. The economy, expected to grow between 8 to 9 % per year on a

sustained basis provided appropriate policies are put in place. Population

growth at 1.5 % per year would ensure that the real income of the

average Indian would double in ten years.

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10. Some of the major Challenges have been identified as

a. Providing Essential Public Services for the Poor.

b. Regaining Agricultural Dynamism.

c. Increasing manufacturing Competitiveness: To achieve the GDP

growth rate of between 8-9 % the manufacturing growth rate

must be targeted at 12 %.

d. Developing Human Resource.

e. Protecting Environment.

11. Promotion of Industrial Growth: The 11th Plan aims at raising

the rate of growth of the industrial sector to 10% and manufacturing

growth to 12% per annum. The most critical short-term barriers to

growth of the manufacturing sector are absence of world-class

infrastructure and shortage of skilled manpower. The 11th Plan will place

special emphasis on infrastructure and skill formation. Draft 11th Plan

priority initiatives to facilitate rapid industrial growth :

a. Taxes and duties should be made non-distortionary and

internationally competitive.

b. Efforts to promote infrastructure development in local areas such as

Special Economic Zones and Special Economic Regions.

c. Technological modernization and upgrading technological standards

and building international partnerships and FDI.

d. To create an investor friendly climate by State Government.

e. Labour intensive mass manufacturing based on relatively lower skill

levels provides an opportunity to expand employment in the

industrial sector with greater flexibility in some of the labour laws.

f. With reduced barriers to trade, and the negotiation of free trade

agreements with our neighbours and with ASEAN, our domestic

procedures have to compete with imports even if they don’t aim at

export markets. They cannot do so if reservation limits their ability

to modernize. The policy of progressive de-reservation of industries

for small scale production should continue in the 11th Plan at an

accelerated pace.

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II. Growth drivers for the economy

12. The downstream plastic processing sector - highly labour-

intensive which currently provides employment to 3.3 million people. It

has the potential to generate 3.7 million new jobs by 2011-12. Plastics

can also boost agricultural growth from the existing level of only 2%

through plasticulture and can reduce losses and wastages through

packaging of agricultural produce saving Rs 23,000 crores annually.

Plastics can play a key role in the implementation of the Government’s

schemes like “Bharat Nirman” and “Rajiv Gandhi National Drinking Water

Mission” for rural development and housing and universal access to

potable water in India. Plastics play a vital role in providing low cost

Medicare: disposable syringes, blood bags etc. In addition, increased

usage of plastics brings substantial ecological benefits through resource

conservation and its energy efficiency compared to traditional materials.

Recognising the economic benefits and employment potential of the

downstream sector, China had first developed the plastic processing

sector.

III. Global petrochemical Scenario

13. Global chemicals market size is estimated to be US $ 1.8 trillion.

Petrochemicals constitute the single largest segment accounting for

approximately 40 % (US $ 72 billion). During l1950 – 1990, countries in

West of Suez was dominating in the petrochemicals manufacturing. In the

late 1980s the petrochemicals epicentre has shifted from the West of Suez

(WOS) to East of Suez (EOS), which has emerged as the production and

consumption centre for petrochemicals. This is largely due to availability

crude oil and natural gas in Middle East and the developing markets in

Asia which has the large population base. Among the countries in Asia

China and India are emerging as the dominant economies. China started

as major consumer by establishing the downstream processing industry

by importing petrochemical raw materials. After capturing global market’s

share, China started focusing on upstream cracker investments to

increase their raw material and intermediate security. China has

established globally competitive downstream processing industry which is

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growing. Middle East, due to feedstock advantage, is fast emerging as the

petrochemical production hub for the world’s investments on

petrochemicals largely aimed at the emerging markets in Asia. Historically

Petrochemicals have positive linkage with the growth in GDP which was

1.5 times the global GDP. This trend is continuing even today.

14. India should utilize the emerging potential in Asia and increase the

investments in petrochemicals for a sustained development. The domestic

strengths are in highly qualified and technically trained man power,

transparent policy framework, legal framework, competitively placed

labour force, etc. India should use this opportunity to accelerate the

growth and attract investments in the petrochemicals sector.

IV. 10th Fiver Plan Performance: 15. The Economic Reforms initiated in 1991 brought about significant

changes in the structure of the domestic petrochemical industry.

Delicensing and de-regulation allowed the market forces to determine

investment and growth. In order to further strengthen the petrochemical

industry in the context of emerging opportunities and challenges, the

Government of India constituted a Task Force on Petrochemicals vide

Resolution dated 04.12.2000. The Task Force, headed by Shri G.V.

Ramakrishna, submitted its Report in April 2003.

14. The Task Force on Petrochemicals has identified the directions and

broad contours of the national vision in the petrochemical sector. Demand

projections were made for 10th and 11th Five plan. The performance of the

petrochemicals industry against the demand projections are as follows:

A. Commodity polymers. (Polyethylene, Polypropylene, Poly Vinyl Chloride, Polystyrene)

Demand Projection were between 2000-01 to 2006-07 was made in two

levels Level I - 3293 kilo tons to 7282 kilo tons with a CARG 13 %. Level

II - 3293 kilo tons to 6465 kilo tons CARG 12 %. Against this the

estimated demand in 2006-07 is 5260 kilo tons with a CARG 8 %.

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Performance of Commodity polymers during 10th Five Year plan period are

indicated at Table 1. The reasons for lower consumption trend are:

a) Adverse impact due to external factors (Global economic slowdown,

increased basic building blocks - crude oil / Natural gas prices) and

internal factor (high cost issues, high incidence of taxes and excise

duty, accelerated tariff reduction).

b) Import led growth did not take place due to structural constrains in

the processing sector.

c) Because absorption capacity of small downstream plastic units is

limiting factor

d) Investments in Downstream Plastic Processing investment were

also low.

e) Exports of polymers were 0.7 to 1 million tons against the average

imports of 0.4 million during 2002 to 2006.

f) The last Petrochemical complex was implemented in 2001. No grass

root investment except for incremental increase in capacity by way

of debottlenecking.

Table 1: Performance of Commodity polymers.

Unit Kilo tons

Type 2006-07 Projected Demand

CARG % Projected

Capacity Estimated 2006-07

2006-07 Estimated Consumption

CARG % Achieved

LDPE 226 2.0 200 234 2.7

LLD / HD PE 2325 12.0 1870 1755 6.9

PP 2371 15.0 1635 1712 8.9

PVC 1143 8.0 965 1320 10.6

PS 400 15 500 239 5.5

Total 6465 12 5170 5260 8

B. Downstream Plastic Processing Industry. Downstream plastic processing industry is extremely fragmented & plants

operating with outdated technology need major modernisation and up

gradation in both scales of operation and technology, which is inhibiting its

international competitiveness. As a result, India’s share in world trade in

plastic products continues to remain insignificant Imports of plastic

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products from China and Thailand in to India have increased rapidly

during recent years due to non-availability of quality plastic products in

the country

About 22,000 units in tiny, small and medium scale sector.

75 % of the units are in small scale sector.

Industry consumes 30 % recycled material in the total consumption.

Currently direct employment employs about 6.34 lac people and

indirect employment about 23.8 lac persons.

C. Synthetic Fibre Demand for synthetic fibre is arising mainly due to the demand from

fabrics and garments. The demand for synthetic fibre, which are

predominantly used in the textiles, will depend on – the growth of textiles

for household consumption. The growth of textiles for non-household

consumption and the growth in exports not only of synthetic fibre but also

synthetic fibre based yarns, fabrics and garments. Synthetic fibre consist

of Acrylic Fibre, Nylon Filament Yarn and polyesters Fibre and Filament

yarn. Polyesters constitutes more than 85 % in the synthetic fibre / yarns.

Even though natural fibre cotton has the major share in textile application,

Synthetic fibre based fabric is common man’s fabric.

Task force projected demand to grow from 1587 kilo tons in 2000-01 to

2304 kilo tons in 2006-07 CARG 6.4 %. Estimated consumption in 2006-

07 is 2346 kilo tons with a CARG 6.8 %, 2 % more than the projected

demand. The domestic production capacity synthetic fibre in 2006-07 is

3730 kilo tons. (Sufficient to meet the demand)

Table 2. Performance of Synthetic fibre during 10th Plan.

Unit Kilo tons Type 2006-07

Projected Demand

CARG % Projected


2006-07 Estimated

Consumption

CARG % Achieved

PFY 1192 6.6 2159 1395 9.4 PSF 820 6.7 1292 800 6.3

NFY 33 1.8 44 38 4.0

NIY/TC 67 4.0 64 68 4.2

AF 132 3.2 154 100 (-) 1.4 PPFY 93 7.6 17 13 (-) 6.9 Total 2304 6.4 3730 2349 6.7

22

Technical textiles include all textile products, which are used

predominantly for their performance or functional characteristics and not

for aesthetic appeal such as fabric for garments. Technical textiles use

commodity yarn for low end applications and high tenacity yarn for high

performance products. Synthetic fire is the dominant fiber in these

applications. Currently major domestic consumption of technical textiles

are in nylon tyre cord, belting fabric, luggage cloths etc.

In India tyre industry used predominantly nylon 6 tyre cord fabric made

from high tenacity nylon tyre yarn and a small consumption of polyester

tyre cord. In additions both nylon and polyesters are used as industrial

yarn in non-tyre applications. The consumption of tyre cord in 2000-01

was 61 kilo tons and increased to 91 kilo tons in 2005-06. Out of this

polyester tyre cord 4 % and nylon constitutes 96 %.

D. Synthetic Rubber Synthetic Rubber demand depends on the availability of Natural Rubber.

Synthetic Rubbers are broadly classified in two categories viz General

Purpose (SBR/PBR) and special purpose synthetic rubber (NBR/ EVA/

EPDM/ BR). In the Report of Task force on Petrochemicals, Synthetic

Rubber Demand was projected to grow from 153 kilo tons to 241 kilo

tons. CARG 10 %. Against this the Synthetic Rubber estimated demand in

2006-07 – 362 kilo tons. CARG- 19 %. Table 3 indicates the performance

of synthetic rubbers.

Table 3: Performance of Synthetic Rubber Unit kilo tons

Type 2006-07 Projected Demand

CARG % Projected


2006-07 Estimated

Consumption

CARG % Achieved

SBR 76 11.6 62 80 12.7

PBR 76 3.8 50 89 7.2

NBR 17 13.6 13 23 20.6

Butyl Rubber 22 4.1 0 34 13.6

EVA 23 87.0 13 121 160.9

EPDM 14 4.9 10 15 6.4

Total 228 10 148 362 19.0

23

E. Surfactant Intermediates: Surfactant intermediates are used in the manufacture of detergents.

Comprises of Linear Alkyl Benzene (LAB) and Ethylene Oxide (EO).

During the Xth Five Year Plan.

LAB demand projections was to grow from 318 kilo tons to 505 kilo

tons with a CARG 8 %. The consumption of LAB in 2006-07 is likely

to be 450 kilo tons at CARG 5.2 %.

Ethylene Oxide projections was to grow from 66 kilo tons to 111

kilo tons with a CARG of 9.1 %. The consumption in 2006-07 is

likely to be 96 kilo tons at CARG of 6.4 %

Table 4 : Performance of Surfactant Intermediates Type 2006-07

Projected Demand

CARG % Projected


2006-07 Estimated

Consumption

CARG % Achieved

LAB 505 8.0 450 390 5.2

EO 111 9.1 129 96 6.4

Total 616 8.2 579 486 4.0

V. Demand projection for 11th Plan

15. Based on the performance of the major petrochemicals

complexes/projects the demand projections have been made by the Sub-

Groups as follows:

A. Commodity Polymers

Commodity Polymers – Demand Projections in two Scenario

Scenario I – 5.3 million tons in 2006-07 to 12.6 million tons. (CARG of 19

%) Table 5. Scenario II - 5.3 million tons in 2006-07 to 7.9 million tons

in 2011-12 (CARG of 8 %) Table 6 . If policy environment improves,

demand for polymers has the potential to reach 12.5 MMT by the end of

the 11th Five-Year Plan growing at a CARG of 18%. The above translates

to an Ethylene equivalent deficit of ~5 MMT by 2012 necessitating

commissioning of 5 additional crackers of 1 MMT average size with

investments of US$ 8 billion (~Rs 40,000 crores).To keep in sync, ~US$ 6

billion (Rs 30,000 crores) investments would be required in the

downstream plastic processing sector by 2011-12. The fructification of the

massive investments in the petrochemicals sector is possible only if the

policy environment improves so as to facilitate fresh investments.

24

Table 5 :Demand Projections for 11th Plan – Commodity Polymers Level -I Unit kilo tons

Type 2005-06 Actual

2006-07 Projected 2011-12 Projected

CARG % 2006-07 to 2011-12

Projected LDPE 232 234 344 8

LLD/HD PE 1680 1755 4367 20

PP 1445 1712 4627 22 PVC 1254 1320 2772 16

PS 241 239 481 15

Total 4852 5260 12591 19

Source –Sub-Group report on Petrochemicals Table 6 :Demand Projections for 11th Plan – Commodity Polymers Level -II

Type 2005-06 Actual


CARG % 2006-07 to 2011-

12 Projected

LDPE 232 234 285 4.0

LLD/HD PE 1680 1755 2579 8.0

PP 1445 1712 2634 9.0

PVC 1254 1320 2031 9.0

PS 241 239 351 8.0

Total 4852 5260 7880 8.0

Source –Sub-Group report on Petrochemicals

B. Synthetic Fibre – Vision statement of Textile Industry aims to

facilitate Indian Textile Industry to achieve 12 % growth in volume terms

and 16 % on value terms. In exports to achieve 6 % share in global

textile trade by the end of the 11th Five-year plan. The fabric demand

(from 100 % Cotton, Blended and 100 % non-cotton, Khadi, wool and

silk) is projected to increase from present level of 57,000 million sq. mts

in 2006-07 to 90,000 million sq.mts. by 2012 i.e. 58 % cumulative

increase. Out of this the synthetic fibre based fabric and the

corresponding synthetic fibre / yarn demand is likely to be 3885 kilo tons

against 2346 kilo tons i.e 65 % cumulative increase.

The 2006-07 capacity of synthetic fibre is 3665 kilo tons. Capacity

additions in synthetic fiber likely to increase with the increase in export of

synthetic fibre / yarn

25

Demand will increase from 2.3 Million tons in 2006-07 to 5.4 million tons

by 2011-12. (includes 1.5 million tons fibre / yarn exports)

Table 7 Demand Projections for 11th Plan – Synthetic fibre

Unit kilo tons

Type 2005-06 Actual


CARG % 2006-07 to 2011-

12 Projected

PFY 1005 1395 2509 12.5 PSF 640 800 1181 8.1

NFY 46 38 50 5.6

NIY/TC 68 87 121 6.8

PIY NA 5 12 19.1 AF 114 100 120 3.7

PPFY 17 13 25 14.0

Total 1893 2438 4018 10.5

Source –Sub-Group Report on Synthetic fibre and Fibre Intermediates

In case of synthetic fibre for Technical textile fibres the demand

projections are as follows:

Table 8: Demand projections for 11th Plan – Technical Textile Fibre

Unit kilo tons

2006-07 Estimated 2011-12 Projected CARG % N6 Tyre Cord 87 121 6.9 Polyester tyre Cord 5 12 21 Nylon Industrial yarn (Non –Tyre application)

9 24 21

Polyester Industrial yarn (non-tyre applications)

17 51 27

Source –Sub-Group Report on Synthetic Fibre and fibre Intermediates

C. Technical Textile –Opportunity for India

Technical textiles are functional textiles used in agriculture, geo textiles,

medical textiles, automobile textiles, reinforcement in buildings, fire

retardant textiles, etc. The Global market of technical textile is a US $ 100

million. The industry registered a growth of 2.8% between 1995 and

2005. and is expected to grow with the projected growth rate of 3.5%

during 2005-2010. In 2005 Asia accounted for 15%, China 16% and

India 4% of the global share and which is expected to increase to 18%

Asia, 22% China and 9% India.

In the domestic technical textiles market currently tyre cord fabric made

of nylon is dominating. The other applications include fabric for conveyor

26

belt, rubber hose reinforcement, tarpaulin, awnings, static covers and

display fabric.

Between 2006-2012 the projections are: The tyre cord demand made

out of Nylon is projected to grow with the compounded annual rate of

growth of 6.9% and polyester tyre cord with 21%, from a level of 120

kilo tons to 210 kilo tons per annum. Currently India is predominantly in

traditional low end applications on technical clothes and packaging. The

estimated size of the industry in 2003-2004 is Rs. 19,130 crores.

Synthetic fibre is likely to have the major share of the demand. Growth in

technical textiles depends on regulatory frame work, awareness creation,

quality standards, etc. There is a potential for additional 1668 kilo tons of

Technical textiles in India with an estimated investment of Rs 43,700

crores.

Table 9 - Demand supply in Synthetic Fibre Intermediates and Building Block

Units kilo tons

Product Capacity 2006-07 Demand estimate

2011-12

Gap in Capacity

PTA/ DMT ( as PTA equivalent)

2661 3879 1217

MEG 920 1499 579

Caprolactum 120 200 80

Acrylonitrile 33 147 124

Para Xylene 2180 2560 380

Source –Sub-Group Report on Synthetic Fibre and Fibre intermediates

D. Synthetic Rubber – Demand increase from 361 kilo tons in 2006-

07 to 647 kilo tons by 2011-12 ( CARG of 12 %). Demand projections are

indicated at Table 10.

Table 10 : Demand Projections for 11th Plan – Synthetic Rubber Unit Kilo Tons

Type 2005-06 Actual


CARG % 2006-07 to 2011-

12 Projected

PBR 80 89 149 9.0 SBR 88 80 129 8.3 NBR 20 23 40 9.7

Butyl Rubber 48 34 45 4.8

EVA 49 121 255 13.2 EPDM 10 15 28 11.0

Total 295 361 647 10.2

27

Source –Sub-Group Report on Petrochemicals

E. Surfactant Intermediate –Demand Increase from 392 kilo tons to

490 kilo tons by 2011-12. (CARG of 6 %). (Table 11)

Table 11 :Demand Projections for 11th Plan – Surfactant Intermediates Units Kilo tons

Type 2005-06 Actual

2006-07 Projected

2011-12 Projected

CARG % 2006-07 to 2011-12

Projected

LAB 366 390 490 6

EO 87 96 141 8

Total 453 486 631 5.4


F. Downstream Plastic Processing – The additional investment

needed during 11th plan is approximately Rs 10,790 crore. Special

attention is required for meeting the rising manpower needs of the plastic

processing industry. A Technology Upgradation Fund (TUF) needs to be

put in place for technology upgradation in the plastic processing sector.

Jute Packaging Material Act, 1987 should be phased out in the interest of

the Indian economy. Creation of plastic parks will go a long way in

developing international competitiveness of the downstream sector.

G. Building Blocks - likely to increase from 3.7 million tons to 7.3

million tons. The current capacity of ethylene is 2.4 million tons and the

gap in capacity by 2012 is projected to be 4.9 million tons. Ethylene

equivalent deficit by 2012 expected to be ~ 4.9 MMT necessitating

commissioning of 5 additional crackers of 1 MMT average size

involving investments to the tune of US $ 3.5 billion (~Rs. 15,400

crores)

• With a policy environment conducive to growth, demand for polymers

in India is expected to reach from 5.33 MMT in 2006-07 to 10.5

MMT by 2011-12 growing at a CARG of 15% which translates to a

massive opportunity for investment & growth.

• Investment projections in downstream plastic processing sector to

reach – US $ 2.5 billion (Rs. 10, 790 crores) by 2011.

28

Table 12 Demand Projections for Ethylene Units Kilo tons

Year Capacity Demand Demand Supply Gap

No of Cracker complexes of

1000 kt ethylene

2000-01 2424 2656 (-) 232

2006-07 2424 3675 (-) 1251

2011-12 2424 7311 (-) 4887 5


VI. Feedstock Issues

16. Refineries in India produce adequate quantity of Naphtha for

meeting feedstock requirement of the petrochemical industry, which is

expected to increase significantly as new refinery capacities are added.

Availability of gas for use as petrochemical feedstock is limited as meeting

demand from the fertilizer and power sectors is given priority. Despite

adequate availability, the inverted duty structure on account of the 5%

import duty on crude oil encourages refineries to export Naphtha rather

than selling it domestically. Naphtha domestic production in 2005-06 is

estimated at 15.7 million tons. Out of which 4.4 million tons of Naphtha is

exported. Naphtha availability is expected to increase significantly as new

refinery capacity addition by 2012 is likely to be 155 million tons. These

additional refining capacities will result in additional quantity of 17 million

tons of naphtha. Naphtha prices are bench marked on import parity

prices. Thus the availability of is expected to be abundant. To ensure

steady Naphtha supply to domestic petrochemical industry, it is necessary

to eliminate duty on crude oil (or to treat Naphtha supply to domestic

petrochemical industry as deemed exports).

17. Availability of gas for use as petrochemical feedstock is limited as

demand from the fertilizer and power sectors is given priority. Gas supply

to petrochemicals sector needs to be given a higher priority. Currently

1.2 million standard cubic meters per day (MMSCMD) natural gas

component (C2/C3) is used in petrochemical as against the domestic

29

production of 72 MMSCMD. New gas based petrochemicals projects can be

viable only if the steady supply of natural gas and its pricing.

18. Hydrocarbon feed stocks likely to dominate during next 10 to 15

years. World wide studies under way to use coal based chemicals, natural

gas to liquid and olefins (GTO) technology. The alternate feed stocks (bio-

based) are becoming more relevant with changing times. The importance

of renewable feed stocks is on focus due to environmental impacts, non-

biodegradable plastics in packaging applications and bio-medical

applications.

VII. Human Resource Development

19. The current employment (both direct and indirect) in the

petrochemicals industry (excluding synthetic fibre) is 2.38 million.

Additional employment in Polymer and Plastic processing industry is

projected at 3.7 million (both direct and indirect employment). The

infrastructure for training needs to be upgraded and expanded. Additional

training centers need to be established both in public and private sector

for providing training in plastic processing technology to meet the

additional man-power need in the sector.

20. The training facility in Central Institute of Plastics Engineering &

Technology needs to be enhanced to cater the increasing demand of

trained manpower. During 11th plan strengthening high End Testing

facility, identification and establishment of new centers, upgradation of

the exting centers will be undertaken.

21 Textile industry including synthetic fibre and technical textiles will

generate an employment of additional 12 million people. Partnership

programs for Education and Training to build Application Engineering

Resource are potential areas. In Technical textiles employment potential

is about 1 million on direct employment and 1-2 million people in indirect

employment.

VIII. Technology and Research and Development

30

22. The upstream petrochemical products are technology intensive for

which the technologies are imported from the global licensors. The

increasing crude oil and natural gas feedstock prices have also enhanced

the R & D efforts to identify the alternate feedstock and maximization of

hydrocarbon utilization to derive chemicals. The entire downstream plastic

processing and fabrication industry needs major technological upgradation

in the areas of scales of operation, core processing machineries,

downstream finishing equipments, tools, moulds and innovations in end

products to meet the emerging global and domestic market demands.

Currently the expenditure on Research and Development in this sector is

less than 1% of industry turnover. Industry estimates for the turnover in

processing industry is Rs 55,000 crore. The R & D Expenditure needs to be

increased up to 2 – 3 % of the turnover.

23. New advancements have also taken place in performance plastics,

engineering polymers and specialty plastics. There are also

developments in advance composite materials in the field of additives,

master batches, alloys, blends, compounds, composites and high grade

reinforcement materials such as glass and carbon fibers which also

requires attention for technology development. New developments in the

field of bio and photodegradable plastics and replacement of additives and

master batches by materials with lesser adverse impact on environment

are taking place all over the world.

24. Technology and Research & Development Initiatives will be focused

on Modernization and Upgradation, quality standards, etc of

petrochemicals sector to become globally competitive and increase

exports. Feed stock alternatives for the manufacture of petrochemicals.

Promotion of Emerging areas, Plasticulture, Bio-Polymers, Product and

Application Developments, Plastics in Infrastructure, construction and

Plastic Waste Management. All these initiatives will dovetail the existing

initiatives of the Government in collaboration with the concerned

Ministries / Departments. The new initiatives will be on Private Public

Partnership Model.

31

IX. Environmental issues

25. The increase in consumption of plastics must also devote

attention to issues relating to plastic waste disposal and its effect on

environment. Plastic conserves natural reserves like wood, metals etc.

Plastics are recyclable per se and not harmful to the environment. It is

the indiscriminate littering which cause environmental impact by way of

solid waste management. The presence of carbon and hydrogen in the

polymer chains makes it a source for energy recovery. There is need to

develop awareness on recyclable properties and eliminate littering.

Promotion of recycling technology for used plastics may be promoted as a

parallel industry. The recycled plastics industry has already made an

achievement by providing employment in the manufacture of varied

consumer products. Research projects are also underway to generate fuel

from recycled plastic. Due emphasis will be given to this area. To address

environmental problems concerted efforts by the Government, industry

and non-government organizations are required for bringing awareness

about the proper disposal of plastic waste and for developing suitable

mechanisms for systematic waste collection, recycling and promote

recycled products in the non-critical applications.

X. Plastics in Thrust Area

26. Plastics are light in weight and save energy in the manufacturing

and transportation. It also provides cost effective substitutes for the

conventional and natural materials. Plastics can replace high value metals

or wood in various applications. It can be used in carrying potable water,

plasticulture, construction, etc. Engineering plastics have the potential for

substituting metals in high performance applications and are used in

electronics, telecommunications, automobiles, consumer durables, and

infrastructure and transportation sector for specific industrial applications.

In the construction industry also there is a wide scope for using plastic

products like door / window frames and insulation panels. In the

transportation sector, the use of geotextiles, geosynthetics and polymer-

modified bitumen is highly recommended.

32

XI. Policy Issues & Recommendations

27. In the 11th five year plan the foucs will be on:-

(i) increasing investments in the sector and capture a slice of the

resurgent Asian demand in polymers through additions in

capacity/production by ensuring availability of feedstock at

internationally competitive prices, creating infrastructure,

rationalising tariffs & taxes and promoting exports;

(ii) increasing the domestic demand and per capita consumption of

plastics and synthetic fibres from the present 4 Kgs and 1.6 Kgs

respectively to about 12 Kgs and 4 Kgs respectively by 2011 by

increasing the use of petrochemicals in thrust areas;

(iii) increasing the competitiveness and polymer absorption capacity of

the domestic downstream plastic processing industry by

modernizing and technologically upgrading it and freeing it from

structural constraints; and

(iv) achieve environmentally sustainable growth through innovative

methods of plastic waste management/recycling and development

of bio/photodegradable polymers and plastics.

28. To achieve healthy growth in petrochemical sector which will enable

India to compete globally are:

1. To build focus National Policy on Petrochemicals needs to be

announced.

2. Setting up of Advisory Mechanism under IDR Act “Plastic Development

Council” with members from industry, experts, etc.

3. Downstream plastic processing industry needs upgradation and

modenisation to encourage investments there is a need to Set-up

Technology Upgradation Fund for Petrochemicals.

4. To reduce the environmental impact, Awareness Programme on use

and disposal of Plastics – Know Plastics.

33

5. To improve quality and sustain exports possibility of Mandating use of

BIS / International specifications both for domestically

produced/imported articles of Plastic in place of voluntary use.

6. To promote investment and reduce investment on infrastructural

constraints like power, roads, effluent treatment, etc facilitating cluster

approach and creation of Plastic Parks and investment regions needs to

be formulated.

7. Export incentives to Plastic Processing, Raw material, Machinery sector

"All types of Plastics Processing Machinery" be brought under the Focus

Product Scheme, which would not only increase the export of these

machines but also add to the employment in this industry.

• The major recommendations for ensuring a healthy growth in

petrochemical sector to enable India to compete globally are:

Technology Upgradation in synthetic fibre (including high

performance technical fibres) and downstream plastic processing

industry to increase the value addition and promoting plastic

processing machinery industry.

Rationalisation of indirect taxes, duty structures and removing the

structural constraints (reservation for SSI).

In the trade agreements both bilateral and multilateral

agreements, adequate steps to be taken to protect the domestic

industry.

Compliances ofquality standards. (articles of plastic and technical

textile as focus)

Regulatory frame work to be put in place for technical textiles.

Creation / upgradation of existing plastic clusters / dedicated Plastic

Parks with quality infrastructure.

Human resource Development to meet the growing demand and

partnership programmes for education and training to build

application engineering.

Plastic waste Management and recycling.

Feed stocks – Availability and Pricing – (Naphtha and Natural gas

components).

Infrastructure – PCPIR, Cluster formation, dedicated plastic parks.

34

Thrust Areas – Plastic processed articles use to be encouraged for

better productivity and energy efficiency.

Technology & R & D – Modernization and upgradation of plastic

processing industry, Plastic recycling and Bio-degradable plastics.

Export Promotion

29. Fiscal benefits for petrochemical sector

1. To accelerate demand growth, excise duty on polymers and articles

of plastics needs to be reduced from the existing 16% to 8%. The

resultant decline in Government revenue is likely to be bridged by

way of increased consumption and compliances.

2. A uniform 4% VAT be applied for polymers and all articles of plastic

across states.

3. Phasing out of 100% Jute monopoly for packing food grains and

sugar under JPMA Act, 1987.

4. Import tariff on capital goods to be reduced to nil/ zero

5. Import tariff on key petrochemical inputs - Naphtha used for

Petrochemicals other than polymer and Propane be reduced to nil.

6. Import tariff on catalysts used in petrochemicals to be reduced to

nil.

7. Redressal of the issue of sales tax on deemed exports making

deemed exports tax-free.

8. CST needs to be abolished as implementation of VAT has made it

redundant.

9. Like crude oil, natural gas and Naphtha be included in the list of

“declared goods” under CST Act and be taxed at uniform 4% (or

4% uniform VAT be applied if CST is abolished).

10. The Tentative projection on the various schemes / initiatives

proposed to be under taken during the 11th Five Year Plan are as

follows:

A. Petrochemical Research and Development Fund

B. Petrochemicals Thrust Area

35

C. Plastic Waste Management

D. Petrochemicals Competitivness Initiatives

All these projects will be under taken in consultation with the existing

initiatives / schemes of Department of Science and Technology,

Department of Scientific and Industrial Research, Ministry of environment

and Forest, Ministry of Industry and Ministry Small Scale Industry.

36

Chapter 1 Introduction

1. Petrochemicals are derived from various chemical compounds,

mainly hydrocarbons. These hydrocarbons are derived from crude oil and

natural gas. Among the various fractions produced by distillation of crude

oil, petroleum gases, naphtha, kerosene and gas oil are the main feed-

stocks for the petrochemical industry. Ethane and natural gas liquids

obtained from natural gas are the other important feedstocks used in the

petrochemical industry. Olefins (Ethylene, Propylene & Butadiene) and

Aromatics (Benzene, Toluene & Xylenes) are the major building blocks

from which most petrochemicals are produced.

2. Petrochemical manufacturing involves manufacture of building

blocks by cracking or reforming operation; conversion of building blocks

into intermediates such as fibre intermediates (Acrylonitrile, Caprolactum,

Dimethyl Terephthalate/Purified Terephthalic Acid, Mono Ethylene Glycol);

precursors (Styrene, Ethylene Dichloride, Vinyl Chloride Monomer etc.)

and other chemical intermediates; production of synthetic fibres, plastics,

elastomers, other chemicals and processing of plastics to produce

consumer and industrial products.

3. Petrochemical products namely synthetic fibers cater to the clothing

needs of mankind and are used in both apparel and non-apparel

applications. Polymers find major applications in packaging for

preservation of food articles, moulded industrial and home appliances,

furniture, extruded pipes etc. Synthetic rubbers are used for making

various types of tyres and non-tyre rubber goods and supplement natural

rubber. Surfactant intermediates are used in the manufacture of

detergnents.

4. Petrochemical downstream processing units are major contributors

to employment generation and entrepreneurial development, thereby

serving a vital need of the economy. Starting from the raw material

production to conversion into finished products, the employment potential

37

(both direct and indirect) is generated in a cascading manner, which is

currently estimated at over one million.

5. The petrochemical industry is technology driven industry and for

operation of sophisticated and modern petrochemical plants, skilled

manpower is required. Some of the major units are having R & D facilities

and the expenditure towards R & D is very low. There is a need for

investing about 1 to 2 % of the total turnover in R & D. To meet the

growing need of skilled man power, emphasis is required to be given on

training and human resource development.

6. Petrochemical industry plays a vital role in economic growth &

development and Indianan petrochemical industry has been one of fastest

growing sectors in the country.

7. Plastic Processing Industry cater to the needs of the following major

sectors.

Agriculture:

Enhancing agricultural productivity to meet growing demand for food and

achieving food security for the entire population is one of the key

objectives facing the country. Improving post-harvest handling and

packaging to improve delivery efficiency by reduction of wastages is a key

challenge. Plastics are vital inputs in all these areas and only through

increased plastics usage can these targets be achieved. Plastic pipes,

films, drip systems for micro-irrigation projects, packaging films, crates

for handling and storage, etc. can improve agricultural productivity

significantly and contribute to food security in India.

Infrastructure:

According to the World Bank, improvement of infrastructure will be a key

determinant of sustainability of high growth in India. Improving urban

infrastructure, water distribution systems and sewerage systems, building

roads, ports, and airports and other components of infrastructure can be

made possible by increased use of plastics in the form of plastic pipes,

profiles, geo-textiles etc.

38

Public Health:

Role of plastics in helping enhance public health infrastructure is evident

the world over. Plastic syringes, blood bags, drip pouches, etc. are central

to any health infrastructure. The rural health infrastructure needs to be

significantly improved in India and plastics would play a key role in the

process.

Conservation:

Across the globe, plastics play a major role in the process of conservation

of natural resources like wood, minerals, etc by providing a cost-effective

and environment-friendly alternative to natural resources. Expanding

India’s forest cover being one of the key targets at the national level,

plastics are likely to play a pivotal role.

Employment:

Generating employment opportunities is key to the concept of “inclusive

growth” – one of the priority areas for the Government. Plastics can play a

key role in realizing this objective. The plastic industry in India currently

provides employment to 3.3 million people (direct and indirect) and has

the potential of generating additional 3.7 million jobs in the coming years

if the sector’s growth is supported with suitable policy support which

facilitate development of this industry. With the adoption of micro-

irrigation, which depends substantially on plastic pipes, drippers, and

mulch film. Additionally, 17 million people would be employed in the rural

sector.

Among all the petrochemicals, use of plastics encompasses every sphere

of life. Today Plastics find major applications in a wide array of sectors.

Some of the key applications are packaging for preservation of food

articles and medicines, moulded industrial and household items including

furniture; electrical, including appliances and white goods; Electronics

both entertainment as also Computer Hardware; Telematics. It also has

wide usage globally in transportation of liquids and Gas through pipelines

and in construction industry for Doors, Windows and conduit pipes.

39

Environment:

Lack of awareness about plastics and appropriate mechanism for

segregation of biodegradable and non-biodegradable waste has often

resulted in incorrect public perception of the role plastics play in modern

day life. As a sector, plastic industry have received little attention of the

policymakers and major part of its immense growth potential, which can

bring concomitant benefits to the economy at large in terms of generating

additional employment, resource conservation etc., remains untapped. It

is time that cognizance is taken of the critical role it can play in India’s

growth and development and the sector is provided with a policy

environment conducive to growth.

8. The National Strategy for Manufacturing –March 2006

The Report prepared by National Manufacturing Competitiveness Council

(NMCC) identified that manufacturing growth is imperative for achieving

balanced growth of the economy and generating adequate employment.

The Challenges facing Indian manufacturing warrant appropriate response

from both the government as well as the industry for improving the

competitiveness of the sector. Therefore to improve overall

competitiveness of any product, it is essential to improve national level

competitiveness as well as firm level competitiveness. The growth

manufacturing sector is dependent on Government policies which

influence the market environment in which the business operates as well

as on the role played by the industry itself. There are certain areas where

both Government and industry need to put efforts, preferably through a

well-designed Public- Private Partnership (Polypropylene) Mode.

Government would need to deal with, among others, the following

principle changes:

Ensure macro economic stability including containment of core

inflation.

Ensuring cost competitiveness’ and stimulating domestic demand.

Strengthening education and skill building.

40

Investing in innovations & technology.

Enabling speedy development of infrastructure.

Providing right market framework and regulatory environment to

reduce transaction costs.

Ensuring effective coordination between Central, State and Local

levels.

Creating a standing mechanism for resolving manufacturing policy

issues.

Enabling Small & Medium Enterprises (SMEs) to achieve

competitiveness.

Enabling Public Sector Enterprises (PSEs) to meet competitive

market conditions.

Industry needs to deal with the following challenges:

Investing in R & D and Technology.

Showing a continuing commitment to skills development &

knowledge enhancement.

Adopting global standards and benchmarking their performance

against the best in the class.

Adopting best manufacturing practices & production techniques,

and

Increasing scale of operations and delivering on globally acceptable

quality levels.

Manufacturing sector in India needs to access the vast market possibility

available at the bottom of the income pyramid in the country. For this,

they need to design, produce and offer at affordable prices products

suitable for Indian conditions and appropriate for these people. This large

potential market still remains to be exploited.

41

TERMS OF REFERENCE - 1

To review the performance, present status and growth of

domestic and global Chemicals and Petrochemical

Industry keeping in view the emerging trends, strength

and weakness and changing economic scenario in the

country.

42

Global Scenario of petrochemicals Industry

1. The Global Chemical market has been estimated at US$ 1.8 trillion.

Petrochemicals constitute the single largest segment accounting for ~40%

(~US$ 72 billion) of the total chemical market. Historically, growth in the

chemical market had been 1.5 times that of global GDP – a trend that

continues even today. Today petrochemical products find applications

across almost all sectors of the economy and are present in every sphere of

modern life. Use of petrochemical products has multiple benefits both for

the individual and the society at large by improving the quality of life.

High Value Addition in the Industry

2. Value addition in the petrochemical industry is very high – higher

than most of the other industry sectors. When a barrel of oil valued at US$

50 (Rs 2182) is used for fuel production, gasoline worth US$ 112 (Rs 4887)

is produced with value addition of US$ 62 (Rs 2705) only. The same barrel

of oil when used for petrochemicals production, US$ 1120 (Rs 48868)

worth of finished goods is produced with a value addition of US$ 1070 (Rs

46686) – more than 17 times that of fuel production.

Polymers

3. Polymers constitute one of the key segments of the petrochemical

industry. Ever since its inception, the polymer industry had grown rapidly

on account of the multiple benefits it offers compared to traditional

materials like aluminium, steel, wood, paper, etc.

4. In addition to being cheaper, lighter and more versatile in terms of

applications compared to traditional materials, use of polymers conserves

precious natural resources. Hence the world over, polymers have been

replacing traditional materials across applications and sectors.

The Global Polymer Industry

5. The inception of the polymer industry was in the West during the

1930s but its widespread commercial use in various sectors replacing

traditional materials like metals and wood picked up in the 1950s.

43

The multiple benefits offered by polymers compared to traditional materials

like metals, paper and wood, high value addition and versatility of their

applications across sectors can be gauged from the fact that even after 5

decades since its birth, the industry continues to grow at rates 1.5 times

that of global GDP. Global polymer demand i.e. demand for commodity

plastics increased from 123 MMT in 2000 to 148 MMT in 2005 while global

polymer capacity went up from 142 MMT to 170 MMT in the same period,

both capacity and demand increased at an annual rate of growth of 4%.

Among the polymers, demand for Linear Low Density Polyethylene (LLDPE)

and Polypropylene (PP) registered the fastest growth with 6% annual

growth of during 2000-05 followed by High Density Polyethylene (HDPE)

with 5% annual growth during the same period.

6. Sustained growth in the global polymer industry over the decades

had resulted in significant investment flow into the sector for additional

capacity augmentation necessary to meet the surging demand. As shown

in Table 1.1 both the pace and size of new capacity addition have

increased over the decades.

Table 1.1 Global Commodity Polymer Demand

Unit - Million Tons Commodity Polymers

1980 1990 2000 2005

Demand 36 71 123 148 Source – Sub Group on Petrochemicals Report – Industry Association

7. Similar trend has been witnessed for the individual polymers also

with the pace and size of capacity build-up rising over the decades as

shown in the Table 1.2.

Table 1.2: Global Capacity Addition

Global Capacity Additions (Million MT) 1960s 1970s 1980s 1990s 2000's 2001-05 Ethylene 20 17 23 37 44 19.5 PE 6 11 15 26 31 11.4 PP 2 5 7 21 24 8.2 PVC 4 4 10 11 11 6.2 Source – Sub Group on Petrochemicals Report – Industry Association

The global demand – supply scenario from 2000 is indicated at Table 1.3

44

Table 1.3: Global Demand Supply – Polymers (Commodity Plastics) Unit Million MT

2000 2005 CARG (2000-05) % Capacity Demand Capacity Demand Capacity Demand

LDPE 18.8 16.4 20 17.7 1.3% 1.5% LLDPE 15.8 13.3 20.4 17.8 5.2% 5.9% HDPE 27 22.7 32.8 28.6 3.9% 4.7% PP 35.4 30.4 44.2 41.1 4.5% 6.2% PVC 31.1 25.2 37.3 30.7 3.7% 4.1% PS 13.7 10.7 15.1 11.8 2.0% 1.9% Total 142 119 169.9 147.8 3.7% 4.4% Source – Sub Group on Petrochemicals Report – Industry Association

8. However, the regional composition of global polymer demand

growth has undergone significant changes with the epicentre of industry

growth shifting from the West of Suez (WOS) to the East of Suez (EOS) as

markets in WOS reached saturation points.

Shift of Industry from WOS to EOS

9. During 1950-1990, countries in the West of Suez (WOS) region viz.

the US and European countries essentially dominated the polymer industry.

Demand for petrochemicals having a strong positive correlation with

economic growth, consumption of polymers rapidly rose in the WOS on the

back of the strong economic performance of the countries in the region.

10. However, as a result of sustained growth over 4 decades, polymer

consumption levels in WOS countries reached a saturation point in the late

1980s limiting the industry’s growth potential. As the petrochemical

industry matured in the WOS, it was just making a beginning in the East of

Suez (EOS) comprising of Asia & the Middle East. The huge disparity in

petrochemical consumption between WOS, where the industry has grown

rapidly for 4 decades & the EOS where the industry had just about started

prompted a shift in the industry from the WOS to EOS. The above

developments ushered in the emergence of EOS not only as a key polymer

consumption centre but also as a key-manufacturing base.

Dominance of China

11. The decade of the 1990s witnessed a fundamental relocation of the

polymer industry from WOS to EOS with significant capacity build up in

45

East Asia & ASEAN , as the fulcrum of economic growth shifted to East of

Suez (EOS) with the rapid economic growth in ASEAN, South Korea &

China.

12. In the aftermath of the Asian crisis in 1997, all countries in the Asia

Pacific, with the sole exception of China, were left with substantial

exportable surpluses because of the significant capacity addition in the

mid-1990s & shrinkage in their domestic demand caused by the crisis. With

its huge polymer imports, China emerged as the global sink and the

polymer market in the EOS witnessed intense competition with countries

competing with each other for a share of the Chinese market.

3. The decade of 1990s witnessed massive increase in China’s polymer

demand. China’s polymer imports increased from 275 kT in 1990 to 13674

kT in 2005 making China the largest polymer importer globally. China’s

import dependency for polymers went up commensurately from 9% in

1990 to 35% in 2005.

Emergence of Middle East

14. Around the same time when ASEAN countries were witnessing

significant capacity build-up, the first wave of capacity build-up

materialized in the Middle East attracting investments from global

petrochemical players like Exxon Mobil, Chevron, etc. who wanted to avail

the significant feedstock advantage of the region. These capacity additions

are aimed at the export market.

15. The feedstock advantage coupled with the various incentives/

concessions/ benefits offered by Governments in the Middle East attracted

substantial investments – both domestic & foreign. Among the countries in

the Middle East, a major part of the additional Ethylene capacity was

established in Saudi Arabia primarily on account of the subsidized

feedstock (Ethane) provided by the Government to the petrochemical

manufacturers by pricing it at $ 0.75/MMBTU – much lower than gas prices

of $ 5.5-7.5/MMBTU elsewhere in the world & ~US$ 10/MMBTU in the

United States. Other countries in the Middle East like UAE & Qatar also

46

provide subsidized gas to the petrochemical industry though gas price in

Saudi Arabia remains the lowest – giving manufacturers there substantial

advantage vis-à-vis their counterparts elsewhere as Table 1.4 shows.

Table1.4: Ethane Price in GCC Countries Country US $ /MMBtu

Saudi Arabia 0.75 Oman 0.80 UAE (Abu Dhabi) 1.15 Kuwait 1.00 – 2.00 Qatar 1.70 – 2.00 Bahrain 2.00

Source – Sub Group on Petrochemicals Report – Industry Association

Thus major capacity additions are taking place where the Feedstock is

available (Middle East) at the low cost or where there is market (China,

South East Asia)

Synthetic Fibre

16. The Synthetic fibre demand is arises mainly out of the demand of

fabrics and garments. Synthetic fibre supplements natural fibre cotton in

the fabric applications due to superior property and price advantage

against cotton. In addition, Synthetic fibre also finds application in

technical textile which are functional textiles. Technical Textiles have been

replacing conventional materials with innovative technology, low cost,

better efficacy and many added features. The Global fibre consumption in

2005 was 63.7 million tons. The share of Synthetics in 1990 was 40 %,

which increased to 59 % in 2005. The details are in Table 1. 5

Table 1.5 Global Fibre Consumption (million MT)

Types 1990 2000 2005 Cotton 19.0 19.8 23.1 Cellulosic 3.1 2.7 2.9 Synthetics 16.1 29.8 36.3

Polyesters 8.6 19.0 25.4 Others 7.5 10.8 10.9

Others 1.9 1.4 1.3 Total 40.0 53.7 63.7

Source : Sub- Group on Synthetic fibre and fibre Intermediate - Industry Association – ASFI

In case of technical textiles, the global technical textiles industry is worth

US $ 100 billion. During the last five years global technical textile industry

registered approximately 3-4 % Compounded Annual Rate of growth

47

(CARG) and it is expected to grow at 3.5 % CARG over the next five years.

In the Global consumption, USA, Western Europe and Japan accounts for

nearly 50 %. In 2010 it is projected that Asia Region will account for one

half of the World’s consumption.

Synthetic Rubber

17. Synthetic Rubber consumption depends on the availability of

natural rubber. Globally, consumption of rubber increased from 18 million

tons in 2000 to 21 million in 2005. Out of the total rubber consumption

21 million tons in 2005, natural rubber consumption was 8.8 million tons

and synthetic rubber accounted for 12.2 million tons. The growth in total

rubber demand during 2000-05 was 16 %. During the period 2000-05 the

demand for natural rubber and synthetic rubber were 14 % and 20 %

respectively. Globally, the ratio between natural rubber demand and that

of synthetic rubber is 42: 58.

Domestic Petrochemical Industry

18. Post economic reforms in 1991, there was major investment in

petrochemical capacities, which have tapered off by Year 2001-2002. Due

to this major capacity additions, import dependency has been brought

down substantially to 10% saving the country’s foreign exchange.

Investment in the downstream petrochemical industry has also followed the

same pattern where the capacity addition beyond 2001-02 has been mainly

through debottlenecking. However, despite huge increase in capacity, the

per capita plastics consumption in India is ~5 kgs, much lower than the

global average of 25 kgs and 30 kgs in China. The low level of per capita

plastics consumption in the country compared to the same elsewhere is

indicative of the immense growth potential of the Indian plastics industry.

Crackers 19. Current domestic ethylene capacities are shown in Table 1.6. Out

of the 2.55 MMT total ethylene capacity in the country, ~61% is Naphtha-

based & 39% is gas-based.

48

Table 1.6 Ethylene Cracker Capacities - India 20. Globally, the petrochemical industry has witnessed steady increase

in cracker size. During the 1990s, the trend of increasing average cracker

size was witnessed in the Indian polymer industry also. Following the

global trend of rising average cracker size with I MMT being the size of

world-scale cracker, the average size of ethylene crackers in India, which

was 80 kTA in 1990-91, has increased to 350 kTA in 2004-05.

21. Indian Petrochemicals industry is very small in international

standards. The comparison of the Indian and world capacities of the major

building blocks and the polymers are as shown in Table 1.7

Table 1.7 India vs World Capacities Unit – Kilo tons

Products India World India’s Share

Building Blocks Ethylene 2716 117645 2.3 % Propylene 1916 71228 2.7 %

POLYMERS Polyethylene (PE) 1775 73396 2.4 % Polypropylene (PP) 1760 44368 4.0 % Poly Vinyl chloride (PVC) 979 37406 2.6 % Polystyrene (PS) 365 15225 2.4 % Acrylonitrile Butadiene Styrene Resin (ABS) 76 8536 0.9 %

Indian Plastics Industry Snapshot

22. Since the commissioning of the first cracker in 1967, the

petrochemical industry in India has come a long way. Among the various

segments of the petrochemical industry, the plastics sector had emerged as

the fastest growing sector. Table 1.8 gives a snapshot of the plastics

industry in India.

Plant Ethylene Capacity Feedstock Mix

NOCIL60,000

NaphthaIPCL, Baroda 130,000 NaphthaIPCL, Gandhar 300,000 Ethane Propane mix

GAIL, Auraiya 300,000 Ethane Propane mixIPCL, Nagothane 400,000 Ethane Propane mixHPL, Haldia 520,000 NaphthaRIL, Hazira 750,000 Naphtha

49

Table 1.8 Indian Plastic Industry Snapshot

23. The domestic downstream industry comprises of three key

segments viz. Injection moulding, Blow moulding and Extrusion cater to

the requirements of a wide array of applications like packaging,

automobile, consumer durables, healthcare, etc. The total investments in

the Indian plastic processing industry is in the vicinity of Rs 40,000 crores

of which more than 50% is in the injection molding sector. The total

employment in the downstream sector is ~636,000 more than a third of

which is in the injection molding segment. It is estimated that the plastic

industry provides employment to around 3.53 million people if the indirect

employment generated by the sector is also factored in.

24. During the period 2001-2005 capacity in the plastic processing

sector has increased at a CARG of 8% as Table 1.9 shows. However, the

average capacity per machine has remained virtually unchanged at ~250

MT reflective of sub-optimal scale of operation which has been adversely

affecting the competitiveness of the domestic manufacturers.

Table 1.9 Processing Capacity Addition 2001-05

UnitMajor Raw Material Producers Nos. 15Processing Units Nos. 22,000Number of machines Nos. 65,484Processing Industry Turnover Rs crores 55,000Polymer Industry Capital Asset Rs crores 85,000Plastic Raw Material Production MMT 4.9Employment Direct / Indirect Million Nos. 3.3Value of Exports USD billion 1.9Revenue to Government Rs crores 7300

Capacity Addition in the Plastic Processing Industry

Upto 2001 01-'02 02-'03 03-'04 04-'05 Total Upto '05 CARG %Machines Added (nos.) 46100 2540 2600 3095 3085 11320 65484 9%Installed Capacity (kT) 8270 680 615 830 745 2870 11167 8%

Source: Industry8%

Addition

Avg capacity per machine (MT) 179 268 237 268 241 254

50

Uneconomic Size of Indian Plastic Processing Units

25. The downstream processing industry in India is extremely

fragmented and uses outdated technology essentially because of

Government’s policy of reservation of various plastic products for

exclusive manufacture in small-scale units and the various excise

exemptions offered to them. As a result, both aggregate demand for

plastic raw material from the processing sector as well as per unit

consumption are very low, much below than what they are in other

countries as shown in Figure 1.1. The low level of consumption in

processing industry is reflected in the deceleration in polymer demand

growth in the country.

Figure 1.1 Downstream Plastic Processing Units Source – Industry Association Synthetic Rubber 26. India is the fourth largest producer and consumer of natural rubber.

Thailand, Malaysia and Indonesia are the other leading producers of

natural rubber. The large availability of natural rubber significantly

influences demand for synthetic rubbers in the country. Indian ratio of

Natural Rubber: Synthetic Rubber is 78:22.

27. In the domestic scene the products manufactured from rubber are

classified into two categories viz. Tyres and non-tyres. Tyres applications

1333

1111

682

673

588

179

0 200 400 600 800 1000 1200 1400

USA

Germany

China

Brazil

Canada

India

Unit Size in tons per unit

51

are the major enduse for rubber in India accounting for 55 % of the total

rubber demand. Non-tyre products include belting, hoses, footwear,

moulded rubber goods, sports goods and proofing fabrics.

28. India’s per capita consumption of rubber is only approximately one

kg, which is one fourth of the global average.

29. SUMMARY / CONCLUSION

1. Petrochemicals (polymers, synthetic fibre, synthetic rubber,

surfactants, etc.) derived from hydrocarbons have multiple benefits

both for society and individual at large by improving the quality of

life. They supplements and conserve competing natural materials.

2. Petrochemicals especially ethylene and commodity polymers have a

strong positive linkage with growth in GDP.

3. Value additions in petrochemicals are high in comparison to the

other industrial sector.

4. Global polymer industry witnessed significant investment flow

during the last decade.

5. The investments in polymers have shifted from West of Suez to

East of Suez which was driven by the cheap feedstock availability in

Middle East and consumption centres in Asia.

6. Synthetic fibres supplemented natural fibre cotton in both fabric

and industrial fabric applications.

7. Synthetic rubber supplements natural rubber in both tyre and non-

tyre applications.

8. In the domestic scene also similar trend was observed.

9. Domestic Plastic Processing industry is having a large base with

22,000 nos of units spread thought the country. The sizes of the

units are small in comparison to the average capacities in

developed and developing country.

52

Terms Of Reference 2

To review the status of the domestic industry in

terms of Tenth Plan targets vis-à-vis

achievements.

53

1. Keeping in view the rapid growth in the petrochemical industry and

taking cognizance of the vital role it can play in the overall economic

growth & development in India, Govt. of India constituted a Task Force on

Petrochemicals to formulate a long-term growth strategy for the sector in

December 2000. The Report of the Task Force on Petrochemicals was

submitted in April 2003.

2. The report made the demand projections, identified the major

issues facing the industry & made specific recommendations for making the

domestic industry internationally competitive, attracting fresh investments

and sustaining its rapid growth in the long-term. The demand projections

made in the Report of the Task Force for the sub-sectors are indicated in

Table 2.1.

Table 2.1 Demand Projection made in the Report of the Task Force on

Petrochemicals

Units: ‘000 tons

Products 2000-01 2006-07 2011-12 Growth Rate %

06-07 / 00-01

Growth Rate % 11-12/ 06-07

Synthetic Fibre (Excl. NIY/TC)

1587 2304 3039 6.4 5.6

Acrylic Fibre (AF) 109 132 152 3.2 2.3 Nylon Filament yarn( NFY) 30 33 44 1.8 5.6 Polyester Staple Fibre (PSF) 556 820 1102 6.7 6.2 Polyester Filament Yarn (PFY)

812 1192 1565 6.6 5.6

Polyester Staple Fibre Fill (PSFF)

20 34 54 9.4 10.5

Polypropylene Filament Yarn (PPFY)

60 93 122 7.6 5.6

Nylon Industrial Yarn / Nylon Tyre Cord Fabric (NIY / NTCF)

53 67 82 4 4

Commodity Polymers Level I 3293 7281 14052 13 12

Low Density Polyethylene (LDPE)

199 252 306 4 4

Linear Low Density/ High Density Polyethylene (LLD / HD

PE)

1176 2586 4557 14 12

Polypropylene (PP) 1025 2767 6330 18 13 Polystyrene (PS) 173 400 805 15 15

Poly Vinyl Chloride (PVC) 720 1276 2054 10 10

54

Products 2000-01 2006-07 2011-12 Growth Rate %

06-07 / 00-01

Growth Rate % 11-12/ 06-07

Level II 3293 6465 10844 12 11 Low Density Polyethylene

(LDPE) 199 224 247 2 2

Linear Low Density/ High Density Polyethylene (LLD / HD

PE)

1176 2325 3745 12 10

Polypropylene (PP) 1025 2371 4368 15 13 Polystyrene (PS) 173 400 805 15 15

Poly Vinyl Chloride (PVC) 720 1143 1679 8 8 Synthetic Rubber 153 241 652 18.3 13.5 Poly Butadiene Rubber (PBR) 63 76 117 3.8 9

Styrene Butadiene Rubber (SBR)

44 76 396 11.6 39.1

Butyl Rubber 18 22 32 4.1 7.8 Nitrile Butadiene Rubber

(NBR) 9 17 28 13.6 10.5

Ethylene Propylene Dimer (EPDM)

11 14 19 4.9 6.3

Ethyle Vinyl Acetate (EVA) 1 23 37 87 10 Others 7 13 23 13.2 12.1

Surfactant Intermediates 384 615 838 8.2 6.4 Linear Alkyl Benzene (LAB) 318 505 675 8.0 6.0

Ethylene Oxide (EO) 66 111 163 9.1 8.0

3. Report of the Task Force made the demand projections of various

major petrochemicals including polymers and major building blocks up to

2011-12 i.e end of the 11th Five Year Plan. The demand of ethylene has

been derived from the projected demand estimations of ethylene based

products. The details of future demand / supply gaps are indicated in the

Table 2.2. Table 2.2 Demand Supply Gap

Unit ‘000 tons Capacity

Demand

Deficit/ Surplus

Average Unit Size

No plants required

C2 Ethylene 2001-02 2363 2715 (-) 352 2006-07 2363 4933 (-) 2570 700 4 2011-12 2363 8647 (-) 6284 700 9 Polymers 2001-02 4207 3651 556 2006-07 4687 5338 (-) 651 200 3 2011-12 4687 9197 (-) 4510 200 23

4. The Capacity details in the above table have included the

announced expansion / new projects / planned capacity additions by

2003. The future capacity requirements in order to meet the growing

demand of petrochemicals in the country would entail setting up of 9

crackers of 700 KT each and 23 polymer plants with average capacity of

200 KT by 2011-12 as shown above. The future capacity needed

55

projections by the Task Force assuming that the phenomenal demand

growth witnessed in the 1990s would continue post-2001 and attract fresh

investments in the sector.

Commodity Polymers

5. Performance of Commodity polymers against the demand

projections made in the Report of Task force on petrochemicals are

indicated in Table 2.3. . The comparisons are made with Level II since the

growth was lower than Level I demand projections.

Table 2. 3 Performance of Commodity polymers during 2000-2006

Unit – kilo tons

Products 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 CARG % Commodity Polymers

Demand Projections 3293 3675 4106 4592 5141 5760 12.0 Apparent Consumption 3319 3826 3795 4106 4177 4795 6.1

% Achievement 101 104 92 89 81 84 Capacity 4141 4252 4316 4449 4632 4728

Production 3466 3974 4175 4499 4776 4768 Imports 221 420 381 450 416 722 Exports 368 568 761 843 1015 695

LDPE Demand Projections 199 203 207 211 215 220 2.0

Apparent Consumption 199 218 199 209 201 232 1.6 % Achievement 100 107 96 99 93 106

Capacity 200 200 200 200 200 200 Production 184 187 192 184 205 201

Imports 26 38 28 28 29 46 Exports 11 6 20 2 33 14

LLD/ HD PE Demand Projections 1176 1317 1475 1652 1850 2073 12.0



Imports 115 254 181 204 187 263 Exports 71 123 251 260 418 309

PP Demand Projections 1025 1179 1356 1559 1793 2062 15.0



Imports 59 87 104 98 96 128 Exports 203 373 406 486 472 224

PVC Demand Projections 720 778 840 907 980 1058 8.0



Imports 11 32 58 107 92 267 Exports 51 9 1 15 16 21

56

Products 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 CARG % PS + EPS




Source- Monitoring & Evaluation Division, DCPC

6. In reality, the performance of the industry deteriorated compared

to the 1990s due to the adverse impact of a combination of several

external (global economic slowdown since end-2001, 9/11 tragedy in the

US, outbreak of SARS, etc) and internal factors (high cost issues,

accelerated tariff reduction, etc).

7. Since 2001 Compounded Annual Rate of Growth (CARG) of demand

for polymers had been only 6.1 % during 2001-02 to 2005-06, much lower

than the growth rates witnessed in the 1990s and the demand projection

made in the Report of the Task Force. In the period 2001-05 (with the

exception of 2001-02) the business environment for the domestic

petrochemical industry deteriorated as demand nose-dived, the

downstream processing industry continued to remain uncompetitive and no

capacity addition took place since 2001. In absence of growth in domestic

demand for polymers, Indian manufacturers are compelled to export 0.70

MMT polymers, which otherwise could have been consumed domestically.

8. The domestic polymer demand elasticity in comparison with Global

and China are presented in Table 2.3.

Table 2.3 Demand Elasticity Global, China and India

Average Polymer Demand Growth (%)

Average GDP Growth % Average Elasticity of Polymer Demand

94-00 95-00 00-04 94-00 95-00 00-04 94-00 95-00 00-04

Global 6.1 5.5 4.0 3.8 3.9 3.7 1.6 1.5 1.1 China 16.1 16.0 11.2 9.3 12.5 8.7 1.4 1.9 1.3 India 13.7 12.5 5.6 6.3 6.2 5.9 2.3 2.2 1.0

Source Industry Association

Table 2.3 shows that average income elasticity of polymer demand in

India during the 1990s was significantly higher than both the global

average and that of China but has declined to a level lower than the global

average and that of China only in the last 5 years. The above unique trend

57

being witnessed in India is reflective of the adverse business environment

in the industry and is a cause for serious concern, the continuation of

which is likely to disrupt fresh investments in the industry.

9. Capacity additions taken place during 9th and 10th Fiver year plan

period have been compared in Table 2.4

Table 2.4 Capacity Additions in major building blocks and polymers

during 9th and 10th Plan period

9th Plan 10th Plan % Growth

in Capacity

CARG %

% Growth

in Capacity

CARG %

97-98 01-02 02-03 06-07 Estimated

06-07/01-02 01-02/97-98

Ethylene 1208 2409 2409 2575 7 1.3 99 18.8 Propylene 639 1524 1548 2010 32 5.7 139 24.3 LDPE 202 160 160 205 28 5.1 (-) 21 (-) 5.7 LLD/HD PE 620 1530 1510 1700 11 2.1 147 25.3 PP 560 1370 1450 1895 38 6.7 145 25.1 PVC 783 778 790 1085 39 6.9 (-) 1 (-) 0.2 PS 140 354 354 430 21 4.0 153 26.1


As shown in Table 2.4 capacity for ethylene – the key petrochemical

building block – doubled during the 9th Five Year Plan period (1997-98 to

2001-02) from 1.21 MMT in 1997-98 to 2.41 MMT in 2001-02 at a CARG of

about 19%. However, during 10th plan, ethylene capacity is estimated to

grow only by 166 kT or 7% to reach 2.57 MMT by 2006-07 at a CARG of

1.3%.

10. Similarly, during the 9th plan, propylene capacity in the country

went up by 139% from 639 KT in 1997-98 to 1548 kt in 2001-02

registering a CARG of over 24%, but tapered down during the 10th plan

when capacity is estimated to go up by 32% only at a CARG of 5.7% from

1.55 MMT in 2002-03 to 2 MMT in 2006-07.

11. The above trend is reflected in polymer capacities as well. During

the 9th Five Year Plan period, capacities for PE (LLDPE/HDPE), PP and PS

individually increased by around 150% with CARG of over 25%. For the

10th plan period, India’s capacity for PE, PP and PS is expected to increase

by 11% (CARG 2.1%), 38% (CARG 6.7%) and 21% (CARG 4.1%)

respectively.

58

12. The above figures are indicative of the fact that petrochemical

capacity augmentation in the country during the 10th plan period has

slowed down significantly compared to the same over the 9th plan and the

quantum of incremental capacity during the 10th plan is also much lower

vis-à-vis the same during the 9th plan.

13. Petrochemicals demand during the 10th Five Year Plan period also

showed signs of moderation compared to the 9th plan period. The Details

are indicated in Table 2.5.

Table 2.5 Demand of major building blocks and polymers

during 9th and 10th Plan period

9th Plan 10th Plan % Growth

in Capacity

CARG %

% Growth

in Capacity

CARG %

97-98 01-02 02-03 06-07 06-07/01-02 01-02/97-98

Ethylene 1251 2166 2325 2853 32 5.7 73 14.7 Propylene 619 1570 1589 1935 23 4.3 154 26.2 LDPE 238 219 200 234 7 1.3 (-) 8 (-) 2 LLD/HD PE 732 1471 1407 1755 19 3.6 101 19.1 PP 614 1084 1129 1712 58 9.6 76 15.2 PVC 687 852 879 1320 55 9.1 24 5.5 PS 129 176 152 239 36 6.4 36 8


Demand for Ethylene – the key petrochemical building block – which

increased from 1.2 MMT to 2.17 MMT during the 9th Plan clocking a 73%

increase with a CARG of 14.7%, is estimated to go up by 32% only over

the level at the end of the 9th Plan reflecting a modest CARG of 5.7%.

Consequently, ethylene demand in India which was projected at 2.3 MMT in

2002-03 is expected to go up to 2.8 MMT in 2006-07 in sharp contrast to

the same during the 9th Plan.

Demand for Propylene is estimated to increase from 1.6 MMT at the

beginning of the 10th Plan to 1.9 MMT at the end of the 10th Plan at a CARG

of only 4.3% in contrast to the 26.2% CARG achieved during the 9th Plan.

While demand for Propylene went up by 154% during the 5 years in the 9th

Plan period, the same during the 10th Plan is projected to rise by 23% only

as Table 2.5 shows– indicative of slow down in demand.

59

Coming to individul polymers as shown in Table 2.5, demand for PE

(LLDPE/HDPE) and PP has decelerated in the 10th Plan period. PE demand

more than doubled during the 5 years of the 9th Plan from 0.7 MMT in

1997-98 to 1.5 MMT in 2001-02 at a CARG of 19%. However, over the 10th

Plan period, PE demand is estimated to go up by 19% only from 1.41 MMT

in 2002-03 to 1.8 MMT in 2006-07 at a CARG of 3.6%.

Similarly, the demand for PP is projected to increase from 1.13 MMT in

2002-03 to 1.7 MMT in 2006-07 at a CARG of 9.6% compared to the 9th

Plan period when it increased from 0.6 MMT in 1997-98 to 1.1 MMT in

2001-02 at a CARG of 15.2%. The deceleration in demand growth for the 2

key cracker derivatives viz. PE and PP reflects a demand slow down.

However, demand growth for PVC is estimated to improve during the

10th Plan. PVC demand is projected to go up from 0.9 MMT at the beginning

of the 10th Plan to 1.3 MMT in 2006-07 reflecting an increase of 55% during

the plan period at a CARG of 9.1% - higher than 5.5% witnessed during

the 9th Plan.

During the 5 years period between 2002-03 and 2006-07, demand for PS

is expected to go up 36%, which was also the same witnessed during the

9th Plan, albeit at a lower CARG of 6.4% during 10th plan compared to the

8% CARG registered during the 9th Plan.

Polymer Trade – India’s exports and imports of polymers during the 9th

and 10th Five Year Plans are shown in Table 2.6. India emerged as a net

polymer exporter half way through the 9th Plan in 2000-01 and remained

so till 2004-05 on the back of rising exports. In 2004-05 India’s polymer

exports crossed the million ton mark but volume of exports in 2005-06

declined to almost ¾th the level of the year before. Consequently, India

became a net importer of polymers in 2005-06 after remaining a net

exporter in the preceding 5 years balance for PP and PS, close to being

balanced for PE and a negative trade balance for PVC.

60

Table 2.6 India’s Polymer Trade During 9th and 10th Plan Period

In kilo tons Imports Export Net Trade

1997-98 444 60 (-) 383 1998-99 593 44 (-) 550 1999-00 546 105 (-) 440 2000-01 221 368 147

9th Plan

2001-02 420 567 148 2002-03 381 760 379 2003-04 450 842 392 2004-05 400 1005 604 2005-06 412 746 334

Source DGCIS, Calcutta

14. Since 2002-03, the beginning of the 10th Plan period, exports of

individual polymers from India showed varied trends. Exports of PE and PP

increased in the first 2 years of the 10th Plan and have since then shown

declining trends, while PS exports exhibited a downward trend in the first 3

years of the 10th Plan but have been on the rise ever since.

15. Also, for PE and PP, the gap between exports and imports has been

narrowing during the 10th Plan period but the same has widened for PVC

and PS, for all polymers combined together net trade was on the rise

during the first 3 years of the 10th Plan but declined significantly in 2005-

06.

16. Petrochemical complexes - Presently in total there are eight

naphtha and gas cracker complexes with a combined ethylene capacity of

about 2.5 million tones per annum. Of these, one million ton per annum

ethylene capacity is gas based (40%) and the rest is naphtha based

(60%). There are four aromatic complexes in the country with a combined

xylene capacity of 1.9 million tones per annum. The last petrochemical

complex was commissioned in 2001-02. During 2002 to 2006 there have

been only de-bottlenecking and expansion in capacities in the existing

complexes.

61

17. Synthetic Fibre/Yarn and synthetic fibre for Technical

Textiles.

Synthetic Staple Fibre/Filament Yarn (Acrylic, Nylon, Polyester and

Polypropylene) has played an important role in supplementing cotton and

other man-made fibre in the demand for fabrics and garments. In fibers

for technical textiles, the projections were made only for Nylon Industrial

Yarn and Tyre Cord Yarn which supplement natural fibre in fishnets, tyre

cords and other industrial applications.

18. Actual performance of Synthetic Fibre industry during 2001-02 to

2005-6 is placed in Table 2.7

Table 2. 7 Performance of Synthetic Fibre during 2000-2006 Unit – kilo tons

Products 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 CARG % Synthetic Fibre / Yarn




PFY Demand Projections 812 866 923 984 1049 1118 6.6



Imports 63 88 115 99 120 99 Exports 93 68 94 72 98 110

PSF Demand Projections 556 593 633 675 721 769 6.7



Imports 21 27 26 12 15 16 Exports 29 18 29 32 50 43

PSFF Demand Projections 20 22 24 26 29 31 9.4



Imports - - - - - - Exports - - - - - -

NFY Demand Projections 30 31 31 32 32 33 1.8



Imports 8 6 5 9 16 12 Exports 4 3 5 12 7 6

62

Products 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 CARG % PPFY /PPSF

Demand Projections 60 65 69 75 80 87 7.6 Apparent Consumption 17 18 22 21 19 16 (-) 1.4



ASF Demand Projections 109 112 116 120 124 128 3.2



Imports 15 13 22 14 15 12 Exports 5 6 11 19 18 11

Source- Monitoring & Evaluation Division, DCPC

19. In 2006-07, the domestic capacity of synthetic fibre/ yarn is likely

to be 2349 kilo tons which matches the projected demand estimations

made in the Report of the Task Force on Petrochemicals. In the sub-sector

level, Polyester filament yarn and nylon filament yarn domestic

consumption is likely to exceed the projected demand projection by 13 %

and 31 % respectively.

20. There is likely shortfall of 4 % from the projected demand in

Polyester Staple Fibre. This is attributed to the demand shift taking place

due to increased cotton production and the excise duty advantages on

cotton, which is 4 % optional duty as compared to 8 % mandatory duty

in case of synthetic fibre. Similarly in case of acrylic fibre, due to mixing

of cotton in the end use segments the domestic consumption is likely to

be 28 % lower than the projected demand estimate. In case of

Polypropylene filament yarn there is likely short fall of 86 % on

consumption as against the project demand estimation. This is attributed

to the higher projected demand estimation due to anticipated penetration

in new and existing applications, which has not materialized.

21. Only demand projections for Nylon Industrial Yarn / Tyre Cord

Fabric requirements were made in the Task Force Report and demand

Projection for Polyester Industrial yarn for both tyre and non-tyre

63

applications were not included earlier due to negligible consumption. The

performance details are inTable 2.8

Table 2. 8 Performance of Nylon Industrial Yarn during 2000-2006

Unit – kilo tons Products 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 CARG %

Synthetic Fibre / Yarn




Source Monitoring & Evaluation Division, DCPC

The actual consumption of Nylon Industrial Yarn and Tyre Card exceeded

the demand projections by 5 %.

Synthetic Rubber (Elastomers)

22. Synthetic rubbers include Styrene Butadiene Rubber (SBR), Poly

Butadiene Rubber (PBR), Nitrile Butadiene Rubber (NBR), Ethylene

Propylene Dimers (EPDM), Butyl Rubber and Ethyl Vinyl Acetate (EVA).

The demand for synthetic rubber depends on the availability of natural

rubber. Among synthetic rubbers, PBR, SBR and EVA constitute ~78% of

domestic demand. During the period 2001-02 to 2005-06 the AAGR for

PBR, SBR and EVA were 4, 11 and 66 percent respectively. The higher

growth of EVA was albeit from lower base. Year-wise details of demand-

supply balance for PBR, SBR and EVA are shown at Table 2.8

Table 2.8 Performance of Synthetic Rubber during 2000-2006

Unit – kilo tons Products 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 CARG %

Synthetic Rubber Demand Projections 142 146 157 169 184 203 9.3



Imports 93 105 123 179 210 240 Exports 3 3 10 8 7 22

PBR Demand Projections 61 63 65 68 70 73 3.8



Imports 26 25 22 18 15 17 Exports Neg Neg 6 2 Neg 5

64

Products 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 CARG % SBR (PSF)



Production 14 17 16 19 16 15 Imports 32 36 49 63 76 70 Exports Neg 2 2 4 3 13

NBR Demand Projections 9 9 10 12 13 15 13.6



Imports 4 5 7 9 12 12 Exports Neg Neg Neg Neg Neg Neg

Butyl Rubber Demand Projections 18 18 19 20 20 21 4.1



Imports 24 27 30 53 49 40 Exports Neg Neg Neg Neg Neg Neg

EPDM Demand Projections 11 11 12 12 13 13 4.9



Imports 2 3 2 7 10 11 Exports Neg Neg Neg 1 3 2

EVA Demand Projections 1 1 2 3 7 12 87.0



Imports 4 10 13 30 47 90 Exports Neg Neg Neg 1 Neg Neg

Source Monitoring & Evaluation Division, DCPC

23. During the period 2001-02 to 2005-06 the demand for synthetic

rubber grew at an impressive Average Annual rate of Growth (AARG) of

16.5 percent while the demand for natural rubber grew at an AAGR of only

4.1 percent and the overall demand of rubber registered AARG of 7

percent.

24. Due to rapid growth in demand of synthetic rubber and its limited

domestic availability, the imports have been steadily increasing. Import

dependency, which was at 56.6 percent in 2001-02, has increased to 72.3

percent in 2005-06.

65

Surfactants

25. Surfactants include Linear Alkyl Benzene (LAB) and Ethylene Oxide

(EO).

Linear Alkyl Benzene:- The current (2005-06) domestic capacity for

LAB is 449 kilo tons. In Auguest 2004 M/s Indian Oil Corporation Ltd,

commissioned 120 kilo tons LAB plant with an investment of US $ 290

million. The demand for LAB increased from 265 kilo tons in 2001-02 to

350 kilo tons in 2005-06 with a Compounded Annual Rate of growth of 6

%. The demand growth during 2001-02 to 2005-06 was falling short of

about 25 % against the demand projection made in the report of the Task

Force on Petrochemicals. The industry is operating with a capacity

utilization of over 100 %. Due to less anticipated domestic demand,

manufacturers are exporting about 23 % of the LAB domestic production.

Ethylene Oxide :-

The current (2005-06) domestic capacity for Ethylene Oxide is 148 kilo

tons. The demand for Ethylene Oxide increased from 69 kilo tons in 2001-

02 to 88 kilo tons in 2005-06 with a Compounded Annual Rate of growth

of 7 %. the demand growth during 2001-02 to 2005-06 there was a

shortfall of about 16 % against the demand projection made in the report

of the Task Force on Petrochemicals. This can be attributed to the

economic slowdown during the initial phase of the plan period.

Table 2.9 Performance of Surfactant Intermediate during 2000-2006 Unit – kilo tons

Products 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 CARG % Surfacatnt intermediate

Demand Projections 384 415 449 486 526 569 8.2 Apparent Consumption 384 393 390 414 431 453 3.6 % Achievement 100 95 87 85 82 80 Capacity 409 409 420 426 566 578 Production 425 425 447 453 488 545 Imports Neg Neg Neg 3 10 6 Exports 41 32 58 42 67 108 LAB Demand Projections 318 343 371 401 433 467 8.0 Apparent Consumption 318 324 318 343 352 366 3.1 % Achievement 100 94 86 86 81 78 Capacity 312 312 314 314 449 449 Production 359 356 375 382 409 468 Imports Neg Neg Neg 3 10 6 Exports 41 32 58 42 67 108

66

Products 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 CARG % EO Demand Projections 66 72 79 86 94 102 9.1 Apparent Consumption 66 69 72 71 79 87 6.0 % Achievement 100 96 92 83 84 85 Capacity 97 97 107 112 117 129 Production 66 69 72 71 79 88 Imports Neg Neg Neg Neg Neg Neg Exports Neg Neg Neg Neg Neg Neg

Downstream Plastic Processing Industry

26. The domestic plastic processing industry is highly fragmented and

consists of tiny, small and medium units. Presently there are about 22000

plastic processing units of which about 75% are in the small-scale sector.

However, the small-scale sector accounts for only about 25% of polymer

consumption. The industry also consumes recycled plastic.

27. The plastic processing industry is relatively competitive and the

plastic processed articles are exported both to the developed and the

developing countries. It is one of the important foreign exchange earners

for the country. The status of the downstream plastic processing industry

as on 2004-05 is given in Table 2.10

67

Table 2.10 Downstream Plastic Processing Industry Status – 2004-05

Source : Sub-Group on Petrochemicals

Sector

Consumption Virgin +

Reprocessed (KT)

Operating rate Size (MT)

Machines (Nos)

Investment (Rs Lacs)/ Machine

Project Investment 1.75 times Machine

Manpower Direct/

Machine

Total Investment Rs Crores

Total Employment

(Nos)Monolayer 693 54% 200 6099 30.0 52.5 16 3200 97590Multilayer 306 60% 1400 664 84.6 148.1 20 983 13280Pipes 82 37% 1200 620 59.1 103.4 14 641 8680PP/HD Woven Sacks 531 59% 2000 1200 197.6 345.8 60 4150 72000Extr. Coating 79 39% 1200 344 79.7 139.4 20 480 6880PPTQ Film 209 55% 360 1693 14.8 25.9 10 439 16930PVC Pipe 578 32% 1400 2880 72.5 126.8 18 3652 51844Injection Moulding 1,400 46% 155 36257 31.8 55.6 6 20154 217542Blow Moulding 288 49% 150 5628 10.1 17.7 5 995 28140Monofilaments 55 49% 360 986 10.8 18.9 5 186 4928Calendered Sh. 69 35% 3760 34 741.9 1298.3 120 441 4080BOPP Film 85 72% 10800 21 3451.8 6040.7 210 1269 4410Fibres & Fil. 55 88% 1800 69 456.7 799.3 36 552 2484PVC Wire & Cables 73 27% 360 864 14.2 24.9 3 215 2592PVC Blown Film & Sheet 52 66% 600 338 23.4 41.0 7 138 2366Sheet Lines 30 27% 1200 249 57.9 101.4 10 252 2490Other Extrusion ETC. 203 26% 1600 2438 32.0 56.0 20 1366 48751Reprocessing Pelletisers 1,051 87% 1169 5100 5.3 9.3 10 475 51000Total** 4,789 65,484 39,588 635,986**Consumption Excluding ReprocessedIndirect Employment Upstream 0.5 317993

Downstream 3.75 2384948Total Estimated Employment 3338927

Plastics Recycling Industry in India

28. Industry claims that ~60% of its plastic waste (Source Industry

association), the highest rate of recycling in the world. In comparison, the

world on an average recycles only about 22% of its plastic waste. Some

statistics about the Indian recycling industry are shown in Table 2.11

Table 2.11: Plastics Recycling Industry in India

Volume recycled 1.3 million tons No. of Units ~ 2,300 Pelletizers ~ 4,500 Turnover (Rs. Cr) ~ 5,000 Value addition (Rs. Cr.) ~ 1,600

Source – Sub-Group on Petrochemicals

Consumer waste is collected from households, hotels, the street and dump

yard by scrap dealers and rag pickers. This is then sent to the recycler. The

plastic waste is then sorted and cleaned followed by grinding, cleaning and

drying. The waste is then formed into lumps and grounded and then

granulated and packaged.

Imports and Exports

29. The total imports of plastc and Articles of products by 68 countries

under Chapter 39 in 2005 was about 371 billion US Dollars as against our total

exports of about 2.2 billion US Dollars which is about 0.60%. In case we take

the imports into other major regions (Middle East and Africa) our share will be

reduced further. Table 8 shows imports of items under chapter 39 for leading

economies. Details in Table 2.12. World imports of key plastic products as

against the Indian exports for a few major items that comprise our export

basket are shown in Table 2.13.

69

Table 2.12 Import of Chapter 39 Plastics and Articles thereof by leading economies

Importing Countries 2003 2004 2005 France 27628 32657 36032 China 21042 28064 33339 United States 22848 26561 31715 Italy 10821 27353 30110 United Kingdom 22469 26932 28658 Germany 18555 22353 24737 Mexico 11575 12665 14301 Hong Kong 9582 11582 13408 Belgium 9974 11881 13168 Canada 8690 9765 11280 Netherlands 8255 9581 10547 Austria 7680 9263 10157 Spain 6969 8415 8955 Japan 6315 7524 8568 Poland 4167 5334 6080 Turkey 3237 4763 5787 South Korea 3459 4399 5401 Taiwan 3404 4579 5173 Source – Sub-Group on Petrochemicals Report

Table 2.12 World Imports of selected plastic products (in about 68 Countries) Vis-à-vis India’s Export (figurers in million dollars)

2004 2005 2004 2005 PET Film India’s Export India’s Share %

3462 74 2.1

3944 106 2.7

Writing Instruments India’s Export India’s Share %

4620 70 1.5

4744 92 1.9

Polypropylene India’s Export India’s Share %

12362 402 3.3

15162 230 1.5

Tooth Brushes India’s Export India’s Share %

1302 11 0.9

1422 13 0.9

FIBCs India’s Export India’s Share %

899 0 0

1082 2

0.2

Caps, closures etc India’s Export India’s Share %

4333 10 0.2

4699 13 0.3

Woven Scaks/Bags India’s Export India’s Share %

555 1

0.2

633 1

0.2

Tableware/Kitchenware India’s Export India’s Share %

4491 23 0.5

5025 29 0.6

Sacks / Bags India’s Export India’s Share %

5806 22 0.4

6999 34 0.5

Houseware India’s Export India’s Share %

3852 14 0.4

4200 18 0.4

Source – Sub-Group on Petrochemicals Report

30. Conclusions: 1. Commodity polymers registered a Compounded Annual Rate of

Growth (CARG) of 6.1 % against the projected demand of 12 % (Level

I) and 13 % in (Level II) in the Report of the Task Force on

70

Petrochemicals. During the period polymers witnessed price increase

due to crude oil prices, exports of Polypropylene, High Density

Polyethylene (HDPE) and Polystyrene increased. Imports of polymers

were decreasing, Polyvinyl Chloride imports increased. There was no

major green field capacity addition after 2000-01. The capacity

additions (CARG of 5 % between 2000-01 to 2005-06) were by way of

substantial expansion and de-bottlenecking of the existing plant.

2. Synthetic Fibre registered a growth of 2.5 % against the projected

demand of 6.4 % in the Report of the Task Force on Petrochemicals.

Polyesters and Nylon Filament yarn demand exceeds the projected

demand. During the period the excise duty on synthetic yarn / fibre

reduced from 18/36 % to 8 % against the cotton excise duty of 4 %.

These excise duty corrections improved the consumptions. The

capacity additions (3.2 % CARG during 2000-01 t0o 2005-06) were

expansion by the existing units.

3. Nylon Tyre Cord Yarn consumption exceeded the demand projection

by about 5 %.

4. Synthetic rubber registered a growth of 3.6 % against the projected

demand of 8.2 % in the Report of the Task Force on Petrochemicals.

M/s Indian Oil Corporation Ltd., commissioned 120 kilo ton Linera

Alkyl Benzene Plant in 2004.

5. Synthetic detergent intermediates registered a growth of 16 %

against the projected demand of 9.3 % in the Report of the Task Force

on Petrochemicals

6. Downstream Plastic processing industry is fragmented and consists of

22,000 units in tiny, small, medium and large scale sector. Domestic

plastic processing sector has low competitiveness in scales of

operation as compared to global scenario. Export of plastics products

are increasing however, the share of plastic products exports in global

trade is less than 1 %.

7. Domestic industry consumes about 30 % of its plastic waste, which is

highest in the world average of 22 %.

71

Terms of Reference 3

To review the feedstock availability and pricing

related issues including availability of industrial

alcohol

72

Petrochemical Feedstock

1. Petrochemicals are derived from various chemical compounds, mainly

hydrocarbons. These hydrocarbons are derived from crude oil and natural

gas. Among the various fractions produced by distillation of crude oil,

petroleum gases, naphtha, kerosene and gas oil are the main feed-stocks for

the petrochemical industry. Ethane / Propane (C2/C3) and natural gas

liquids obtained from natural gas are the other important feedstock used in

the petrochemical industry. Olefins (ethylene, propylene & butadiene) and

Aromatics (benzene, toluene & xylenes) are the major building blocks from

which most petrochemicals are produced.

2. In the domestic petrochemical industry, around 56% of ethylene

cracking capacity is based on naphtha as a feedstock, the balance being met

from gas.Assessment by various agencies indicates significant growth of

Petrochemical products in India. A high demand for petrochemicals would in

turn influence the feedstock requirement.

Naphtha

3. Domestic Naphtha is available from two sources - the refineries and

fractionators. Trends of domestic naphtha availability in past along with

current production of Naphtha is shown in Table 3.1

Table 3.1 Naphtha Availability in India (Million Tons)

1990-91 1995-96 2000-01 2005-06 (Estimated)

Refinery Production 4.9 6.0 9.9 14.2 Fractionators 0.6 1.5 1.5 1.5 Total domestic availability

5.5 7.5 11.4 15.7

Source: Report of Sub-Group on Petrochemicals Report

4. Domestic Naphtha availability has been increasing. The sharp rise in

Naphtha production has rendered it surplus in the country and the country

has now started exporting significant quantity of Naphtha on net basis as

shown in Table 3.2

73

Table 3.2 Imports & Exports of Naphtha (Million tons)

2002-03 2003-04 2004-05 2005-06 (est)

Imports 2.8 2.4 2.2 2.5 Exports 2.1 2.2 2.9 4.4 Net import I Export (-) 0.7 0.2 -0.7 -1.9


5. A contributing factor for the increse in Naphtha exports during 2005-

06 has been rising imports of LNG and higher availability of gas. Among the

existing refineries in India, no single refinery has naphtha avilability

necessary for setting up a world-scale petrochemical complex.

6. Currently, naphtha production is on an average about 11% of total

refinery capacity with being as high as 19% for newer refineries. Projected

refinery capacity additions in the next few years are tabulated in Table 3. 3

Table 3.3 Projected Refinery Capacity Additions (MMT)

2005 2008 2010 2012 Refining Capacity 132.5 158.7 242.3 287.3 Addition in capacity 26.2 109.8 154.8 Additional Naphtha Availability 2.9 12.1 17.0


Depending upon the completion schedule of planned refineries, large

quantities of naphtha would become available.

7. Refineries have two options to deal with these quantities, either

market their Naphtha to others - domestically or through exports or use it

themselves for adding value to their business. Domestic demand of naphtha,

at present does not appear to be commensurate with the increased

availability while exports are generally resorted to as a second best option.

Therefore, looking at the surplus availability, several PSU refineries have

planned petrochemical complex along with their expansion or grassroots

refinery projects.

8. Indian Oil Corporation (IOCL), Oil and Natural Gas Corporation

(ONGC), Hindustan Petroleum Corporation (HPCL), Bharat Petroleum

74

Corporation (BPCL), and Gas Authority of India (GAIL) have plans for setting

up Petrochemicals Complex. Probable locations for proposed new plants are

Panipat, Dahej, Vizag, Mangalore, Haldia and Paradeep. IOC, Panipet have

implemented crude oil refinery in the second phase they are commissioning

para Xylene and PTA Plant in the next phase IOCL is implementing a naphtha

cracker project with downstream poymers polyethylene, Polypropylene and

Monoethylene Glycol.

9. Naphtha from PSU sources would mostly be used up, should all these

planned projects fructify. The pricing of naphtha is market driven and bench

marked against the imported prices. In any case, the deficit can be easily

met by imports from international oil markets. Therefore, depending upon

pricing policy, there would be no constraint in availability of Naphtha.

Natural Gas

10. Past trends and current gas availability for use by petrochemical

plants are shown in Table 3.4

Table 3.4 Gas Production & Availability for Petrochemical Industry

Unit Million Standard Cubic Meter per Day (MMSCMD) 1990-91 1995-96 2000-01 2004-05

Gross Gas Production 18.0 22.6 29.5 31.813 Used by petrochemicals 0.4 0.5 0.8 1.2


11. Pretrochemicals plants consumes C2/ C3 fraction as feedstock and

significant amount of gas is used as fuel in captive power plants for

petrochemical plants which also needs to be added to the consumption of

gas as feedstock in petrochemical plants while computing the requirement of

gas in the petrochemical industry. Gas production seems to have stagnated

in the last five years.

12. Power and fertilizer sectors have traditionally been core consumers of

natural gas. These two sectors together consume about 70% of the gas

consumed in the country today. The balance goes to industrial units where it

75

replaces mostly liquid fuels. Further, gas is increasingly being supplied on

priority, to households as piped gas or to automobiles as CNG.

13. In this context, it needs to be mentioned that petrochemical industry

adds tremendous value to the feedstock and hence, needs to receive a

higher priority compared to sectors like fertilizers for which cheap sources of

imports exist.

14. Total current domestic production of natural gas is about 72 Million

Standard Cubic Meter per Day (MMSCMD). Additional regassified LNG of

around 18 MMSCMD is available from PLL-Dahej and Shell-Hazira. Further,

current domestic availability of natural gas from the largest domestic source

i.e. ONGC is projected to decrease from 53 MMSCMD to around 30 MMSCMD

by 2010-11. This shall be offset from increase in domestic availability from

private gas sources such as RIL and other NELP fields, as per information

available at this stage. GAIL has announced plans for setting up gas based

petrochemical complexes at Kochi and Dibrugarh.

15. Import of natural gas in the form of LNG and through transnational

pipelines would be major sources of gas availability in future. It is however

likely that such imports would be of lean gas where the exporting countries

may extract important C2, C3 and C4 fraction before supplying the gas.

Taking all the above factors into account. The total gas availability in the

country may increase to around 244 -314 MMSCMD by 2010-11.

16. As against the above total gas availability, the total projected demand

of natural gas is 327 MMSCMD by 2010-11. In the near term i.e. 2007-08. it

is estimated that as against the total demand of around 185 MMSCMD the

gas availability in the country shall be only around 138 MMSCMD. Gas being

price sensitive, its demand is likely to vary in line with price and price of

available alternatives.

17. Therefore, there appears to be critical constraints limiting the

availability of gas for petrochemical projects especially if power and fertilizer

sectors continue to receive priority in terms of gas supply. Besides even

76

within the available gas the obtainable fractions for use in petrochemicals

are likely to be low. Hence new gas based petrochemical projects can be

viable only if it can ensure steady supply of gas with a long term supply

contract.

18. The key feedstock issues which are crucial for setting up new

petrochemical manufacturing facilities in the country are as follows.

Identification of primary feedstock to be utilized for production and

ensuring steady supply.

Dual or multiple primary feed options for the plants necessary for

operational flexibility

Coastal locations for the plants to be preferred for flexibility of

import of feed stocks.

Existing refineries should be encouraged to added value to their

hydrocarbon chain.

As a policy C2/C3 fractions available in the natural Gas and LNG

needs to be allocated to petrochemicals project.

Due weightage also need to be given to propylene derived from

refineries.

Feedstock Pricing

19. Feedstock forms a key component of cost for petrochemical products

and it is important to ensure that this input is available to domestic

petrochemical manufacturers at globally competitive prices. Government’s

feedstock policy, therefore, should be tailored to make this critical inputs

tariff free.

Crude oil

20 All countries, which serve as manufacturing hubs, exempt duties on

the raw materials, imported for such purpose. In India, the customs duty on

crude oil is presently at 5%. If India is to emerge as an attractive location

for Petroleum, Chemicals and Petrochemicals, it is imperative that the

customs duty on crude oil be reduced to zero. Both input (crude oil) and

output (Naphtha) would be at zero duty.

77

21 The above measure would remove the anomaly in pricing of Naphtha

supplied to petrochemical industry, which is currently nil for the manufacture

of polymers and 5 % for others like benzene, toluene, xylene, ethylene,

propylene and butadiene etc..

Naphtha

22 Naphtha price has been deregulated since April 1998. As a result,

currently, the pricing of Naphtha for domestic customers in fertilizer as well

as non-fertilizer categories (mainly power and petrochemical sectors are

included in the non- fertilizer category) is market determined. Though the

initial price is essentially based on import parity, discounts and other

reductions depending upon the nature of customer, volume sought and

demand-supply conditions make the price essentially market determined.

23 As domestic Naphtha prices are based on international prices, the

volatility in the international prices is also reflected in the domestic prices

24 In the current tariff structure, the 5% customs duty on crude oil vis-a-

vis nil customs duty on Naphtha for manufacture of polymers results in a

negative protection to the domestic refineries, which discourages them to

supply Naphtha to petrochemical units. The refineries are increasingly

seeking exports as choice; as exports of Naphtha allows refineries to claim

duty drawback against customs duty paid on imported crude, while a

domestic sale results in loss of customs duty on the input i.e. crude oil. The

current tariff structure, therefore, is encouraging exports at the expense of

the domestic petrochemical industry, needlessly overburdening port

infrastructure, and leading to infructuous freight costs. The present situation

needs to be rectified for ensuring stable Naphtha supply to the domestic

petrochemical industry.

Measures to Ensure Steady Feedstock Supply to Petrochemical Industry

25 Crude oil tariff needs to be realigned and reduced to nil. Such a step

will encourage both - the refinery projects and also domestic sales of

Naphtha.

78

Import Tariff on Propane

26 Propane another key petrochemical feedstock - also attracts 5%

import tariff same as ethylene and propylene, which are derived by cracking

Propane. Import tariff on Propoane also should be placed at zero.

VAT on Natural Gas & Credit Benefits

27 Natural gas attracts high rates of sales tax e.g. 20% in Gujarat

without credit benefit. Being a feedstock it is necessary that VAT on natural

gas be reduced and credit benefits are allowed for using it as inputs.

Alternate Feedstock 28 Based on Industry projections and trends in petrochemicals products

along with the proven reserves of crude oil and natural gas, the Crude oil

and Natural gas is likely to remain the main sources of feedstock for the

petrochemicals for the next 10 to 15 years, however, the pricing of the

natural gas is going to be a crucial issues in attracting investment in gas

cracker complexes.

29 The development will focus on maximising the value additions by way

of increased hydrocarbon utilization.

30 The increasing availability of Natural Gas with major percentage of

methane content have already generated research activity on Gas to Liquid

Technology (Natural gas to Methanol) which could be easily transported and

used as chemicals feedstock.

31 Developments are also on Coal Bed Methane as a feedstock for

chemicals.

32 There is renewed interest due to high crude oil prices on the coal

based monomers for the manufacture of chemicals like acetylene based

chemicals through calcium carbide route and others.

79

33 Initially Commodity polymers were produced from alcohol (ethyl

alcohol) obtained mainly from sugar cane molasses. Currently these are

made from Acetic Acid, Acetic anhydride, Ethyl Acetate, Butyl Acetate. The

increase in use of alcohol in petrol/ gasoline and diesel have increased the

demand and prices of alcohol, hence the availability of alcohol as feed stock

for petrochemicals is not likely to materialise.

34 The edible and non-edible oils based fatty acids are currently used in

small way in polyurethanes and other speciality polymers.

35 Sustainability, industrial ecology, and green chemistry are new

principles that are guiding the development of the next generation of

materials, products and processes. The alternative bio-based feed-stocks,

like Agricultural and plant origin, Animal Origin, Microbial origin hold promise

for achieving the goals of sustainable development and implementing the

principles of industrial ecology.

36 The alternative feed-stocks and products offer value in the

sustainability by being part of the biological carbon cycle, especially as it

relates to carbon-based polymeric materials such as plastics, water soluble

polymers, lubricants, biodiesel, and detergents. Life cycle analysis (LCAs) of

these biopolymer materials often show reduced environmental impact and

energy use when compared to petroleum-based materials.

37 All alternative feedstocks are annually renewable agricultural and

biomass feedstocks and can be obtained either by direct extraction from

biomass (cellulose, starch, proteins, fibers, and vegetable oils) or

alternatively, the renewable resources/biomass feedstock can be converted

to bio-monomers by fermentation or hydrolysis and then further converted

by chemical synthesis to biodegradable polymers like polylactic acid.

Bio-monomers can also be microbial transformation to biopolymers like the

polyhydroxyalkanoates. Surfactants, detergents, adhesives, Vegetable oil

based lubricants, urethane foams and water-soluble polymers can be

engineered from alternative feedstocks.

80

38 Summary & Conclusion

(i) Refineries in India produce adequate amount of Naphtha for meeting

feedstock requirement of the petrochemical industry, which is

expected to increase significantly as new refinery capacities are

added.

(ii) Availability of gas for use as petrochemical feedstock is limited as the

demand from the fertilizer and power sectors is given priority. Gas

supply to petrochemicals sector needs to be given a higher priority, as

cheap sources of fertilizer imports are available. There is a need to

allocate C2/ C3 fractions for the manufature of petrochemicals and

due weightage also needs to be given to propylene derived from

refineries. This will increse the value addition and improve the

economic vaiability of the project.

(iii) Despite adequate Naphtha availability, the inverted duty structure on

account of the 5% import duty on crude oil encourages refineries to

export Naphtha rather than selling it domestically.

(iv) Hydrocarbon based (Crude Oil and Natural gas) is likely to dominate

the petrochemicals manufactureing for the next 15 to 20 yaers.

(v) To ensure steady Naphtha supply to domestic petrochemical industry,

it is necessary to eliminate duty on crude oil (or to treat Naphtha

supply to domestic petrochemical industry as deemed exports).

(vi) In the alternate feedstock promotion of Gas to liquid and coal bed

methane to chemicals needs to be under taken.

(vii) In case of natural product based renewable resource a study needs to

be undertaken to identify the potential alternate feedstock and its

economic viability.

81


To review and assess the global business strategy

and domestic preparation for international

competitiveness and to realize potential of

emerging areas including specialty chemicals in the

light of the new IPR regime, identify specific key

products having potential for growth and suggest

measures for putting the indigenous industry on

sound footing.

82

Global Petrochemical Industry -Strategy

1. Centre for growth and developments are shifting back to Asia and the

global GDP share is moving towards emerging markets. The percentage of

share of emerging markets is as follows:

Population 84 %

Energy Consumption 57 %

GDP at market exchange rates 28 %

GDP PPP 54 %

Exports 42 %

Foreign Exchange Reserves 71 %

Stock market capitalisation 18 %

(Source Industry Association.)

2. The regional share of world trade is increasing in Asian economies.

The predictions for 2040 are China over takes USA in GDP to first position and

India is placed at third position. The forecast for 2006 indicates that global

growth forecast is 5.1 % with India at 8.5 %, China 10.5 %.

3. The oil price is the key issue to-day. The crude fundamentals are

driven by increased Exploration and Production cost, Low replacement of

reserves, difficult reserves, strong demand, Geo-political concerns and

contango by hedge funds. Industry estimates that the crude price may not fall

below US $ 55 / bbl.

4. Petrochemical Industry is driven by the following factors:

The Demand side is influenced by US demand and China demand. This

reflects in the GDP, based on the elasticity the demand growth is

effected.

In the supply side the mergers and acquisitions to remain competitive,

new investments, turnarounds and disruption are the key factors

affecting supply.

The prices are influenced by the crude price which in turn depends on

world economy, Geopolitical situation, demand & supply, weather and

future markets.

83

The petrochemical prices are influenced by the Crude oil price and the

operating rates of the plants.

Petrochemical products follow a cyclic upswing and the downturns. In the

past petrochemicals have sparkled through several cycles and challenges The

factors which influence the petrochemical cycles are Technology, market,

capital cost, capacity build ups, oil price shocks, operating costs maturity of

markets, feedstock availability, scale of operation, integration through

mergers and accusations, location of the project, innovations, capital infusion,

responsible care, environmental concerns and public perception.

5. The competitiveness of any industry is measured in terms of capital

cost expenditure per metric ton of investment and operating cost per metric

ton of out put.

Commodity Polymers

6. USA and European countries dominated the polymer industry during

1950-1990. After a sustained growth over 4 decades, polymer consumption

levels in USA and European countries reached a saturation point limiting the

industry’s growth potential. The regional composition global polymer demand

growth has undergone significant changes with the epicentre of industry

growth shifting from the West of Suez (WOS) to the East of Suez (EOS) and

EOS emerged not only as a key polymer consumption centre but also as a

key-manufacturing base. The world Petrochemical spread in 2006 can be

summarised in Table 4.1

Table 4.1 World Petrochemicals Capacity – 2006 Kilo tons

Capacity/ Ethylene Propylene Polyethylene Polypropylene Capacity 2006 in Million Mt

123 74 78 47

Region ( %) N. America 28.6 26.8 25.4 20.4 S. America 4.2 4.4 5.1 5.3 W. Europe 19.4 23.1 20.1 21.1 E. Europe 5.8 5.2 5.4 4.2 Africa and Middle East 12.9 6.2 13.5 8.4 Asia Pacific 29.0 34.4 30.5 40.6

Source- Report of Sub-Group on Petrochemicals

84

Industry estimates the regional capacity additions in Ethylene is as in Table

4.2.

Table 4.2 Regional Ethylene Capacity Additions -2006-2101

Units Kilo tons

Capacities in Million tons Region / Year 2006 2007 2008 2009 2010

N. America 0.6 0.3 0 0 0 S. America 0.5 0 0.1 0.1 0.2 W. Europe 0.2 0.2 0.4 0.3 0.3 E. Europe 0.5 0 0 0 0 Africa 0.3 0.1 0 0.2 0.2 Middle East 2.4 2.2 1.7 6.1 5.3 Asia 2.4 2.9 1.5 3.8 1.3 Total 6.9 5.8 3.7 10.5 7.2

Source- Report of Sub-Group on Petrochemicals

7. Investments are planned where there is feedstock advantage namely

Middle East and where the market exists namely Asia. China emerged as the

largest polymer importer from 275 kilo tons in 1990 to 13,674 kilo tons in

2005 i.e import dependency increased from 9 % in 1990 to 35 % in 2005.

Around the same time ASEAN countries were witnessing significant capacity

build-up. The first wave of capacity build up was in Middle East. The

Government of Middle East and ASEAN countries were offering incentives to

attract global players for investments. The feedstock advantage and various

incentives / concessions / benefits offered by Government of Middle attracted

large scale investments

Table 4.3 Incentives for Petrochemicals Industry in Middle East & ASEAN

Tax Holidays Up to 8 Years Import Duty

Naphtha Catalyst & Chemicals

Machinery

0-5 % 0-5 % 0 %

Utility Cost Low cost utility provided Exports Export incentives Feedstock Price (Naphtha & Ethane 30 % discount in Middle East

8. The feedstock advantage coupled with the various

incentives/concessions/benefits offered by Governments in the Middle East

attracted substantial investments – both domestic & foreign in the countries

of the region. The subsidized feedstock available in GCC countries gives

petrochemical manufacturers in Gulf Countries advantage vis-à-vis

manufacturers elsewhere. Gas price in Saudi Arabia is likely to remain

85

unchanged till 2011-12 when it is due for review & hence, the Middle East is

likely to remain an attractive destination for petrochemical investments in the

coming years. During the period 2005-09, the major part of new investments

for additional C2 capacity globally is projected to come up in the Middle East.

Impact on operating rates

9. In fact, many analysts believe that as significant new capacity in the

Middle East are scheduled to become operational in 2009, it is likely to

depress the global ethylene operating rates (which currently is at a healthy

level of above 90% due to limited C2 capacity additions in the last 2 years) as

chart 17 shows.

10. Falling operating rate is going to impact the profitability of the the

petrochemical industry and with the low cost feed stock advantage Middle

east this will be a great opportunity to consolidate further

11. Domestic Industry made the following demand projections to meet the

international competitiveness and realize the potential in commodity

polymers.

12 The sub-group on petrochemical projected the demand for commodity

polymers in Scenario I Polymer demand projections in an improved policy

environment and Scenario II Polymer demand projections, if existing policy

environment continues.

In Scenario 1 Polymer demand has been projected to increase from 5260

Kilo Tons in 2006-07 to 12591 Kilo Tons by 2011-2012 with a compounded

annual rate of growth of 19%. Table 4.4.

In scenario II polymer demand has been projected to increase from 5260

kilo tons in 2006-07 to 7880 kilo tons by 2011-12 with a Compounded

Annual Rate of Growth (CARG) of 8 %. Table 4.5

86

Table 4.4 Commodity Polymers – Scenario I

Unit Kilo tons

X Plan XI Plan % Growth in Demand

CARG % Polymers

2005-06 Actual

2006-07 Projected

11-12 11/12 – 06/07

LDPE 232 234 344 47 8 LLD/HD PE 1680 1755 4367 149 20 PP 1445 1712 4627 170 22 PVC 1254 1320 2772 110 16 PS 241 239 481 101 15 Total 4852 5260 12591 139 19

Table 4.5 Commodity Polymers – Scenario II

Unit Kilo tons

X Plan XI Plan % Growth in Demand

CARG % Polymers

2005-06 Actual

2006-07 Projected

11-12 11/12 – 06/07

LDPE 232 234 285 22 4 LLD/HD PE 1680 1755 2579 47 8 PP 1445 1712 2634 54 9 PVC 1254 1320 2031 54 9 PS 241 239 351 47 8 Total 4852 5260 7880 50 8

13. Based on the above projections the domestic Ethylene demand has

been derived as 7311 Kilo Tons. At the current Ethylene capacity of 2500

Kilo Tons, the demand for Ethylene will increase to 7311 Kilo Tons. This will

have a gap of approximately 4900 Kilo Tons of Ethylene ( Scenario I). If the

demand supply gap in Ethylene has to be filled in by the domestic production

then there is a potential for five Naphtha/Gas Cracker with a capacity of one

million tons of Ethylene per annum. This will attract approximately 4.3

billion US $ investment. The last cracker complex was implemented in

2000-2001. Between 2001 and 2006 there was only marginal capacity

increase by way of expansion/debottlenecking.

14. The Capacity additions in Naphtha / Gas Cracker Ethylene capacity

under Implementation and under Planning are in Table 4.6.

Table 4.6 Investments in Naphtha and Gas Cracker Plants

Unit Kilo tons

Company Feed stock 2005-06 Ethylene Capacity

Proposed Ethylene Capacity

Likely Investment

Likely date of Commissioning

IPCL, Nagothane

Gas 400 600 NA Planning

IPCL, Gandhar Gas 300 600 NA Planning GAIL, Pata Gas 300 400 Rs 650 Cr By 2006 HPL, Haldia Naphtha 520 670 Rs 650 Cr * By 2006-07

87

IOC, Panipet Naphtha 0 800 Rs 6300 Cr * By 2009-10 GAIL, Assam Gas/ Naphtha 0 220 Rs 5460 Cr * By 2011-12 GAIL, Kerala Naphtha 0 - NA Under Planning IOC, Paradip Naphtha 0 - NA Under Planning HPCL, Bhatinda

Naphtha 0 - NA Under Planning

* Includes downstream polymer and intermediates investments.

Table 4.7 Investments in building blocks, intermediate and polymers Plants

Unit Kilo tons

Company Propylene LLD/HD PE PP PVC Styrene GAIL, Pata, Phase I

0 100 0 0 0

GAIL, Pata Phase II

300 200 300 0 0

HPL, Haldia 75 140 75 0 0 IOC, Panipet 575 650 600 0 0 Assam Gas Cracker

60 220 60 0 0

RIL, Jamnagar 900 - 900 0 0 Finolex - - - 130 0 IOC, Paradip NA 0 680 600

The existing manufacturers have also announced marginal expansion during

the XIth Plan period. There are several projects under planning/concept

stage by Public Sector Undertakings based on Naphtha as well as

C2C3/Natural Gas liquids from LNG. All these projects are likely to be

finalized/implemented beyond XIth Five Year Plan.

15. The gap in capacity to meet the demand of commodity polymers is

estimated to be around 7000 Kilo Tons which requires 16 Plants with an

average capacity of 400 to 450 Kilo Tons. The gestation period for the

implementation of petrochemical project is around 36 months to 48 months.

Hence, the capacity implementation during XIth Five Year Plan is not likely.

16. Government is pursuing regional trade agreements, free trade

agreements with ASEAN, GCC countries, Mercasour, WTO which are likely to

reduce the duty levels on the petrochemicals by way of concessions in these

trade agreements. These trade agreements are likely to increase the

availability of petrochemicals including articles of plastics. Hence, the above

mentioned commodity polymer projection are likely to include domestic

manufacturing of petrochemicals, inputs under trade agreements, etc.

88

Global Strategy for Synthetic Fibers

17. The demand for Synthetic Fibers is derived from the demand of yarns,

fabrics, made-ups and clothing. The Textile Industry which was very

dominant in the Western world that is essentially in Europe and Americas in

the 80s, has over a period of time, moved first to Japan, Hong Kong and

Singapore and then to Korea, Taiwan, Indonesia and Thailand and from late

90s has moved to China, India, Vietnam, Sri Lanka, Pakistan, Bangladesh

etc.

18. Thus, Asia has now become the producer and provider of clothing to

the world as over 75% of the fabrics and clothing production is in Asia.

19. The production of raw-materials for Synthetic Fibers earlier was based

in USA, Canada and Europe. With a large number of Petrochemical

complexes coming up in Asia and Middle East, the manufacturing base for

raw-materials and Fiber Intermediates has also moved away from Europe to

these new centers of production. Obviously, Synthetic Fibers which are a

bridge between Fibre Intermediates and Textiles have also moved to Asia.

Asia, thus, has become a Textile and Clothing provider to the world

supported by production of Fibre Intermediates and Synthetic Fibers, apart

from cotton whereas the major consumption is in the developed world.

Indian Synthetic Fibre Industry has recognized the importance of sharing

this Asian growth and dominance.

20. India, therefore, needs to create a cost competitive domestic

Synthetic Fibre Industry which will fuel the production of Textiles and

Clothing in India to meet the growing domestic demand as well as to meet

the requirement of raw-materials for exports of fabrics and clothing. The

domestic strategy for the synthetic fibre and fibre intermediates during the

11th Five year plan is to create additional employment of 8 million; and

realise the Textile Vision of reaching a textile output of US $ 85 billion in

2010 and US $ 25 billion in 2011-12.

89

21. The 11th Five year plan needs a 11-12 % volumetric growth for

synthetics. The installed capacity at the end of the 10th Five year plan (2006-

07) is higher than the domestic demand for 2006-07. The 11th five year plan

targets have been worked out based on the following assumptions

GDP growth rate is estimated at 8.5 Compounded Average Growth Rate

(CAGR),

population growth is estimated at 1.17 % CAGR and

percentage of PFCE spent on textiles is expected to go up from 5.3 %

in the terminal year of 10th Five Plan to 5.9 % in the terminal year of

the 11th plan growing slowly and steadily.

FTAs should be beneficial and should not creat inverted duty structure.

SEZs and EPZs will be promoted.

22. Based on these assumptions the capacity at the end of 2006-07,

demand projections for the 11th five year plan terminal year and the demand

supply gaps have been worked out as follows:

Table 4.8 Demand projections for Synthetic Fibre Unit – kilo tons

Products Capacity in 2006-07

Demand by 11th Plan terminal

year (2011-12)

Additional Capacity Required

(@90 % Capacity Utilisation)

Likely Investments

Rs. Cr

PFY 2159 2809 962 5772 PSF 1292 1481 354 1416 ASF 154 120 - - NFY 44 50 12 120 PPFY 17 25 11 22 Total 3666 3885 1339 7430

Source- Report of the Sub-Group on Synthetic Fibre and Intermediates

Note- 1) Depending on the price relationship between cotton and polyester

a demand swing of 300 kilo tons can take place.

2) Additionally 1500 kilo tons of fibre and yarn required for exports.

i.e if the prices of cotton increases the demand fr synthetic fibre will

increase from 3885 kilo tons to 4235 kilo tons and Export of 1000 kilo tons

of synthetic fibre / yarn will increase the demand additionally to 5235 kilo

tons. This increase will be in polyester.

90

Technical Textiles

23. World technical textile industry was growing at the rate of

approximately 3-4 % and is expected to grow at 3.5 % compounded annual

rate of growth during the next five years. The developing regions however

are expected to grow at over 5-6 % Compounded annual rate of growth.

USA, Western Europe and Japan currently accounts for over 50 % of the

total global consumption. It is projected that by 2010, the Asian region will

account for over half of the world consumption. The potential application

areas are as follows:

Table 4.9 – Major Application Areas – Technical Textiles

Application Area Areas covered Key End-use segment

Agrotech Agriculture, Horticulture, Floriculture, Fishery

Cover, protection, fishing

Buildtech Building and Construction textiles

Protection, display, reinforcements, construction

Clothtech Technical components of shoes and clothing

Show components, sewing, insulation

Geotech Geotextiles, Civil engineering

Stabilization, separation, reinforcement, erosion control

Hometech Furnishing, household products

Curtains, furniture component, cleaning

Indutech Filtration, Cleaning Filtration, MRGs, cleaning electrical components

Medtech Hygiene and Medical Cleaning, cover, wound care, protection

Mobiletech Automotive, Marine, Railways, and Aerospace

MRGs, safety, floor covering, composites

Packtech Packing Bulk packing, disposables

Sportech Sport and Leisure equipment

Luggage components, nets, sports equipment

Source- Report of the Sub-Group on Synthetic Fibre and Intermediates

In all these applications the preferred fibre are synthetic fibre / yarn namely,

Polyester, Nylon and polypropylene.

91

24. In the domestic scenario during the last five years India has

established competitiveness in nylon tyre cord as the second largest

consumer in the world. In belting fabric India exports to over 30 countries.

Tyre cord demand during the 11 plan period is estimated to register a

growth of 7.8 % out of thiws the nylon 6 tyre cord is expected to grow at 6.9

%

consumption of nylon 6 tyre cord will increase from 87 kilo tons in

2006-07 to 121 kilo tons in 20011-12.

Consumption of polyester tyre cord will increase from 5 kilo tons in

2006-07 to 12 kilo tons in 2011-12.

25. Industrial (high tencity) yarn comprises of nylon and polyester. Nylon

Industrial yarn in used in air bags, mechanical rubber goods, ropes, fishing

net twins etc. Polyester industrial yarn is used in mechanical rubber goods,

coated fabric for dynamic and static cover, display fabric, seat belts etc. In

the developed countries, the share of industrial yarn (high tenacity) used for

non-tyre application is over 50 % against 10-15 % in developing countries.

As the economy grows, the share of non-tyre applications in industrial yarn

will also grow. The estimated demand for nylon high tenacity yarn and

polyester yarn is projected as follows:

Nylon industrial yarn consumption is projected to increase from 9 kilo

tons in 2006-07 to 24 kilo tons in 2011-12.

Polyester industrial yarn consumption is estimated to grow from 17

kilo tons in 2006-07 to 51 kilo tons in 2011-12.

26. In case of synthetic fibre for Technical textile fibres the demand

projections are as follows:

Table 4.10 – Demand Projections for Technical Textile Fibre

Unit – Kilo Tons

2006-07 Estimated 2011-12 Projected CARG % N6 Tyre Cord 87 121 6.9 Polyester tyre Cord 5 12 21 Nylon Industrial yarn (Non –Tyre application)

9 24 21

Polyester Industrial yarn (non-tyre applications)

17 51 27

Source –Report of Sub Group on Synthetic fibre and Intermediates

92

Synthetic Rubber

27. Globally, consumption of rubber increased from 18 million MT in 2000

to 21 million MT in 2005. Out of the total consumption of 21 million MT in

2005, consumption of natural rubber was 8.8 million MT and Synthetic

Rubber 12.2 million MT. Globally, the ratio between natural rubber and

synthetic rubber consumption was 42:58. India is a fourth largest producer

and consumer of natural rubber. Thailand, Malaysia and Indonesia are other

leading producers of natural rubber. The ratio of natural rubber and

synthetic rubber in India is 78:22.

28. The strong economic growth, which is likely to be sustained during the

XIth Plan Period, overall demand for total rubber is expected to be strong.

The auto sector which accounts for over 50% of total rubber demand, is

expected to maintain strong growth especially in the passenger carts and

commercial vehicles segments. The demand for synthetic rubber depends

on the availability of natural rubber. The Rubber Board has projected

natural rubber projection around 4% during the next two years. Based on

this and keeping the past growth on synthetic rubber, the following

projections have been made for the XIth Plan Period :

Total rubber consumption is estimated to grow at 7% annual average

growth from 1177 Kilo tons in 2006-07 to 1664 Kilo tons in 2011-

2012.

Natural rubber is projected to grow from 816 Kilo Tons in 2006-07 to

1017 Kilo Tons in 2011-12 with an annual rate of growth of 4% during

2006-07 to 2010-2011 and 5% during 2011-2012.

Synthetic Rubber is projected to grow from 361 Kilo Tons in 2006-

2007 to 647 Kilo Tons in 2011-2012. The annual average growth rate

estimated was 13% during 2006-2007 to 2008-2009 and 12% during

2009-2010 to 2011-2012.

93

Table 4.11 : Demand Projections for 11th Plan – Synthetic Rubber Unit Kilo Tons

Type 2005-06 Actual


CARG % 2006-07 to 2011-

12 Projected

PBR 80 89 149 9.0

SBR 88 80 129 8.3

NBR 20 23 40 9.7

Butyl Rubber 48 34 45 4.8

EVA 49 121 255 13.2

EPDM 10 15 28 11.0

Total 295 361 647 10.2

Source –Report of Sub Group on Synthetic fibre and Intermediates

Synthetic Detergent Intermediates :

29. The demand projections for Synthetic Detergent Intermediate – Linear

Alkyl Benzene is estimated at 6% annual average growth rate during the

XIth Plan Period. The demand growth will increase from 392 Kilo Tons in

2007-08 to 490 Kilo Tons. Throughout the XIth Five Year Plan, there is likely

to be a surplus which will be exported.

30. In Ethylene Oxide the demand projections for the XIth Plan Period is

estimated to grow at 8% annual average rate of growth. The demand will

increase from 103 Kilo Tons in 2007-08 to 141 Kilo Tons in 2011-2012.

Table 4.12 :Demand Projections for 11th Plan – Surfactant Intermediates

Units Kilo tons

Type 2005-06 Actual

2006-07 Projected

2011-12 Projected

CARG % 2006-07 to 2011-12 Projected

LAB 366 390 490 6

EO 87 96 141 8

Total 453 486 631 5.4

Downstream Plastic Processing Industry 31. There are about 22,000 plastic processing units in the down stream

industry. The total investment in the industry is Rs 40,000 crores. In 2004-

05 Indian plastic processing industry consumed 4.8 million tons of polymers.

Among the various segments namely Injection Moulding, Blow Moulding,

94

Extrusion, Injection moulding segment accounts for 30 % of the total

polymer consumption. The number of plastic processing machines installed

in 2004-05 was 65,484 nos more than 55 % of the machines are injection

moulding machines. During 2000-2005 the installed capacity on plastic

processing sector increased from 8270 kilo tons to 11167 kilo tons with a

Compounded Annual Rate of Growth of 8 %. During the same period the

average capacity of the machine increased from 179 MT to 254 MT. The low

average capacity is reducing the competitiveness of the industry. The

policies of reservation of articles for the manufacture of exclusively in small

scale sector and investment restriction, etc. have provided incentive to

remain small. The removal of quantitative restrictions on imports, placing

the imports under open general licence and the regional, bilateral and

multilateral trade agreement offered concessions on import tariffs have

reduced the investments in this sector during the last five years. Keeping the

above in view the industry projected the sector wise additional investments

needed in the down stream plastic processing sector as follow:

Plastic Recycling Industry 32. Domestic plastic industry recycles approximately 30 % of the plastic

waste. The thrust should be emphasised to maintain the recycling rate and

Sector 05-06 06-07 07-08 08-09 09-10 10-11 Total (05-11)Monolayer 232.6 150.7 203.1 242.5 284.7 323.4 1437.1Multilayer 49.1 64.1 87.5 113.4 151.8 119.3 585.1Pipes 30.9 21.7 28.2 36.5 47.9 41.3 206.4PP/HD Woven Sacks 114.4 109.0 126.5 133.0 139.7 146.8 769.3Extr. Coating 9.6 12.0 15.1 15.1 18.3 21.5 91.6PPTQ Film 1.4 9.9 5.0 7.1 4.6 5.0 33.0PVC Pipe 86.9 92.1 108.2 129.0 138.4 121.1 675.6Injection Moulding 460.8 632.3 750.8 1072.9 1335.9 1415.4 5668.1Blow Moulding 32.1 32.6 35.9 49.1 53.4 41.0 244.1Monofilaments 3.1 3.5 2.6 3.7 3.2 5.2 21.3Calendered Sh. 39.1 24.8 26.1 18.4 19.4 61.2 188.9BOPP Film 50.0 50.0 50.0 99.9 149.9 149.9 549.5Fibres & Fil. 19.6 15.7 22.5 36.2 51.7 48.5 194.1PVC Wire & Cables 0.7 1.4 1.5 1.9 2.7 3.7 11.8PVC Blown Film & Sheet 2.6 1.4 1.0 0.7 0.5 0.0 6.2Sheet Lines 6.0 6.1 5.3 8.1 16.2 21.3 63.0Other Extrusion ETC. 8.9 7.0 7.1 9.3 8.2 4.4 44.8Extrusion Overall 654.9 569.2 689.6 854.7 1037.0 1072.5 4877.9Total ** 1147.8 1234.1 1476.4 1976.8 2426.2 2528.8 10790.0Source: Industry ** Excluding Reprocessing Pelletisers

Sectorwise Addl Investments Required For Processing (Rs cr)

95

also to increase the recycling. The strategy steps involve building awareness,

effective waste management by way of government regulations in

collaboration with Municipal Corporation, industry, NGOs and government.

Evolving mechanism to collect, segregate and recycle. Identification of

appropriate technology options. Training and promotion of Centers of

Excellence in the are of plastic waste recycling.

33. Summary and conclusion

♦ Petrochemicals is one of the key industries with high value addition.

♦ China is major consumer and importers of petrochemicals and with

focus on the upstream the import dependency of China is reducing

♦ SEA and Japan who were mainly producing for China are now looking

for new markets to sell their products.

♦ Middle East due to feedstock advantage is going to be the

petrochemical hub for the World

♦ India being in middle of the Middle East and SEA becomes vulnerable.

♦ India already missed an opportunity to accelerate growth & attract

investments in the industry on account of the adverse policy

environment like accelerated tariff reduction, slow internal reforms,

infrastructural constraints, etc. . However, given low per capita

consumption, India can still become a consumption hub with focused

efforts by the Industry and Government. Otherwise, a major

opportunity will be lost.

♦ Promotional activities to attract investment, FDI for the down stream

plastic processing industry to increase value addition and export.

♦ Promotion of recycling technology and increase the recycling rate.

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To suggest ways and means of strengthening R&D

in the sector.

97

Technology and Research and Development

1. Technical Know-how is an asset of any successful industry or a

company. Technology can be used to establish a competitive advantage on a

proprietary basis or also can be licensed out as a revenue generator. But

developing technology is often capital intensive. To license the technology

optimally some companies form alliances. As in any industry, using a

technology, whether derived from research and development or technology

transfer, is key component to the development of the petrochemicals

industry globally.

2. The upstream petrochemical products are technology intensive for

which the technologies are imported from the global licensors. During the

past decade petrochemicals industry witnessed consolidation and mergers

and acquisition to remain globally competitive. The number of petrochemical

licensors has also reduced due to consolidation. The scales of operations are

also continuously increasing, which are influenced by the availability of

feedstock and its pricing, product market size and export potential. In

addition the increasing prices of crude oil and natural gas have also

influenced the development of alternate sources of feedstock. The non-

biodegradable nature of the polymers has also resulted in search for

biodegradable polymers for disposable / packaging applications. There is

renewed focus on natural products based polymers.

3. While the new Indian petrochemical plants are based on state-of-the-

art technologies, there are still some old units both in manufacturing of

polymers and synthetic fibre, which need to modernize / upgrade technology

in terms of sale of operation, conversion efficiency, energy economies,

product qualities and newer applications.

4. The downstream plastic processing and fabrication industry is

fragmented and spread throughout the country. These plants needs major

technological upgradation in the areas of scales of operation, core

processing machineries, downstream finishing equipments, tools, moulds

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and innovations in end products to meet the emerging global and domestic

market demands.

5. Currently the domestic expenditure on Research and Development in

petrochemicals sector is less than 1% of industry turnover. Industry

estimates for the turnover in processing industry is Rs 55,000 crore. The

increase in R & D Expenditure up to 2 – 3 % of the turnover needs to be

promoted through the Government, Academia and Industry initiatives.

6. New advancements have also taken place in performance plastics,

engineering polymers and specialty plastics/ elastomers. There are also

developments in advance composite materials. Developments are also

pronounced in the field of additives, master batches, alloys, blends,

compounds, composites and high grade reinforcement materials such as

glass and carbon fibers which also requires attention for technology

development. In the Engineering Plastics and Specialty Elastomers few

Global Majors have set up R & D Product Application Development Centers in

India

7. Developed countries have also started focusing on bio- and photo-

degradable plastics and replacement of additives on environmental and

healthcare concerns and master batches to reduce the processing

parameters by materials with lesser adverse impact on environment are

taking place all over the world.

8. Research and Development efforts to modernize and upgrade the

existing manufacturing process, improve the quality of existing product,

making it safe for environment and human health.

9. The emerging area in the Indian context in plastic products is

irrigation, drinking water, water management, Plasticulture applications,

infrastructure, construction, healthcare, etc. In synthetic fibre – Technical

textile both woven and non-woven and performance fibre.

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10. The future Research and Development vision of the Petrochemicals

Industry will address:

Efficiency improvement in raw material usage, energy efficiency and

reuse of recycled materials.

Process operation improvement with efficient management of supply

chain.

Environmental impacts and project viability economic should be

balanced.

Commitment to long term R & D investment and innovation.

Technology forecasting and identification of emerging technology

fusion areas.

Recycling technologies and recycled product development.

Collaborative investment in public private partnership in technology

development by Government, Academic Institutions and Industry in a

targeted R & D Initiatives which will have long term impact.

Innovative plastic processing technologies, new process technologies

for high performance polymers (green processes, etc.)

Thrust on new platforms – bio- nano sciences as enabler for improved

polymer advance materials.

R & D Thrust in Capital goods, development of moulds, dies and tools.

Development of world class R & D Centre for appropriate material /

technology. Networking of institutes / R & D institutions for integrated

research projects.

Knowledge alliances and networking. Initiative to add value to IPR

from know-how/ knowledge.

Generation & management of intellectual property rights, awareness,

development, protection and utilization and enforcement programmes.

Product application, design development centers.

11. To realize the vision A National Programme on Petrochemical

Development is proposed to be initiated during the 11th Five Year Plan. The

Programme aims to improve the existing petrochemical technology, research

in upstream and down stream sectors, particularly in the domestic plastic

processing and fabrication technology to increase value addition, quality

100

improvement and to promote the development of new applications of

polymers and plastics. The scheme will also include waste management

and promotion of recycling options, development of degradable and bio

degradable polymers and overall impact of plastics to the environment (life

cycle initiatives). In addition Department will also facilitate inclusion of

synthetic fibre sector in the Technology Upgradation fund operated by

Ministry of Textiles.

12. The major components of this Programme would be as follows:

Petrochemical Research and Development Fund

The feasibility of setting up a new scheme of Petrochemical Research and

Development Fund (PRDF) which would cater to the projects of R&D in

Upgradation and modernization of existing technology, waste management,

recycling and development of biopolymers and biodegradable polymers is

proposed to be evaluated in Public Private Partnership (PPP) Mode. This

feasibility will take into account the existing initiatives of the Government on

Technology Development and Technology Leadership in India and work out

mechanism to dovetail with the existing schemes or suggest sector specific

new initiatives. Special focus will be given to supporting research and

development in new and emerging areas of petrochemicals technology.

Plastic Development Council

Plastic Development Council under the Schedule 19 (4) of the IDR Act, 1951

will be set up. This body will be an advisory body with members from

industry, academia and the Government. This will work for a sustained

development of plastics processing sector including technology and R & D

initiatives.

Petrochemicals Competitiveness Initiatives

Dedicated plastic parks will be evaluated to promote cluster approach in the

areas of development of plastic applications and plastic recycling.

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Steps to augment the existing testing centers and promoting new testing

centers in PPP Mode to act as certifying agencies for testing plastic products

and raw materials to meet international as well as BIS standards. Feasibility

of mandating plastic products on health safety and quality aspects.

Centers of Excellence in Polymer Technology

Centers of Excellence will be set up in existing educational and research

institutions working in the field of polymers viz. National Chemical

Laboratory, CSIR, Indian Institute of Chemical Technology, Indian Institutes

of Technology, National Institutes of Technology and others established R &

D set ups. The initiative will also include setting up of new world class R & D

set ups in Public Private Partnership. These initiatives will be prioritized

and phased out during the 11th Five Year Plan:

• Alternate sources of feedstock for petrochemicals and maximizing

hydrocarbon utilization in the value addition chain for feedstock

securitization

• Updating products for new uses, extending the cycle for existing

products through modification

• Innovative product technology and product design changes.

• Improvements in the production process to make it more efficient

• Recycling process technology, innovative collection, segregation,

cleaning and development of recycled products

• Development of biopolymers and biodegradable polymers

• Product and application developments using engineering polymers/

compounds /blends /alloys

• Industrial spent water treatment for recycling.

• Quality Improvement initiatives and enforcement of quality standards

benchmarking with the international practices.

• Thrust on R & D in capital goods for plastic processing dies and mould

developments.

• Other emerging areas in the field of Petrochemicals.

• Also the development of new centres in focused areas for R&D to be

encouraged.

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Development of Bio-degradable Polymers

In view of the growing environmental concerns arising due to the non-

degradable nature of plastics, particularly carry bags, there is an urgent

need to develop biodegradable polymers. Biodegradable polymers have

also been identified as one of the core research areas under the New

Millennium Initiative Technology Leadership India (NMITLI), in the Ministry of

Science and Technology. The proposed PRDF would also fund projects for the

development of biodegradable polymers.

Development of Plastics Applications in Thrust Areas

The thrust areas will focus on resource conservation. Plastics are light in

weight and save energy in the manufacturing and transportation. It also

provides cost effective substitutes for the conventional and natural materials.

Plastics can replace high value metals or wood in various applications. It can

be used in carrying potable water, plasticulture, construction, etc.

Engineering plastics have the potential for substituting metals in high

performance applications and are used in electronics, telecommunications,

automobiles, consumer durables, and infrastructure and transportation

sector for specific industrial applications. In the construction industry also

there is a wide scope for using plastic products like door / window frames

and insulation panels. Use of geo-textiles, geo-synthetics and polymer-

modified bitumen, etc. in the transportation sector. In respect of

plasticulture there is a need to establish a linkage between the National

Committee on Plasticulture Applications in Horticulture (NCPAH). and the

proposed Plastic Development Council (PDC) which may be responsible for

over all coordination, monitoring, technology support and quality control in

the field of plasticulture. Some countries like China have made it mandatory

to use a certain percentage of plastic products in various sectors. The

feasibility of plastics usage in agriculture and other sectors with a view to

substitute the use of natural products with plastics will be examined. It is

proposed to set up an Inter-Ministerial Expert Committee under the

Department of Chemicals and Petrochemicals, which will look into the

requirement of making the use of plastics in thrust areas and make

recommendations to the concerned Ministries. This Expert Committee will be

serviced by the Plastic Development Council.

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The Tentative projection in the budget about various schemes / initiatives

proposed to be under taken during the 11th Five Year Plan are as follows:

A. Petrochemical Research and Development Fund

B. Petrochemicals Thrust Area

C. Plastic Waste Management

D. Petrochemicals Competitivness Initiatives

All these projects will be undertaken in consultation with the existing

initiatives / schemes of Department of Science and Technology, Department

of Scientific and Industrial Research.

13. Conclusion:

Research and Development Initiatives will be focused on Modernization

and Upgradation, quality standards, etc of sector to become globally

competitive and increase exports.

Research and Policy initiatives for promotion of Emerging areas,

Plasticulture, Bio-Polymers, Product and Application Developments,

Plastics in Infrastructure, construction, Alternate source of feedstocks.

Research and developments in Plastic Waste Management.

All these initiatives will dovetail the existing initiatives of the

Government in collaboration with the concerned Ministries /

Departments. The new initiatives will be on PPP Model.

The projects will be identified and monitored on a Mission Mode with a

group of experts in the field of Research and Development constituted

under the Chairmanship of Secretary focusing on the PPP Model. The

individual sector will have an institution identified in the specific area of

Research either Government R & D setups / Educational Institutes /

Accredited Institutes / Industry Institutes operating in the specific

areas under the Chairmanship of Joint Secretary. Plastic Development

Council will also act as advisory body for identification of the R & D

Projects/ Institutes.

The deliverables will be by measuring the success rate and review of

the progress, half early of the identified projects by the Expert group

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and quarterly by the Joint Secretary on the sector specific imitative.

The milestones and measurement parameters will be identified in

consultation with the Expert group.

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To assess the present status of domestic Good

Manufacturing Practice with the bench mark of international

practice and suggest measures for compliance by

manufacturers of chemicals and petrochemicals products

in the country.

106

Good manufacturing practices (GMPs)

1. Good manufacturing practices (GMPs) lie at the heart of quality. GMPs

comprise a variety of practices that ensure quality including things such as:

• raw materials quality assurance

• record-keeping of substances throughout the manufacturing process

• standards for cleanliness and safety

• qualifications of manufacturing personnel

• in-house testing

• production and process controls

• warehousing and distribution

GMPs: A more reliable means of achieving quality

2. GMPs provide quality assurances that off-the-shelf testing cannot. Off-

the-shelf testing relies upon random sampling of a very small subset of the

final product. Enormous resources must be expended to test one substance -

- testing just a few samples of each brand. These tests provide only a

snapshot-in-time view of a product's quality. Fluctuations in product quality

are slow to be discovered via such after-the-fact testing.

3. In contrast, GMPs provide continual measures of quality that can

uncover problems and fluctuations as they occur and before the product is

shipped. Thus, GMPs are a more immediate and consistent way to control

quality.

Industry GMP standards

4. Virtually every manufacturer adheres to an in-house GMP standard,

which varies from producer to producer. In-house GMPs, while often

extremely effective, do not provide a means for outside verification of

quality. In order to provide such verification, many are now embracing

industry-standard GMPs which are usually subject to an independent outside

audit for compliance.

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5. Good Manufacturing Practices currently applied to Health Care

Industry. The Petrochemicals Industry is adopting Responsive Care initiatives

which calls for companies to demonstrate their commitment to improve all

aspects of performance which relates to protection of health, safety and

environment. Industry feels that demonstration of both commitment and

improved performance is the key to maintaining and retaining public

acceptability of the Induatry.

6. Responsive Care Adoption

• Adherence to international quality management systems like ISO, DNV

certification.

• Best in-house practices 5S, clean manufacturing, Six-Sigma.

• Development and strict enforcement of quality standards as per

international practices that are a benchmark.

• Training of Personnel in the following

o Regulatory issues governing personnel, materials, equipment

and processes.

o Develop documentation such as SOPs and environmental

compliance records.

o Material handling procedures.

o Process control and process validation.

• National Conferences/Seminars focused on good manufacturing

practices to be organized by engineering societies (like IIChE).

• Globally adopted Change Management practices.

7. Conclusion

Focus Areas with Industry Input

• Revolutionizing Agriculture with Polymer Applications. Plasticulture

shall be the thrust area

• High Performance Packaging Technologies for Water and Food Security

• Safe Health Practices through Plastic Medical Accessories.

• Maximize Plastics Utilization through Recycling.

• Polymers for Energy Efficiency.

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• Innovative Plastics Processing Technologies like Solid State Extrusion,

PO micro-pellet etc

• New Process Technologies for High Performance Polymers. E.g. Green

processes, Supercritical technologies.

• Thrust on New platforms: Bio-Nano Sciences as enabler for Improved

Polymers, Advanced Materials

• Need to have a thrust on research & development in Capital Goods

for Plastic Processing & Petrochemical; industry since there is very

less R & D initiatives in this area.

• Development of Dies & Moulds is an important area where more thrust

is needed. Currently the lead time in manufacturing and long delivery

of schedules are the constraints resulting in imports of Finished

products.

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Terms of Reference 7 & 8

To assess the present employment and likely employment that

will be created ruing the 11th Plan period and in the perspective of

15 years.

To assess the human resource development need of the industry

to recommend strategy to meet the same.

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Employment and Manpower Requirement in Petrochemicals Sector

1. Trained manpower is essential for any industry to grow. Manpower

requirement in petrochemical industry is governed by industry growth in

terms of plastic material consumption. While, the Indian polymer industry is

growing, it is necessary for the downstream processing sector to grow

equally fast if the over all growth has to be sustained over the long run. For

the downstream sector, a substantial portion of which belongs to the small-

scale sector, it is important to ensure that skill and manpower availability is

not a constraint if it has to remain on the high-growth path in the years to

come

2. Petrochemical industry in 2004-05 employed 3.3 million people both in

upstream and downstream. The upstream petrochemical plants are both

capital and technology intensive with less employment intensity. The

downstream plastic processing indutry is fairlly employment intensive.

Industry estimates for the current employment and the projected

employment requirement in the downstream plastic processing industry in

2005-06 and 2011-12 is indicated in the Table 7.1. The table also includes

the the type of skill sets required to meet this rising human resource need in

the processing industry. As shown in table total direct manpower

requirement in the downstream plastic processing industry is expected to go

up from 7 lakhs in 2005-06 to over 1.3 million in 2011-12.

3. In addition, growth in the plastics sector is likely to generate indirect

employment which added to the direct employment requirement takes the

manpower requirement in the sector to ~7 million by the year 2011-12.

4. In order to meet the soaring manpower needs in the domestic plastics

sector, the infrastructure for training needs to be upgraded & expanded.

Additional centers for training in processing technology need to be established

in various parts of the country on the lines of CIPET. Also universities could be

identified for providing training in specialized areas

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Table 7.1 Man-power Requirment – Plastic Processing

within processing technology to additional persons to meet the specialized

requirements in the sector.

o Polymer Scientists/Technologists are needed at various levels.

o Polymer Science/Technology to be introduced as an undergraduate

degree program in more number of institutions.

o Only a few IITs have Polymer Technology at M.Tech/Ph.D. level.

Should be expanded to other IITs and premier academic institutes &

establish centre of excellence in existing institutions.

o Motivation of young talents to pursue Plastics / Polymer Science &

Technology at Graduate & Post Graduate Levels.

Sector 05-06 11-12 Total Skilled Semi skilled Unskilled OthersExtr : Monolayer 14640 32592 223382 13961 27923 139614 41884Extr : Multilayer 1860 7280 34520 3452 5178 17260 8630Extr : HD Pipe 812 4256 19544 1396 2792 11168 4188Extr : PP/HD Woven 4140 9720 108600 14480 14480 50680 28960Extr : Extr Coating 380 740 10000 1000 2000 4000 3000Extr : PPTQ Film 470 620 20110 2011 2011 12066 4022Extr : PVC Pipe 4428 12636 94846 5269 10538 63230 15808Injection Molding 17064 38412 364968 60828 60828 182484 60828Blow Molding 2180 4110 45455 9091 9091 18182 9091Extr : Monofilament 225 510 6883 1377 1377 2753 1377Extr : Calendered Sh. 840 1680 10920 1092 1638 5460 2730Extr : BOPP Film 420 1680 9240 660 1760 4400 2420Extr : Fibres & Fil. 216 540 4464 496 496 2480 992PVC Wire & Cables 36 51 2838 946 946 946PVC Blown Film & Sheet 126 -21 3143 449 449 1796 449Sheet Lines 130 270 3660 366 366 2196 732Other Extrusion ETC. 700 280 53331 5333 10666 21332 15999Reprocessing Pelletiser 15850 38620 193380 19338 38676 116028 19338

64517 153976 1209283 140599 191215 656076 221393Cumulative Employment 700503 136325904-05Indirect Employment Upstream 317993 681630Downstream 2384948 5112221 3.7 Million

Direct DirectManpower Required

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o R & D Carried out by Indian Scientists must be patented under current

IPR rights, Procedure must be made easy so that hard work done by

Indian Scientist should not remain un utilized.

o Continuous revision of Polymer Engineering/Science curriculum at

UG/PG levels to include emerging and advanced research areas like

nano-technology, bio-polymers etc.

5. Type of Manpower requirement by Plastics Processing

Industry

Plastics/Polymer Technologists with Research & Development Temper.

Engineers with techno-managerial & plant engineering competencies

Design & Development Engineers with CAD/CAM/CAE competencies

Plastics Processing and Quality Control Engineers

Mould Design Engineers

Mould & Machine Maintenance Engineers

Mould Development Engineers

6. The manpower requirement by the plastics processing industry may

be arranged in a hierarchical structure feeding the specific segments as

follows:

Apex Programme Level V M. Tech Industry Specific Programme Level III & IV Post Graduate Diploma Foundation Programme Level II Post Diploma ITI Trade Certificate Level I Operator Programme

In addition to this the Master Trainer Programme also needs to be organized

for the for the trainers

7. The human resource development activity is undertaken through three

tier Education system in the country comprising of development of

Plastics Technologist/Scientist (through university education system)

Plastics Engineer/ Production Engineer/ Processing Engineer or

Supervisors (through technical/vocational education institutions like

CIPET)

Mould & Die Makers/Technicians/Machine operators (through

technical-education at CIPET, Indo-German Tool rooms, NTTF, etc.

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The University education system offers Degree, Post Graduate Degree &

Ph.D. programmes in polymer/plastic technology through Institutions like,

IITs, HBTI, UDCT, Engineering colleges (around 30 institutions). CIPET has

also introduced PG Degree in Plastics Engineering/Technology in the year

2003 and encouraging responses of industry has been received by 100%

placement for first batch.

8. Besides University System, the Institutions are offering courses in

specific areas of plastics technology to impart specialised skills. These

Institutions are CIPET (15 centres across the country), IPI (All India

presence), NTTF, GTTC, IGTR, CTTC, CITD, etc., (specialized courses in tool

& die making)

9. The Diploma Level and ITI institutions offering Diploma & Plastics

processing operator trade certificate are Government and private

polytechnics (around 60 polytechnics in the country), ITIs (around 100

across the country).

CIPET’s contribution for HRD 10. CIPET, as an Institution has played significant role in providing

manpower “The Vital Input” to Indian Plastics Industry. As on date, CIPET

has developed more than 27,000 plastics professionals in various disciplines

of Plastics Engineering & Technology, since its inception. Pass outs of early

batches opted for entrepreneurship as their career option, thus created the

job opportunities for fresh students. At an average 90 to 95% aspirants

offered employment through on campus/off campus recruitment during the

year 2004-05 and 2005-06.

11. Interventions Required In order to improve the plastics education in the country, interventions of

Govt. of India is proposed through following steps :

Commitment to rebuild the education system with creation of

synergy between institute and industry, motivate young talents to

pursue plastics/ polymer science and engineering courses (Dept. of

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Chemicals & Petrochemicals as Nodal department for Plastics

Sector)

To establish Centre of Excellence in Polymer/ Plastics Technology in

existing institutions like IITs, NITs, CIPET, etc. and strengthening

S&T linkages through co-operation and networking

To grant status of Institute of National Importance/ Excellence to

CIPET, as a support to the HRD initiatives in Plastics Sector.

To meet the growing demand in technically trained manpower the

following initiatives are propose to be taken up in CIPET.

Enhancement of training capacities.

Upgradation through IT enabled training facilities.

Establishment of new CIPET centres

Strengthening Testing facilities.

Centers for advanced design and development of tool rooms.

Technology upgradation in training plant and equipment,

revision of syllabus, It enabled library etc.

R & D Programme in emerging areas.

12. Strategies : Prima facie, the nature of action required for education and training for

creation of human asset would involve the following :

o Investment in plastics and polymer education infrastructure and

faculty to increase supply of skilled professionals with relevant skills.

o Investment in plastics and polymer training institutions to upgrade

skill sets with specific reference to vocational skills & behavioral

dynamics.

o Strengthening of plastics and polymer education curriculum to include

practical knowledge, know-how and understanding of global

requirement.

o Creative funding mechanism to achieve the quality education in

plastics engineering and technology.

o Standards and bodies for setting the bench marking and to certify

skills to ensure employability.

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13. In order to implement the strategies, for HRD to meet the domestic

as well global requirements, alignment to guiding principles, consultation

between participating agencies is inevitable for effective approaches,

especially for professional and vocational education. Technical education

supports the development of the individual to engage in economic activity,

therefore, the curriculum should be responsive to market needs and

recognised world over. The skill and competence based training and

education prepares individual for the job market. The strategies to be

adopted and action areas for improving various education providers are

enumerated below :

The tentative Programme for conducting various Human Resource

Development Initiatives are as follows:

2 Weeks Faculty Development Programme on Plastics Engineering and

Technology for ITI faculty with an average intake of 20 trainers

4 weeks Orientation Training Programme on with 30 students in each

batch.

1 Week Entrepreneur awareness Programme with 30 students in each

batch.

4 weeks Entrepreneur Development Programme with 30 students in

each batch.

14.The actual expenditure depends on the location and number of

batches in each location.

15. In addition the faculty upgradation and introduction of new

courses and upgradation of existing and other initiatives need to be

identified in consultation with the respective institutes / experts in the

area under Public Private Partnership Mode. These initiatives will also

take into account the existing HRD initiatives by the Government and

dovetail with these initiatives. An Expert Group consisting of Government,

Academic Institutions, Industry experts will formulate the schemes,

deliverables, monitoring mechanism and submit to the Government in

Public Private Partnership model for approval. Tentative expenditure of Rs

5 Crore for each year during the 11th Five Year Plan.

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16. Conclusion

University/Professional Education : In Collaboration with Government/ Educational Institutions/ Industry • Enhancement in the number of Institutions and their capacity to create

requisite number of professionals by implementation of IT enabled tools.

• Increase in autonomy of existing Institutes in the field of curriculum

design, managing infrastructure and retention of faculty.

• Improve quality of education and promote relevance through modification

of curriculum, upgradation of infrastructure and faculty training.

• Financial support for internet facilities to promote familiarity and

incorporation of IT in core education.

• Provide inputs into the skill requirements for the newly trained

persons/professionals.

• Introduction of courses in the emerging areas

• Formulation of schemes to expand, develop and retain the faculty in

technical institutions.

• Networking of Institutions to optimize resources and faculty exchange

programmes.

• Enhancing quality of education, through infrastructure upgradation and

faculty training.

• Advance feed back to policy making sectors in relation to upcoming

requirement of professionals and scientific research.

• Extending facility through back ward integration for specialized human

resource development.

Skill Development Training :

• Formulating a scheme of continuing education for providing the

opportunity to employees of plastics industry to upgrade their technical

knowledge.

• Introducing flexible learning system (CBT) for knowledge upgradation.

• Facilitate and augment existing Institutes to commence e-learning

programmes.

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• Providing generous funding support to Institutes engaged in the field for

creation of infrastructure.

• Collaborate with the Institutions through Industry Institute interaction for

improving the functioning by providing knowledge and expertise.

• Facilitate inplant training of longer duration.

• Providing advanced inputs regarding skill requirement of new

professionals enabling to orient the curriculum.

****

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Terms of reference 9

To assess the need for sector specific investment

regions for the chemicals and petrochemicals

industry and to suggest measures including

institutional mechanisms to strengthen it

including investment and sources of investment.

119

Infrastructure

1. The Indian petrochemical industry has been constrained by the lack of

adequate infrastructure. Expensive and poor quality of power, inadequate

water availability, inadequate common effluent treatment facilities, poor road

and transport conditions, congested ports etc. have been identified as the

critical areas affecting the growth of the petrochemical industry. According to

the world industry, poor infrastructure is the main constraint for attracting

investments in India. In order to address the issue of quality infrastructures

the following initiatives are being proposed:-

Petroleum, Chemical and Petrochemical Investment Regions

(PCPIRs)

The Government is working out the details of Petroleum, Chemicals and

Petrochemicals Investment regions to promote investment in this sector and

make the country an important hub for both domestic and international

markets. The government is also working to attract major investment to

these investment regions, both domestic and foreign, which would have

excellent infrastructure that would provide conducive and competitive

environment for setting up businesses. These investment regions will provide

a sustained, transparent, consistent investment friendly policy and

facilitation regime that would encourage production for both domestic and

world market. These regions will provide growth engine with state-of-the-art

infrastructure and support which will boost manufacturing, augment exports

and generate employment. This integrated Petroleum, Chemical and

Petrochemical complex would reap the benefits of co-siting, networking and

greater efficiency through use of common infrastructure and support

services. The infrastructure facilities will include power, adequate water

availability, common effluent treatment facility, good quality roads, transport

and state of the art ports etc.

120

Existing Industries

For infrastructure related problems of the existing industry, the Department

of Chemicals and Petrochemicals would set up Facilitation mechanism in

consultations with the Concerned Ministries.

Plastic Parks

Government will evolve the feasibility of setting up of dedicated Plastic Parks

to promote a cluster approach in the areas of development of plastic

applications and plastic recycling. These would mainly benefit the

downstream petrochemical sector in the areas of technology development,

best practices, market development and recycling of plastic waste.

2. Suggestions & Conclusion

♦ Promotion of Investment regions with world class infrastructure which

will increase investment in the petrochemicals sector.

♦ To reduce the investment common facilities cluster approach and

dedicated plastics parks will be promoted.

♦ Plastic products are also consumed in the infrastructure developments

like wires, cables, pipes in water transportation/ management, etc.

♦ Centrally sponsored Programmes/ Schemes like Urban Renewal,

Bharat Nirman will consume plastic products.

♦ Synthetic fibre as geo textiles can find application in roads &

Highways.

121


To make such other recommendations as are considered by the

working group appropriate, to make the Chemicals &

Petrochemicals industry internationally competitive at the

earliest.

122

Industrial Policy

1. Petrochemical sector is deregulated/de-licensed. The items, which

require compulsory licenses, are hydrocyanic acids and its derivatives,

Isocyanates and di-isocyanates & Phosgene and its derivatives. The license

is required for manufacture of above products due to their hazardous nature

and for safety considerations.

2. There is no sectoral cap for Foreign Direct Investment (FDI) in

petrochemicals. 100% FDI is generally permitted through automatic route

except for proposals requiring compulsory licensing, foreign investment of

more than 25% in equity capital of a company manufacturing items reserved

for small-scale sector, foreign companies having previous technology

transfer/financial collaboration and proposals relating to acquisition of

existing shares in an Indian company. Foreign Investment Promotion Board

(FIPB) approves these proposals on a case-to-case basis.

3. 100 % Foraging Direct Investment is generally permitted in case of

trading companies for the following activity

Exports

Bulk Imports with Exports / Ex-bonded warehouse

Cash and carry Whole scale trading.

4. Petrochemical products are imported freely under Open General

License (OGL).

5. 84 Articles of Plastic products are reserved for manufacture in Small

Scale Sector. Any investor proposes to manufacture items reserved for SSI

may have to under take 50 % Export obligation. The current investment limit

for SSI unit is Rs 5 crore

123

6. Issues Projected by the Industry in the Sub-Groups for

achieving the Growth

Petrochemicals:

Early announcement of National Policy on Petrochemicals.

Setting up of Plastic Development Council with members of this group as

members.

Setting up of Technology Upgradation Fund for Petrochemicals on the

patern of Textiles (T.U.F.)

Rationalisation of Central Excise Duty on Polymers & Plastic Articles from

16% to 8%.

Rationalisation of VAT on Plastic Articles from various slabs to uniform

4%.

Awareness Programme on use and disposal of Plastics – Know Plastics.

Phasing out of 100% Jute Monopoly for packing food grains and sugar

under JPMA Act, 1987.

Mandatory use of BIS specifications both for domestically

produced/imported articles of Plastic in place of voluntary use.

Export incentives to Plastic Processing, Raw material, Machinery sector.

Incentives to raw material and machinery sector maximize domestic

consumption.

Fiscal benefits to SMEs in Plastic Processing Sector.

Creation of Plastic Parks.

Import tariff on key petrochemical inputs including catalysts, capital

goods, Naphtha and Propane be reduced to nil.

The issue of removal of sales tax on deemed exports be taken up by the

Ministry of Finance, Government of India with the State governments for

changing the existing sales tax regulations in states required to make

deemed exports tax free.

CST needs to be abolished as implementation of VAT has made it

redundant.

Like crude oil, natural gas and Naphtha be included in the list of “declared

goods” under CST Act and be taxed at uniform 4% or 4% uniform VAT be

applied if CST is abolished.

124

Withholding tax on interest on foreign currency borrowings made by units

located in Special Economic Zones as well as developers of Special

Economic Zones be abolished.

“All types of Plastics Processing Machinery” be included under the Focus

Product Scheme, ( new scheme recently announced by Dept. Commerce)

which would not only increase the export of these machines but also add

to the employment in this industry.

Synthetic fibre

Excise duty structure across all fibers and through out the chain needs to

be rationalized by the first year of the XIth Five Year Plan (2007-2008).

This step is needed as 75% of the Synthetic Fibers are consumed by the

economically weaker sections of the society.

There is a potential to generate additional employment of ten million

people. If the targets as set up by textile industry are achieved.

In the trade agreements both bilateral and multi lateral agreements,

adequate steps to be taken to protect the domestic textile industry. The

rules of origin should be stricter without any dilution for the trading

partner and avoid inverted duty structure.

The non availability of the technology Upgradation fund for the synthetic

fiber industry is creating distortion between synthetic fiber industry and

textile industry, which needs to be corrected.

The synthetic fiber manufacturing machinery import duty needs to be

reduced to 5% and excise duty on such machineries, spare parts,

equipments etc. should be reduced to 8%.

Technical Textiles

Encourage investments in High Performance Yarn by extending

Technology Upgradation Fund.

Regulatory framework in use of technical textiles to be put in place for

the following areas :

o Geotextiles for road construction.

125

o Fire retardant textiles in public places (exhibitions hall, cinema hall

etc.)

o Airbag in Passenger Cars.

o Non-woven disposables in health care.

Create awareness – benefits of Technical Textiles particularly in

Agriculture.

Creation of Standards for Technical Textiles to ensure strict performance

and safety of users.

Rationalization of duty structure across the value chain to eliminate

anomalies and accumulation of Cenvat.

Partnership programs for Education and Training to build Application

Engineering Resource.

7. In case of biodegradeable plastics, the following initiatives are

proposed :

• To set up a centre for study of polymer degradation and life cycle

analysis in a well reputed institution to systematically explore all

facets of polymer usage and its impact on the environment.

• Set up basic testing facility in one or two locations for certifying the

bio or environmental degradability of materials for defined end

applications. Here NCL is willing to play a lead/catalytic role in helping

set up facilities.

• Develop and establish Indian standards for testing and evaluating of

degradability of polymers (bio and environment) and provide hands

on training to representative of industry for the same.

• BIS should constitute a committee on biodegradability and bio

polymers and adopt such standards.

• Conduct training and awareness programs on all aspects of bio and

environmental degradation of polymers and lifecycle analysis.

8. Recycling and Waste Management :

The potential and the aim to increase the consumption of plastic must

also devote attention to issues relating to plastic waste disposal and its

126

effect on environment. Plastic are recyclable per-say. It is the littering habit

which creates waste management problem. To avoid such environmental

problem concerted efforts by the Government, industry and non-

Governmental organizations are required for bringing awareness about the

proper disposal of plastic waste and for developing suitable mechanism for

systematic waste collection and recycling. The different techniques involved

in waste management are reduced – source reduction; reused – multiple use

of products; recycle - mechanical recycling and recover – feedstock and

energy. The recycling of plastic increase the value addition to waste. For

easy separation and segregation the marking of polymer type as per BIS

specifications should be made mandatory. In case of mixed plastic waste

alternate technologies need to be evaluated/implemented. Wherever there

is a cluster of industrial units manufacturing plastic products a recycling

park/zone could be developed with financial incentive. As already large

number of units which are recycling plastic waste needs to be upgraded and

modernized in their technology of operation. All these measures should

involve the active participation of producers, intermediate industrial units

using these plastic materials, consumers, local Governments, NGOs and

Central Government initiatives in a shared responsibility model.

9. Human Resource Developments:

In order to implement the strategies, for HRD to meet the domestic as well

global requirements, alignment to guiding principles, consultation between

participating agencies is inevitable for effective approaches, especially for

professional and vocational education. Technical education supports the

development of the individual to engage in economic activity, therefore, the

curriculum should be responsive to market needs and recognised world over.

The skill and competence based training and education prepares individual

for the job market.

^^^^^^^

1

VOLUME II

REPORTS OF Sub-group on Petrochemicals

CONSTITUTED BY DEPT. OF CHEMICALS & PETROCHEMICALS, GOVT. OF INDIA

WORKING GROUP ON CHEMICALS & PETROCHEMICALS FOR THE 11TH FIVE YEAR PLAN

Government of India

2

CONTENTS

Preface

1. EXECUTIVE SUMMARY........................................................................10

2. GROWTH DRIVERS FOR THE ECONOMY ..........................................14

2.2. Employment.......................................................................................14

2.3. India’s Potential.................................................................................17

2.4. Plasticulture & Water Management .................................................19

2.5. Resource Savings Through Micro Irrigation...................................21

2.6. Plastics & Natural Resource Conservation.....................................30

2.7. Energy Conservation ........................................................................33

2.8. Energy Savings Through Plastics Usage........................................34

2.9. Infrastructure.....................................................................................44

2.10. Summary & Conclusion ................................................................45

3. GLOBAL SCENARIO OF PETROCHEMICALS ....................................47

3.1. Growth of Global petrochemical Industry.......................................47

3.2. Global demand supply situation......................................................50

3.3. Shift of Industry from WOS to EOS .................................................51

3.4. Dominance of China .........................................................................52

3.5. Emergence of Middle East................................................................54

3.6. Impact on operating rates ................................................................58

3.7. Summary and conclusion.................................................................59

4. OVERVIEW – INDIAN PETROCHEMICAL INDUSTRY.........................60

4.1. Economic Reforms & Indian Petrochemical Industry....................60

4.2. Perspective on the Petrochemical Industry....................................61

4.3. Development of Indian Petrochemical Industry .............................63

3

5. CURRENT STATUS OF INDIAN PETROCHEMICAL INDUSTRY ........66

5.1. Background .......................................................................................66

5.2. Crackers.............................................................................................66

5.3. Plastics...............................................................................................67

5.4. Task force on Petrochemicals .........................................................69

5.5. Performance of the Plastics Industry During 10th Five Year Plan71

6. DOWNSTREAM PLASTIC PROCESSING INDUSTRY.........................76

6.1. Current Status of the Processing Industry .....................................76

6.3. Plastics Recycling Industry in India ................................................79

7. R & D, MANPOWER & OTHER ISSUES ...............................................83

7.1. R & D ..................................................................................................83

7.2. Manpower Requirement in Processing Sector ...............................83

7.3. Jute Packaging Material Act (JPMA) ...............................................85

7.4. Summary & Conclusion....................................................................86

8. DEMAND PROJECTIONS .....................................................................87

8.1. Polymers ............................................................................................87

8.2. Ethylene .............................................................................................88

8.3. Downstream Plastic Processing Industry.......................................91

8.4. Summary & Conclusions..................................................................92

9. FEEDSTOCK ISSUES ...........................................................................94

9.1. Feedstock Availability.......................................................................94

9.2. Feedstock Pricing .............................................................................97

9.3. Summary & Conclusion....................................................................99

10. POLICY ISSUES & SUBMISSIONS .................................................100

10.2. Fiscal Issues ................................................................................100

4

10.3. Petroleum Chemicals & Petrochemicals Investment Regions (PCPIR) 107

10.4. Export Promotion Measures.......................................................109

10.5. Facilitative Policy Environment – Pre-requisite to Sustained High Growth ...............................................................................................115

10.6. Summary & Conclusion ..............................................................116

5

Tables Table 1: Plastic Processing Industry in India vis-à-vis China..................17 Table 2: Projected Area Coverage of Micro Irrigation for 11th Five-Year

Plan Period............................................................................................21 Table 3: Water Savings in Micro Irrigation ................................................22 Table 4: Electricity Savings Through Micro Irrigation ..............................23 Table 5: Reduction in Annual Energy Requirement Using Micro Irrigation

................................................................................................................24 Table 6: Cumulative Energy Savings Using Micro Irrigation ...................24 Table 7: Annual Fertilizer Requirements – Conventional Irrigation ........25 Table 8: Micro Irrigation to Reduce Govt.’s Subsidy Burden...................26 Table 9: Adoption of Micro Irrigation to Generate Significant

Employment Opportunities..................................................................27 Table 10: Adoption of Micro Irrigation to Increase Revenue to Farmers 28 Table 11: Yield Improvement Using Drip Irrigation...................................28 Table 12: Summary of Benefits from Adoption of Micro Irrigation..........29 Table 13: Cross-country Comparison of Forest Cover.............................31 Table 14: Projected Wood Consumption in India......................................32 Table 15: Gains from Plastics Use in Furniture & Profile.........................32 Table 16: Comparison of Plastic Sacks With Jute & Paper......................36 Table 17: Energy Savings in Plastic Milk Pouches ...................................37 Table 18: Energy Savings in Packaging Lube in HDPE Cans ..................38 Table 19: Fuel Savings Using Plastics in Automobiles ............................40 Table 20: Energy Savings by Using Plastic Pipes ....................................41 Table 21: Energy Savings in Replacement of GI/CI Pipes by PVC Pipes 42 Table 22: Energy Savings Using PVC Window Profiles ...........................43 Table 23: Global Capacity Addition............................................................50 Table 24: Global Demand Supply – Polymers (Commodity Plastics)......51 Table 25: Incentives for Petrochemical Industry in ASEAN & Middle East

................................................................................................................54 Table 26: Ethane Price in GCC Countries..................................................55 Table 27: Ethylene Cracker Capacities - India...........................................66 Table 28: Indian Plastic Industry Snapshot...............................................67 Table 29: India Vs World Capacity .............................................................68 Table 30: Task Force Forecast (2001-02) ...................................................69 Table 31: Polymer Demand-Supply Balance 2005-06 – India...................70 Table 32: Polymer Demand Elasticity ........................................................71 Table 33: Petrochemical Capacity Addition During 9th & 10th Plan .........71 Table 34: Demand for Petrochemicals during 9th & 10th Plan ..................73 Table 35: India’s Polymer Trade During 9th & 10th Plan ............................74 Table 36 : Downstream Plastic Processing Industry Status – 2004-05 ...76 Table 37 : Processing Capacity Addition 2001-05.....................................77 Table 38: Plastics Recycling Industry in India ..........................................79 Table 39: Manpower Requirement in Plastic Processing Sector.............84 Table 40: Demand Projections for Polymers.............................................87 Table 41: Cracker Requirement Projections..............................................91 Table 42: Additional Investment Requirement in Plastic Processing

Sector ....................................................................................................92 Table 43: Naphtha Availability in India (MMT) ...........................................94 Table 44: Imports & Exports of Naphtha (MMT) ........................................94

6

Table 45: Projected Refinery Capacity Additions (MMT)..........................95 Table 46: Gas Production & Availability for Petrochemical Industry ......95 Table 47: Naphtha Exports from India .......................................................98 Table 48: Cross-country Comparison of Tariff for Polymers.................101 Table 49: Existing & Proposed Import Tariffs - Key Polymer Inputs.....102 Table 50: Cross-country Comparison of Levies on Domestic Sales.....103 Table 51: Impact of ED Reduction from 16% to 8% on Govt. Revenue .104 Table 52: Import of Chapter 39 Products.................................................110 Table 53: World Imports of Key Plastic Products ...................................110 Table 54: Imports of PE Sacks & bags in to the US................................112 Table 55: Scenario 1 -Polymer Demand Projections in an Improved

Policy Environment ............................................................................115 Table 56: Scenario 2- Polymer Demand Projections if Existing Policy

Environment Continues .....................................................................116

7

Charts Chart 1: Footwear Exports from China...........................................................16 Chart 2: Toy Exports from China....................................................................16 Chart 3: Share of Working Age Population in Total Population......................18 Chart 4: Size of Income Groups (Million Households) ...................................19 Chart 5: Population & Per Capita Water Availability.......................................20 Chart 6: Share of Forest Cover in Total Area.................................................30 Chart 7: Global Chemical Market ...................................................................47 Chart 8: Petrochemical Value Addition ..........................................................48 Chart 9 : Global Polymer Demand .................................................................49 Chart 10: Share of EOS in Global Capacity ...................................................52 Chart 11: China’s Polymer Demand & Imports (kT) .......................................53 Chart 12: Ethylene Capacity (kT) in the Middle East......................................55 Chart 13: Ethylene Production Cost...............................................................56 Chart 14: Distribution of C2 Capacity (kT) by Type of Feedstock ..................57 Chart 15: Regional distribution of New Ethylene Capacity 2005-09 (kT) .......57 Chart 16: Share of Middle East in Global C2 Capacity Expected to Rise ......58 Chart 17: Global Ethylene Operating Rates (%) ............................................59 Chart 18: Petrochemical Chain ......................................................................62 Chart 19: Advantages of Using Plastics for Packaging ..................................63 Chart 20: Ethylene and Paraxylene Capacity buildup India ...........................64 Chart 21: Polymer Capacity Buildup India .....................................................65 Chart 22: World per capita plastic consumption.............................................65 Chart 23: Average Cracker Size (Kta) in India ...............................................67 Chart 24: GDP Vs Polymer Growth................................................................70 Chart 25: India’s Trade in Polymers...............................................................74 Chart 26: Output per Unit in Processing Industry...........................................78 Chart 27: High Tax Incidence on Plastic Products.........................................79 Chart 28: Polymer Consumption in India & China..........................................85 Chart 29: Region-wise Ethylene Projects 2005-11.........................................89 Chart 30: Ethylene Projects Feedstock-wise 2005-11 ...................................89 Chart 31: Projected Ethylene Demand-Supply Gap (kT) - India ....................90 Chart 32: Import Tariff (%) on Polymers ......................................................101

8

Preface Indian economy has come a long way since the initiation of economic reforms in 1991. A decade and half of economic reform and globalisation is yielding returns cutting across income groups. Growth of the economy has accelerated along with higher growth in industry and services sector. As the 10th Five Year Plan nears its end and the beginning of the 11th Plan period draws near, it is important to focus on the areas where progress during the current plan period has fallen short of expectations. In the coming years, if India has to sustain the tempo of rapid growth then the following areas would need focused attention where significant improvement is called for. Agriculture: Enhancing agricultural productivity to meet growing demand for food and achieving food security for the entire population is one of the key objectives facing the country. Improving post-harvest handling and packaging to improve delivery efficiency by reduction of wastages is a key challenge. Plastics are vital inputs in all these areas and only through increased plastics usage can these targets be achieved. Plastic pipes, films, drip systems for micro-irrigation projects, packaging films, crates for handling and storage, etc. can improve agricultural productivity significantly and contribute to food security in India. Infrastructure: According to the World Bank, improvement of infrastructure will be a key determinant of sustainability of high growth in India. Improving urban infrastructure, water distribution systems and sewerage systems, building roads, ports, and airports and other components of infrastructure can be made possible by increased use of plastics in the form of plastic pipes, profiles, geo-textiles etc. Public Health: Role of plastics in helping enhance public health infrastructure is evident the world over. Plastic syringes, blood bags, drip pouches, etc. are central to any health infrastructure. The rural health infrastructure needs to be significantly improved in India and plastics would play a key role in the process. Conservation: Across the globe, plastics play a major role in the process of conservation of natural resources like wood, minerals, etc by providing a cost-effective and environment-friendly alternative to natural resources. Expanding India’s forest cover being one of the key targets at the national level, plastics are likely to play a pivotal role.

Employment: Generating employment opportunities is key to the concept of “inclusive growth” – one of the priority areas for the Government. Plastics can play a key role in realizing this objective.

9

The plastic industry in India currently provides employment to 3.3 million people (direct and indirect) and has the potential of generating additional 3.7 million jobs in the coming years if the sector’s growth is nurtured with appropriate policy and suitable policy support which facilitate development of this industry. With the adoption of micro-irrigation, which depends substantially on plastic pipes, drippers, and mulch film. Additionally, 17 million people would be employed in the rural sector. Among all the petrochemicals, use of plastics encompasses every sphere of life. Today Plastics find major applications in a wide array of sectors. Some of the key applications are packaging for preservation of food articles and medicines, moulded industrial and household items including furniture; electrical, including appliances and white goods; Electronics both entertainment as also Computer Hardware; Telematics. It also has wide usage globally in transportation of liquids and Gas through pipelines and in construction industry for Doors, Windows and conduit pipes.

Environment: Lack of awareness about plastics and appropriate mechanism for segregation of biodegradable and non-biodegradable waste has often resulted in incorrect public perception of the role plastics play in modern day life. In the words of eminent scientist Dr R A Mashelkar, “Plastics are seen as a nuisance when they are littered. They have high visibility. I do not think we can blame plastics for this. We need to learn to use and reuse plastics more judiciously. Fortunately, India is one country where the plastics recycle industry is well developed. Secondly, it is often forgotten what would have been consequence of using alternative materials such as aluminium in lamitube or tin for containers. Apart from the low weight of plastic, the design options such as multi layer extrusion have further helped us to bring down the materials requirements for specific end use. I think there is a need to educate public at large regarding the merits of plastics vis-à-vis alternative options. Finally, plastics offer a very diverse range of properties and it is for us to decide were widely used in the medical sector in disposable applications. But with the growing realization of the costs of disposing off these disposables, there is a growing trend to use materials which can be sterilized and reused. Once again, engineering plastics, which can be sterilized and reused have proven to be an alternative to glass.” As a sector, plastic industry have received little attention of policymakers and major part of its immense growth potential, which can bring concomitant benefits to the economy at large in terms of generating additional employment, resource conservation etc., remains untapped. It is time that cognizance is taken of the critical role it can play in India’s growth and development and the sector is provided with a policy environment conducive to growth.

10

1. Executive Summary

1.1. Petrochemical industry plays a vital role in economic growth & development

1.2. Indian petrochemical industry has been one of fastest growing sectors

in the country. During the 1990s this sector was growing at 1.5-2.5 times of GDP.

1.3. Growth drivers for the economy

1.3.1 The downstream plastic processing sector is highly labour-

intensive which currently provides employment to 3.3 million people.

1.3.2 It has the potential to generate 3.7 million new jobs by 2011-

12.

1.3.3 Plastics can also boost agricultural growth from the existing level of only 2% through plasticulture and can reduce losses and wastages through packaging of agricultural produce saving Rs 23,000 crores annually.

1.3.4 Plastics can play a key role in the implementation of the

Government’s schemes like “Bharat Nirman” and “Rajiv Gandhi National Drinking Water Mission” for rural development and housing and universal access to potable water in India.

1.3.5 Plastics play a vital role in providing low cost Medicare:

disposable syringes, blood bags etc. Key for national health where affordability is key.

1.3.6 In addition, increased usage of plastics brings substantial

ecological benefits through resource conservation and its energy efficiency compared to traditional materials.

1.3.7 Recognising the economic benefits and employment potential of

the downstream sector, China had first developed the plastic processing sector.

1.3.8 Today compared to India’s exports of US$ 1 billion, China –

largest exporter of plastic products globally - exports plastic products worth US$ 18 billion.

1.3.9 India has similar potential, which can be realized with support of

the Government.

11

1.4. Global petrochemical Scenario

1.4.1 Globally, petrochemicals epicentre has shifted from the West of

Suez (WOS) to East of Suez (EOS), which has emerged as the production and consumption centre for petrochemicals.

1.4.2 China is major consumer and largest importer of petrochemicals

but thrust on upstream the import dependency of China is reducing

1.4.3 Middle East, due to feedstock advantage, is fast emerging as

the petrochemical production hub for the world.

1.5. Current Status of the Indian Petrochemical Industry

1.5.1 Demand growth for petrochemicals has significantly slowed down in the last 4 years.

1.5.2 Forecasts made by the Task Force on Petrochemicals in 2001-

02 have not fructified as demand growth for petrochemicals decelerated in the last 4/5 years.

1.6. Downstream Plastic Processing Industry

1.6.1 Downstream plastic processing industry is extremely

fragmented & operating with outdated technology, which is inhibiting its international competitiveness.

1.6.2 As a result, India’s share in world trade in plastic products

continues to remain insignificant 1.6.3 Imports of plastic products from China and Thailand in to

India have increased rapidly in recent years due to non-availability of quality plastic products in the country.

1.7. R & D Manpower & Other Issues

1.7.1 Special attention is required for meeting the rising manpower

needs of the plastic processing industry.

1.7.2 A Technology Upgradation Fund (TUF) needs to be put in place for technology upgradation in the plastic processing sector.

1.7.3 JPMA to be abolished in the interest of the Indian economy. 1.7.4 Creation of plastic parks will go a long way in developing

international competitiveness of the downstream sector.

12

1.8. Demand Projections

1.8.1 If policy environment improves, demand for polymers has the potential to reach 12.5 MMT by the end of the 11th Five-Year Plan growing at a CARG of 18%.

1.8.2 The above translates to an Ethylene equivalent deficit of ~5

MMT by 2012 necessitating commissioning of 5 additional crackers of 1 MMT average size with investments of US$ 8 billion (~Rs 40,000 crores).

1.8.3 To keep in sync, ~US$ 6 billion (Rs 30,000 crores)

investments would be required in the downstream plastic processing sector by 2011-12.

1.8.4 The fructification of the massive investments in the

petrochemicals sector is possible only if the policy environment improves so as to facilitate fresh investments.

1.9. Feedstock Issues

1.9.1 Refineries in India produce adequate amount of Naphtha for

meeting feedstock requirement of the petrochemical industry, which is expected to increase significantly as new refinery capacities are added.

1.9.2 Availability of gas for use as petrochemical feedstock is limited

as meeting demand from the fertilizer and power sectors are given priority.

1.9.3 Despite adequate availability, the inverted duty structure on

account of the 5% import duty on crude oil encourages refineries to export Naphtha rather than selling it domestically.

1.9.4 To ensure steady Naphtha supply to domestic petrochemical

industry, it is necessary to eliminate duty on crude oil (or to treat Naphtha supply to domestic petrochemical industry as deemed exports).

1.10. Policy Issues & Recommendations

1.10.1 Early announcement of National Policy on

Petrochemicals. 1.10.2 Setting up of Plastic Development Council with members of

this group as members 1.10.3 Setting up of Technology Upgradation Fund for

Petrochemicals similar to Textiles.

13

1.10.4 Awareness Programme on use and disposal of Plastics – Know Plastics

1.10.5 Mandatory use of BIS specifications both for domestically produced/imported articles of Plastic in place of voluntary use

1.10.6 Creation of Plastic Parks 1.10.7 Export incentives to Plastic Processing, Raw material,

Machinery sector 1.10.8 Incentives to raw material, and machinery sector maximize

domestic consumption 1.10.9 "All types of Plastics Processing Machinery" be brought

under the Focus Product Scheme, which would not only increase the export of these machines but also add to the employment in this industry.

Fiscal benefits for petrochemical sector

1.10.10 To accelerate demand growth, excise duty on polymers and articles of plastics needs to be reduced from the existing 16% to 8%. The resultant decline in Government revenue estimated at ~Rs 2477 crores over 3 years is insignificant compared to the 3.7 million additional employment created due to the excise reduction.

1.10.11 A uniform 4% VAT be applied for polymers and all articles of plastic across states.

1.10.12 Phasing out of 100% Jute monopoly for packing food grains and sugar under JPMA Act, 1987.

1.10.13 Import tariff on capital goods to be reduced to nil 1.10.14 Import tariff on key petrochemical inputs - Naphtha used for

Petrochemicals other than polymer and Propane be reduced to nil.

1.10.15 Import tariff on catalysts used in petrochemicals to be reduced to nil

1.10.16 Redressal of the issue of sales tax on deemed exports making deemed exports tax-free.

1.10.17 CST needs to be abolished as implementation of VAT has made it redundant.

1.10.18 Like crude oil, natural gas and Naphtha be included in the list of “declared goods” under CST Act and be taxed at uniform 4% (or 4% uniform VAT be applied if CST is abolished).

14

2. Growth Drivers for the Economy 2.1.1. Consumption of plastics has shown a strong correlation with economic

growth validated with data on global plastics demand and world GDP growth for 2 decades. It is widely acknowledged globally that rising disposable income and population are the prime drivers of growth of plastics industry.

2.1.2. Plastic demand is derived demand and results from overall development of the economy. Plastics play important role in Agriculture, Infrastructure, retails, white goods and other basic Industry.

2.2. Employment

2.2.1. As the economy shifts from agriculture base to manufacturing base plastic processing has great potential to generate employment for unskilled labour.

2.2.2. In 1990, India and China had almost the same GDP per capita. Since

then, driven by its manufacturing sector which has a share of 37.3% in Chinese GDP (share of industry in China’s GDP is ~53% while the same for India is ~27%), China’s economy has grown much faster than India’s.

2.2.3. The difference between the two economies has widened over the

years, to a large extent on account of stagnating manufacturing sector in India.

2.2.4. To achieve faster rates of economic growth, India urgently needs to

strengthen its manufacturing sector. Discovering and applying the lessons in China’s success can be an effective way to do so.

2.2.5. China has leveraged its manpower strength to become the

manufacturing hub for the plastics across the world and currently exports $18 Billion processed plastics compared to India’s $1 Billion.

2.2.6. China has realized the importance of plastic in growing the national

economy and has adopted a strategy for energy conservation by use of plastics.

2.2.7. Generation of adequate employment for the population is a necessary

condition for sustained economic growth. China is largest importer of the polymers across world and has focused on the downstream development requiring less capital and generating huge employment.

2.2.8. Plastic industry in India currently provides employment to 3.3 million

people (direct and indirect) and has the potential of generating additional 3.7 million jobs in the coming years if the sector’s growth is

15

nurtured with appropriate policy and suitable incentives which facilitate development of this industry.

2.2.9. The Chinese Experience

2.2.10. China’s growth was brought about by a well-executed series of reforms

undertaken by the Chinese government. Five key elements of these reforms were as follows.

(1) Reduction and simplification of indirect taxes which were

reduced from over 30 per cent in 1994 to a VAT of 17 per cent currently

(2) Creation of an environment that fosters high labour productivity through liberal labour laws and through absorption of best practices from foreign-invested companies

(3) Creation of Special Economic Zones (SEZs) that have acted as a major magnet for investments (domestic and foreign) due to their investor friendly environment, their world-class infrastructure, the fiscal benefits they offer and the fact that they offer access to the large Chinese domestic market;

(4) Maintenance of low interest rates to stimulate investment. 2.2.11. These policies can be replicated in India and could lead to the revival

of its manufacturing sector. Moreover, reviving India’s manufacturing is not merely possible but also is urgently needed, as India needs to create a large number of manufacturing jobs to absorb the large increase in workforce expected by 2012. If India does not act immediately, the manufacturing sector could decline even further in the near future.

2.2.12. China had realized the above long ago and its development strategy

for the plastics sector had began with the development of the relatively labour-intensive downstream plastic processing industry.

2.2.13. Emulating China: Aggressive Exports of Value-added Articles of

Plastic 2.2.14. India needs to emulate the example of China in transforming the plastic

industry as an engine of growth for the economy as a whole. Today, China is the largest importer of plastics raw materials, importing almost 50% of its consumption and also the largest exporter of value added plastic products.

2.2.15. Today, China is the largest exporter of several articles of plastic like

footwear, toy, plastic bags, etc. As shown in chart 1, China, with a share of 50% in global exports of footwear, exported 5.88 billion pairs of shoes in 2004 valued at over US$ 14 billion.

16

Chart 1: Footwear Exports from China

2.2.16. Today, China commands 70% share in the world toy market. Exports of toys from China has grown at an average rate of 12.1% in the past 9 years, and in the year 2004 toy exports from China crossed US$ 15 billion.

Chart 2: Toy Exports from China

17

2.2.17. Annually China exports 18 MMT of processed articles of plastic, which enables it to capture tremendous value and adds to the growth momentum of the Chinese economy.

2.2.18. Downstream Plastic Processing Industry: China & India

2.2.19. A comparison of the downstream plastic processing industry in China

and India presents a picture of stark contrast. As shown in table 1, the processing industry in China consumes 40 MMT polymers (virgin plus reprocessed) annually while the same for India is only 5.6 MMT – about one-seventh that of China.

Table 1: Plastic Processing Industry in India vis-à-vis China

2.2.20. The value of India’s annual exports of plastic products is ~US$ 1 billion

which is miniscule compared to the same in China of US$ 18 billion as table 1 shows.

2.2.21. In order to stimulate plastics industry growth, India needs to emulate

China in aggressively pushing exports of plastics product and the policy environment needs to be conducive to growth to realise India’s full potential in the plastic industry.

2.3. India’s Potential 2.3.1. Rising Disposable Income in India 2.3.2. After pursuing the agenda for economic reforms for a decade and half,

the Indian economy today is on a high growth trajectory on account of the sustained rapid growth in the services and industry sectors. As a result, the economy witnessed upward mobility of the various income groups with higher disposable income.

2.3.3. In addition, with the economy becoming increasingly globalised,

aspirations of the Indian consumer are on the rise, which coupled with increasing disposable income of the people is fueling demand for various goods and services. India’s population of 1.1 billion people is second highest in the world after China provides a tremendous market opportunity.

Unit India ChinaPer Capita Plastic Consumption Kgs 5 24Resin Consumption in Processing Sector (including reprocessed) MMT 5.6 40

Exports of Processed Articles of Plastic USD bn 1 18

18

2.3.4. India’s Demographic Advantage

2.3.5. India has a unique advantage in terms of demography, which is likely to complement economic growth. While demographic trends in other key economies like Brazil, China, Russia and G6 show a decline in the share of working age population i.e. population in the age group of 15-60 years, in total population over the period 2005-2030, the same for India is predicted to rise as chart 3 shows.

Chart 3: Share of Working Age Population in Total Population

2.3.6. The above, in turn, implies that in contrast to the greying population in

the key economies which is ultimately expected to lead to a shortage of workers in the long run, India with its growing working age population would not be constrained by any shortfall in terms of manpower and would be able to sustain its growth momentum over a longer term.

2.3.7. Chart 4 shows the size of the various income groups in India in terms

of the number of households. As shown in the chart, the sizes of the income groups for which the ratio of consumption expenditure to total income are very high viz. Upper-middle, Middle and Lower-middle income groups, are increasing over the years and are likely to continue in the coming years as well. The upward movement of households is likely to result in higher consumption expenditure and thereby adding to the growth momentum.

54

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66

68

70

72

7420

00

2005

2010

2015

2020

2025

2030

India Brazil ChinaRussia G6

Source: IMF

19

Chart 4: Size of Income Groups (Million Households)

2.3.8. With its applications in the key sectors of the economy including agriculture and infrastructure, plastics can play a key role in India’s growth and achieving India’s development targets. Increased use of plastics in these sectors can successfully address the challenges in those sectors and simultaneously contribute significantly to economic growth by generating additional employment opportunities and conserving the country’s resources.

2.4. Plasticulture & Water Management

2.4.1. India accounts for ~16% of global population and ~30% of livestock but

only 4% of global water resources. India today faces the formidable challenge of achieving water & food security - a key step towards the Government’s objective of poverty alleviation in the country.

2.4.2. The World Bank has estimated that demand for fresh water would rise

to about 105 bn cu mts by 2025 from the current level of around 75 bn cu mts. However, projections for the future reveal declining per capita availability of water as the population continues to grow as shown in chart 5.

85

54

208

6

55

76

36

17

20

27

76

65

29

46

1995-96 2004-05 2014-15

Household income classes (USD p.a.)

Rich: > 3775

Upper Middle: 2830 -3775Middle: 1887- 2830

Lower Middle: 943 -1887Low: < 943

Source: NCAER

20

Chart 5: Population & Per Capita Water Availability

2.4.3. As per estimates made by the World Water Council, a third of Indian

population is likely to face acute water scarcity condition by 2025. Hence, efficient management of water resources with minimal wastage is critical for avoiding the impending water crisis in the country.

2.4.4. Plasticulture is essentially the use of plastics in water management,

agriculture and allied areas, which results in the following.

a) Productivity improvement – improvement in quality and quantity of agricultural produce. b) Stretching the available land and water resources for agricultural production. c) Improvement in pre and post-harvest operations.

2.4.5. Plastic greenhouses and low tunnels provide favourable microclimate

for crops and optimise crop yield. Usage of greenhouses makes it possible to provide the right micro climate for crops even during off-season, thereby, ensuring perennial supply round the year. This increase in crop availability through out the year raises the level of food security in the country – an important step towards eradication of malnutrition.

2.4.6. Also applications like mulch films conserve water, retain moisture by

preventing evaporation and arrest weed growth resulting in significant increase in crop yield as well as saving in intercultural operations.

2.4.7. Plastics in Agricultural Packaging

2.4.8. One of the chronic problems plaguing Indian agriculture is the wastage

of farm produce, which in turn, is one of the key reasons for the prevalence of malnutrition in the country, esp among the poorer sections. A study by Mc Kinsey & Co and CII estimated that 40-50% of

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the fruits and vegetables produced in India is wasted before it can reach the consumer. In each stage of the food chain i.e. handling, storage, transhipment and distribution, there is a significant amount of value loss, which add up to over Rs 23,000 crore annually.

2.4.9. Plastic woven sacks provide a safe and hygienic alternative mode of

packaging food grains and transporting it to retail outlets. Plastic Leno bags – another application of food packaging – is the global standard for packaging of agricultural produce like fruits and vegetables.

2.4.10. The world over plastics are the material of choice for agricultural

packaging due to its low cost and versatile applications both for bulk and retail distribution and is ideal for a country like India where wastage of agricultural produce is rampant.

2.4.11. It is estimated that a 1% increase in plastic packaging in agriculture

leads to 1.6% decline in food wastage. Plastics can play an important role in preventing food wastage right from the production stage to retail distribution of produce, which would translate into increased food availability.

2.5. Resource Savings Through Micro Irrigation 2.5.1. Projections by Task Force on Micro Irrigation for 11th Plan 2.5.2. Government of India had constituted a Task Force on Micro Irrigation

for making recommendations for widening the user base of micro irrigation in India in view of its multiple benefits. In its report submitted to the Government, the Task Force had projected the coverage of micro irrigation for the 11th Five Year Plan period, shown in table 2.

Table 2: Projected Area Coverage of Micro Irrigation for 11th Five-Year

Plan Period

Total Fund Requirement (Rs Crores)

Drip Sprinkler Total PVC PE PP Total

2007-08 1 0.6 1.6 70 186 10 266 54002008-09 1.5 0.7 2.2 105 257 15 377 78002009-10 2 0.8 2.8 140 328 20 488 102002010-11 2.5 0.9 3.4 175 399 25 599 126002011-12 3 1 4 210 470 30 710 15000Total for XIth Plan 10 4 14 700 1640 100 2440 51000

Source: Report of The Task Force on Microirrigation, Govt. of India

Year

Proposed area for adoption (million hectares) Plastics Requirement ('000 MTA)

22

2.5.3. As per the projections made by the Task Force, 14 million hectares of land is expected to adopt micro irrigation with 10 million hectares using drip irrigation and remaining 4 million hectares expected to use sprinkler.

2.5.4. The projected coverage of micro irrigation above is expected to raise

domestic plastics consumption by 2.4 MMT with incremental demand for PE, PP and PVC of 1.6 MMT, 0.1 MMT and 0.7 MMT respectively as shown in table 2. The Task Force has estimated that implementation of the above coverage of micro irrigation would necessitate fund requirement to the tune of Rs 51,000 crores.

2.5.5. Water Savings in Micro Irrigation

2.5.6. With the adoption of Micro Irrigation, utilization of water in agriculture is

likely to improve significantly resulting in substantial savings of irrigation water, which could then be used in areas where coverage of irrigation is relatively lower. Benefits would also accrue to India as a nation in the form of savings in cost of creating irrigation infrastructure for expanding irrigation coverage and in costs for improving the efficiency of existing irrigation infrastructure in all major, medium and minor irrigation projects.

Table 3: Water Savings in Micro Irrigation

Note: Investment on Major/Medium irrigation projects for creating 1MCM of water potential is Rs 77 lacs or Rs 770 Crores per BCM

2.5.7. Table 3 quantifies the total value of the water savings to the nation on

account of micro irrigation which otherwise had to be incurred for creating equal amount of irrigation coverage for the 11th Plan period.

Widely Spaced Crops suitable

for Drip Irrigation

Closely Spaced Crops suitable

for Drip Irrigation

Crops suitable for Sprinkler

IrrigationTotal

2007-08 0.37 0.63 0.6 1.62008-09 0.55 0.95 0.7 2.22009-10 0.74 1.26 0.8 2.82010-11 0.93 1.57 0.9 3.42011-12 1.11 1.89 1 4

XI th Plan 3.7 6.3 4 14

2007-08 1.11 3.15 0.9 5.16 39732008-09 1.65 4.75 1.05 7.45 57372009-10 2.22 6.3 1.2 9.72 74842010-11 2.79 7.85 1.35 11.99 92322011-12 3.33 9.45 1.5 14.28 10996

XI th Plan 11.1 31.5 6 48.6 37422Source: Report of The Task Force on Microirrigation, Govt. of India

Proposed area for adoption, million hectares

Water Saving, BCM/year

Value of infrastructure investement

saved @ Rs 770 Crores/ BCM,*

Rs Crores

23

As shown in table 3, achieving the target of micro irrigation coverage of 14 million hectares during the 11th Plan period is likely to save 48.6 BCM water, which translates to a savings of Rs 37422 crores for the country. The water thus saved could then be channelised to other areas needing irrigation.

2.5.8. Electricity Savings 2.5.9. Electricity for irrigation in the agriculture sector is subsidized and the

huge subsidy bill for the same is one of the key reasons for the mounting losses of the State Electricity Boards. Adoption of micro irrigation and the resultant efficient water utilization is likely to reduce the requirement of electricity for the purpose of irrigation, thereby, reducing the Government’s subsidy burden.

2.5.10. Tables 4 and 5 show the savings in electricity/hectare on account of

adoption of micro irrigation in agriculture. As table 4 shows, switching over from conventional flood irrigation to drip irrigation results in electricity savings of ~278 KWhr/hectare and is likely to reduce the Government’s subsidy bill substantially.

Table 4: Electricity Savings Through Micro Irrigation

2.5.11. Based on the Savings in Electricity consumption and based on the

yearly acreage targets for adoption of micro irrigation, the potential annual savings in electrical power due to micro irrigation are shown in table 5.

2.5.12. As shown in table 5, electricity savings per hectare through use of

micro irrigation for various categories of crops is in the range of 116-370 KWhr. For closely spaced crops suitable for drip irrigation, energy savings are the highest at 370 KWhr/hectare, followed by widely

Serial No. Flood Drip

1 Water requirement, mm 900 6002 Water requirement, m3/ha/annum [= (1) x 10000

m2/1000 ] 9000 60003 Water requirement, lts. [=(2) x 1000] 9000000 60000004 No of irrigation days in a year 200 2005 No of irrigation hours in a year @ 8 hours/day 1600 16006 Average flow per ha, lps [= (3)/[(5)*3600] ] 1.56 1.047 Average pumping head, m 40 50

8Average HP per ha based on above flow and head, [=(7)*(6)/(75*0.8*0.75)] 1.4 1.16

9 Average kW per ha, = (8) x 0.75 1 0.9

10 Total annual energy kWhr/ha = (9) x (5) 1666.7 1388.911 Electricity Savings kWhr/ha 277.8


24

spaced crops suitable for drip irrigation with energy savings of 278 KWhr/hectare.

Table 5: Reduction in Annual Energy Requirement Using Micro Irrigation

2.5.13. The potential savings from the areas brought under micro irrigation will

be accruing every year after the adoption of micro irrigation and hence, the cumulative savings show the true potential of micro irrigation as shown in table 6. Table 6: Cumulative Energy Savings Using Micro Irrigation

Flood Drip/Spr. Flood Drip/Spr Saving

1Widely Spaced Crops suitable for Drip Irrigation 900 600 1667 1389 278

2Closely Spaced Crops suitable for Drip Irrigation 1700 1200 3148 2778 370

3Crops suitable for Sprinkler Irrigation 500 350 926 810 116


S. No. CropAverage annual irrigation

depth, mmAverage annual Energy Requirement,

kWhr/ha

Widely Spaced Crops suitable

for Drip Irrigation


for Drip Irrigation


IrrigationTotal

2007-08 0.37 0.63 0.6 1.62008-09 0.55 0.95 0.7 2.22009-10 0.74 1.26 0.8 2.82010-11 0.93 1.57 0.9 3.42011-12 1.11 1.89 1 4Total for 11th Plan 3.7 6.3 4 14

2007-08 26 58 17 1012008-09 38 88 20 1462009-10 51 117 23 1912010-11 65 145 26 2362011-12 77 175 29 281Total for 11th Plan 257 583 115 955

2007-08* 78 174 46 2982008-09 116 262 67 4452009-10 167 378 90 6362010-11 232 524 116 8722011-12 309 698 145 1153Total for 11th Plan 902 2036 464 3404Note: Production cost of Electricity taken as Rs 2.50/kWhr.*Cumulative starting from 2005-06Source: Report of The Task Force on Microirrigation, Govt. of India

Cost of Electrical Power Saved or Reduction in Loss to SEBs, Rs Crores

Cumulative Cost of Electrical Power Saved or Cumulative Reduction in Loss to SEBs, Rs Crores

Proposed area for adoption, million hectares

25

2.5.14. As shown in table 6, cumulative electricity saving on account of micro irrigation works out to be Rs 3404 crores in the 5 years of the 11th Five Year Plan.

2.5.15. Savings in Fertilizer Consumption

2.5.16. Annual fertilizer requirements for various categories of crops under

conventional flood irrigation varies between 100 Kgs/hectare to 800 Kgs/hectare as table 7 shows. Adoption of micro irrigation cuts down the requirements significantly by minimizing wastages and efficient use of fertilizers.

Table 7: Annual Fertilizer Requirements – Conventional Irrigation

2.5.17. Micro irrigation saves fertilizers required in irrigated agriculture

because of improved efficiency in fertilizer delivery to the plants along with irrigation water itself. Such saving having been quantified in several research works in farmers’ fields also and it is well established that Micro Irrigation brings fertilizer savings. An average saving of 15% in fertilizer use is considered for the calculations on overall savings.

2.5.18. The Indian economy is particularly likely to benefit from savings in

fertilizer requirements as almost all the fertilizers in the country are made available to the farmers at subsidized prices. Savings in fertilizer consumption will reduce the Government’s burden of subsidies. Table 8 quantifies the potential savings in fertilizer consumption based on the yearly targets for adoption of micro irrigation for each of the years in the 11th Five Year Plan period taking the average subsidy support for the fertilizers by the Government at Rs 5800 per hectare of micro irrigation.

2.5.19. The cumulative savings to the exchequer on account of reduction

in the Government’s fertilizer subsidy bill using micro irrigation is estimated to be Rs 16178 crores during the 11th Five Year Plan period.

Crop CategoryFertilizer

consumption (kg/ha/annum)

Widely Spaced Crops suitable for Drip Irrigation 800Closely Spaced Crops suitable for Drip Irrigation 300Crops suitable for Sprinkler Irrigation 100Note:Figures are for conventionally irrigated agriculture Source: Report of The Task Force on Microirrigation, Govt. of India

26

Table 8: Micro Irrigation to Reduce Govt.’s Subsidy Burden

2.5.20. Potential for Employment Generation 2.5.21. Successful adoption of micro irrigation is expected to generate

significant employment opportunities in rural areas, which is one of the thrust areas for the Government. As per the Task Force report, adoption of micro irrigation would create additional jobs in the following areas.

• For every Rs 100 crores of size of the micro irrigation industry

employment opportunities for ~500 skilled/unskilled people are generated.

• For every 100 hectares coming under micro irrigation, generate employment for 2 semi-skilled persons for installation and maintenance.

• With intensive agriculture being possible with adoption of micro irrigation, direct employment in agriculture will also increase at the rate of one additional person per hectare of area brought under micro irrigation.

• Indirect employment in allied sectors such as post-harvest handling, processing, transportation, etc will also be generated at the rate of one person for every 5 hectares of area under micro irrigation.

2.5.22. Table 9 shows the potential for employment generation on account of

adoption of micro irrigation in the country as per the yearly targets proposed by the Task Force. As table 9 shows, for the 11th Five Year Plan period (2007-08-2011-12) successful adoption of micro irrigation as per the road map recommended by the Task Force and achieving the coverage targets for the same is likely to

Widely Spaced Crops suitable for

Drip Irrigation


for Drip Irrigation


IrrigationTotal

Amount of Fertilizer Subsidy Saved on account of reduced

Fertilzer Consumption due to adoption of MI @

Rs 5800 per MT, Rs Crores

Cumulative Saving in on account of reduced

Fertilzer Consumption, Rs

Crores

2007-08* 0.444 0.284 0.09 0.818 474 14092008-09 0.66 0.428 0.105 1.193 692 21012009-10 0.888 0.567 0.12 1.575 914 30152010-11 1.116 0.707 0.135 1.958 1135 41502011-12 1.332 0.851 0.15 2.333 1353 5503

Total for 11th Plan 4.44 2.837 0.6 7.877 10368 16178


Fertilizer Saving, Million MT/year

*Cumulative starting from 2005-06

27

generate additional employment opportunities for over 17 million people in rural India.

Table 9: Adoption of Micro Irrigation to Generate Significant

Employment Opportunities

2.5.23. Increase in Crop Yield 2.5.24. The most important benefit of adoption micro irrigation in the country is

the increase in yields of crops in the areas where it is adopted. The last two decades of research experience and the experiences of various farmers across the country has convincingly proved that the yields of crops increase due to adoption of micro irrigation. The benefit of such higher crop yields will accrue to the farmers directly and increase their purchasing power and increasing India’s GDP.

2.5.25. Table 10 shows the likely increase in yields on account of adoption of

micro irrigation as per the Task Force report. As table 10 shows, adoption of micro irrigation is expected to increase revenues to the farmers by Rs 16181 crores and increase national GDP by the same amount during the 11th Five Year Plan.

2.5.26. The cumulative incremental revenue to the farmers on account of

adoption of micro irrigation for the 11th Plan period is estimated to be Rs 57712 crores.

Estimated cost of MI, Rs Crores

Required for Drip Industry

Required for Installation/

Maintenance

Direct employment in

intensive farming

Indirect employment in allied services

Total Emloyment generation

2007-08 5400 27000 32000 1600000 320000 19841002008-09 7800 39000 44000 2200000 440000 27306502009-10 10200 51000 56000 2800000 560000 34772002010-11 12600 63000 68000 3400000 680000 42237502011-12 15000 75000 80000 4000000 800000 4970300Total for 11th Plan 51000 255000 280000 14000000 2800000 17386000


Employment Potential (Nos)

28

Table 10: Adoption of Micro Irrigation to Increase Revenue to Farmers

2.5.27. The above incremental revenue calculations are based on the yield

and price assumptions made for different categories of crops as given in table 11.

Table 11: Yield Improvement Using Drip Irrigation

2.5.28. The additional revenue benefit to the farmers can repay the loans on

account of 50% cost of the MI systems with 2 crop seasons and later on can add to the individual farm incomes.

Widely Spaced Crops suitable for

Drip Irrigation

Closely Spaced Crops suitable for

Drip Irrigation

Crops suitable for Sprinkler Irrigation Total

2007-08 259 1134 338 17312008-09 385 1710 394 24892009-10 518 2268 450 32362010-11 651 2826 506 39832011-12 777 3402 563 4742Total for 11th Plan 2590 11340 2251 16181

2007-08* 784 3384 900 50682008-09 1169 5094 1294 75572009-10 1687 7362 1744 107932010-11 2338 10188 2250 147762011-12 3115 13590 2813 19518Total for 11th Plan 9093 39618 9001 57712


Incremental Revenue to Farmers or Addition to GDP due to increase in yield, Rs Crores

Cumulative Incremental Revenue to Farmers or Addition to GDP due to increase in yield, Rs Crores

*Cumulative starting from 2005-06

Average Price (Rs/MT)

Without drip With dripWidely Spaced Crops suitable for Drip Irrigation 4 7.5 2000

Closely Spaced Crops suitable for Drip Irrigation 40 70 600

Crops suitable for Sprinkler Irrigation 2 2.75 7500


Type of CropAverage Productivity

(MT/hectare)

29

2.5.29. Thus, the above estimates clearly establishes the immense impact

micro irrigation can bring to Nation at large and the farming community in particular. The employment generation potential in the rural areas is of paramount importance in the context of the socio-economic advancement in India.

2.5.30. Summary of Benefits to the Indian Economy & Farmers by

Bringing 14 Million Hectare Area Under Micro Irrigation During 11th Plan

2.5.31. Table 12 summarises the benefits likely to accrue to the farmers as

well as the Indian economy on account of increasing the coverage of micro irrigation to 14 million hectares during the 11th Five Year Plan period.

2.5.32. As shown in table 12, the total benefits due to adoption of micro

irrigation during 11th Plan is estimated at Rs 114716 crores along with creation of employment opportunities for 17.4 million people in rural India.

Table 12: Summary of Benefits from Adoption of Micro Irrigation

2.5.33. These benefits are against a total investment of Rs. 51,000 crores over a period of five years for installation and running of micro irrigation systems with average life of 8-10 years.

2.5.34. Comparison of the total benefits due to micro irrigation to the

investments required for the same shows a 125% return on the investments made for installation and running of micro irrigation systems.

Saving in water required for irrigation and consequent indirect benefit by saving in infrastructural investments on irrigation projects (Rs crores) 37422

Savings in subsidized electricity supplied to agriculture sector due to reduction in electricity consumption with micro irrigation (Rs crores) 3404

Savings in fertilizers consumption due to adoption of micro irrigation (Rs crores) 16178

Incremental benefits due to increase in yield (Rs crores) 57712

Total benefits to the Indian economy (Rs crores) 114716

Additional employment to be generated due to adoption of micro irrigation for the 11th Five Year Plan period I.e. 2007-8-2011-12 (million) 17.4


30

2.5.35. Therefore, in the interest of the Indian farmers and the over all Indian economy adoption of micro irrigation and expansion of its coverage need to be proactively promoted by the Government and treated as a thrust area for policy.

2.6. Plastics & Natural Resource Conservation

2.6.1. Rapid Depletion of Forest Cover in India

2.6.2. Globally, it is well recognized that forest cover plays a critical role in preventing environmental degradation and conservation of natural resources. In fact, the Rio Summit on Sustainable Development has identified forest conservation with its significant impact on rainfall pattern, as key to sustainable development.

2.6.3. For a country like India, the threat from rapid depletion of forest cover

becomes even more critical as income of almost 60% of the population is dependent on agriculture which is a thrust area for the Government and declining forest cover is likely to adversely affect the performance of the agriculture sector.

2.6.4. World over many countries have initiated several measures to arrest

the rapid depletion of forest cover. Chart 6 compares the status of forest cover in India with other countries and shows that the existing 20% forest cover in India is not only lower than the global average of ~33% and the developed country average of ~36% but is also far lower that the average forest cover of ~31% for developing countries taken together.

Chart 6: Share of Forest Cover in Total Area

Comparison of Forest Cover (As % of area)

33%

20%

31%

36%

India Developingcountries

World DevelopedcountriesSource: FAO

31

2.6.5. In the period 1990-2000, the world has lost 9.4 million hectares of forest cover of which over 20% (~ 2 million hectares), deforestation has taken place in India alone.

2.6.6. Despite the Government’s efforts over the years, forest cover in India is

yet to register significant increase. The forest cover in India (forest cover = existing forest cover – deforestation + aforestation) is stagnant at around 20% of land area, which is likely to pose one of the toughest challenges for the country in the future.

2.6.7. Moreover, with a burgeoning population and more or less stagnant

share of forest cover in total land area of the country, per capita forest in India is far lower vis-à-vis other countries – both developed and developing – as table 13 shows. This makes it imperative that the rapid depletion of forests in India needs to be arrested and the issue of unrestricted use of wood needs to be addressed on a war footing.

Table 13: Cross-country Comparison of Forest Cover

2.6.8. Furniture & Builders ware: Major Wood Consumers

2.6.9. During the 1990s around 2 million hectares of land were deforested to meet the growing demand for wood in the country. The furniture and construction sectors are two of the largest consumers of wood in India. Table 14 shows the estimated share of these 2 sectors in the total wood consumption in India in the coming years.

Comparison of Forest CoverForest cover as % of

total land area Per capita forest (ha)

Asia 16.4 0.10Africa 17.7 0.70Europe 41.3 1.30China 14.3 0.10Pakistan 2.3 0.01Nepal 33.7 0.20Bangladesh 7.8 0.02Sri Lanka 27.8 0.10Indonesia 60.6 0.60Malaysia 47.1 0.80Philippines 2.7 0.10Japan 66.8 0.20USA 23.2 0.80India 19.7 0.06Source: State of World Forest, FAO

32

Table 14: Projected Wood Consumption in India

2.6.10. As shown in table 14, wood consumption in India is forecasted to grow

from 74 million cubic meters in 2005 to 152 million cubic meters in 2020 of which 36 million cubic meters is projected to be consumed in construction & furniture sectors.

2.6.11. The Planning Commission has set a target of increasing the forest

cover in the country from the existing level of 20% to 25% by 2007 and further to 33% by 2010. Plastics can play a key role in achieving the target.

2.6.12. Replacement of wood with plastics only in the furniture and

construction sectors will go a long way towards arresting the rapid depletion of forests in India thereby helping the country to meet one of its toughest challenges and bringing substantial benefits to both the national economy as well as the consumers.

2.6.13. Forest Conservation Through Increased Use of Plastics

2.6.14. Increased usage of plastics in furniture and construction is likely to

bring several tangible and intangible benefits to the country. To illustrate the likely benefits, the benefits in terms of aforestation or preventing deforestation are depicted in table 15.

Table 15: Gains from Plastics Use in Furniture & Profile

Projected wood consumption in India

(in million cubic

metres)

Total wood consumption in

India

Wood consumption in construction &

furniture sectors

Share of construction &

furniture sector in total wood

consumption

2005 74 23 31.1%2010 95 27 28.4%2015 123 32 26.0%2020 152 36 23.7%

(at 10% replacement rate) Unit CostArea covered under aforestation mn hectares 6Cost of aforestation Rs lakhs 102500

Cost of aforestation/hectare Rs/hectares 1708Forest saved through plastic use hectare 640000Gain from plastic use in aforestation equivalent Rs crores 109Source:Industry

33

2.6.15. As shown in the table 15, at a 10% replacement rate use of plastics in furniture and profiles can save 640,000 hectares of forest, equivalent to 2.7 million cubic metres of wood. Also with cost of aforestation at Rs. 1708/hectare the above translates to a national savings of Rs 109 crores.

2.7. Energy Conservation

2.7.1. Plastics can play an important role in energy conservation and bring substantial economic benefits to the economy. It is estimated that energy consumption for plastic doors and windows is about one-fourth to one-eighth of that for steel and aluminium. Additionally, usage of plastics doors and windows results in 30-50% savings in terms of building heating/cooling load.

2.7.2. Plastics As Wood Substitute - Benefits to the Consumer 2.7.3. Over and above the benefits to the country as a whole, use of plastics

in furniture and construction will be benefiting the end-consumer as well. Some of the benefits to the consumer on account of substitution of wood by plastics in furniture and construction are as follows.

• Lightweight compared to wood – makes transportation easy.

• Longer life vis-à-vis traditional materials.

• Low thermal conductivity – maintains uniform temperature

• Maintenance free – no painting/coating required

• Flexibility

• Recyclable

• Non-toxic – nil risk of contamination

• Abrasion resistant

• Low over all costs of installation

• Fire resistant

34

2.8. Energy Savings Through Plastics Usage

2.8.1. Compared to its substitute materials like glass, wood, galvanized iron, etc. plastics are much more energy-efficient. Replacement of traditional materials with plastics in applications like transportation and distribution of water, packaging, automotive parts, door and window profiles, etc results in substantial energy savings.

2.8.2. Today, plastics touch every sphere of life and are indispensable to

modern day living. 2.8.3. Apart from its multiple functional advantages over other conventional

materials like metals, glass, jute, paper, etc., plastics consume lesser energy during its life cycle and hence reduce the energy cost burden on the exchequer.

2.8.4. Energy conservation in plastics takes place in two ways.

i) The process of manufacturing plastic products consumes less energy compared to what the energy consumption would have been using conventional materials. ii) Energy recovery through incineration after the life cycle of the plastic product is over.

2.8.5. A study titled “Resource & Environmental Profile Analysis” conducted

by Franklin Associates Ltd. Had concluded that 53 billion units of electricity are saved annually by improvements in appliance energy efficiency brought about by application of plastics.

2.8.6. The energy content of waste plastics can be equivalent to coal or oil. Sweden already recovers energy from 56% of its plastics in domestic waste, providing 15% of its total district heating needs. In Denmark, 62% of plastics in domestic waste are recovered for conversion to energy. In Switzerland, the figure is 72%.

2.8.7. Use of plastics, actually saves more oil than is needed to manufacture

them. Plastics due to their unique properties like light-weight, durability, malleability, etc. coupled with the low temperature required for processing plastics vis-à-vis other materials save significant amount of energy across applications. Some of the energy-saving applications of plastics are as follows.

2.8.8. Packaging Applications

2.8.9. The Society for Research in Packaging Market (Germany) in its study titled “ Packaging Without Plastics: Ecological & Economic Consequences from a Packaging Materials Market without Plastics” inferred that American manufacturers saved 338 trillion btu of energy equivalent to 58 million barrel of oil or 325 billion cft of natural gas or 32

35

billion pounds of coal, using plastics in packaging replacing metals, glass & paper.

2.8.10. Manufacturing of plastic bags requires ~ 1/3rd less energy than paper

bags and disposable plastic containers consume 30% less energy compared to paper board containers and hence, are more energy efficient as a packaging material vis-à-vis metals, glass and paper.

2.8.11. Similarly, plastic pouches consume one-tenth the amount of energy for

packaging & delivering milk compared to glass bottles, which were earlier, used for the purpose.

2.8.12. Bulk Packaging

2.8.13. Bulk commodities have traditionally been packed in either Jute or paper sacks. The sacks for bulk packaging are required to be strong, light and easy to handle and safe from the point of hygiene. In addition to above attributes sacks for bulk packaging must be environment-friendly, energy-efficient.

2.8.14. Due to its superior properties plastic woven sacks today have replaced

traditional sacks in bulk packaging of a wide range of products like fertilizers, cement, etc. However, use of PWS for packaging of food grains and sugar has been thwarted by the continuation of JPMA, which makes use of Jute bags mandatory for packaging of the 2 commodities mentioned above.

Figure 1: Bulk Packaging of Food Grains

2.8.15. Studies on the suitability of PWS for edible commodities like food grains and sugar by leading research institutions like IGSMRI, IARI, ATRC, CFTRI and National Sugar Institute have established the superiority of PWS in terms of functional performance compared to jute bags. The above studies have recommended the use of PWS for long term storage of edible commodities like food grains and sugar.

2.8.16. Table 17 compares energy requirement for plastic sacks for bulk

packaging of 1 MMT commodity with the same for Jute and paper sacks. As shown in the table, the volume of material required for Jute and paper sacks are 6 times and 3 times that of PWS respectively. Net energy consumption, which is 180000 GJ for PWS, is much more for Jute sacks (333000 GJ) or paper sacks (638000 GJ).

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Table 16: Comparison of Plastic Sacks With Jute & Paper

2.8.17. Food Grain Packaging

2.8.18. Historically, synthetic sack industry was dependent on import of synthetic raw materials viz. HDPE & PP due to insufficient domestic supplies. However, with new capacity build-up by IPCL, RIL, GAIL and subsequently by Haldia Petrochemicals, domestic supplies eased significantly during the past few years.

2.8.19. With installed capacity of 800 kT distributed among 1000 small,

medium and large units, the Rs.5000 crore Indian synthetic sack industry consumes around 700 kT of polymers annually and provides employment to around 0.55 million persons.

2.8.20. However, despite having multiple advantages over traditionally used

jute sacks, the synthetic sack industry in India is yet to realise its high growth potential on account of the prevailing policy environment in the country, which is strangulating demand for synthetic sacks for bulk packaging due to continuation of the Jute Packaging Materials Act (JPMA).

2.8.21. JPMA was introduced in 1987 as a temporary measure with a view to

provide reservations in favour of jute sectors for the benefit of jute farmers much against the interest of synthetic sack industry which made it mandatory for key commodities requiring bulk packaging i..e. foodgrains, sugar, cement and fertilizers to be packed in jute sacks.

2.8.22. When introduced, JPMA was to be completely phased out by 1994 but

continues to remain in vogue despite repeated protests from not only synthetic sack industry, but also from the user sectors like foodgrains and sugar.

Unit Plastic Woven Sacks Jute Sacks Paper Sacks

Production of Sacks Material Required MT 2310 12290 7200

Energy Required for Raw Materials Production 000 GJ 178.3 153.6 612

Energy Required for Manufacturing Sacks 000 GJ 48.5 179.4 57.6Total Energy Requirement 000 GJ 226.8 333 669.6Transportation of SacksTotal No. of Truck loads Required No. 111368 112477 111873Additional Truck Loads Required Over PWS No. 1109 505Additional Fuel Required Over PWS litres 36355 16570Additional Energy Required Over PWS GJ 2035.9 927.9Net Energy Consumption Including Production, Transportation, Incineration & Recycling

000 GJ 180 333 638

Source: LCA, IIT DelhiNote:Figures are for packaging 1 MMT commodity transported over 100 Km

Comparison of PWS, Jute Sacks & Paper Sacks for Bulk Packaging of 1 MMT Commodity

37

2.8.23. Even though fertilizers and cement have been taken out of JPMA’s

ambit, the existing 100% reservations in favour of jute for packaging of food grains and sugar are strangulating demand for synthetic sacks and denying producers of food grains and sugar the choice of a cheaper and better packaging material i.e. synthetic woven sacks.

2.8.24. Milk Packaging

2.8.25. Over the years especially in urban areas plastic pouches have replaced glass bottles, which were earlier used for milk packaging. However, in rural India milk continues to be sold in loose form without any packaging and it is expected that once packaging of milk catches up in those areas, it will provide a boost to demand for plastic pouches for milk packaging.

2.8.26. Table 17 compares the merits of packaging milk in plastic pouches vis-

à-vis glass bottles. As shown in table 17, for packaging of 1 lac litres of milk in glass bottles 45.4 MT of glass is required in sharp contrast to only 0.4 MT of plastics which translates to a requirement of 450 gms glass and only 4 gms of plastic for packaging of 1 litre milk. Over all, for packaging of 1 lac litres of milk and recycling of the packaging material, total energy requirement for glass bottles is 1980 GJ compared to only 184.4 GJ for plastic pouches.

Table 17: Energy Savings in Plastic Milk Pouches

2.8.27. In addition, glass requires 32 times more energy for unit packaging vis-

à-vis plastic pouch. Transportation of 1lac litre milk in plastic pouches rather than in glass bottles results in fuel savings of 929 litres.

2.8.28. Also, reuse of glass bottles leads to double the energy consumption on

new plastic pouch. Apart from energy savings, reuse of glass bottles may pose serious issue of hygiene. Waste plastic pouch on incineration leads to energy generation while waste glass has no incineration value

Unit Glass Bottle Plastic PouchMaterial Required MT 45.4 0.4Energy Required for Raw Materials Production GJ 1202 36.8Energy Required for 100% Recycling GJ 501 4.6Energy Required for 95% Reuse GJ 277 143Total Energy Required GJ 1980 184.4Note:For packaging of 1 lac litre milkSource: LCA, IIT Delhi

Energy Savings in Milk Packaging: Glass Bottles vs Plastic Pouch

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2.8.29. Lube Oil Packaging 2.8.30. Lube oil is packed predominantly in 5 & 10 Kg cans made of Tin or

HDPE.

Figure 2: Containers for Lube Packaging

2.8.31. Plastic (HDPE) cans offer the following additional benefits compared to Tin cans

• Lightweight • Good impact strength • Ease of handling during transportation • Tin cans consume 15% higher energy compared to Plastic cans • Tin cans consume 3% extra energy over plastic cans for

transportation of equivalent quantity of lube oil transportation. • Energy savings in recycling of plastic can is 25% over tin cans

2.8.32. Energy savings on account of packaging lube oil in HDPE cans in

place of tin cans are shown in table 18. As shown in table 18, for packaging of 1 MMT of lube oil 86207 MT of tin is required as against 63218 MT of plastics and total energy requirement is 9086.7 GJ for tin cans and 8146 GJ for HDPE cans.

Table 18: Energy Savings in Packaging Lube in HDPE Cans

Unit Tin Cans HDPE CansMaterial Required MT 86207 63218Energy Required for Manufacturing Cans 000 GJ 7484 6526Total No. of Truck loads Required No. 120690 118135

Energy Required for Distribution 4.7 times that of HDPE cans

Energy Required for 100% Recycling GJ 1602 1620Total Energy Required GJ 9086.7 8146Note: For packaging of 1 MMT Lube OilSource: LCA, IIT Delhi

Energy Savings in Lube Oil Packaging: Tin Cans vs HDPE Cans

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2.8.33. Plastics Use in Automotives

2.8.34. Plastics have enabled auto manufacturers to produce lightweight vehicles at an economical cost, enhancing safety, strength, reliability & comfort in addition to fuel economy.

2.8.35. The following distinct advantages of using plastics in automobiles had

prompted automakers to switch from traditionally used metals to plastics.

• Cost-effective and cheaper material • Weight reduction (Energy / Fuel Savings) • Styling potential • Functional design • New effects • Reduced maintenance • Corrosion & chemical resistance

2.8.36. The fuel economy resulting from replacement of metals with plastics

has been a key consideration for the switch over to plastic auto components, which in today’s spiraling oil prices has become increasingly important to customers & vehicle manufacturers. Several countries have passed legislation stipulating minimum fuel economy for vehicles. As an example, the US has ‘Corporate Average Fuel Economy’ (CAFÉ) legislation since 1985 to ensure every car sold gives a minimum mileage of 11Km/litre.

2.8.37. Replacement of iron and steel with plastics to make fuel tank & battery

boxes reduces the weight of the components by 40% & 70% respectively making the vehicle more fuel-efficient. It is estimated that 100 Kgs of plastics replaces ~300 Kgs metals in cars and results in 30% reduction in the weight of the vehicle due to plastics use, improving fuel economy by 2.1 Km/litre.

2.8.38. Increased usage of plastics in a car running 15000 Km, results in fuel

savings of 750 litres corresponding to oil savings of 21 million barrels per annum, which, in turn, reduces 50 MMT CO2 emission per year worldwide.

2.8.39. Share of iron and steel in a vehicle has declined from 75%-78% in

1980 to 58%-63% currently, while that of plastics has increased from 4% to 9.3% and is expected to grow to 15% in near future.

2.8.40. Table 19 shows the potential energy savings if plastic contents in

automobiles increase from the present level of 30 Kg/car to 60 Kg/car. With improvement in mileage, not only will it save 81.2 billion litres of diesel, the subsidy burden of the exchequer will also shrink by US$ 10.1 billion from the existing level.

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Table 19: Fuel Savings Using Plastics in Automobiles

2.8.41. Plastics in Healthcare: 2.8.42. Plastics have made significant contribution in the area of healthcare.

Wide range of plastic products from disposable syringes, IV sets and blood bags to heart valves have saved millions of lives. India's demand for medical devices is steadily increasing. Disadvantages in using glass and metals in healthcare applications like fragility, higher weight and higher costs have made plastics the material of choice for medical applications. Major applications of plastics in healthcare include medical devices, implants, disposables, drug delivery systems, packaging products and safety devices. Use of disposable plastic syringe plays a key role in preventing spread of fatal diseases like AIDS.

2.8.43. Over the next decade, medical technology innovations are expected to

fundamentally transform healthcare with novel drug delivery systems providing new solutions with medical devices and change the face of public healthcare systems. Plastics are likely to play a vital role in this transformation.

2.8.44. Energy Savings by Use of Plastic Pipes and Profiles

2.8.45. Plastic Pipes

2.8.46. Compared to pipes made of galvanized iron and cast iron plastic pipes require less energy both for manufacturing as well as for transportation. During 2002-2006 consumption of PE pipes in India was 358 kT and table 20 shows the resultant energy savings.

2005 2010Car Production 1568000 3223000Use of Plastics 30 60Additional run km/Ltr. 0.63 1.26Fuel savings per annum bn. Ltr. 19.8 81.2Savings by Govt. bn. USD. (current subsidy @ Rs. 5.77/ Ltr. Diesel) 2.5 10.1

Assumptions:Plastic contents in present car @ 30KgPlastic contents in each car to increase to 60Kg / car by 2010

Average Indian cars runs 20000 km per year

100 Kg of Plastics replacing 200 to 300 kg metals increases mileage by 2.1Km/Ltr.

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Table 20: Energy Savings by Using Plastic Pipes

2.8.47. As shown in table 20, during 2002-2006 energy saving due to use of PE pipes compared to GI pipes was 9.023 million MWH and 3.013 million MWH compared to CI pipes. The above energy savings translate to annual energy savings of 2.25 million MWH compared to GI pipes and 0.75 million MWH compared to CI pipes.

2.8.48. Similarly, 5100 kT of PVC pipes have been consumed since 1992-93

and the resultant energy savings are shown in table 21. As table 21 shows, use of PVC pipes resulted in total energy savings to the tune of 117 million MWH compared to GI pipes and 29 million MWH compared to CI Pipes. The above translate to average annual energy savings of 8.35 million MWH in comparison to GI pipes and 2.08 million MWH compared to CI pipes.

2.8.49. It has been observed that there has been 10% energy saving while

using PE/ PVC v/s traditional materials due to difference in C Value. 2.8.50. Considering installed capacity of power generation (180,000 MW) and

energy which is used in pumping (taken as 10% of installed capacity i.e. 18,000 MW), total energy savings of 10% works out to be 15.76 Million MWH.

Energy Savings By using PE Pipes

Wt/mtr (kg) Product Energy

Transportation Product Energy

Transportation Product Energy

Transportation

1.480 34.95 12.89 600.65 9.05 226.41 9.05Year KT Length (Km)02-03 63 42568 1487.7 548.7 25568.2 385.2 9637.7 385.203-04 67 45270 1582.2 583.5 27191.6 409.7 10249.6 409.704-05 112 75676 2644.9 975.5 45454.6 684.9 17133.7 684.905-06 116 78378 2739.3 1010.3 47078.0 709.3 17745.6 709.3Total 358 241892 8454.1 3118.0 145292.4 2189.1 54766.7 2189.1All Figs in B KcalTotal Energy Consumption (2002 to 2006)

PE GI CIPipes B Kcal 11572 147481 56956

Energy Saving

PE V/s GI M Kcal 135909 9.023 Million MWH

PE V/s CI M Kcal 45384 3.013 Million MWH

PE Pipes GI Pipes CI Pipes

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Table 21: Energy Savings in Replacement of GI/CI Pipes by PVC Pipes

2.8.51. Case Study of Energy Savings by Use of PVC Pipes – Ahmedabad Municipal Corporation

2.8.52. Ahmedabad Municipal Corporation (AMC) has 5 french wells having

pumps, which draw 800,000 gallons of water per hour on an average. MS pipes, used in these wells were causing frictional losses and were drawing less water than they were supposed to. AMC replaced 8” MS pipes in one of the wells with 10” PVC pipes and the flow rate increased from 370 m3/ hr to 540 m3/hr.

2.8.53. Replication of the above (replacement of 8” MS pipes with 10” PVC

pipes) in the balance 4 wells resulted in savings of 1.7 million kwh of electricity per year, reducing electricity charges by ~Rs 4.5 million.

2.8.54. PVC Window Profiles

2.8.55. Comparison between PVC window profiles with aluminium window profiles (most commonly used) in terms of energy consumption during extrusion of the material shows PVC profiles to be consuming much less energy vis-à-vis aluminium. While extrusion of 1 MT of aluminium

Wt/mtr (kg) Product Energy (B Kcal)

Transportation (B Kcal)

Product Energy (B Kcal)


Product Energy (B Kcal)


1.441 98.91 12.89 600.65 9.05 226.41 9.05Year KT Length (Km)92-93 143 99363 9828 1281 59682 899 22497 89993-94 171 118605 11731 1529 71240 1073 26853 107394-95 189 131222 12979 1691 78818 1188 29710 118895-96 217 150464 14882 1939 90376 1362 34066 136296-97 232 160873 15912 2074 96628 1456 36423 145697-98 305 211343 20904 2724 126943 1913 47850 191398-99 353 244780 24211 3155 147027 2215 55421 221599-00 332 230269 22776 2968 138311 2084 52135 208400-01 365 252981 25022 3261 151953 2289 57277 228901-02 515 357075 35318 4603 214477 3232 80845 323202-03 461 319775 31629 4122 192073 2894 72400 289403-04 553 383572 37939 4944 230393 3471 86845 347104-05 552 383311 37913 4941 230236 3469 86785 346905-06 714 495466 49007 6387 297602 4484 112179 4484Total 5100 3539099 350052 45619 2125760 32029 801287 32029

Total Energy Consumption (1992 to 2006) 1000

PVC GI CIPipes B Kcal 395671 2157789 833316

Energy Saving

PVC V/s GI B Kcal 1762117 117 Million MWH

PVC V/s CI B Kcal 437645 29 Million MWH

PVC Pipes GI Pipes CI Pipes

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consumes 17,500 KWh, polymers including PVC consume only 650 KWh.

2.8.56. Based on the above, energy consumed for extrusion of 65000 MT of

aluminium used for window profiles is 1137,500 MWH while for polymers it is 42250 MWH implying that energy consumption for extruding polymers for window profiles is just 3.7% of the same for aluminium.

2.8.57. Case Study of Energy Savings by Use of PVC Window Profiles –

Hotel Taj Blue Diamond, Pune

2.8.58. The results in terms of energy savings by using PVC window profiles in Hotel Taj Blue Diamond, Pune are detailed in table 22. As shown in table 22, power consumption in the case of PVC profiles was 594454 KWh compared to 763230 KWh in the case of aluminium. Therefore, use of PVC window profiles resulted in annual energy savings of 168776 KWh.

Table 22: Energy Savings Using PVC Window Profiles

PVC Windows Aluminium WindowsNo. of windows (Guest rooms) 58 58Glazing configuration 6 + 12 + 6 (Clear) 6mm clearArea of one window 7.45 Sq.M 7.45 Sq.MGlass area 6.16 Sq.M 6.83 Sq.MFrame area 1.29 Sq.M 0.62 Sq.MRelative heat gain (RHG) 567 W/m 2 x 6.16m2 663W/m2 x 6.83 m2through glass 3492.72W 4528.29 W

1.4 W/m2.K x 8 K x 1.29m2 16 W/m2.K x 8 K x .62m214.44 W 79.36 W

3492.72 W +14.44 W 4528 W + 79.36 W3507.16W 4607.65Wi.e.3.51 KW i.e.4.61 KW

For 58 windows 203.58 KW 261.38 KW

Annual Usage 2920 hours 2920 hours203.58 KW x 2920 hr. 261.38 KW x 2920 hr.

594454 KWhr. 763230 KWhr.

Annual Savings 1,68,776 KWhr. (Units)

Assuming, 10 hours of a/c usage per day and 80 % occupancy rate:

Annual power consumption to compensate the heat gain

Direct energy transfer (DET) through frameTotal heat gain

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2.9. Infrastructure

2.9.1. Plastics play a key role in infrastructure development. Wires and cables for telecom and electricity, pipes for water conveyance, door and window profiles for building and construction, etc are some of the major applications of plastics in the infrastructure.

2.9.2. The “Bharat Nirman” scheme announced in the Union Budget 2006-07,

envisages huge investments over the next 5 years in physical and social infrastructure especially in rural areas across the country. In addition to the ongoing infrastructure development projects, the “Bharat Nirman” scheme has set the following development targets to be achieved over the next 5 years.

a) Increasing irrigation coverage to 14 million hectares b) Bringing additional 74,000 habitats under water supply c) Implementation of the Rajiv Gandhi National Drinking

Water Mission with budget allocation of Rs 4680 crores to make potable water available across rural India.

d) Electrification of an additional 80,000 villages

e) Construction of 2 million additional dwelling units every

year

f) Commercial exploitation of huge offshore natural gas reserves

g) Construction of Golden Quadrilateral and North-South

and East-West Expressway Corridors 2.9.3. Meeting the above targets is expected to result in massive additional

demand for quality plastic pipes and fittings for use in irrigation, conveyance of potable water, etc.

2.9.4. The draft Approach Paper to the XIth Five Year Plan has set a target

of 12% annual industrial growth and has underlined the criticality of infrastructure development for sustaining India’s rapid growth in the long term. If the above targets are to be achieved, it is imperative that plastics are intensively used in development of infrastructure in line with other countries across the globe.

2.9.5. It is estimated that execution of the targets set by the Government is

likely to result in additional plastics consumption of 2.3 MMT in the country.

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2.9.6. Mandation in China 2.9.7. In order to promote energy savings & the use of materials substituting

precious natural resources like wood, China has adopted the mandation model. Under the existing policy regime in China, for all new constructions it is mandatory to use certain specified builders ware made of material which substitutes wood e.g. Door/window profiles made of PVC in place of traditional wooden profiles. The State stringently implements the energy saving of building product certification and elimination which is required under law and any non-compliance attracts heavy penalty for the builder.

2.9.8. Non-conformance of energy saving standard or modification without

permission attracts a penalty of Rs 11,60000 to Rs 29,00000 (RMB 200,000 to RMB 500,000) while non-compliance with standards and specifications results in a penalty of Rs 58,0000 to Rs 17,40,000 (RMB 100,000 to RMB 300,000). For constructions not following energy saving designs can invite penalty to the tune of 2-4% of the contract price. Under the stringent monitoring system in China, if 3 projects are not constructed according to energy saving design standards within a time period of 2 years, business of the construction unit will be suspended along with lowering or withdrawal of qualification by the government.

2.9.9. If India emulates China’s example, over and above promoting usage of

wood substitutes like PVC, it would also go a long way towards arresting the rapid depletion of India’s natural resources & conserving India’s forest cover.

2.9.10. Geotextiles 2.9.11. The world over geotextiles are mandated for use in the infrastructure

sector esp. roads & highways. However, in India its use is not mandatory & growth potential through increased use of geotextiles remains untapped.

2.10. Summary & Conclusion

2.10.1. Plastics demand has strong positive correlation with economic growth. 2.10.2. For sustained economic growth generation of adequate new

employment opportunities is imperative. 2.10.3. Indian plastic industry provides employment to 3.3 million people

currently and has the potential to generate 3.7 million additional jobs. There is additional employment potential of 17 million skilled (semi skilled) labour in the rural area with the exploitation of micro-irrigation ? using plastics covering a targeted 14 million hectares as ? by the task force.

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2.10.4. Plastics find applications across key sectors of the economy including agriculture and infrastructure.

2.10.5. Intensive use of plastics in the end-user sectors especially Packaging,

infrastructure and agriculture is likely to drive growth of the economy as well as the plastic industry.

2.10.6. Increased use of plastics in plasticulture is also likely to substantially

increase agricultural productivity & provide a boost to the Indian economy

2.10.7. China, having realized the benefits of plastics use, used the mandation

model to substantially increase plastics usage.

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3. Global Scenario of petrochemicals

3.1. Growth of Global petrochemical Industry

3.1.1. Within the US$ 1.8 trillion global chemical market, petrochemicals constitute the single largest segment accounting for ~40% (~US$ 72 billion) of the chemical market as depicted in chart 7. Historically, growth in the chemical market had been 1.5 times that of global GDP – a trend that continues even today.

Chart 7: Global Chemical Market

3.1.2. Today petrochemical products find applications across all/many sectors of the economy and are present in every sphere of modern life. Use of petrochemical products has multiple benefits both for the individual and the society at large by improving the quality of life.

3.1.3. High Value Addition in the Industry 3.1.4. Value addition in the petrochemical industry is very high – higher than

most other industry sectors. 3.1.5. As chart 8 shows, when a barrel of oil valued at US$ 50 (Rs 2182) is

used for fuel production, gasoline worth US$ 112 (Rs 4887) is produced with value addition of US$ 62 (Rs 2705) only. The same

Global Chemical Market : Growing @ 1.5 times GDP

Textiles10%

Petrochemicals39%

Performance chemicals

16%

Pharmaceutical chemicals

16%

Agrochemicals11% Other fine

chemicals1%

Inorganic chemicals

7%

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barrel of oil when used for petrochemicals production, US$ 1120 (Rs 48868) worth of finished goods are produced with a value addition of US$ 1070 (Rs 46686) – more than 17 times that of fuel production.

Chart 8: Petrochemical Value Addition

(Naphtha 70 kg)

30 Dress Shirts(65% polyester) and

14 Cans forKerosene

40 Sweaters(100% acrylic), or)

5 BeerContainers

1 Automobile Tire, and 16 Bicycle TireInner Tubes

50 kg ofUrea Fertilizers

CrackerBottom Oil

1.2 kg ofCarbon Black

160 Pairs ofNylon Underwear,or

410 pairs ofNylon PantyHose

Off Gas

13.6 k

g

2.4 kg

Pyrolysis

Gasoline 15.2 kg

Butane Butylene

7.3 kg

Prop

ylene

11.8

kg

Ethylene19.7 kg

$ 50 (Rs. 2182)for a barrel of Oil

$ 112 (Rs. 4887) worth of gasoline

$ 1120 (Rs. 48,868)worth of finished goods

When used in petrochemical industry

ORWhen used as fuel

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3.1.6. Polymers 3.1.7. Polymers constitute one of the key segments of the petrochemical

industry. Ever since its inception, the polymer industry had grown rapidly on account of the multiple benefits it offers compared to traditional materials like aluminium, steel, wood, paper, etc.

3.1.8. In addition to being cheaper, lighter and more versatile in terms of

applications compared to traditional materials, use of polymers conserves precious natural resources. Hence the world over, polymers have been replacing traditional materials across applications and sectors.

3.1.9. The Global Polymer Industry 3.1.10. The inception of the polymer industry was in the West during the 1930s

but its widespread commercial use in various sectors replacing traditional materials like metals and wood picked up in the 1950s.

3.1.11. The multiple benefits offered by polymers compared to traditional

materials like metals, paper and wood, high value addition and versatility of their applications across sectors can be gauged from the fact that even after 5 decades since its birth, the industry continues to grow at rates 1.5 times that of global GDP. Between 1980 & 2005, global polymer demand i.e. demand for commodity plastics has more than quadrupled from 36 MMT in 1980 to 148 MMT in 2005 with a CARG of 5.7% as shown in chart 9.

Global Commodity Polymer Demand (MMT)

36

71

123

148

1980 1990 2000 2005Source: CMAI

Chart 9 : Global Polymer Demand

3.1.12. Sustained growth in the polymer industry over the decades had

resulted in significant investment flow into the sector for additional capacity augmentation necessary to meet the surging demand. As

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shown in table 23, both the pace and size of new capacity addition have increased over the decades. As shown in table 23, compared to ~20 MMT new ethylene capacity added during the 60s, 70s and 80s, the 1990s witnessed addition of 37 MMT new ethylene capacity. The quantum of additional ethylene capacity is expected to increase further to 44 MMT during the current decade (2001-2010) of which 19.5 MMT has already been commissioned.

Table 23: Global Capacity Addition

Global Capacity Additions (MMT) 1960s 1970s 1980s 1990s 2000's 2001-05Ethylene 20 17 23 37 44 * 19.5 PE 6 11 15 26 31 11.4 PP 2 5 7 21 24 8.2 PVC 4 4 10 11 11* 6.2 Source: Chem systems, CMAI Olefins,CMAI Vinyls,* Estd.

3.1.13. Similar trend has been witnessed for the individual polymers also with

the pace & size of capacity build-up rising over the decades as shown in the table above.

3.1.14. However, the regional composition global polymer demand growth has

undergone significant changes with the epicenter of industry growth shifting from the West of Suez (WOS) to the East of Suez (EOS) as markets in WOS reached saturation points.

3.2. Global demand supply situation

3.2.1. Global polymer demand i.e. demand for commodity plastics increased from 123 MMT in 2000 to 148 MMT in 2005 while global polymer capacity went up from 142 MMT to 170 MMT in the same period, both capacity & demand increasing at a CARG of 4%. Among the polymers, demand for LLDPE & PP registered the fastest growth with a CARG of 6% during 2000-05 followed by HDPE with a CARG of 5%.

3.2.2. As per industry projections, global polymer demand i.e. demand for

commodity plastics is expected to grow at a CARG of 5% during 2005-09 & increase from 148 MMT in 2005 to 178 MMT in 2009. Global polymer capacity during 2005-09 is likely to go up from 170 MMT in 2005 to 202 MMT in 2009 at a CARG of 4%. Demand for LLDPE, HDPE & PP is projected to grow at a CARG of 6% followed by PVC at 4% as shown in table 24.

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Table 24: Global Demand Supply – Polymers (Commodity Plastics)

Global Demand Supply Scenario Commodity Plastics MMT

2000 2005 CARG (2000-05) % Capacity Demand Capacity Demand Capacity Demand LDPE 18.8 16.4 20 17.7 1.3% 1.5% LLDPE 15.8 13.3 20.4 17.8 5.2% 5.9% HDPE 27 22.7 32.8 28.6 3.9% 4.7% PP 35.4 30.4 44.2 41.1 4.5% 6.2% PVC 31.1 25.2 37.3 30.7 3.7% 4.1% PS 13.7 10.7 15.1 11.8 2.0% 1.9% Total 142 119 169.9 147.8 3.7% 4.4%

2005 2009 CARG (2005-09) % Capacity Demand Capacity Demand Capacity Demand LDPE 20 17.7 22.1 19.2 2.6% 2.1% LLDPE 20.4 17.8 25.6 22 5.8% 5.5% HDPE 32.8 28.6 40.8 35.6 5.6% 5.7% PP 44.2 41.1 57.7 51.2 6.9% 5.7% PVC 37.3 30.7 39.4 35.8 1.4% 3.9% PS 15.1 11.8 16.5 13.5 2.2% 3.4% Total 169.9 147.8 202.4 177.5 4.5% 4.7% Source: CMAI

3.3. Shift of Industry from WOS to EOS

3.3.1. During 1950-1990, countries in the West of Suez (WOS) region viz. the US and European countries essentially dominated the polymer industry. Demand for petrochemicals having a strong positive correlation with economic growth, consumption of polymers rapidly rose in the WOS on the back of the strong economic performance of the countries in the region.

3.3.2. However, as a result of sustained growth over 4 decades, polymer

consumption levels in WOS countries reached a saturation point in the late 1980s limiting the industry’s growth potential. As the petrochemical industry matured in the WOS, it was just making a beginning in the East of Suez (EOS) comprising of Asia & the Middle East. The huge disparity in petrochemical consumption between WOS, where the industry has grown rapidly for 4 decades & the EOS where the industry had just about started prompted a fundamental shift in the industry from the WOS to EOS.

52

Chart 10: Share of EOS in Global Capacity

3.3.3. The above developments ushered in the emergence of EOS not only

as a key polymer consumption centre but also as a key-manufacturing base. For ethylene – the basic building block for polymers – the share of EOS in global C2 capacity rose from only 24% in 1990 to 38% in 2004 as shown in chart 10 – indicative of the rising importance of EOS in the global petrochemical industry.

3.3.4. Similar trend was witnessed for para-xylene (PX) – basic building block

for aromatics. Share of EOS in global PX capacity, which was 33% in 1990 increased to 76% in 2004.

3.3.5. This trend of rising EOS share in global petrochemical capacities is

expected to continue in the coming years as well. By the year 2009, share of EOS in global ethylene capacity is expected to rise from the existing level of 38% to 48% while the same for PX is projected to increase from the existing 76% to 85%.

3.4. Dominance of China

3.4.1. The decade of the 1990s witnessed a fundamental relocation of the polymer industry from WOS to EOS with significant capacity build up in East Asia & ASEAN , as the fulcrum of economic growth shifted to East of Suez (EOS) with the rapid economic growth in ASEAN, South Korea & China.

C2: 1990 - 63 MMT

WOS 76%

EOS 24%

C2: 2004 - 112 MMT

WOS 62%

EOS 38%

C2: 2009 - 143 MMT

EOS 48%WOS

52%

PX: 1990 - 9 MMT

EOS 33%

WOS 67%

PX: 2004 - 25 MMT

EOS 76%

WOS 24%

PX: 2009 - 34 MMT

EOS 85%

WOS 15%

53

Chart 11: China’s Polymer Demand & Imports (kT)

3.4.2. In the aftermath of the Asian crisis in 1997, all countries in the Asia Pacific, with the sole exception of China, were left with substantial exportable surpluses because of the significant capacity addition in the mid-1990s & shrinkage in their domestic demand caused by the crisis. With its huge polymer imports as chart 11 shows, China emerged as the global sink and the polymer market in the EOS witnessed intense competition with countries competing with each other for a share of the Chinese market.

3.4.3. The 1990s decade witnessed massive increase in China’s polymer

demand. As chart 11 shows, China’s polymer imports increased from 275 kT in 1990 to 13674 kT in 2005 making China the largest polymer importer globally. China’s import dependency for polymers went up commensurately from 9% in 1990 to 35% in 2005.

0

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LDPE LLDPE HDPE PPPVC PS Imports

54

3.5. Emergence of Middle East

3.5.1. Around the same time when ASEAN countries were witnessing significant capacity build-up, the first wave of capacity build-up materialized in the Middle East attracting investments from global petrochemical players like Exxon Mobil, Chevron, etc. who wanted to take the significant feedstock advantage of the region.

3.5.2. At the same time, governments in ASEAN & the Middle East were

providing several incentives/concessions/benefits to attract investments & develop their respective domestic polymer industry. Some of the incentives/ concessions/ benefits made available to the industry are listed in table 25.

Table 25: Incentives for Petrochemical Industry in ASEAN &

Middle East

3.5.3. The feedstock advantage coupled with the various incentives/concessions/benefits offered by Governments in the Middle East attracted substantial investments – both domestic & foreign – in the countries in the region. Chart 12 shows the capacity build-up for Ethylene in the Middle East over the years.

Incentives to the Petrochemical Industry in Middle East & ASEANTax holiday upto 8 yearsImport duty

Naphtha 0-5%Catalysts & chemicals 0-5%Machinery 0%

Utilitity cost Low cost utility providedExports Export incentivesFeedstock price (Naphtha & Ethane) 30% discount in M East

55

Chart 12: Ethylene Capacity (kT) in the Middle East

3.5.4. As reflected in chart 12, among the countries in the Middle East, a

major part of the additional Ethylene capacity was established in Saudi Arabia primarily on account of the subsidized feedstock (Ethane) provided by the Government to the petrochemical manufacturers by pricing it at $ 0.75/MMBTU – much lower than gas prices of $ 5.5-7.5/MMBTU elsewhere in the world & ~US$ 10/MMBTU in the US. Other countries in the Middle East like UAE & Qatar also provide subsidized gas to the petrochemical industry though gas price in Saudi Arabia remains the lowest – giving manufacturers there substantial advantage vis-à-vis their counterparts elsewhere as table 26 shows.

Table 26: Ethane Price in GCC Countries

(US$/mmbtu)Saudi Arabia 0.75Oman 0.80UAE* 1.15Kuwait 1.00-2.00Qatar 1.70-2.00Bahrain 2.00

Price of Feedstock (Ethane)

Source: CMAI, 2005*Price for Abu Dhabi

0

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S Arabia Iran Iraq Israel Kuwait Qatar Turkey UAE M East

56

3.5.5. The subsidized feedstock available in GCC countries gives petrochemical manufacturers in GCC an unfair advantage vis-à-vis manufacturers elsewhere.

Chart 13: Ethylene Production Cost

3.5.6. As shown in chart 13 which compares costs of production of ethylene in GCC with the same in India showing that cost of production of ethylene for manufacturers in GCC who are provided with feedstock at the price prevailing in Saudi Arabia ($ 0.75/mmbtu) is $ 143/MT only compared to $ 697/MT in India. It gives manufacturers in GCC an unfair advantage of $ 554 for every ton of ethylene produced.

3.5.7. Even if ethane price in GCC is increased to reflect the prices prevailing

in GCC countries other than Saudi Arabia, it still results in producers in GCC enjoying an unfair advantage of $ 414/MT vis-à-vis their Indian counterparts.

3.5.8. A major part of C2 capacity in the Middle East being based on Ethane

feedstock as chart 14 shows, the subsidized Ethane price makes the region an attractive destination for new investments.

Ethylene Production Cost (US$/MT)

69169

374

143

283

697

GCC (Saudi Ethane) GCC Typical India (Naphtha)

Cash CostFull Production Cost

Source: Nexant

554414

57

Chart 14: Distribution of C2 Capacity (kT) by Type of Feedstock

3.5.9. Gas price in Saudi Arabia is likely to remain unchanged till 2011-12 when it is due for review & hence, the Middle East is likely to remain an attractive destination for petrochemical investments in the coming years as shown in chart 15. During the period 2005-09, the major part of new investments for additional C2 capacity globally is projected to come up in the Middle East.

Chart 15: Regional distribution of New Ethylene Capacity 2005-09 (kT)

2414

5

2508

8

2518

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2640

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2511

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2735

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Ethane Propane Butane NaphthaGas Oil Others Capacity

2455

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2278 2700

562

860

2826

1850

6900

0 4000 8000 12000 16000

As Pc

M East

Africa

E Europe

W Europe

S America

N America 2005 2006 2007 2008 2009

58

Chart 16: Share of Middle East in Global C2 Capacity Expected to Rise

3.5.10. As chart 16 shows, the share of Middle East in global C2 capacity is projected to continue rising to increase from the existing 11% to 19% by 2009 when a lot of capacity in the Middle East comes on-stream as it is likely to remain an attractive investment destination on account of feedstock pricing.

3.5.11. Major capacity additions are taking place where the Feedstock is

available (Middle east) at the low cost or the market is there (China)

3.6. Impact on operating rates

3.6.1. In fact, many analysts believe that as significant new capacity in the Middle East are scheduled to become operational in 2009, it is likely to depress the global ethylene operating rates (which currently is at a healthy level of above 90% due to limited C2 capacity additions in the last 2 years) as chart 17 shows.

3.6.2. Falling operating rate is going to impact the profitability of the the

petrochemical industry and with the low cost feed stock advantage Middle east this will be a great opportunity to consolidate further

2005N

America30%

As Pc28%

S America

4%

Middle East11%

Africa1%E Europe

6%W

Europe20%

2009

N America

25%

As Pc28%

S America

4%

Middle East19%

Africa2%

E Europe5%

W Europe

17%

59

Chart 17: Global Ethylene Operating Rates (%)

3.7. Summary and conclusion

3.7.1. Petrochemicals is one of the key industries with high value addition. 3.7.2. China is major consumer and importers of petrochemicals and with

focus on the upstream the import dependency of China is reducing 3.7.3. SEA and Japan who were mainly producing for China are now looking

for new markets to sell their products. 3.7.4. Middle East due to feedstock advantage is going to be the

petrochemical hub for the World 3.7.5. India being in middle of the Middle East and SEA becomes vulnerable. 3.7.6. We have already lost an opportunity to accelerate growth & attract

investments in the industry on account of the adverse policy environment. However, given low per capita consumption, India can still become a consumption hub with focused efforts by the Industry and Government. Otherwise, a major opportunity will be lost.

Source: CMAI

0

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60

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100

120

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2001

2002

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2005

2006

2007

2008

2009

2010

86%

87%

88%

89%

90%

91%

92%

93%

94%Dom. Demand Op. Rate, % Capacity

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4. Overview – Indian Petrochemical Industry

4.1. Economic Reforms & Indian Petrochemical Industry

4.1.1. The foundation of economic reforms in India was initiated with a new

industrial policy that was laid in Parliament on July 24, 1991. The new policy was designed to de-regulate the industrial economy by:

• Removal of licensing for majority of industries • Dispensing with capacity licensing.

4.1.2. The other major changes effected were amendment in the Monopolies

and Restrictive Trade Practices (MRTP) Act, lowering entry barriers in foreign direct investment, free import of technology, de-reservation of industrial sectors that were earlier reserved for public sector, liberalization of almost all industrial imports from import licensing in the trade policy and wider access to the capital market.

4.1.3. The economic reform impacted the industrial sector as a whole,

particularly the petrochemical industry. During the pre-reform era, petrochemical industry was nurtured through industrial and trade policies. The emphasis was on import substitution to cater to domestic demand.

4.1.4. A decade after post-economic reform, close integration of

petrochemical industry with socio-economic realities of India has made it impossible to disassociate the growth in petrochemical consumption from the overall economic growth. This can be seen in the case of polymers and synthetic fibres with a CARG of 14% and 12% respectively during 1990-2002. This growth rate was 2 to 3 times the growth of GDP.

4.1.5. The diversified domestic economy is one of the key drivers of the

success of the petrochemical industry in India. In addition, the growth of domestic market and policy reforms helped the petrochemical industry to attain greater heights in the Indian Industrial scenario. Petrochemical Industry is capital intensive, depends on availability of naphtha, natural gas, technology developments and economies of scale.

4.1.6. In recent past, the global petrochemical industry has also undergone a

major change. As a result of major restructuring in the industry, production, distribution and trade in the petrochemical industry have undergone significant changes. To enhance competitiveness, petrochemical manufacturers have adopted a strategy to consolidate both capacities & markets by mergers and acquisitions, development and upgradation of technology, undertaking manufacture of high value added products, etc. Several petrochemical manufacturing facilities

61

have relocated in the EOS region, especially in Middle East with feedstock advantage, closer to the key consuming markets in the Asia Pacific.

4.1.7. Continuing reduction in tariffs and gradual elimination of non-tariff

barriers have led to fierce competition in the sector, and manufacturers have focused on enhancing their international competitiveness on a continuous basis in an increasingly globalised world. Simultaneously, the role of the Government has changed from a regulator to a facilitator for enhancing competitiveness to promote the growth of the industry.

4.1.8. India has propelled itself into the high growth trajectory where 8%+

growth rates are easily possible but from 2000 onwards-domestic polymers industry is growing at very slow pace where polymer consumption has gone below GDP. Indian Petrochemical industry is facing the major challenge of growth where Industry and government partnership is imperative.

4.2. Perspective on the Petrochemical Industry

4.2.1. Petrochemicals are derived from mainly hydrocarbons produced from crude oil and natural gas. Among various fractions produced by distillation of crude oil, petroleum gases, naphtha, kerosene and gas oil are the main feedstocks for the petrochemical industry. Ethane and natural gas liquids obtained from natural gas are the other important feedstocks used in the industry. Olefins (ethylene, propylene and butadiene) and Aromatics (benzene, toluene & xylenes) are major building blocks from which key petrochemicals are produced.

4.2.2. Petrochemical manufacturing involves manufacture of building blocks

by cracking or reforming operations; conversion of building blocks into intermediates such as fibre intermediates (acrylonitrile, caprolactum, dimethyl terephthalate/purified terephthalic acid, mono-ethylene glycol); precursors (styrene, ethylene dichloride, vinyl chloride monomer, etc.) and other chemical intermediates and finally, production of synthetic fibres, plastics, elastomers, other chemicals and processing of plastics to produce consumer and industrial products.

4.2.3. Petrochemical products namely, synthetic fibres cater to the clothing

needs of mankind and are used in both apparel and non-apparel applications. Polymers find major applications in packaging for preservation of food articles, moulded industrial and home appliances, furniture, extruded pipes, etc. Synthetic rubbers are used for making various types of tyres and non-tyre rubber goods and supplement natural rubber.

4.2.4. Petrochemical downstream processing units are major contributors to

employment generation and entrepreneurial development, thereby, serving a vital need of the economy. Starting from the raw material

62

production to conversion into finished products, the employment potential (both direct and indirect) is generated in a cascading manner, which is currently estimated at over 3 million.

4.2.5. The petrochemical industry is technology driven and for operation of

sophisticated and modern petrochemical plants, skilled manpower is required.

4.2.6. Some of the major units have R&D facilities but the expenditure

towards R&D is very low. To meet the growing need of skilled manpower, emphasis is required to be given on training and human resource development.

Chart 18: Petrochemical Chain

4.2.7. Among the various segments within the petrochemical industry,

polymers or plastic raw materials are the most versatile. Polymers are used across sectors in the economy as the material of choice on account of its multiple benefits compared to substitute materials like glass, wood, metals, etc. Today plastics are used in a wide array of sectors ranging from agriculture and infrastructure to consumer durables and non-durables.

4.2.8. Packaging, both rigid and flexible, is the largest consumer of plastics

among all the user sectors. Traditional materials like wood, aluminium, paper, etc have been replaced with plastics over the years and today most products including perishables come packaged with plastic.

4.2.9. Chart 19 shows the indispensability of plastics as packaging medium.

As shown in chart 19, without using plastics, cost of packaging would go up by 300%, weight of packaging would rise by 200% and energy

Val

ue A

dded

Oil & Gas E & P

Petroleum Refining

Olefins Aromatics

Polymers FiberIntermediates Chemicals

Fibers

Textiles

Raw Material

Building Blocks

Main Products

Consumer FacingProducts.

Infrastructure, Agriculture,

Lifestyle, Packaging,

etc

Detergents, Fertilizers,

Paints, Pharma

63

consumption would increase by 150% along with doubling of the volume of waste in the process. Similar benefits are there for other applications of plastics as well which makes it indispensable to modern life.

Chart 19: Advantages of Using Plastics for Packaging

4.3. Development of Indian Petrochemical Industry

4.3.1. The Indian petrochemical industry is a relatively new entrant in the industrial scenario in India. It made a modest beginning with the first naphtha cracker set-up in the early sixties by Union Carbide India Ltd. at Mumbai with an installed capacity of ethylene of 20,000 tpa. This was followed by another naphtha cracker of ethylene capacity of 60,000 tpa by National Organic Chemical Industries Ltd. (NOCIL), at Thane. In 1978 the Indian Petrochemical Corporation Ltd (IPCL) then state-owned, commissioned a naphtha cracker with ethylene capacity of 130,000 tpa alongwith a large number of downstream plants at Baroda which gave impetus to the petrochemical industry in the country.

4.3.2. The economic reforms initiated in 1991 brought major changes in the

structure of the domestic petrochemical industry. Delicensing and deregulation allowed the market forces to determine growth and investment. Liberalization of trade policies and lowering of tariffs geared the domestic industry to align itself with the global petrochemical industry. Taking advantage of liberalization, the Indian petrochemical industry invested approximately Rs.350 billion in the 1990s, raising the domestic polymer capacity from less than 0.5 million

200 % Increase

100% Increase

150 % Increase

300 % Increase

0 100 200 300 400 500

Cost of Packaging Cost of Packaging

Energy ConsumptionEnergy Consumption

Volume of WasteVolume of Waste

Weight of PackagingWeight of Packaging

Source: GVM, Germany-1987 / 91 (APME)

Without plastics Without plastics

With plastics With plastics

64

tones to the current level of over 4 million tones. Mega sized cracker complexes using the state-of-the-art technologies were set up and the ethylene capacity increased from 0.22 million tones in 1990 to 2.4 million tones in 2001 as chart 20 shows.

Chart 20: Ethylene and Paraxylene Capacity buildup India

4.3.3. Despite the low per capita consumption of plastics in India the Indian plastic industry has not got the attention it deserves. As a result, the Indian polymer industry’s growth has decelerated, in sharp contrast to the sustained rapid growth of 1.5-2.5 times GDP growth witnessed in the 1990s.

4.3.4. Post reforms in 1991 there was major investment in petrochemical

capacities, which have tapered off by Year 2001-2002. Due to this major capacity additions import dependency has been brought down substantially to 10% saving the country foreign exchange.

4.3.5. Investment in the downstream petrochemical industry has also followed

the same pattern where the capacity addition beyond 2001-02 has been mainly through debottlenecking as shown in chart 21.

0.23

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Ethylene

P-Xylene

65

Chart 21: Polymer Capacity Buildup India

4.3.6. However, despite huge increase in capacity, the per capita plastics

consumption in India is ~5 kgs – much lower than the global average of 25 kgs and 30 kgs in China as chart 22 shows. The low level of per capita plastics consumption in the country compared to the same elsewhere is indicative of the immense growth potential of the Indian plastics industry.

Chart 22: World per capita plastic consumption

0.0

1.0

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4.0

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-06

Capacity (mmt) PS PVC PP LLD/HDPE LDPE Demand

E. Europe (10)

L. America (18)

SEA (10)

Note : • Asia/ Pacific excludes Japan • figures in kg

China (18) India (4)

N.America (90) W. Europe

(65)

World Average (25)

E. Europe (10)

L. America (18)

SEA (10)




(65)

World Average (25)

E. Europe (10)

L. America (18)

SEA (10)




(65)

World Average (25)

E. Europe (10)

L. America (18)

SEA (10)




(65)

World Average (25)

Source: Industry

66

5. Current Status of Indian Petrochemical Industry

5.1. Background

5.1.1. The petrochemical industry, a relatively new entrant in the Indian industrial scene, had its inception in the 1960s and registered rapid growth in the 1970s, 1980s and 1990s. The major industry segments are synthetic fibres, polymers, elastomers, synthetic detergents, intermediates and performance plastics.

5.2. Crackers

5.2.1. Table 27 lists out the existing Ethylene cracker capacities in India. As shown in table 27, of the 2.55 MMT total ethylene capacity in the country, ~61% is Naphtha-based & 39% is gas-based.

Table 27: Ethylene Cracker Capacities - India

5.2.2. Size of Indian crackers on the rise 5.2.3. Globally, the petrochemical industry has witnessed steady increase in

cracker size. During the 1990s, the trend of increasing average cracker size was witnessed in the Indian polymer industry also. As shown in chart 23, following the global trend of rising average cracker size with I MMT being the size of world-scale cracker, the average size of ethylene crackers in India, which was 80 kTA in 1990-91, has increased to 350 kTA in 2004-05.

Plant Ethylene Capacity Feedstock Mix

NOCIL 60,000 NaphthaIPCL, Baroda 130,000 NaphthaIPCL, Gandhar 300,000 Ethane Propane mixGAIL, Auraiya 300,000 Ethane Propane mixIPCL, Nagothane 400,000 Ethane Propane mixHPL, Haldia 520,000 NaphthaRIL, Hazira 750,000 Naphtha

67

Chart 23: Average Cracker Size (Kta) in India

5.3. Plastics

5.3.1. Indian Plastics Industry Snapshot

5.3.2. Since the commissioning of the first cracker in 1967, the petrochemical industry in India has come a long way. Among the various segments of the petrochemical industry, the plastics sector had emerged as the fastest growing sector.

5.3.3. Till the end of the 1990s, the plastics sector registered sustained high

growth growing at rates 1.5-2.5 times that of GDP and emerged as one of the fastest growing industry sectors of the economy. Table 28 gives a snapshot of the plastics industry in India.

Table 28: Indian Plastic Industry Snapshot

5.3.4. Presently, there are 15 producers in India producing ~5 MMT of

plastics raw material and ~22,000 plastic processing units. The domestic plastic industry has capital assets valued at Rs 85,000 crores. Value of exports from the industry in 2005-06 was ~US$ 1.9

80

350

1990-91 2004-05Source: Industry

Indian Plastics Industry SnapshotUnit

Major Raw Material Producers Nos. 15Processing Units Nos. 22,000Number of machines Nos. 65,484Processing Industry Turnover Rs crores 55,000Polymer Industry Capital Asset Rs crores 85,000Plastic Raw Material Production MMT 4.9Employment Direct / Indirect Million Nos. 3.3Value of Exports USD billion 1.9Revenue to Government Rs crores 7300

68

billion and the sector contributes Rs 7300 crores to the exchequer annually and is one of the largest contributors to government revenue.

5.3.5. Small Share of Global Market

5.3.6. The Indian petrochemicals industry is small by international standards, with ethylene capacity in India accounting for only 2.3% of global capacity. Polymers constitute the single largest segment within the Indian petrochemical industry but are rather small in the global context, accounting for only around 2.5% of the global production. India ranked 13th in the world in, 2005 in terms of ethylene capacity. India’s share in global capacity for some of the key petrochemicals is shown in table 29.

Table 29: India Vs World Capacity

5.3.7. The Indian petrochemical industry has witnessed rapid reduction in

import tariff since 1991 which has forced the industry to face increased international competition from countries with feedstock advantage (Middle East) where low price of feedstock, e.g. gas at 0.75$/mmbtu in Saudi Arabia, petrochemical production cost is just a fraction of the same in India which gives manufacturers in those countries significant advantage at the export front.

5.3.8. China is the single largest importer of polymers and one of the largest

importers of petrochemicals in the world. Any reduction in the Chinese import demand makes India vulnerable to dumping by the SEA and ME producers, who are keen to tap the huge potential in Indian petrochemical market.

(in KT) India World India's share Building Blocks Ethylene 2716 117645 2.3%Propylene 1916 71228 2.7%PolymersPE 1775 73396 2.4%PP 1760 44368 4.0%PVC 979 37406 2.6%PS 365 15225 2.4%ABS 76 8536 0.9%

Building Blocks & Polymers Capacities in 2005: India vs World

Source:CMAI, 2005

69

5.4. Task force on Petrochemicals

5.4.1. In view of the rapid growth in the petrochemical industry and taking cognizance of the vital role it can play in the overall economic growth & development in India, Govt. of India constituted a Task Force on Petrochemicals to formulate a long-term growth strategy for the sector.

5.4.2. The report submitted by the Task force in April 2003 to the Govt.

identified the major issues facing the industry & made specific recommendations for making the domestic industry internationally competitive, attracting fresh investments and sustaining its rapid growth in the long-term.

5.4.3. Task force recommendations & forecast 5.4.4. The Task Force report made recommendations for resolution of key

issues facing the industry in order to increase investment, boost demand, enhance competitiveness of the downstream industry through technology upgradation and scale expansion & achieve environment-friendly sustainable growth in petrochemical industry.

Table 30: Task Force Forecast (2001-02)

5.4.5. The Task Force projected that future capacity requirements in order to

meet the growing demand in the country would entail setting up of 9 crackers of 700KT each and 23 polymer plants with average capacity of 200KT as shown in table 30.

5.4.6. What really happened

5.4.7. The future capacity needs projected by the Task Force assumed that the phenomenal demand growth witnessed in the 1990s would continue post-2001 and attract fresh investments in the sector.

5.4.8. In reality, however, the performance of the industry deteriorated

compared to the 1990s due to the adverse impact of a combination of several external (global economic slowdown since end-2001, 9/11 tragedy in the US, outbreak of SARS, etc) and internal factors (high

Future Investment Requirements (Kt)

Capacity Demand Deficit/ Surplus

Avg /unit size

No. of Plants reqd.

C2 2001/02 2363 2715 -352 2006/07 2363 4933 -2570 700 4 2011/12 2363 8647 -6284 700 9 All Polymers 2001/02 4207 3651 556 2006/07 4687 5338 -651 200 3 2011/12 4687 9197 -4510 200 23

70

cost issues, accelerated tariff reduction, etc). As shown in table 31, since 2001 CARG of demand for polymers had been only 4% - much lower than the growth rates witnessed in the 1990s. In the period 2001-05 (with the exception of 2001-02) the business environment for the domestic petrochemical industry deteriorated as demand nose-dived, the downstream processing industry continued to remain uncompetitive and no capacity addition took place since 2001.

Table 31: Polymer Demand-Supply Balance 2005-06 – India

5.4.9. In absence of growth in domestic demand for polymers, Indian

manufacturers are compelled to export 0.74 MMT polymers as table 31 shows, which otherwise could have been consumed domestically.

5.4.10. Chart 24 compares the growth in polymer demand with GDP growth.

As shown in the chart, during the 1990s polymer demand grew at rates 1.5-2.5 times GDP growth rates. However, the trend was reversed since 2001 with polymer demand growth dipping to levels below GDP growth.

Chart 24: GDP Vs Polymer Growth

Polymer Demand-Supply Balance in 2005-06

(in KT) Capacity Production Import Export DemandCARG 2001-02

to 2004-05LDPE 205 200 32 20 212 -3%LLDPE 1145 650 100 20 730 16%HDPE 590 1050 90 202 938 -5%PP 1920 1750 90 390 1450 7%PVC 1063 980 85 25 1040 5%PS 354 335 15 89 261 6%All Polymers 5277 4965 412 746 4631 4%Source:Production-Industry , Import-Export - DGCIS, Calcutta

0%

5%

10%

15%

20%

25%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

India Polymer GrowthIndia GDP

71

5.4.11. The phenomenon of polymer demand growth trailing GDP growth, which is being witnessed in India is contrary not only to the industry trend at the global level but also to what is being experienced in other developing countries like China as shown in table 32.

Table 32: Polymer Demand Elasticity

5.4.12. Table 32 also shows that average income elasticity of polymer demand

in India during the 1990s was significantly higher than both the global average & that of China but has declined to a level lower than the global average and that of China only in the last 5 years. The above unique trend being witnessed in India is reflective of the adverse business environment in the industry & is a cause for serious concern, the continuation of which is likely to disrupt fresh investments in the industry.

5.5. Performance of the Plastics Industry During 10th Five Year Plan

5.5.1. Capacity Addition

5.5.2. In the first four years of the 10th Five Year Plan i.e. up to August 2006, there has been little capacity addition in the sector. Table 33 compares the capacity additions for polymers and select building blocks during the 10th Five Year Plan with the same during the 9th plan period.

Table 33: Petrochemical Capacity Addition During 9th & 10th Plan

% Growth in

capacityCARG

% Growth in capacity

CARG

97-98 01-02 02-03 06-07

Ethylene 1208 2409 2409 2575 7% 1.3% 99% 18.8%

Propylene 639 1524 1548 2010 32% 5.7% 139% 24.3%

LDPE 202 160 160 205 28% 5.1% -21% -5.7%

LLD/HDPE 620 1530 1510 1700 11% 2.1% 147% 25.3%

PP 560 1370 1450 1895 38% 6.7% 145% 25.1%

PVC 783 778 790 1085 39% 6.9% -1% -0.2%

PS 140 354 354 430 21% 4.0% 153% 26.1%

01/02-97/98

X Plan

06/07-01/02

IX Plan

94-00 95-00 00-04 94-00 95-00 00-04 94-00 95-00 00-04Global 6.1 5.5 4.0 3.8 3.9 3.7 1.6 1.5 1.1China 16.1 16.0 11.2 9.3 12.5 8.7 1.4 1.9 1.3India 13.7 12.5 5.6 6.3 6.2 5.9 2.3 2.2 1.0

Avg Polymer Demand Growth (%) Avg GDP Growth (%)

Avg Elasticity of Polymer Demand

72

5.5.3. As shown in table 33, capacity for ethylene – the key petrochemical building block – doubled during the 9th Five Year Plan period (1997-98 to 2001-02) from 1.2 MMT in 1997-98 to 2.4 MMT in 2001-02 at a CARG of ~19%. However, during 10th plan, ethylene capacity is estimated to grow only by 166 kT or 7% to reach 2.57 MMT by 2006-07 at a CARG of 1.3%.

5.5.4. Similarly, during the 9th plan, propylene capacity in the country went up

by 139% from 639 KT in 1997-98 to 1.54 MMT in 2001-02 registering a CARG of over 24%, but tapered down during the 10th plan when capacity is estimated to go up by 32% only at a CARG of 5.7% from 1.55 MMT to 2 MMT.

5.5.5. The above trend is reflected in polymer capacities as well. During the

9th Five Year Plan period, capacities for PE (LLDPE/HDPE), PP and PS individually increased by ~150% with CARG of over 25%. For the 10th plan period, India’s capacity for PE, PP and PS is expected to increase by 11% (CARG 2.1%), 38% (CARG 6.7%) and 21% (CARG 4.1%) respectively.

5.5.6. The above is indicative of the fact that petrochemical capacity

augmentation in the country during the 10th plan period has slowed down significantly compared to the same over the 9th plan and the quantum of incremental capacity during the 10th plan is also much lower vis-à-vis the same during the 9th plan.

5.5.7. Petrochemicals Demand

5.5.8. Petrochemicals demand during the 10th Five Year Plan period also shows signs of moderation compared to the 9th plan period as depicted in table 34. Demand for Ethylene – the key petrochemical building block – which increased from 1.2 MMT to 2.1 MMT during the 9th Plan clocking a 73% increase with a CARG of 14.7%, is estimated to go up by 87% only over the level at the end of the 9th Plan reflecting a modest CARG of 13.3%. Consequently, ethylene demand in India is projected to go up from 2.6 MMT to 4 MMT in 2006-07.

5.5.9. Demand for Propylene is estimated to increase from 1.4 MMT at the

beginning of the 10th Plan to 2.2 MMT at the end of the 10th Plan at a CARG of only 7.4% in contrast to the 26.2% CARG achieved during the 9th Plan. While demand for Propylene went up by 154% during the 5 years in the 9th Plan, during the 10th Plan it is projected to rise by 43% only as table 34 shows– indicative of demand slow down.

73

Table 34: Demand for Petrochemicals during 9th & 10th Plan

5.5.10. As shown in table 34, demand for PE (LLDPE/HDPE) and PP has decelerated in the 10th Plan period. PE demand more than doubled during the 5 years of the 9th Plan from 0.7 MMT in 1997-98 to 1.5 MMT in 2001-02 at a CARG of 19%. Over the 10th Plan period, PE demand is estimated to go up by 34% only from 1.4 MMT in 2002-03 to ~2 MMT in 2006-07 at a CARG of 6%.

5.5.11. Similarly, demand for PP is projected to increase from 1.1 MMT in

2002-03 to 1.7 MMT in 2006-07 at a CARG of 10.2% compared to the 9th Plan period when it increased from 0.6 MMT in 1997-98 to 1.1 MMT in 2001-02 at a CARG of 15.2%. The deceleration in demand growth for the 2 key cracker derivatives viz. PE and PP reflects a demand slow down.

5.5.12. However, demand growth for PVC is estimated to improve during the

10th Plan. PVC demand is projected to go up from 0.9 MMT at the beginning of the 10th Plan to 1.3 MMT in 2006-07 reflecting an increase of 57% during the plan period at a CARG of 9.5% - higher than the 5.5% witnessed during the 9th Plan.

5.5.13. During the 5 year period between 2002-03 and 2006-07, demand for

PS is expected to go up 36%, which was also the increase witnessed during the 9th Plan, albeit at a lower CARG of 6.4% compared to the 8% CARG registered during the 9th Plan.

5.5.14. Polymer Trade

5.5.15. India’s exports and imports of polymers during the 9th and 10th Five Year Plans are shown in table 35. As table 35 shows, India emerged as a net polymer exporter half way through the 9th Plan in 2000-01 and

% Growth in Demand CARG % Growth in

Demand CARG

97-98 01-02 02-03 06-07

Ethylene 1251 2166 2695 4041 87% 13.3% 73% 14.7%

Propylene 619 1570 1449 2243 43% 7.4% 154% 26.2%

LDPE 238 219 200 253 15% 2.9% -8% -2.0%

LLD/HDPE 732 1471 1407 1971 34% 6.0% 101% 19.1%

PP 614 1084 1129 1763 63% 10.2% 76% 15.2%

PVC 687 852 879 1341 57% 9.5% 24% 5.5%

PS 129 176 152 239 36% 6.4% 36% 8.0%

IXth Plan Xth Plan

06/07-01/02 01/02-97/98

74

remained so till 2004-05 on the back of rising exports. In 2004-05 India’s polymer exports crossed the million ton mark but volume of exports in 2005-06 declined to almost half the level of the year before. Consequently, India became a net importer of polymers in 2005-06 after remaining a net exporter in the preceding 5 years.

Table 35: India’s Polymer Trade During 9th & 10th Plan

5.5.16. Chart 25 shows the trade performance of the individual polymers. As

shown in the chart, in 2005-06, despite declining exports, India had a positive trade balance for PP and PS, close to being balanced for PE and a negative trade balance for PVC.

Chart 25: India’s Trade in Polymers

India's Polymer Trade(in kT) Imports Exports Net Trade

1997-98 444 60 -3831998-99 593 44 -5501999-00 546 105 -4402000-01 221 368 1472001-02 420 567 1482002-03 381 760 3792003-04 450 842 3922004-05 400 1005 6042005-06 412 746 334

Source:DGCIS

9th Plan

10th Plan

Polyethylene

-500

-400-300

-200-100

0

100200

300400

500

1991

-92

1993

-94

1995

-96

1997

-98

1999

-00

2001

-02

2003

-04

2005

-06

Net Trade Imports Exports

Polypropylene

-500

-300

-100

100

300

500

1991

-92

1993

-94

1995

-96

1997

-98

1999

-00

2001

-02

2003

-04

2005

-06


Polyvinyl Chloride

-200-150-100-50

050

100150200

1991

-92

1993

-94

1995

-96

1997

-98

1999

-00

2001

-02

2003

-04

2005

-06

Net Trade ImportsExports

Polystyrene

-100-80-60-40-20

020406080

100

1991

-92

1993

-94

1995

-96

1997

-98

1999

-00

2001

-02

2003

-04

2005

-06

Net TradeImportsExports

75

5.5.17. Since 2002-03, the beginning of the 10th Plan period, exports of

individual polymers from India show varied trends. Exports of PE and PP increased in the first 2 years of the 10th Plan and have since then shown declining trends, while PS exports exhibited a downward trend in the first 3 years of the 10th Plan but have been on the rise ever since.

5.5.18. Also, for PE and PP, the gap between exports and imports has been

narrowing during the 10th Plan period but the same has widened for PVC and PS. As shown in table 36, for all polymers combined together net trade was on the rise during the first 3 years of the 10th Plan but declined significantly in 2005-06.

76

6. Downstream plastic processing industry

6.1. Current Status of the Processing Industry

6.1.1. With around 22,000 processing units, the domestic downstream industry comprises of 3 key segments viz. Injection moulding, Blow moulding and Extrusion and caters to the requirements of a wide array of applications like packaging, automobile, consumer durables, healthcare, etc.

6.1.2. Table 36 shows the current status of the domestic downstream plastic

processing industry. As shown in table 36, the Indian plastic processing industry consumed 4.8 MMT in 2004-05, which includes both virgin & reprocessed polymers. Among the various segments in the processing sector, the Injection molding segment accounts for ~30% of the total polymer consumption in the processing sector consuming 1.4 MMT of polymers in 2004-05.

6.1.3. As of 2004-05, the number of machines installed in the processing

sector is 65484 more than 55% of which is in the injection molding segment. Investment per machine is the highest for BOPP films at Rs 3451.8 lacs/machine. Project investment is estimated as 1.75 times that of investment/machine & is Rs 6040.7 lacs for BOPP film as Table 36 shows.

Table 36 : Downstream Plastic Processing Industry Status – 2004-05

6.1.4. The total investments in the Indian plastic processing industry is in the

vicinity of Rs 40,000 crores of which more than 50% is in the injection

Sector

Consum ption V irg in +

Reprocessed (KT)

Operating rate S ize (MT)

Machines (Nos)

Investm ent (Rs Lacs)/ Machine

Project Investm ent 1.75 tim es M achine

M anpow er D irect/

Machine

Tota l Investm ent Rs Crores

Tota l Em ploym ent

(Nos)Monolayer 693 54% 200 6099 30.0 52.5 16 3200 97590Multilayer 306 60% 1400 664 84.6 148.1 20 983 13280Pipes 82 37% 1200 620 59.1 103.4 14 641 8680PP/HD W oven Sacks 531 59% 2000 1200 197.6 345.8 60 4150 72000Extr. Coating 79 39% 1200 344 79.7 139.4 20 480 6880PPTQ Film 209 55% 360 1693 14.8 25.9 10 439 16930PVC Pipe 578 32% 1400 2880 72.5 126.8 18 3652 51844Injection Mould ing 1,400 46% 155 36257 31.8 55.6 6 20154 217542Blow Mould ing 288 49% 150 5628 10.1 17.7 5 995 28140Monofilam ents 55 49% 360 986 10.8 18.9 5 186 4928Calendered Sh. 69 35% 3760 34 741.9 1298.3 120 441 4080BOPP Film 85 72% 10800 21 3451.8 6040.7 210 1269 4410Fibres & F il. 55 88% 1800 69 456.7 799.3 36 552 2484PVC W ire & Cab les 73 27% 360 864 14.2 24.9 3 215 2592PVC B low n Film & Sheet 52 66% 600 338 23.4 41.0 7 138 2366Sheet Lines 30 27% 1200 249 57.9 101.4 10 252 2490O ther Extrusion ETC. 203 26% 1600 2438 32.0 56.0 20 1366 48751Reprocessing Pe lletisers 1,051 87% 1169 5100 5.3 9.3 10 475 51000Total** 4,789 65,484 39,588 635,986**Consum ption Exclud ing ReprocessedInd irect Em ploym ent Upstream 0.5 317993

Dow nstream 3.75 2384948Tota l Estim ated Em ploym ent 3338927

77

molding sector. As shown in table 36, the total employment in the downstream sector is ~636,000 more than a third of which is in the injection molding segment. It is estimated that the plastic industry provides employment to around 3.53 million people if the indirect employment generated by the sector is also factored in.

6.1.5. During the period 2001-2005 capacity in the plastic processing sector

has increased at a CARG of 8% as table 37 shows. However, the average capacity per machine has remained virtually unchanged at ~250 MT reflective of sub-optimal scale of operation which has been adversely affecting the competitiveness of the domestic manufacturers.

Table 37 : Processing Capacity Addition 2001-05

6.1.6. Uneconomic Size of Indian Plastic Processing Units

6.1.7. The downstream processing industry in India is extremely fragmented and uses outdated technology essentially because of Government’s policy of reservation of various plastic products for exclusive manufacture in small-scale units and the various excise exemptions offered to them.

6.1.8. As a result, both aggregate demand for plastic raw material from the

processing sector as well as per unit consumption are very low – much below than what they are in other countries as shown in chart 26. The low level of consumption in processing industry is reflected in the deceleration in polymer demand growth in the country.

Capacity Addition in the Plastic Processing Industry

Upto 2001 01-'02 02-'03 03-'04 04-'05 Total Upto '05 CARG %Machines Added (nos.) 46100 2540 2600 3095 3085 11320 65484 9%Installed Capacity (kT) 8270 680 615 830 745 2870 11167 8%

Source: Industry8%

Addition

Avg capacity per machine (MT) 179 268 237 268 241 254

78

1333

1111

682

673

588

179

0 500 1000 1500

USA

Germany

China

Brazil

Canada

India

Chart 26: Output per Unit in Processing Industry

6.1.9. On account of the outdated technology and sub-optimal scale of operations, products manufactured by majority of the processing units are internationally uncompetitive and hence, have not been able to tap lucrative export markets. While China is importing plastic raw materials for production of value-added plastic products, which then are exported to countries across the world, Indian processing industry has lost out on a tremendous growth opportunity.

6.1.10. Furthermore, in a world of fading geographical boundaries, today the

very survival of the domestic processing industry is at risk due to the severe threat from imports. Hence, it is imperative that the downstream industry enhances its international competitiveness through technology upgradation and expansion of scale of operations.

6.2. High Incidence of Taxes on Plastic Products

6.2.1. One of the key factors adversely affecting the demand for plastic

products is the high incidence of indirect taxes (excluding import duty). Presently, the total incidence of indirect taxes on articles of plastic in India works out to be ~31% - highest among the countries in the Asia Pacific region as chart 27 shows. Boosting demand for plastic products in India necessitates a reduction in total tax incidence on the same.

79

Chart 27: High Tax Incidence on Plastic Products

6.3. Plastics Recycling Industry in India

6.3.1. India recycles ~30% of its plastic waste, the highest rate of recycling in the world. In comparison, the world on an average recycles only about 22% of its plastic waste. Some statistics about the Indian recycling industry are shown in table 38.

Table 38: Plastics Recycling Industry in India

6.3.2. Consumer waste is collected from households, hotels, the street and dump yard by scrap dealers and rag pickers. This is then sent to the recycler. The plastic waste is then sorted and cleaned followed by grinding, cleaning and drying. The waste is then formed into lumps and grounded and then granulated and packaged. This is then sold to processors who convert it into end products as shown in figure 3.

Volume Recycled 1.3 MMT

No. of Units ~2,300

Pelletizers ~4,500

Turnover (Rs. Cr) ~5,000

Value Add. (Rs. Cr) ~1,600

17%

10%

5%

10%

10%

5%

10%

5%

7%

10%

31%

China

Indonesia

Japan

Malaysia

Philippines

Singapore

South Korea

Taiwan

Thailand

Vietnam

India (all levies combined)

80

Figure 3: Recycling Process Flow Diagram

6.3.3. The most common kind of recycling is mechanical recycling. In this process, plastics are directly recycled and converted from discarded materials to plastic pellets. These recycled pellets are then reintroduced into the plastic production process to form new products. There are two types of plastics recycling systems:

6.3.4. Primary recycling: it involves using uniform, uncontaminated plastics

waste to manufacture plastic products of same or similar types. Much fabricator scrap, commonly blended with virgin resins in various ratios, is used in primary recycling but sometimes used alone.

Figure 4: The Recycling Process

ShreddingSorting/CleaningCollection

Melting/Heating Granulation

MouldingFinished Product

Energy Water

Source: Life cycle Analysis of PP-HDPE Woven Sacks vis-à-vis Jute/Paper Sacks in terms of Environmental Studies, IIT Delhi

Waste Plastic

Recycling Useful Products

Energy, Water

Heat

Source: Life cycle Analysis of PP-HDPE Woven Sacks vis-à-vis Jute/Paper Sacks in terms of Environmental Studies, IIT Delhi

81

6.3.5. Secondary recycling: Post-consumer PP-HDPE woven sacks are used for this type of recycling. This involves granulation, cleaning, and sometimes recompounding and palletizing to form different products such as carry-out containers, planters, funnels, desks, benches, tables, chairs, baskets, rakes, barricades, niwar patti, small packaging, box strapping, brushes, scrubbers, twines, buckets, container baskets, chairs, etc.

Figure 5: Process Chain of Plastics Recycling 6.3.6. However, the availability of long-term outlets for the sale of recycled

material is the prime requirement for the adoption of this technique. Materials collected for recycling into new products is often of relatively low bulk density, when collected, and transportation costs can be prohibitive if the reception points are not suitably located.

6.3.7. The quantity of material to be sold is very relevant and this is best

achieved by the collection of community source separated waste in order to avoid contamination. The materials to be recycled are best handled and processed in a central plant catering for communities of between 2,50,000 and 5,00,000 people. Only at this level can effective

Process chain of plastic recycling

82

tonnages of each material be brought together and scale benefit be obtained from mechanization of the sorting processes.

83

7. R & D, Manpower & Other Issues

7.1. R & D

7.1.1. National Program on Plastic Technology

7.1.2. Plastic Development Council (PDC), constituted under IDR Act, 1951, is the apex body at national level to coordinate & encourage developments and can play a key role in the development of the industry in India. PDC constitutes of members from Government & industry. Its major initiatives are:

· Encourage replacing natural, scarce and high energy

consuming materials with plastics · Development of new products / applications in plastics · Generate additional employment initiatives · Administer Plastic Technology Development Fund

7.1.3. Plastic Technology Upgradation Fund (PTUF)

7.1.4. In line with technology Upgradation Fund Scheme for Textiles (TUFS), PTUF should be created with the objectives of technology upgradation, cost reduction & quality improvement, which are imperative to compete with international players. It is proposed that a cess of Rs. 100/MT of polymer production and imports to be levied for mobilizing the funds. The Empowered Committee (EC) in the proposed PDC can manage the fund. The EC to be composed of members from industry, business and Science & Technology community. The EC would monitor allocation, disbursement, priorization, utilization & control of funds.

7.1.5. Specific portion of the PTUF to be utilized for R&D, projects on waste

management, recycling and developments on biopolymers & biodegradable polymers.

7.2. Manpower Requirement in Processing Sector

7.2.1. Table 39 shows the projected manpower requirement in the downstream plastic processing industry through 2011-12 & the type of skill sets required to meet this rising human resource need in the processing industry. As shown in table 39, total direct manpower requirement in the downstream plastic processing industry is expected to go up from 7 lakhs in 2005-06 to over 1.3 million in 2011-12.

7.2.2. In addition, growth in the plastics sector it is likely to generate indirect

employment which added to the direct employment requirement takes the manpower requirement in the sector to ~7 million by the year 2011-12.

84

Table 39: Manpower Requirement in Plastic Processing Sector

7.2.3. Submission

7.2.4. In order to meet the soaring manpower needs in the domestic plastics sector, the infrastructure for training needs to be upgraded & expanded. Additional centers for training in processing technology need to be established in various parts of the country in the lines of CIPET. Also universities could be identified for providing training in specialized areas within processing technology to additional persons to meet the specialized requirements in the sector.

7.2.5. India Missing Out on Growth Opportunity

7.2.6. India needs to emulate the example of China - the largest exporter of processed plastic products globally - in transforming the plastic processing sector as the engine of growth. As shown in chart 28, China’s total consumption of plastics increased 10 times from ~3 MMT in 1990 to ~40 MMT in 2005 as China’s exports of valued added


64517 153976 1209283 140599 191215 656076 221393Cumulative Employment 700503 136325904-05Indirect Employment Upstream 317993 681630Downstream 2384948 5112221 3.7 MillionTotal Employment 3338927 7003134 Additional Employment 3664207


85

processed plastic products soared leading to sustained rapid growth in the Chinese plastic industry.

Chart 28: Virgin Polymer Consumption in India & China (kt)

7.2.7. During 1990-2005, per capita plastics consumption in China increased from a low level of less than 3 kgs to 24 kgs – indicative of the high growth in the sector, which further added to the tempo of growth of the Chinese economy.

7.2.8. In 2005, China exported plastic products valued at ~US$ 18 billion in

sharp contrast to India’s exports of plastic products worth US$ 1 billion only during fiscal year 2005.

7.2.9. India has significant advantage in the plastic processing sector and

should fully tap the immense growth potential in the sector, which would provide a fillip to fresh investments in the sector and generate additional employment opportunities. In addition, de-reservation of plastic products would also go a long way towards realising the Government’s vision of increasing per capita plastic consumption in India from the current low level of ~5 kgs to 12 kgs by 2011-12.

7.3. Jute Packaging Material Act (JPMA)

7.3.1. The Jute Packaging Material Act (JPMA) was enacted in 1987 as a temporary measure to provide some assistance to the ailing jute industry. The Act made jute packaging mandatory for food grains, sugar, cement & fertilizers. However, even after over 18 years, the Act continues to remain in existence even though cement & fertilizers have been taken out of its ambit.

3014

30141

8924631

05000

100001500020000250003000035000

1990 2005

ChinaIndia

Source: CMAI, Industry

86

7.3.2. Currently, 100% of sugar & food grains produced in India have to be mandatorily packed in jute sacks despite more versatile and cost-effective substitutes e.g. plastic woven sacks, exist.

7.3.3. Moreover, several field trials conducted in various parts of the country,

some which had been carried out along with Government agencies like the FCI, had clearly established the superiority of synthetic sacks compared to Jute sacks. The continuation of the Act continues to strangulate demand for plastic sacks despite the fact that Jute availability in India has virtually stagnated.

7.3.4. Submission

7.3.5. JPMA be done away with at the earliest.


7.4.1. JPMA, which is strangulating demand for synthetic woven sacks for

packaging of food grains & sugar needs to be abolished. 7.4.2. Additional training centres be established for providing training in

plastic processing technology to meet the additional manpower need in the sector.

87

8. Demand Projections

8.1. Polymers

8.1.1. Based on the trends in the end-user sectors, factoring in the various parameters affecting demand for polymers this section tries to arrive at the likely demand scenario in the coming years through 2011-12.

8.1.2. Table 40 shows the demand projections for each of the polymers. The

demand scenario projected is based on the following assumptions.

• Indian economy would be able to sustain the growth tempo & continue to grow at rates witnessed in the last 3 years or more.

• The policy environment in the country would improve and be

facilitative for growth.

• The issues, which are currently hindering industry’s growth would be addressed appropriately to the industry’s satisfaction.

Table 40: Demand Projections for Polymers

Task Force Projection No. of Plants Required

(in kT) PE PP PVC PS Commodity

Polymers Level-I (High

Growth) Level-II

(Moderate Growth)

Level-I Level-II Revised

2000-01 1705 1370 778 354 4207 4215 4215

2006-07 2124 1678 1214 282 5299 7281 6465 8 6 3

2011-12 4711 4627 2772 481 12591 14052 10844 25 17 16

CARG 20% 22% 16% 15% 19% 14% 11%

8.1.3. As shown in table 40, in a facilitative policy environment, the domestic

polymer industry is expected to grow at a compounded average rate of 15% between 2006-07 & 2011-12. Among the polymers, PVC is likely to grow most rapidly at a CARG of 17% followed by PP with a CARG of 16%. PS demand is predicted to register a CARG of 8% in the period 2006-07 to 2011-12.

8.1.4. Demand for PE is expected to grow at the same rate as all polymers

together or less. Within PE, demand for HDPE is projected to grow at the highest rate of 15% while LLDPE demand is expected show a CARG of 12%. Demand for LDPE is likely to grow at a CARG of 7% - much below the rates likely to be witnessed for other polymers.

88

8.2. Ethylene

8.2.1. Establishment of economic size crackers 8.2.2. The global ethylene industry added 2.13MMT of capacity in 2004 an

increase from the addition rate of 1.34MMT in 2003. Capacity growth over 2003 is a meagre 1.9% with a demand change of roughly 4.4%, which entails a requirement to set up a ballpark number of 4MMT capacity to be set up every year.

8.2.3. Ethylene markets continued to recover in 2004 and with a average

global operating rate of 92% Demand for Ethylene is catching up with the Capacity. Global operating rates will remain strong through 2007- 2008. The market may cycle down starting in 2008-2009 when the wave of new capacity additions in the Middle East will outpace demand growth.

8.2.4. Global Ethylene Demand growth is expected to be at an average rate

of 4.6% per annum between 2004- 2009 increasing from the present 3.3% per annum between 1999-2004. The Middle East traders are going to dominate the net equivalent Ethylene trade in the future.

8.2.5. Middle East Expansions

8.2.6. Middle East has the most aggressive expansion plans – Projects in the Middle East dominate the addition of new capacities in the next 6-year time frame. Upcoming and announced Ethylene capacities during 2005-2011 are a total of 28MMT.

8.2.7. The projects due for coming up in the short term add up to around

3.7MMT (2005-2006). In the medium term 2007 -2009 a staggering 12.65MMT of Ethylene capacities are due for commissioning and in the long term 2010 and beyond another 9.6MMT are announced.

8.2.8. 99% of the capacities are gas based or are predominantly gas based

Mix feed crackers .The only Naphtha based capacity is the Al Jubail based Jubail Chevron Philips with a capacity of 350KTA.

8.2.9. Of the Greenfield projects considered are a total of 44 MMT of

Ethylene capacities. 8.2.10. The region wise breakup of the upcoming Ethylene projects is given in

chart 29:

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Chart 29: Region-wise Ethylene Projects 2005-11

8.2.11. The breakup of New Ethylene capacities by feedstocks is shown in

chart 30:

Chart 30: Ethylene Projects Feedstock-wise 2005-11

8.2.12. Middle East Crackers are predominantly gas-based while the ones in NE Asia are mostly liquid feed based.

8.2.13. Minimum Economic Size for Indian Crackers

8.2.14. Following the global trend of minimum economic size crackers is necessary for Indian manufacturers if they have to retain their international competitiveness and compete with producers elsewhere including the Middle East.

8.2.15. Compared to the Feedstock and low cost Capital availability for the ME

Crackers, 800 KTA Indian Crackers with 50 % Ethane / Propane – 50% Naphtha Mix feed crackers have a approximate $200/MT

SA1%

SEA9%

WE1%

ME64%

NEA25%

Naphtha & Liquid

Cracker19%

Multifeed Cracker

17%Ethane/LPG

18%

Ethane46%

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disadvantage on full Ethylene cash cost mainly due to higher feedstock and Cost of capital cost.

8.2.16. If Indian Crackers are designed for 1.4 MMT of Mix feed with same

feedstock composition there is an advantage of $30/MT and the disadvantage with ME crackers is down to $ 170 /MT. Indian Crackers with Naphtha feed also have a $62/MT advantage on full cash costs with Cracker design size going up to 1.4 MMT /annum from 900KTA

8.2.17. Ethylene Demand Projections

1.10.19 Based on the projected demand for key Ethylene derivatives including polymers & the existing consumption norms for each derivative, the Ethylene equivalent demand for the years 2006-07 to 2011-12 has been worked out. Comparison of the same with the existing Ethylene capacity in India of 2.4 MMT gives the Ethylene equivalent deficits for 2006-07 to 2011-12. Chart 31 shows the projected Ethylene deficits for each of the years between 2006-07 & 2011-12.

2424

2424

2424

2424

2424

2424

2424

2424

2424

2424

2424

2656

2810

3079

3388

3675

3909 44

26 5013 56

88 6455 73

11-232 -386 -655 -964 -1251 -1485

-2002-2589

-3264-4031

-4887

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

C2 Capacity C2 Demand DSG

Chart 31: Projected Ethylene Demand-Supply Gap (kT) - India

8.2.18. As shown in chart 31, 2006 onwards the estimated demand-supply gap

for Ethylene is likely to widen over the years. The Ethylene deficit, which is projected at 1.2 MMT in 2006 is expected to increase steadily to 2.6 MMT in 2009 and further to 4.9 MMT in 2012. In order to meet the widening Ethylene deficit in India, augmentation of additional Ethylene capacity will be required.

8.2.19. Taking 1 MMT as the average size of a global size cracker, the above

Ethylene deficits projected for India translate to a requirement of setting

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up 1 new cracker by 2006 plus 4 new crackers by 2012 & the corresponding downstream polymer plants. The commissioning of additional crackers in the coming years would require massive investments of ~US$ 0.72 billion by 2006 & ~US$ 3.5 billion by 2012, and therefore, presents a huge investment opportunity in the sector.

8.2.20. Table 41 compares the cracker requirement projection made by the

Task Force on Petrochemicals & the revised projection being made now. As shown in the table, while the Task Force estimated that 2 additional crackers of average size of 1 MMT would be required by 2007 to keep pace with growing demand, the revised estimates indicate the requirement of only 1 global size cracker by 2007. Similarly, while the Task Force had predicted that 6 additional crackers would be needed in India by 2012, the revised estimates have reduced the same to 4 crackers only.

Table 41: Cracker Requirement Projections

No. of Plants Required (in kT) Ethylene

Task Force Projection Task force Revised

2000-01 2424 2715

2006-07 3909 4933 2 1

2011-12 7311 8647 6 4

CARG 13% 12%

8.2.21. However, a pre-requisite for the fructification of the additional crackers

is improvement in the policy environment & investment climate in the country. India has already missed the growth opportunities in the sector till date but the same could be made up in the future if a facilitative policy regime is put in place which would encourage rapid industry growth.

8.3. Downstream Plastic Processing Industry

8.3.1. Segment-wise projected additional investment requirements in the downstream plastic processing sector are shown in table 42. As shown in the table, the annual incremental investment required in the processing sector increases from ~Rs 1148 crores in 2005-06 to ~Rs 2529 crores in 2010-11. In the period till 2010-11 the total additional investments needed in the processing sector is estimated to be Rs 10790 crores

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Table 42: Additional Investment Requirement in Plastic Processing Sector

8.3.2. The projections shown in table 42 are indicative of the huge investment

potential in the downstream plastic processing industry. However, the massive investments required in the sector would only materialize if the policy environment and investment climate in the country improve and become conducive to industry growth. The fructification of investments would also depend on the enhancement of competitiveness of the downstream processing units necessary to make the sector internationally competitive.

8.4. Summary & Conclusions

8.4.1. The Task Force projections have not materialized in the absence of supportive policy environment in India and India has already lost a major growth opportunity.

8.4.2. With a policy environment conducive to growth, demand for polymers

in India is expected to exceed ~5.3 MMT by 2006-07 & reach 12.5 MMT by 2011-12 growing at a CARG of over 15% which translates to a massive opportunity for investment & growth.

8.4.3. Ethylene equivalent deficit by 2012 expected to be ~ 4.9 MMT

necessitating commissioning of 5 additional crackers of 1 MMT average size involving investments to the tune of US$ 3.5 billion (~Rs 15,400 crores)

Sector 05-06 06-07 07-08 08-09 09-10 10-11 Total (05-11)Monolayer 232.6 150.7 203.1 242.5 284.7 323.4 1437.1Multilayer 49.1 64.1 87.5 113.4 151.8 119.3 585.1Pipes 30.9 21.7 28.2 36.5 47.9 41.3 206.4PP/HD Woven Sacks 114.4 109.0 126.5 133.0 139.7 146.8 769.3Extr. Coating 9.6 12.0 15.1 15.1 18.3 21.5 91.6PPTQ Film 1.4 9.9 5.0 7.1 4.6 5.0 33.0PVC Pipe 86.9 92.1 108.2 129.0 138.4 121.1 675.6Injection Moulding 460.8 632.3 750.8 1072.9 1335.9 1415.4 5668.1Blow Moulding 32.1 32.6 35.9 49.1 53.4 41.0 244.1Monofilaments 3.1 3.5 2.6 3.7 3.2 5.2 21.3Calendered Sh. 39.1 24.8 26.1 18.4 19.4 61.2 188.9BOPP Film 50.0 50.0 50.0 99.9 149.9 149.9 549.5Fibres & Fil. 19.6 15.7 22.5 36.2 51.7 48.5 194.1PVC Wire & Cables 0.7 1.4 1.5 1.9 2.7 3.7 11.8PVC Blown Film & Sheet 2.6 1.4 1.0 0.7 0.5 0.0 6.2Sheet Lines 6.0 6.1 5.3 8.1 16.2 21.3 63.0Other Extrusion ETC. 8.9 7.0 7.1 9.3 8.2 4.4 44.8Extrusion Overall 654.9 569.2 689.6 854.7 1037.0 1072.5 4877.9Total ** 1147.8 1234.1 1476.4 1976.8 2426.2 2528.8 10790.0Source: Industry ** Excluding Reprocessing Pelletisers

Sectorwise Addl Investments Required For Processing (Rs cr)

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8.4.4. Investment requirement in downstream plastic processing sector to reach ~ US$ 2.5 billion (Rs 10790 crores) by 2011.

8.4.5. The fructification of the massive investments in the petrochemicals

sector is possible only if the policy environment in India improves so as to facilitate fresh investments.

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9. Feedstock Issues

9.1. Feedstock Availability

9.1.1. In the domestic industry, around 56% of ethylene cracking capacity is based on naphtha as a feedstock, the balance being met from gas.

9.1.2. Assessment by various agencies indicates significant growth of

Petrochemical products in India. A high demand for petrochemicals would in turn influence the feedstock requirement.

9.1.3. Naphtha 9.1.4. Domestic Naphtha is available from two sources - the refineries and

fractionators. Trends of domestic naphtha availability in past along with current production of Naphtha is shown in table 43.

Table 43: Naphtha Availability in India (MMT)

1990-91 1995-96 2000-01 2005-06 (Estimated)

Refinery Production 4.9 6.0 9.9 14.2 Fractionators 0.6 1.5 1.5 1.5 Total domestic availability

5.5 7.5 11.4 15.7

Source: Report of Task Force on Petroleum, Chemicals & Petrochemical Investment Regions, 2005

9.1.5. Domestic Naphtha availability has been increasing. The sharp rise in Naphtha production has rendered it surplus in the country and the country has now started exporting significant quantities of Naphtha on net basis as shown in table 44.

Table 44: Imports & Exports of Naphtha (MMT)

2002-03 2003-04 2004-05 2005-06 (est) Imports 2.8 2.4 2.2 2.5 Exports 2.1 2.2 2.9 4.4 Net import I Export (-) 0.7 0.2 -0.7 -1.9 Source: Report of Task Force on Petroleum, Chemicals & Petrochemical Investment Regions, 2005

9.1.6. A contributing factor for the jump in Naphtha exports during 2005- 06 has been rising imports of LNG and higher availability of gas. It may be noted that about 2.2 MMT of Naphtha is required for setting up a world scale size petrochemical plant. Among the existing refineries in India, no single refinery has 2.2 MMT of Naphtha (except RIL refinery in Jamnagar) necessary for setting up a world-scale petrochemical complex.

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9.1.7. Currently, naphtha production is on an average about 11% of total refinery capacity with being as high as 19% for newer refineries. Projected refinery capacity additions in the next few years are tabulated in table 45.

Table 45: Projected Refinery Capacity Additions (MMT)

2005 2008 2010 2012 Refining Capacity 132.5 158.7 242.3 287.3 Addition in capacity 26.2 109.8 154.8 Additional Naphtha Availability 2.9 12.1 17.0 Source: Report of Task Force on Petroleum, Chemicals & Petrochemical Investment Regions, 2005

9.1.8. Depending upon the completion schedule of planned refineries, large quantities of naphtha would become available.

9.1.9. Refineries have two options to deal with these quantities, either market

their Naphtha to others - domestically or through exports or use it themselves for adding value to their business. Domestic demand, at this stage, does not appear to be commensurate with the increased availability while exports are generally resorted to as a second best option. Therefore, looking at the surplus availability, several PSU refineries have planned petrochemical complex along with their expansion or grassroots refinery projects.

9.1.10. IOCL, ONGC, HPCL & GAIL have plans for setting up Petrochemicals

Complex. Probable locations for proposed new plants are Panipat, Dahej, Vizag, Mangalore, Haldia and Paradeep.

9.1.11. Naphtha from PSU sources would mostly be used up, should all these

planned projects fructify. In any case, the deficit can be easily met by imports from international oil markets or by utilization of gas. Therefore, depending upon pricing policy, there would be no constraint in availability of Naphtha.

9.1.12. Gas 9.1.13. Past trends and current gas availability for use by petrochemical plants

are shown in table 46.

Table 46: Gas Production & Availability for Petrochemical Industry (MMSCMD) 1990-91 1995-96 2000-01 2004-05 Gross Gas Production 18.0 22.6 29.5 31.813 Used by petrochemicals 0.4 0.5 0.8 1.2 Source: Report of Task Force on Petroleum, Chemicals & Petrochemical Investment Regions, 2005

9.1.14. Gas production seems to have stagnated in the last five years. Further, the petrochemical sector remains lower in priority for allocation of domestic gas. This is so because the power and fertilizer sectors have traditionally been core consumers of natural gas. These two sectors

96

together consume about 70% of the gas consumed in the country today. The balance goes to industrial units where it replaces mostly liquid fuels. Further, gas is increasingly being supplied on priority, to households as piped gas or to automobiles as CNG.

9.1.15. A significant amount of gas is used as fuel in captive power plants for

petrochemical plants which also needs to be added to the consumption of gas as feedstock in petrochemical plants while computing the requirement of gas in the petrochemical industry.

9.1.16. In this context, it needs to be mentioned that petrochemical industry

adds tremendous value to the feedstock and hence, needs to receive a higher priority compared to sectors like fertilizers for which cheap sources of imports exist.

9.1.17. Total current domestic production of natural gas is about 72 MMSCMD.

9.1.18. Additional regassified LNG of around 18 MMSCMD is available from PLL-Dahej and Shell-Hazira. Further, current domestic availability of natural gas from the largest domestic source i.e. ONGC is projected to decrease from 53 MMSCMD to around 30 MMSCMD by 2010-11. This shall be offset from increase in domestic availability from private gas sources such as RIL and other NELP fields, as per information available at this stage. GAIL has announced plans for setting up gas based petrochemical complexes at Kochi and Dibrugarh.

9.1.19. Import of natural gas in the form of LNG and through transnational

pipelines would be major sources of gas availability in future. It is however likely that such imports would be of lean gas where the exporting countries may extract important c2, c3 and c4 fraction before supplying the gas. Taking all the above factors into account. The total gas availability in the country may increase to around 244 -314 MMSCMD by 2010-11.

9.1.20. As against the above total gas availability, the total projected demand

of natural gas is 327 MMSCMD by 2010-11. In the near term i.e. 2007-08. it is estimated that as against the total demand of around 185 MMSCMD the gas availability in the country shall be only around 138 MMSCMD. Gas being price sensitive, its demand is likely to vary in line with price and price of available alternatives.

9.1.21. Therefore, there appears to be critical constraints limiting the

availability of gas for petrochemical projects especially if power and fertilizer sectors continue to receive priority in terms of gas supply. Besides even within the available gas the obtainable fractions for use in petrochemicals are likely to be low. Hence new gas based petrochemical projects can be viable only if it can ensure steady supply of gas.

97

9.1.22. The key feedstock issues which need to be considered for setting up new petrochemical manufacturing facilities in the country are as follows.

• Identification of primary feedstock to be utilized for production and ensuring steady supply.

• Dual or multiple primary feed options for the plants necessary

for operational flexibility • Coastal locations for the plants to be preferred for flexibility of

import of feedstocks.

9.2. Feedstock Pricing

9.2.1. Feedstock forms a key component of cost for petrochemical products and it is important to ensure that this input is available to domestic petrochemical manufacturers at globally competitive prices. Government’s feedstock policy therefore should be tailored to make this critical inputs tariff free.

9.2.2. Crude oil 9.2.3. All countries, which serve as manufacturing hubs, exempt duties on the

raw materials, imported for such purpose. In India, the customs duty on crude oil is presently at 5%. If India is to emerge as an attractive location for Petroleum, Chemicals and Petrochemicals, it is imperative that the customs duty on crude oil be reduced to Nil. As a result both input (crude oil) and output (Naphtha) would be at nil duty.

9.2.4. The above measure would remove the anomaly in pricing of Naphtha

supplied to petrochemical industry. 9.2.5. Naphtha

9.2.6. Naphtha price has been deregulated since April 1998. As a result, currently, the pricing of Naphtha for domestic customers in fertilizer as well as non-fertilizer categories (mainly power and petrochemical sectors are included in the non- fertilizer category) is market determined. Though the initial price is essentially based on import parity, discounts and other reductions depending upon the nature of customer, volume sought and demand-supply conditions make the price essentially market determined.

9.2.7. As domestic Naphtha prices are based on international prices, the

volatility in the international prices is also reflected in the domestic prices

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9.2.8. Naphtha used as feedstock for polymer manufacturers attracts nil customs duty but for all other petrochemicals there is a duty of 5%.

9.2.9. In the current tariff structure, the 5% customs duty on crude oil vis-a-vis

nil customs duty on Naphtha for manufacture of polymers results in a negative protection to the domestic refineries, which discourages them to supply Naphtha to petrochemical units. As shown in table 47, the last 5 years witnessed sharp increase in net exports of Naphtha from India - from net imports of 0.4 MMT during 2000-01 to net exports of 1.9 MMT during 2005-06 - and this trend is likely to exacerbate.

Table 47: Naphtha Exports from India

Year Quantity in MMT Value in Rs Crores Imports Exports Net Trade Imports Exports Net Trade2000-01 3.2 2.9 0.3 4,106 3,273 833 2001-02 3.3 2.5 0.8 3,477 2,300 1,177 2002-03 2.8 2.1 0.7 3,551 2,325 1,226 2003-04 2.4 2.2 0.2 2,884 2,653 231 2004-05 2.2 2.9 -0.7 4,029 5,030 -1,001 2005-06 2.5 4.4 -1.9 5904 10327 -4423 Source: Report of Task Force on Petroleum, Chemicals & Petrochemical Investment Regions, 2005

9.2.10. The refineries are increasingly seeking exports as choice; as exports of Naphtha allows refineries to claim duty drawback against customs duty paid on imported crude, while a domestic sale results in loss of customs duty on the input i.e. crude oil. The current tariff structure, therefore, is encouraging exports at the expense of the domestic petrochemical industry, needlessly overburdening port infrastructure, and leading to infructuous freight costs. The present situation needs to be rectified for ensuring stable Naphtha supply to the domestic petrochemical industry.

9.2.11. Measures to Ensure Steady Feedstock Supply to Petrochemical

Industry 9.2.12. In view of the above, crude oil tariff needs to be realigned and reduced

to nil. Such a step will encourage both - the refinery projects and also domestic sales of Naphtha.

9.2.13. Import Tariff on Propane

9.2.14. Propane - another key petrochemical feedstock - also attracts 5% import tariff –same tariff as ethylene and propylene, which are derived by cracking Propane. There needs to be a duty differential between ethylene/propylene and Propane which is a key raw material for petrochemicals, import duty on which should logically be nil.

99

9.2.15. VAT on Natural Gas & Credit Benefits

9.2.16. Natural gas attracts high rates of sales tax e.g. 20% in Gujarat without credit benefit. Being a feedstock it is necessary that VAT on natural gas be reduced and credit benefits are allowed for using it as inputs.


9.3.1. Refineries in India produce adequate amount of Naphtha for meeting feedstock requirement of the petrochemical industry, which is expected to increase significantly as new refinery capacities are added.

9.3.2. Availability of gas for use as petrochemical feedstock is limited as

meeting demand from the fertilizer and power sectors are given priority. Gas supply to petrochemicals sector needs to be given a higher priority, as cheap sources of fertilizer imports are available.

9.3.3. Despite adequate Naphtha availability, the inverted duty structure on

account of the 5% import duty on crude oil encourages refineries to export Naphtha rather than selling it domestically.

9.3.4. To ensure steady Naphtha supply to domestic petrochemical industry,

it is necessary to eliminate duty on crude oil (or to treat Naphtha supply to domestic petrochemical industry as deemed exports).

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10. Policy Issues & Submissions

10.1.1. Dismal Demand Growth 10.1.2. As mentioned in chapter 4, the Indian polymer industry has been

witnessing significant slowdown over the past 4 years with growth rates dipping even below GDP growth rates in sharp contrast to past double-digit rates, which were 1.5-2.5 times that of GDP. This phenomenon is also contrary to what is being witnessed with respect to the global polymer industry – in the developed countries as well as developing countries like China.

10.1.3. Polymer demand in India, which grew at a CARG of 14% during 1991-

92 to 2000-01, has been virtually stagnant during 2001-02 to 2004-05 registering a CARG as low as 4%. Moreover, as detailed in chapter 4, over the last 5 years the elasticity of polymer demand with respect to GDP growth has declined to less than 1 in sharp contrast to 2.2 in the preceding 5 years – the reason why despite rapid economic growth, demand for polymers hardly grew in the last 4 years.

10.1.4. Such a scenario of faltering polymer demand is not only affecting the

performance of the industry but is likely to hamper fresh investment inflow in the sector required in the coming years to realize its growth potential. The primary reason for deceleration in demand growth is the lack of a facilitative & investment friendly business environment in India essentially on account of the existing policy regime not being conducive to industry growth.

10.2. Fiscal Issues

10.2.1. Import Tariff on Polymers

10.2.2. Since its inception, the petrochemical industry in India has been plagued with several high cost factors within the Indian economy like high cost of capital, high power tariffs, high import tariffs on key petrochemical inputs including capital goods, etc. Since 1991, while external reforms were carried out, but the corresponding internal reforms necessary to address the high-cost factors within the economy were not undertaken and the India industry continues to remain at a disadvantage.

10.2.3. Since the beginning of the economic reforms process, the domestic

petrochemical industry has been subjected to accelerated reduction in import tariffs. As shown in chart 32, between 2000-01 & 2006-07, import tariff on polymers declined from 46.4% to 5.2%.

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Chart 32: Import Tariff (%) on Polymers

10.2.4. The lack of internal reforms coupled with rapidly declining tariffs has forced the Indian petrochemical manufacturers to compete with their counterparts in other countries on a ‘non-level playing field’, thereby, posing a serious threat to the commercial viability of the investments already made in the sector, especially the ones which have come up in the 1990s.

10.2.5. The existing basic customs duty of 5% on polymers is lower than most

ASEAN countries and the 12% tariff prevailing in Saudi Arabia. The import duty on polymers in many developed countries in the west is ? higher than in India. In USA the current import duty is 6.5%.

Table 48: Cross-country Comparison of Tariff for Polymers

390110 LDPE 5% 30% 8.75% 15% 10% 9.1%390110 LLDPE 5% 30% 8.75% 15% 10% 6.5%390120 HDPE 5% 30% 8.75% 15% 10% 9.1%390210 PP 5% 30% 8.75% 15% 10% 8.6%390410 PVC 5% 20% 8.75% 15% 10% 8.6%390311 PS 5% 20% 8.75% 15% 10% 8.6%

Thailand 2006

Philippines 2006

Indonesia 2006

China 2006

Code Product India 2006

Malaysia 2006

5.2%10.3%

15.5%

20.6%20.2%

31.1%36.4%

41.7%

46.4%

2000-01 2001-02 2002-03 2003-04 Mar2004-05

June2004-05

Sept2004-05

2005-06 2006-07

Note:Tariffs including ACD, SCD, surcharge & Education Cess

102

10.2.6. Import Tariff on Key Inputs

10.2.7. Import tariff on Naphtha – the basic petrochemical feedstock - for polymer production is currently nil while it’s input viz crude oil attracts a duty of 5% making the tariff structure inverted.

10.2.8. However, for manufacture of other petrochemicals the import tariff on

Naphtha is 5% - the same as crude oil from which Naphtha is sourced. 10.2.9. Similarly, Propane - another key petrochemical feedstock - also attracts

5% import tariff –same tariff as ethylene and propylene, which are derived by cracking Propane. There needs to be a duty differential between ethylene/propylene and Propane which is a key raw material for petrochemicals, import duty on which should logically be nil as suggested in table 49 similar to ASEAN countries.

10.2.10. In addition, while import tariff on polymers – the final petrochemical

finished product – has been reduced to 5%, key inputs like catalysts & specialty chemicals and capital goods attract duty of up to 12.5% creating an inverted duty structure and affecting the industry adversely.

Table 49: Existing & Proposed Import Tariffs - Key Polymer Inputs

10.2.11. Excise Duty on Polymers & Articles of Plastic

10.2.12. One of the key reasons for the slowdown in domestic demand for polymers & articles of plastic is the high incidence of taxes in India. The existing 16% excise duty on polymers and articles of plastic translates to a total tax incidence of ~31% (all levies combined) as shown in table 50, making plastic products exorbitantly expensive & strangulating demand. Articles of Plastic are generally mass products, which improve the quality of life for the common man & it is the poorer sections of the society who are currently bearing the maximum adverse impact of the existing 16% excise duty.

10.2.13. Over and above hindering polymer demand growth, the high excise

duty of 16% on polymers & articles of plastic has certain social ramifications in terms of conservation of natural resources like wood and metals. Increased usage of plastics as a substitute for wood for applications like furniture & builders ware like door/window profiles can play a vital role in arresting the pace of deforestation in India,

Existing ProposedNaptha for production of all petrochemicals 5% nilPropane 5% nilSpecialty chemicals & catalysts up to 12.5% nilCapital Goods up to 12.5% nil

Import Duty

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especially when India’s existing forest cover is much lower than what is desirable & is shrinking rapidly but the existing 16% excise duty on plastic products discourage increased use by the consumer.

10.2.14. There is an urgent need to revise down the existing excise duty on

polymers and articles of plastics from 16% to 8% to boost demand, revive industry growth & encourage inflow of fresh investments in the sector.

Table 50: Cross-country Comparison of Levies on Domestic Sales

10.2.15. The impact of the reduction in excise duty from 16% to 8% with

simultaneous abolition of excise exemptions to SSI on the exchequer is expected to be positive over the medium term even though it is expected to decline in the first year immediately after the reduction as shown in table 51.

Country China 17%Indonesia 10%Japan 5%Malaysia 10%Philippines 10%Singapore 5%South Korea 10%Taiwan 5%Thailand 7%Vietnam 10%India (all levies combined) ~31% Source:Deloitte Touche Tohmatsu, 2004

VAT

Cross-country Comparison of Levies on Domestic Sales in Key Asian Countries

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Table 51: Impact of ED Reduction from 16% to 8% on Govt. Revenue

10.2.16. In this context, it needs to be noted that currently polymer prices are

currently ruling high and revenue realization to the Government from each ton polymer is higher compared to the same 2 years back. This is the opportune moment for reducing the excise duty, as the resultant revenue impact to the exchequer will be offset to a large extent by the higher excise realizations on account of high prices.

10.2.17. Submission

10.2.18. In order to revive industry growth, excise duty of polymers & articles of plastic be reduced from the existing level of 16% to 8% with simultaneous abolition of excise exemptions currently available to small-scale units.

10.2.19. Value Added Tax on Deemed Exports

10.2.20. One of the key issues with respect to VAT, which require immediate attention from the Government, is that of deemed exports. The manufacturer exporter has the option of either to import his inputs (for production of exportables) or procure them from domestic suppliers. Currently, when the domestic manufacturer of inputs sells such inputs

No Calc 2006-07 Calc 2007-08 2008-09 2009-10 2010-11 2011-12Consumption (kT) 1 4913 5922 7138 8604 10370 12500Demand growth 2 5% 21% 21% 21% 21% 21%avg c.I.f. price ($/MT) 3 1100 1350 1350 1350 1350 1350FE Rate (1$=Rs) 4 46.00 46 46 46 46 46avg price in Rs 5 3*4 50600 3*4 62100 62100 62100 62100 62100ID 6 5.10% 5.1% 5.1% 5.1% 5.1% 5.1%ID (Rs/MT) 7 2581 3167 3167 3167 3167 3167

Import Price with ID/Domestic Price (Rs/Mt) 8 4+7 53181 4+7 65267 65267 65267 65267 65267

Excise Revenue from RM (Rs/MT) 16.32% 9 9*(ED-16.32) 8679 9*(ED-8.16) 5326 5326 5326 5326 5326

Excise Revenue from RM (Rs Crores) 10 1*9 4264 1*9 3154 3801 4582 5523 6657

Avg price of plastic goods with 40% value addition (Rs/Mt) 11 8*VA 74453 8*VA 91374 91374 91374 91374 91374

Additional Excise revenue with 16% ED (Rs/Mt) 12 11*(ED)-9 3472 11*(ED)-9 2130 2130 2130 2130 2130

Additional Excise revenue with 16% ED (Rs Cr) 13 12*1 1706 12*1 1262 1521 1833 2209 2663

Net Excise Revenue to GOI due to SSI exemption (Rs Cr) - 25% of above 14 13*0.25 426 13*0.75 946 1140 1375 1657 1997

Total Excise Revenue 15 10+14 4690 10+14 4100 4942 5957 7180 8654Revenue Impact -590 252 1266 2490 3964

Assessment of Excise Revenue Loss/Gain from Plastic Industry if Excise Duty on Articles of Plastics and Polymers is reduced from 16% to 8% and Removal of SSI Exemption

105

for exportable production to an ultimate exporter, the sale of such inputs is taxable as per the prevalent sales tax laws in the states.

10.2.21. The tax on sales of inputs for exportable production hinders the growth

of exports and inhibits the competitiveness of the ultimate exporter and encourages him to source the inputs through imports rather than sourcing them domestically. As a result, imports of inputs into India for exportable production increase significantly and Indian manufacturers of such inputs are forced to undertake additional exports of inputs to the extent of the increase in imports for the same.

10.2.22. As there is no tax on exports, and therefore, deemed exporters should

not be asked to pay tax on inputs they are supplying to the ultimate exporter for the production of exportables.

10.2.23. Submission

10.2.24. The issue be taken up by the Ministry of Finance, Govt. of India with the state governments for changing the existing sales tax regulations in states required to make deemed exports tax-free.

10.2.25. Central Sales Tax

10.2.26. Even after majority of Indian states have already implemented VAT, the Indian industry continues to be subjected to the Central Sales Tax, which adds to the industry’s burden of disadvantage. With the VAT machinery in place, it is necessary to do away with levies like the CST, which place the domestic industry at a disadvantage, in order to simplify and streamline the country’s fiscal structure.

10.2.27. Submission

10.2.28. The industry, hence, would like to submit that the CST be abolished as implementation of VAT has made it redundant.

10.2.29. Sales Tax on Natural Gas & Naphtha

10.2.30. Currently natural gas and Naphtha attract sales tax at exorbitant rates, which vary from state to state in contrast to crude oil which attracts a sales tax of only 4% as it is included in the list of “declared goods” under the CST Act.

10.2.31. Submission

10.2.32. Natural gas and Naphtha be included in the list of “declared goods” under CST Act and be taxed at a uniform 4% rate or 4% uniform VAT.

10.2.33. Abolition of withholding tax on interest on foreign currency

borrowings made by units located in Special Economic Zones as well as developers of Special Economic Zones

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10.2.34. The Special Economic Zones Act, 2005 (“SEZ Act”) recently enacted

by the Parliament has provided for certain fiscal incentives for development of SEZs in India. The SEZ Act has introduced certain amendments in the Income-tax Act, 1961 (“the Act”), whereby a deduction in respect of export profits earned by a unit located in an SEZ has been granted for a certain number of years. Simultaneously, developers of SEZs have also been granted a tax holiday for a certain number of years. Simultaneously, section 80LA of the Act has been amended to provide for a tax holiday in respect of income earned by Offshore Banking Units (OBUs) and unit of an International Financial Services Center (IFSC) located in an SEZ in respect of profits earned from certain specified banking and financial activities carried on in the SEZs.

10.2.35. To give a further fillip to offshore banking and other financial services to

be carried out by OBUs and IFSCs in the SEZs, the provisions of section 197A of the Act have also been amended to provide that no withholding tax will be deducted by an OBU from interest paid on deposits made by, or borrowings made from, non-residents or persons not ordinarily resident in India.

10.2.36. Development of SEZs as well as units, which will set up businesses in

SEZs, would require investment of substantial amount of funds. In the current global financial scenario, such developers or units would also be raising funds from foreign financial institutions and other lenders, if overall cost of the borrowing in respect of foreign loans is more attractive than financing the project by domestic debt.

10.2.37. As per the normal commercial practice prevailing in the international

financial markets, any withholding tax deductible on interest paid on cross-border loans in the country of source is to be borne by the borrower and, accordingly, constitutes a part of the cost of the funds for the borrower. It is precisely for this reason that SEZs developed by other countries ensure that the units located in SEZs or the developers of the SEZs are not unnecessarily burdened with extra cost of such withholding tax, by exempting interest paid on such borrowings made by units located in SEZs or developers of SEZs from withholding tax at source.

10.2.38. Submission

10.2.39. In order to make the SEZs to be set up in India commercially more attractive the provisions of section 195 of the Act must be amended so that no withholding tax would be applicable to any interest paid by a developer of an SEZ or a unit located in an SEZ, as defined under the SEZ Act, on the borrowings made by them from non-resident lenders for the purpose of carrying on their business in the SEZ. This would go a long way in ensuring that foreign capital is available at attractive overall interest costs to developers of SEZs and units to be set up in

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SEZs in India and, they are not put to a disadvantage as compared to SEZs located in other countries.

10.3. Petroleum Chemicals & Petrochemicals Investment Regions (PCPIR)

10.3.1. To promote investment in Chemical & Petrochemical sector and make

the country an important hub for both domestic and international markets & to attract major investment, both domestic and foreign, by creating an investment region, which would have high-class infrastructure, and provide a hassle free and competitive business environment, an investment region need to be created, which would reap the benefits of networking and greater efficiency through the use of common infrastructure and support services. Such a region would boost manufacturing, augment exports and generate employment.

10.3.2. In order to enable quick and coordinated decision-making and to

provide an appropriate policy framework for development of investment regions of requisite scale and level of facilities, with the involvement of world-class developers, in the field of petroleum, chemicals and petrochemicals, Government has constituted a Task Force on Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR).

10.3.3. Project Incentives to Encourage Development of PCPIRs

10.3.4. The contributing factors for development of a strong investment region have been briefly touched upon above. Besides an attractive feedstock policy, the Government can take the following policy actions to further the development of PCPIRs.

10.3.5. Stable tax regime

10.3.6. Considering the size of the project these projects are capital intensive, with a long gestation period. When considered alongside, price volatility faced through out the project life, it becomes' apparent that any action taken by the Government to provide stability in economic environment would generally encourage such projects. Therefore, once a particular region or an area has been identified, the Government should provide pre-determined tax regime in terms of central, state, local and incomes taxes for 10 to 15 years.

10.3.7. A stable tax regime would lower project risk and consequently improve

the viability of the project. If this is coupled with ease in procedures and single window clearance, we believe a low cost, incentive would be in place.

10.3.8. Incentives

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10.3.9. Government has several tools available to provide incentives.

Depending upon the final analysis, different tools can be adopted. The incentives can be fashioned on the needs of the project and the quantum of incentives that may be provided.

10.3.10. Capital grants would lower the initial cost of the project and enable

projects to exceed internal return benchmark rates of project developer, particularly when the project return is just below the hurdle rate.

10.3.11. Alternatively, the Government could undertake to provide additional

infrastructure. Generally this would include infrastructure in the nature of utilities power, water, steam etc, which could be used by other projects as well. Infrastructure development would reduce the project cost as such facilities would no longer fall on the developer of the refinery/plant and also encourage other to take benefit of the facilities. Infrastructure development could come through a public-private partnership route, where quality would be assured by private ownership and lower costs through government support to the infrastructure project.

10.3.12. To lower operating costs, low cost loans or interest rebates could be

thought of. Access to cheap finance is a strong incentive, in case of capital intensive and long gestation projects. Similarly, preferential tax treatment in terms of lower local taxes could also be considered where a portion of the output would be sold in the domestic market.

10.3.13. Clearly, adequate availability of feedstock in close proximity to or within

PCPIRs and low cost feedstock will form an import component for lowering operating costs as well as attracting new projects.

10.3.14. Tariff Incentives

10.3.15. An important form of improving viability of large refinery / petrochemical capital; -intensive projects is to build in an appropriate tariff incentive between input and output. Refinery projects require enormous capital and with globally volatile margins, these projects remain in high risk and low return category. Limited MNC interest in putting up refineries in the country, even after India being the 6th largest oil market in the world is a case in point.

10.3.16. To encourage new projects, we may attract them by providing tariff

incentives for their domestic sales. A large domestic market with appropriate tariff difference between crude and petroleum products and/or between naphtha/gas and petrochemical products would not only improve viability of the project, but also reduce project risk as they will be able to tap higher margin domestic market, if coupled with a stable tariff regime.

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10.3.17. Therefore, no further change may be made in customs tariff of petroleum product along with reduction in crude oil duty to nil. For petrochemical units, it appears that petrochemical products enjoy a tariff difference of about 8% to 10% between inputs and outputs.

10.3.18. SEZ incentive to apply automatically 10.3.19. Some large refineries and projects are already planned in SEZs. If the

Government hopes to develop more regions within the country, new projects cannot be at a disadvantage to these SEZ projects. Any other approach would discourage development of new Investment Regions and perhaps even abort new projects in their inception stage.

10.3.20. All new projects, thus, must come in with same benefits or incentives,

which are available to SEZ projects. Domestic customers are now the driving force .for many industries. It would be ironical to deny domestic suppliers benefits offered to global suppliers. Not doing so would also amount to preferring, policy wise, only SEZ projects, which would work against PCPIRs. Besides, large projects would come up in other countries in areas where these benefits are granted. Therefore, it is suggested that SEZ incentives/rules may be applied, automatically, to regions identified as PCPIRs.

10.4. Export Promotion Measures

10.4.1. The total imports of Chapter 39 items by about 68 countries in 2005 was about 371 billion US Dollars as against our total exports of about 2.2 billion US Dollars which is about 0.60%. In case we take the imports into other major regions (Middle East and Africa) our share will be reduced further. Table 52 shows imports of items under chapter 39 for leading economies.

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Table 52: Import of Chapter 39 Products

10.4.2. Table 53 shows the world imports of key plastic products as against the

Indian exports for a few major items that comprise our export basket.

Table 53: World Imports of Key Plastic Products

Importing Country 2003 2004 2005

Total 257757 327717 371779France 27628 32657 36032China 21042 28064 33339United States 22848 26561 31715Italy 10821 27353 30110United Kingdom 22469 26932 28658Germany 18555 22353 24737Mexico 11575 12665 14301Hong Kong 9582 11582 13408Belgium 9974 11881 13168Canada 8690 9765 11280Netherlands 8255 9581 10547Austria 7680 9263 10157Spain 6969 8415 8955Japan 6315 7524 8568Poland 4167 5334 6080Turkey 3237 4763 5787South Korea 3459 4399 5401Taiwan 3404 4579 5173Source:USTR

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10.4.3. Table 54 shows the imports of item 392321 i.e. sacks and bags of polymers of ethylene into the USA and the major suppliers of this item to the US.

2004 2005 2004 2005PET Film 3462 3944 Writing Instruments 4620 4744India's export 74 106 India's export 70 92India's share (%) 2.1 2.7 India's share (%) 1.5 1.9PP 12362 15162 Tooth brushes 1302 1422India's export 402 230 India's export 11 13India's share (%) 3.3 1.5 India's share (%) 0.9 0.9FIBCs 899 1082 Caps, closures etc 4333 4699India's export 0 2 India's export 10 13India's share (%) 0.0 0.2 India's share (%) 0.2 0.3Woven sacks/fabrics 555 633 Tableware/Kitchenware 4491 5025India's export 1 1 India's export 23 29India's share (%) 0.2 0.2 India's share (%) 0.5 0.6Sacks/Bags 5806 6999 Houseware 3852 4200India's export 22 34 India's export 14 18India's share (%) 0.4 0.5 India's share (%) 0.4 0.4

World Imports of select plastic items (in about 68 countries) vis-à-vis India's Exports (figures in million US Dollars)

Source: USTR, DGCIS, CMR various issues

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Table 54: Imports of PE Sacks & bags in to the US

10.4.4. From the data shown in table 54, the following inferences may be drawn:

• Except for a very few items, our share in the global market is

less than 0.5%

• The export potential is huge.

• Countries smaller than India (including Vietnam in some cases) command a much better share than what India commands.

10.4.5. With the above in mind India needs to formulate an export strategy that

will enhance our share in the global market. It is suggested that we target a one percent share for the next five-year plan.

2003 % Share 2004 % Share 2005 % Share

Total Imports 777 100.00 947 100.00 1248 100.00

Canada 313 40.25 335 35.32 387 31.04 China 232 29.84 274 28.92 384 30.80 Thailand 55 7.05 67 7.08 132 10.57 Taiwan 25 3.23 43 4.58 62 4.94 Mexico 31 3.95 42 4.39 36 2.89 Indonesia 4 0.49 16 1.72 28 2.27 Korea South 16 2.10 22 2.32 26 2.05 Malaysia 7 0.92 11 1.11 23 1.84 Vietnam 1 0.14 9 0.96 21 1.69 Hong Kong 10 1.34 9 0.98 18 1.41 Singapore 0 0.05 11 1.15 16 1.29 Sri Lanka 10 1.26 12 1.30 16 1.26 Germany 6 0.82 6 0.60 9 0.72 Costa Rica 3 0.38 6 0.68 8 0.64 Philippines 1 0.16 5 0.58 8 0.63 Brazil 5 0.61 7 0.69 7 0.57 Israel 11 1.46 13 1.33 7 0.57 India 2 0.27 4 0.46 7 0.52Source: WTO, USTR, CMR various issues

Imports of into USA: 392321: Sacks And Bags (Including Cones), Of Polymers Of Ethylene (import values in million US Dollars)

Partner Country

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10.4.6. Foreign Trade Policy (FTP)

10.4.7. The FTP has over the years been simplified drastically and there are hardly any suggestions that need to be made in this regard. The FTP being amended from time to time is coming out with new initiatives. One such scheme is the FOCUS-PRODUCTS scheme under which 2.5% duty free imports are being allowed. Except for writing instruments in the plastic sector, no other item from the plastic sector has been included under the list. The concept of this scheme is to encourage labour intensive items to increase employment.

10.4.8. There are quite a few labour intensive items in the plastic sector, which

need to be added to the list. As per feedback received from the industry, PVC fabricated goods, FIBC, Plastic woven sacs and bags and medical disposables may be included. There may be many more which need to be identified for inclusion in the list so that they could be recommended to the DGFT with a proper background note.

10.4.9. Inclusion of plastic machinery and moulds and dies under the

purview of PLEXCONCIL

10.4.10. There is good scope for exports of Plastics Processing Machinery. By and large, the Plastics Processing Machinery are of acceptable quality but has to face severe competition from South East Asian countries and China. In the last five years the exports of plastics processing machinery (all types) have increased steadily in most of the developing markets. In order to give further impetus to the export growth and to achieve this, the benefit of FOCUS PRODUCT SCHEME, which has been introduced in the Foreign Trade Policy, should be extended to this.

10.4.11. Submission

10.4.12. The plastic industry would like to submit that "All types of Plastics Processing Machinery" be included in Appendix 37D under the Focus Product Scheme, which would not only increase the export of these machines but also add to the employment in this industry.

10.4.13. Export of Plastics Processing Machinery, dies and moulds need to be

brought under the ambit of PLEXCOUNCIL and not under EEPC (Engineering Export Promotion Council) since the exports of Plastics processing machinery and plastics products are synergistic.

10.4.14. Other Export Promotion Measures

10.4.15. Market Studies and projects

10.4.16. It is essential that we do an integrated market study to begin with to identify the product-country combinations to plan effective export promotion strategies and measures for the industry players to act upon.

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Based on this study, specific projects in countries for the corresponding products should be chalked out. Any funding could be availed through the Market Access Initiative (MAI) and the industry.

10.4.17. Promoting India as a sourcing hub for plastic items. 10.4.18. PLEXCONCIL is already doing the same through participation in

reputed trade fairs, sponsoring delegations abroad and other advertisement and publicity measures. These measures could be stepped up more effectively by having a better interface with other Plastic Trade Associations. A beginning was made by joining hands with All India Plastic Manufacturers Association at the NPE 2006. Other Associations should follow to serve the common cause of promoting exports.

10.4.19. Export education and training

10.4.20. Thorough export training and education programmes with a focus on plastic items need to be developed. Education institutions and Plexconcil need to play a lead role in this initiative.

10.4.21. Short-Term Strategies and measures – Direct marketing in

target countries

10.4.22. Given that China is a big competitor for plastic processed items; in the short run (with the constraints of production volumes, infrastructure and the like), we must look at direct marketing strategies in target markets to better withstand the competition. These direct marketing strategies will include formation of cartels for plastic products that are retailed through the same distribution/retail; outlets; warehousing and marketing in the target countries.

10.4.23. The Council had got an approval for such a project in the USA to

market plastic consumer items (under the MAI). However, this did not work out because the cartel formation was not successful and possibly all players including the Council lacked experience in such innovations. Based on the experience that was gained, the project is being recast for approval by the Governemnt for funding under the MAI. Many more such projects for better market access need to be identified, conceptualized and implemented. The role of local Industry Associations is all the more important for getting the concerned industry players together.

10.4.24. Long-term strategies and measures – capacity building

10.4.25. A couple of the main factors contributing to China’s export success are the large volumes of production and the Export Zones like the SEZs in India. Plastic SEZs need to be developed in various locations in India, particularly near the ports and these need to e promoted both in terms of developing the SEZs by investors in India and the overseas (in line

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with the best in the world) and enthusing players within and outside India to set up plastic processing units.

10.5. Facilitative Policy Environment – Pre-requisite to Sustained High Growth

10.5.1. Two likely scenarios are projected regarding the prospects of the

plastics industry during the 11th Five Year Plan depending upon changes in the policy regime for the sector.

10.5.2. Scenario 1

Table 55: Scenario 1 -Polymer Demand Projections in an Improved Policy Environment

10.5.3. Table 55 shows a high growth scenario in a facilitative policy regime

during the 11th Five Year Plan period, which addresses each of the factors hindering growth in polymer demand presently. Such a policy environment, which is conducive to growth, is likely to result in realization of the full potential of the plastics industry.

10.5.4. In such a scenario, polymer demand growth is likely to soar with

polymer demand reaching 12.5 MMT by the terminal year of the 11th Plan i.e. 2011-12 – increasing by 139% over the plan period at a CARG of 19%. Scenario 1 is likely to result in significant additional employment opportunities in the processing sector, raise the revenue to the exchequer and enhance the international competitiveness of the Indian plastics industry.

% Growth in Demand

CARG% Growth in

DemandCARG

02-03 06-07 07-08 11-12LDPE 200 234 253 344 47% 8% 17% 4.0%LLD/HDPE 1407 1755 2106 4367 149% 20% 25% 5.7%PP 1129 1712 2089 4627 170% 22% 52% 11.0%PVC 879 1320 1531 2772 110% 16% 50% 10.7%PS 152 239 275 481 101% 15% 57% 11.9%All Polymers 3767 5260 6253 12591 139% 19% 40% 9%

06/07-02/03

XI Plan

11/12-06/07

X Plan

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10.5.5. Scenario 2

Table 56: Scenario 2- Polymer Demand Projections if Existing Policy Environment Continues

10.5.6. Alternatively, if the policy environment remains unchanged, factors

inhibiting the international competitiveness of the domestic plastic industry continue to plague the industry and factors hindering demand growth are not addressed, the Indian plastic industry is likely to witness little growth.

10.5.7. Table 56 presents the likely demand scenario if the policy environment

in the country does not improve. As shown in table 56, polymer demand is expected to increase by 50% over the 5-year plan period during the 11th Plan to only 7.8 MMT with a CARG of 8% if the existing policy regime continues. In such a scenario, not only would the industry’s growth potential not fructify but potential gains for the economy in terms of more employment generation, increase in government revenue, etc would also have to be foregone.

10.5.8. Standing at the threshold of the 11th Five Year Plan, it is a time for

making choices for determining the forward path for the Indian Plastic Industry.

10.6. Summary & Conclusion 10.6.1. Early announcement of National Policy on Petrochemicals 10.6.2. Setting up of Plastic Development Council 10.6.3. Setting up of Technology Upgradation Fund for Petrochemicals similar

to Textiles (T.U.F) 10.6.4. Rationalisation of Central Excise Duty on Polymers & Plastic Articles

from 16% to 8% 10.6.5. Rationalisation of VAT on Plastic Articles from various slabs to uniform

4%

% Growth in Demand

CARG% Growth in

DemandCARG

02-03 06-07 07-08 11-12LDPE 200 234 243 285 22% 4.0% 17% 4.0%LLD/HDPE 1407 1755 1895 2579 47% 8.0% 25% 5.7%PP 1129 1712 1866 2634 54% 9.0% 52% 11.0%PVC 879 1320 1439 2031 54% 9.0% 50% 10.7%PS 152 239 258 351 47% 8.0% 57% 11.9%All Polymers 3767 5260 5702 7880 50% 8% 40% 9%

06/07-02/03

XI Plan11/12-06/07

X Plan

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10.6.6. Awareness Programme on use and disposal of Plastics – Know

Plastics 10.6.7. Phasing out of 100% Jute Monopoly for packing foodgrains and sugar

under JPMA Act, 1987 10.6.8. Mandatory use of BIS specifications both for domestically

produced/imported articles of Plastic in place of voluntary use 10.6.9. Export incentives to Plastic Processing, Raw material, Machinery

sector 10.6.10. Incentives to raw material, and machinery sector maximize domestic

consumption 10.6.11. Fiscal benefits to SMEs in Plastic Processing Sector 10.6.12. Creation of Plastic Parks 10.6.13. Import tariff on key petrochemical inputs including catalysts, capital

goods, Naphtha and Propane be reduced to nil. 10.6.14. The issue of removal of sales tax on deemed exports be taken up by

the Ministry of Finance, Govt. of India with the state governments for changing the existing sales tax regulations in states required to make deemed exports tax free.

10.6.15. CST needs to be abolished as implementation of VAT has made it

redundant. 10.6.16. Like crude oil, natural gas and Naphtha be included in the list of

“declared goods” under CST Act and be taxed at uniform 4% or 4% uniform VAT be applied if CST is abolished.

10.6.17. "All types of Plastics Processing Machinery" be included in Appendix

37D under the Focus Product Scheme, which would not only increase the export of these machines but also add to the employment in this industry.

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Surfactants

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1. Surfactants

1.1.1 Surfactants are products used as detergents, dispersing agents, emulsifiers, wetting agents, foaming or anti-foam agents, and solubilisers. They also constitute the raw material for the formulation of household products such as fabric detergents, shampoos, housecleaning products, as well as industrial auxiliary products for facilitating work in the manufacture of textile, flotation agents for ore, metal working, etc. They are used in other sectors of industry such as food processing, metallurgy, pharmaceuticals and public works.

1.1.2 Linear Alkyl Benzene (LAB) and Ethylene Oxide (EO) are the major synthetic

intermediates used in manufacture of detergents and surfactants.

1.2 Linear Alkyl Benzene (LAB)

1.2.1 Linear alkyl benzene (LAB), a basic petrochemical intermediate, is used for manufacture detergents. LAB is made from benzene and n-paraffin, which are extracted from kerosene. Around 0.85 tonnes of n-paraffin and 0.37 tonnes of benzene are required to produce 1 tonne of LAB.

1.2.2 Capacity

1.2.3 The industry made a modest beginning in the late 70’s, when IPCL

commissioned the first LAB plant. Subsequently Reliance Industries Ltd (RIL), Tamil Nadu Petrochemicals Limited (TPL) and Nirma Ltd. set up facilities for manufacture of LAB. Indian Oil Corporation Ltd (IOC), which commissioned a plant of capacity of 120 KTA with an investment of US$ 290 million in August 2004, is the latest entrant. The current installed capacity of LAB in India is 449 KTA as shown in table 57.

Table 57: LAB Capacity in India

LAB Capacity ( in kT)Reliance 115TPL 95IPCL 44Nirma 75IOC 120Total 449Source:CPMA

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1.2.4 Supply and Demand Growth

Table 58: LAB Demand- Supply Balance in India

1.2.5 The first year of X Plan i.e. 2002-03 experienced spurt in demand of 11% the demand for LAB has grown at AARG of 6% during 2002-03 to 2005-06. Actual performance vis-à-vis forecast for the X Plan period is shown in table 59.

Table 59: Task Force Projections vs. Actuals

1.2.6 On account of significant capacity additions, operating rates in excess of

hundred percent coupled with less than anticipated domestic demand growth, the domestic producers have been offloading surplus LAB in the international market. LAB exports are significant source of foreign exchange as can be seen in table 60.

(in kT) 2001-02 2002-03 2003-04 2004-05 2005-06Capacity 312 314 314 449 449Production 356 375 382 409 463Imports 0 0 3 12 4Exports 78 91 70 82 105Demand* 265 295 310 334 350

Y-O-Y Growth 11% 5% 7% 4%AARG (05-06/02-03) 6%Source:CPMA* Demand includes deemed exports

(in kT) 2001-02 2002-03 2003-04 2004-05 2005-06Task Force Forecast 371 401 433 467 505Actual 295 310 334 350 370Variation (% from Actual) 20% 23% 23% 25% 27%Source:CPMA

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Table 60: LAB Exports from India

1.2.7 Demand Forecast

1.2.8 The demand for LAB is estimated to grow at AARG of 6% during the 10th Five Year Plan period. The variation from forecast made by the Task Force on Petrochemicals is due to slowdown in the initial phase of the Plan period.

1.2.9 As the domestic economy has already entered growth phase spurred by overall

global economic growth, the overall growth during the XI Plan is expected to be very healthy. The strong economic growth would entail increased purchasing power resulting in higher consumption of a wide range of products including surfactants. Keeping the above in view, the demand for LAB is forecast to register a CARG of 6 percent during the plan period. Table 61 shows the projected demand- supply balance during XI Plan.

Table 61: Projected LAB Demand-Supply During 11th Plan

1.3 Ethylene Oxide (EO)

1.3.1 Ethylene oxide (EO) is a versatile intermediate used in the production of Surfactants and other derivatives such as glycol ethers, polyethylene glycol, polyether polyols, Dye Intermediates, Drug Intermediates and ethanolamines. EO is produced by oxidation of ethylene. In India, cracking of naphtha/ natural gas fractions produces the bulk of ethylene. A small quantity of ethylene is also produced through alcohol route (ethyl alcohol).

Quantity (MT) Value (Rs Lac)2000-01 46678 176782001-02 78309 295442002-03 91432 308302003-04 69716 215192004-05 81677 327592005-06 104539 51670Source: DGCIS

(in kT) 2007-08 2008-09 2009-10 2010-11 2011-12Capacity 449 449 449 449 449Operating Rate 110% 110% 110% 115% 115%Production 493 493 493 516 516Demand Growth 6% 6% 6% 6% 6%Demand 392 416 440 467 490Surplus/Deficit (-) 101 77 53 49 26Source:CPMA

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1.3.2 Capacity

1.3.3 In India, EO is produced by Reliance Industries Ltd (RIL), Indian

Petrochemicals Corporation Ltd (IPCL) and India Glycols Ltd. (IGL). While RIL & IPCL sell entire EO produced for the Merchant Market, IGL captively consumes all EO produced for Surfactants & Glycolethers production. The current effective capacity of EO is 148 KTA. Current capacity is far in excess of demand. The capacity listed below refers to Purified EO capacity excluding EO used in production of Glycols.

Table 62: EO Capacity in India

1.3.4 Supply and Demand Growth

1.3.5 There has been a steady increase in demand and supply of EO for last few

years as table 63 shows, driven mainly by demand of ethoxylates and glycol ether. EO is neither imported nor exported because of its hazardous nature. However, import and export of EO derivatives has been steadily growing over the last few years.

Capacity in kTIPCL (Baroda) 12Relene , Thane 18RIL(Hazira) 50IPCL(Nagothane) 12India Glycol Ltd 30RIL Kurkumbh 16IPCL (Gandhar) 10Total 148Source:CPMA

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Table 63: EO Demand-Supply Balance in India

1.3.6 As can be seen in table 63, after slight contraction in demand in 2003-04, there

has been steady growth. The demand growth in X Plan was, however, slightly lower vis-à-vis the Task Force forecast mainly due to economic slowdown during the initial phase of the Plan period.

Table 64: EO Demand -Task Force Projections vs. Actuals

Demand Forecast

1.3.7 The Task Force had projected demand growth of 9.1 percent (CARG) for X Plan, however, actual demand during the plan period has been much lower as shown in table 8 and demand growth is likely to be about 7 percent (AARG). Taking into consideration the past performance and that the economy has entered growth phase, the demand for EO is forecast to grow at CARG of 8 percent during XI Plan period as shown in table 65.

Table 65: EO Demand Projections During 11th Plan

1.3.8 RIL is setting up an SEZ at Jamnagar, which includes a variety of Petrochemicals. The plans include a fresh EO capacity of 50 KTA. The

(in kT) 2001-02 2002-03 2003-04 2004-05 2005-06Capacity 97 107 112 117 148Production 69 72 71 79 88Demand 69 72 71 79 88Y-o-Y Gowth 4% -1% 11% 11%AARG (05-06/01-02) 7%Source:CPMA

(in kT) 2002-03 2003-04 2004-05 2005-06 06-07( est)Task Force Forecast 79 86 94 102 111Actual 72 71 79 88 96Variation (% from actual) 9% 21% 18% 17% 16%

(in kT) 2007-08 2008-09 2009-10 2010-11 2011-12Capacity 148 148 198 198 198Operating Rate 70% 76% 60% 66% 71%Production 103 112 120 130 141Demand Growth 8% 8% 8% 8% 8%Demand 103 112 120 130 141Capacity Surplus/ Deficit (-) 45 36 78 68 57Source:CPMA

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Capacity estimates from 2009-10 onwards includes an estimated 50 KTA of EO capacity on this account. IOC is also setting up a Naphtha cracker along with downstream products at Panipat, which is expected to be commissioned in 2009.

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Synthetic Rubber

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2 Synthetic Rubber

2.1.1 The importance of the Rubber Industry ever since it first appeared and the decisive role that it has played in the development of modern civilization prompted interest in discovering its chemical composition in order to synthesize the produce. Through these research projects, the tyre industry saw the possibility of breaking away from the grip of world’s Natural rubber plantation.

2.1.2 During World War-II, Germany first produced Polybutadiene Rubber. Over

the last about 60 years there has been tremendous development leading to a large number of synthetic rubbers having diverse physical properties and uses. Synthetic Rubber is broadly classified in two categories viz. General Purpose Rubber (GP) and Special Purpose Synthetic Rubber. GP includes Styrene Butadiene Rubber (SBR) Polybutadiene Rubber (PBR) and Polyisoprene Rubber. Styrene Butadiene Rubber (SBR) is the largest tonnage synthetic rubber. Ethylene-Vinyl Acetate Rubber (EVA), Ethylene -Propylene Rubber (EPM and EDPM), Polyisoprene Rubber (IR) Butyl Rubber (IIR) and Nitrile Rubber are some of the important types of synthetic rubbers.

2.1.3 Global Scene 2.1.4 Globally, consumption of rubber increased from 18 MMT in 2000 to 21 MMT

in 2005. Of the total rubber consumption of 21 MMT in 2005, consumption of natural rubber was 8.8 MMT and synthetic rubber accounted for the remaining 12.2 MMT. In 2000 consumption of synthetic rubber and natural rubber were 10.7 MMT and 7.3 MMT respectively.

2.1.5 The growth in total demand for rubber during 2000-05 was 16%, while

demand for synthetic rubber and natural rubber during the same period grew by 14% and 20% respectively.

2.1.6 Domestic Rubber Sector 2.1.7 India is the 4th largest producer and consumer of natural rubber. Thailand,

Malaysia and Indonesia are other leading producers of natural rubber. The large availability of natural rubber significantly influences demand for synthetic rubbers in the country. While globally the ratio between NR and SR is 42:58 in India it is 78:22.

2.1.8 The wide variety of rubber products produced for various applications are

broadly classified into two categories viz. Tyres and Non-Tyres. Presently the country produces practically entire range of automobile tyres. Non-tyres products include Cycle Tyres, Belting, Hoses, Footwear, Moulded Rubber Goods, sports goods and Proofing Fabrics.

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2.1.9 Table 66 shows growth in demand for natural and synthetic rubber during 2001-02 to 2005-06.Though the overall demand for rubber experienced contraction during the first year of the 10th Plan period i.e. 2002-03 due to the combined impact of a host of factors including the economic slowdown beginning in 2001, the demand for synthetic rubber registered increase of 11%.

Table 66: Rubber Demand During 10th Five-Year Plan

2.1.10 As table 66 shows, during the period from 2002-03 - 2005-06, demand for

synthetic rubber registered a strong growth (AAGR) of 11% in sharp contrast to slow growth of 4% for natural rubber. Consequently the share of Synthetic Rubber has increased from 19% in 2001-02 to 23% in 2005-06 as shown in chart 33.

Chart 33: Share of NR & SR in Total Rubber Consumption

2.1.11 As India’s per capita consumption of rubber of only one kilogram is roughly one fourth of global average, the potential for growth is high. Further, as there are limitations in augmenting availability of natural rubber, synthetic rubber would be called upon to play increasingly important role in meeting the rapidly rising domestic demand for rubber.

SR19%

NR81% NR

77%

SR23%

NRSR

2001-02 2005-06

(in kT) 2001-02 2002-03 2003-04 2004-05 2005-06AARG (05-06/02-03)

Natural Rubber 674 620 680 772 774 4%Syn. Rubber 154 179 218 239 234 11% TOTAL 828 799 898 1011 1008 5%Source: CPMA * Demand= Production + Import -Export Includes PBR ,SBR , NBR, EPDM and Butyl Rubber

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2.1.12 Automotive tyres, accounting for about 55% of total rubber demand, continues to grow rapidly, driven by boom in the auto sector. Chart 34 depicts the rapid growth in automobiles production in India, which has contributed significantly towards rising synthetic rubber demand in the tyre sector.

Chart 34: Automobile Production in India

2.1.13 While overall availability of rubber has grown at a rate higher vis-à-vis demand, yet the gap between demand and supply for 2005-06 was about 200KT. Table 11 shows the trends in supply of rubber in the country during 2001-02 to 2005-06. As shown in table 67, on an average supply of natural rubber has lagged behind compared to the growth in overall rubber supply, which has grown at a AARG of 7% during the period, buoyed by the rapid growth in supply of synthetic rubber at an AARG of 9% over the same period.

2

4

2

4

7

13

4353

7697

0 20 40 60 80 100

2001-02

2005-06

(in Lakhs)

Commercial Vehicles Three Wheelers Passenger Cars Two Wheelers All Vehicles

CARG: 25%

CARG: 20%

CARG: 18%

CARG: 15%

CARG: 16%

2

4

2

4

7

13

4353

7697

0 20 40 60 80 100

2001-02

2005-06

(in Lakhs)

Commercial Vehicles Three Wheelers Passenger Cars Two Wheelers All Vehicles

CARG: 25%

CARG: 20%

CARG: 18%

CARG: 15%

CARG: 16%

Source: SIAM

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Table 67: Rubber Supply in India

2.1.14 Synthetic Rubber: Domestic Capacity 2.1.15 As shown in table 68, the current total capacity of synthetic rubber in India is

only 163 KTA. IPCL is the sole manufacturer of PBR and account for ~60% of domestic synthetic rubber production of 110 kT (2005-06). Synthetics & Chemicals Limited (S&C), which is a major producer of SBR, is under prolonged closure. Other manufacturers of synthetic rubber in the country mostly operate relatively small plants. As of date, domestic production of synthetic rubber is meeting only a third of domestic demand, which was 320 kT in 2005-06 as shown in chart 35.

Table 68: Synthetic Rubber Capacity in India

2.1.16 Synthetic Rubber: Demand-Supply Balance

2.1.17 During the period 2001-02 to 2005-06 the demand for synthetic rubber grew at an impressive AARG of 16.5 percent while the demand for natural rubber grew at an AAGR of only 4.1 percent and overall demand of rubber registered AARG of 7 percent. Year wise details of capacity, production, import export and demand are given in chart 35.

(in kT) 2001-02 2002-03 2003-04 2004-05 2005-06 AARG 2002-03 to 2005-06

Natural Rubber 631 649 712 750 803 6%

Synthetic Rubber 79 81 87 97 110 9%

Total Rubber Supply 710 730 799 847 913 7%

Source:CPMA

Capacity (kT)PBR 65SBR 62NBR 13EVA 13EPDM 10Total 163Source:CPMA

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144

144

147 16

2

163

79 81 87 97 110

99 116

170 19

8

232

3 8 8 6

21

176 18

9

248

288

320

0

50

100

150

200

250

300

350

01-02 02-03 03-04 04-05 05-06

Capacity Production Import Export Demand

Chart 35: Synthetic Rubber Demand-Supply Balance – India

2.1.18 Due to rapid growth in demand of synthetic rubber and its limited domestic

availability, the imports have been steadily increasing. Import dependency, which was at 56.6 percent in 2001-02, has increased to 72.3 percent in 2005-06.

2.1.19 Among synthetic rubbers, PBR and SBR constitute ~78% of domestic

demand. During the period 2001-02 to 2005-06 the AAGR for PBR and SBR were 4 and 11 percent respectively. The higher growth of EVA was albeit from lower base. Table 69 shows year-wise details of demand-supply balance for PBR, SBR and EVA.

Source: CPMA

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Table 69: Demand-Supply Balance – SBR, PBR & EVA

2.1.20 The actual demand for synthetic rubbers till 2005-06 has been higher than the

projections made earlier by the Task Force on Petrochemicals as table 70 shows.

Table 70: Synthetic Rubber Demand – Task Force Projections vs. Actual

(in kT) 2001-02 2002-03 2003-04 2004-05 2005-06PBRCapacity 50 50 50 65 65Production 43 54 56 64 67Import 25 22 18 15 17Export 0 6 2 0 0Demand 67 70 72 79 85Y-o-Y Grow th (%) 5% 2% 10% 7%

AARG (05-06/01-02)(%) 6%SBRCapacity 62 62 62 62 62Production 17 16 19 16 15Import 36 49 63 76 70Export 2 2 4 3 3Demand 51 63 78 88 82Y-o-Y Grow th (%) 25% 23% 14% -7%AARG (05-06/01-02)(%) 14%EVACapacity 13 13 13 13 13Production 9 0 0 4 13Import 10 13 30 45 90Export 0 0 1 0 0Demand 19 13 29 49 102Y-o-Y Grow th (%) -29% 115% 70% 109%AARG (05-06/01-02)(%) 66%Source: DGCIS, CPMA

(in KT) 2002-03 2003-04 2004-05 2005-06 2006-07#PBRForecast 54 57 59 61 63Actual 70 72 79 85 89Variation (%) -23% -21% -26% -28% -29%SBRForecast 56 63 70 79 88Actual 63 78 88 82 80Variation (%) -12% -19% -21% -4% 10%Source:Report of the Task Force on Petrochemicals, April 2003 # Projected

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2.1.21 Demand Projections for Synthetic Rubber

2.1.22 On account of strong economic growth, which is likely to be sustained during XI Plan period, overall demand for total rubber is expected to be strong. The auto sector, which accounts for over 50% of total rubber demand, is expected to maintain strong growth especially the passengers cars and commercial vehicles segments as shown in table 71 and are likely to maintain strong demand for rubber.

Table 71: Vehicles – Production & In Use

2.1.23 The demand of synthetic rubber depends upon availability of natural rubber.

The availability of natural rubber is taken into consideration for deriving demand for synthetic rubber during XI Plan period. The Rubber Board has projected natural rubber production to grow at a CARG of around 4% during the next 2 years. The year wise demand for natural rubber and synthetic rubbers as well as total rubber demand are detailed in table 72.

Table 72: Projected Rubber Demand During 11th Plan

2.1.24 If the projections shown in table 72 translate in to reality, the share of

synthetic rubber in total rubber consumption is likely to increase significantly to 39% in 2011-12 as shown in chart 36 with corresponding reductions in the share of natural rubber.

2000 2005 2010 2015In Use 6914 9809 13858 18480Production 642 1360 2039 2772In Use 3121 3733 5003 6522Production 156 362 456 557

Source: SIAM

( in thousand)

Passenger Cars

Commercial Vehicle

(in kT) Demand Growth Demand Growth Demand Growth2006-07 1177 7% 816 4% 361 13%2007-08 1261 7% 853 4% 408 13%2008-09 1353 7% 891 4% 462 13%2009-10 1448 7% 931 4% 516 12%2010-11 1551 7% 973 4% 578 12%2011-12 1664 7% 1017 5% 647 12%Source: CPMA

Synthetic RubberNatural RubberTotal Rubber

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Chart 36: Projected Shares of NR & SR in Total Rubber Consumption

2.1.25 Demand projections for the individual synthetic rubbers are shown in table 17. As shown in table 73, among the various segments of synthetic rubber demand for EVA is expected to grow at the fastest rate of over 13% during the 11th Five Year Plan Period followed by EPDM. Demand for synthetic rubber as a whole is likely to grow at 10.2% during the 11th Plan period.

Table 73: Synthetic Rubber Demand Projections

SBR BR EPDM NBR CR Total2000 55 50 6 6 5 1222005 79 68 8 8 7 1692006 85 73 8 9 7 1822007 94 79 9 10 7 1982008 107 90 10 11 7 2252009 126 104 11 13 8 2622010 146 118 13 14 8 299

% growth 13.1 11.8 10.8 11.3 3.8 12.1 Source: IRSG/IISRP

31% 32% 34% 36% 37% 39%

69% 68% 66% 64% 63% 61%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

SR NR

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Report of Sub-group on Synthetic Fibre

CONSTITUTED BY DEPT. OF CHEMICALS & PETROCHEMICALS, GOVT. OF INDIA

WORKING GROUP ON CHEMICALS & PETROCHEMICALS FOR THE 11TH FIVE YEAR PLAN

Government of India

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1 SYNTHETIC FIBRE & FIBRE INTERMEDIATES

2 Global Strategy for Synthetic Fibres The demand for Synthetic Fibres is derived from the demand of yarns, fabrics, made-ups and clothings. The Textile Industry which was very dominant in the Western world that is essentially in Europe and Americas in the 80s, has over a period of time, moved first to Japan, Hong Kong and Singapore and then to Korea, Taiwan, Indonesia and Thailand and from late 90s has moved to China, India, Vietnam, Sri Lanka, Pakistan, Bangladesh etc. Thus, Asia has now become the producer and provider of clothing to the world as over 75% of the fabrics and clothing production is in Asia. The production of raw-materials for Synthetic Fibres earlier was based in USA, Canada and Europe. With a large number of Petrochemical complexes coming up in Asia and Middle East, the manufacturing base for raw-materials and Fiber Intermediates has also moved away from Europe to these new centres of production. Obviously, Synthetic Fibres which are a bridge between Fibre Intermediates and Textiles have also moved to Asia. Asia, thus, has become a Textile and Clothing provider to the world supported by production of Fibre Intermediates and Synthetic Fibres, apart from cotton whereas the major consumption is in the developed world. Indian Synthetic Fibre Industry has recognized the importance of sharing this Asian growth and dominance. India, therefore, needs to create a cost competitive domestic Synthetic Fibre Industry which will fuel the production of Textiles and Clothing in India to meet the growing domestic demand as well as to meet the requirement of raw-materials for exports of fabrics and clothing. 11th Plan Sub-Group – Synthetic Fibres & Intermediates

The main objective of the 11th Plan proposals from Sub-group – Synthetic Fibres & Intermediates is :

1) To Create additional 8 million jobs. 2) To realize Textile vision of reaching a textile output of US $ 85

billion in 2010 and US $ 95 billion in 2011-12. Global Fibre Trends The global fibre consumption (Table 1) which was 40- MMT in 1990 has gone up to 63.7 MMT in the year 2005 and this is expected to increase to 76.5 MMT by 2010. Thus, in 20 years time the share of Synthetics in the global fibre consumption will increase from 40% in 1990 to 63% in 2010.

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Interestingly, while the global cotton consumption would increase to 24.7 MMT in these 20 years showing a growth of 30%, the global consumption of synthetics will go up from 16.1 MMT to 47.9 MMT, an increase of 190%.

Table 1 – Global Fibre consumption Unit Million tons

Types 1990 2000 2005 15 Yr Growth

2010 E

Cotton 19.0 19.8 23.1 22 % 24.7 Cellulosics 3.1 2.7 2.9 - 5 % 2.5 Synthetic 16.1 29.8 36.3 126 % 47.9

Polyesters 8.6 19.0 25.4 195 % 36.0 Others 7.5 10.8 10.9 46 % 11.9

Others 1.9 1.4 1.3 - 32 % 1.4 Total 40.0 53.7 63.7 59 % 76.5 Note - 20 year: share of synthetics increases from 40 % to 63 %. Synthetics are growth drivers Polyesters which accounted for 8.6 MMT in 1990out of a total Synthetic Fibre consumption of 16.1 MMT (having a share of 53%), will go up to 36 MMT out of 47.9 MMT for all Synthetics by 2010. Thus, not only share of synthetics will increase to 63% but share of polyester fibres within synthetics will go up to 75%. Synthetics and other Polyester Fibres are thus the growth drivers in the global fibre consumption. Fibre demand in India & China Both India and China have been cotton based economies. Among synthetics China’s consumption has gone up by 198% in the period 2000-2005, while India has registered a growth of 29% for all Synthetics in the same period. The growth of Polyesters both in India and China in these 5 years period (2000-2005) has gone up by 119% and 42% respectively. India has lagged far behind China in both growth as well as volumes.

Table 2 – Fibre Demand : India & China Products 2000 2005 Cotton China 5.1 8.3 India 3.0 3.2 Synthetics China 8.1 16.1 India 1.7 2.2 Polyesters China 5.9 12.9 India 1.4 2.0 Total China 14.2 25.9 India 5.0 5.9 Share of Synthetics in total fibre demand China : 62 % India 37 % India far behind China due to Excise Duty bias

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Feedstock for Synthetic Fibre Position Indian Synthetic Fibre Industry consumes approximately 5 MMT of Naphtha to produce Aromatics and Fibre Intermediates for consumption in Synthetic Fibres. However, the Indian Industry is currently facing and will continue to face acute competition from the Middle East and other Asian Countries. Middle East has a tremendous feedstock cot advantage due to :

a) Discount of approximately 30% given on the crude oil prices to their domestic consumers

b) LNG is being made available in the Middle East in the range of US$ 0.75 to US$ 1.25 per MMBTU. The prices in India for LNG range from US$ 4 to US$ 6 on Contract basis an on Spot basis the LNG is priced in India between US$ 9 to US$ 11 per MMBTU.

Indian Industry, therefore, will not be able to face such a competition from the Middle East which has tremendous feedstock cot advantage. If India enters into an FTA with GCC-6, it will offer further reduction in the import tariffs for the imports coming from GCC-6 who already have a tremendous feedstock cost advantage. This could create Inverted duty structure as well. Competitiveness The competitiveness of any Industry is measured in terms of Capex/ton (capital expenditure per metric ton of Investment) and Opex/ton (Operating cost per Metric tons of output). CAPEX All the synthetic fibre Plants and Fibre Intermediates Plants are set up with bought out Technology. The Technology suppliers while giving guarantees prescribe the Plant and Machineries to be procured from a particular supplier. Most of these Plants and Machineries are also not produced in the country. As such in a total investment cost for any synthetic fibres or Fibre Intermediate plants, approximately 1/3rd of the investment is from imported plant & machineries. This attracts high import duty and CVD at 16% thereof. There is a need, therefore, to reduce the CG import duty to 0% not only on the spares that come along with the Plant & machineries but also on the imports of spares for maintenance of the imported Plant and Machineries. Synthetic Fibre Industry has also been requesting the Government for extension of TUF scheme to Synthetic Fibre sector.

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OPEX Most of the Plants which are coming up currently are of Minimum Economic Size which are cost competitive in terms of the Operating cost. However, they will incur higher operating cost on account of cost of power, transaction cost and higher cost of infrastructure. These issues are not limited to only synthetic fibres industry. These are major issues affecting and Industries in th country and are beyond the control of the Industry. These factors of high cost economy need to be treated at a high speed, if the Indian Industry is to be made cost competitive. Research & Development Currently there is only one R & D Centre in the Synthetic Fibre sector. R & D is essentially for development of new Fibres, new variants and for wider applications. Efforts need to be made to create many more such Centers of Excellence for R & D. Manpower availability There is no problem at the moment in getting adequate skilled and trained manpower for the synthetic fibre industry. The current infrastructure is adequate to provide skilled and trained manpower whether as workers, supervisors or in the managerial cadre. However, the demand for synthetic fibres is a derived demand from fabrics and garments which segments may require a lot of manpower. Ministry of Textiles is attending to this area as it comes under their purview. Export Promotion measures As mentioned, the factor cost in India needs to be offset through suitable export incentives. Duty drawback scheme should cover excise duty, sales tax and other local taxes besides interest rate differential which affects the cost competitiveness of the Indian textile and Synthetic Fibre Industry. These measures need to be WTO compatible. Price Trend The prices trends of Polyester fibre/ yarn and their intermediates and feed stocks are indicated at Table 3.

In the last eight quarters, the prices of crude oil have gone up by 65% which has resulted in increase of the price of Naphtha by almost 46% which is basically the input for production of Aromatics from which Fibre

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Table 3 - Price Trend

US $ /

MT MEG PTA PX PSF POY Naphtha Crude

Q4 04 1077 848 971 1227 1469 390 299 Q1 05 1059 862 996 1223 1427 397 330 Q2 05 776 745 834 1140 1400 412 360 Q3 05 821 800 896 1093 1367 503 423 Q4 05 813 807 938 1133 1349 473 395 Q1 06 825 814 992 1113 1341 510 433 Q2 06 835 852 1139 1127 1410 579 485 Q3 06 917 1038 1419 1327 1510 572 493 intermediates are produced. However, due to stiff competition the prices of Synthetic Fibres like POY have gone up by only 10% and that of PSF have gone up by only 8% thus affecting the profitability of these two major synthetic fibres which account for 90% of the synthetic fibre consumption in the country. If the crude oil prices continue to remain high or if the prices of crude oil continue to go up, it may be very difficult for synthetic fibres to pass on the cost push to the downstream user Industry. In the ultimate analysis, the prices and availability of cotton will always affect the prices and margins in the Synthetic Fibre Industry particularly in the Polyester fibres both as Staple Fibre and as Filament Yarn. Effect of Excise Duty on Demand (Chart 1,2,3)

Chart 1 Domestic Consumption of PFY

11%

5%

10%

-2%

6%

16%

-4%-2%0%2%4%6%8%

10%12%14%16%18%

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 (E)

2003-04 to 2006-07 CARG % 6 %

Effect of ED on Demand Further ED reduction required to accelerated growth

In spite of the fact that more than 67% of the domestic production of fabrics and garments are made out of synthetics/man-made fibres, the

140

Government has not still fully recognized that high excise duties are a burden on the common man. The major distortion was created in the budget of July 2004 when entire cotton sector was freed from the excise duty by extension of optional route to them while the excise duty continued to be mandatory and kept at higher rates on Synthetic Fibres.

Chart 2- Domestic Consumption of PSF

-1%

3% 4%

11%

-5%

13%

-10%

-5%

0%

5%

10%

15%

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 (E)

@ 2003-4 to 2006-07 CARG of 6 %

Effect of ED on Demand Further ED reduction required to accelerated growth

Chart 3 Domestic Consumption - NFY

-10%

12%

0%

-20%

37%

23%

-30%

-20%

-10%

0%

10%

20%

30%

40%

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 (E)

Cenvat accumulation on caprolactum continues

Further ED reduction required to accelerated growth

As a result, PFY which had an average growth rate of 8 to 9% in the previous three years suddenly showed a negative growth rate in 2004-05. However, when a partial correction was made in the distorted excise duty structure in the budget of February, 2005, PFY started showing a growth in 2005-06. In the budget of February, 2006 another correction was made and the Excise duty on PFY was brought down to 8%. This spurred growth of PFY which is estimated to show a 16% growth in the current financial year (2006-07) against the previous

141

financial year. Further reduction of excise duty is required to accelerate this growth. Simultaneously in the case of PSF, the distortion of excise duty in the budget of July 2004 had resulted in negative growth in 2005-06. Partial correction was made in the budget of February 2006 which resorted the growth. Further reduction of excise duty for PSF is necessary to accelerate growth. In the case of NFY, the past growth rates have been fluctuating. However, when a partial correction was made in the budget of February, 2006, NFY registered a very good growth. Unfortunately, NFY still suffers from convat accumulation as the excise duty on caprolactum continues to be at 16% while the excise duty on NFY is at 8%. This also needs to be corrected alongwith the further correction in the excise duty on NFY. The 11th Plan needs a 11-12% volumertric growth for synthetics, not 6%. 10th Plant Projection : Table 4 -10th Plan Projections & likely figurers

Product 10th Plan Estimates

(kta)

Demand Estimate 2006-07

Likely (kta) Varience Remarks Cotton 3190 (188 lakh

bales) 4131 (243 lakh

bales) 30 % Huge Cotton

Production coupled with ED

advantage VFY 58 53 - 9 % VSF 270 263 - 3 % Cellulosics 328 316 - 4 % PFY 1238 1395 13 % PSF (incl FF) 830 800 - 4 % demand shifted

to cotton ED NFY 29 38 31 % PPFY 93 13 - 86 % Estimates were

very high ASF 139 100 - 28 % Cotton got

mixed with ASF Others 20 - - No other

synthetic fibre production

Synthetics 2349 2346 0 % It would be seen that higher growth would be registered by cotton in the terminal year of the 10th Plan against the 10th Plan estimate. The production for cotton will thus rise to 4.1 MMT against the estimated 3.2 MMT. Both Cellulosics (VFY and VSF) have shown a negative performance against the estimate. Among Synthetics, PFY has

142

registered 13% growth thanks to the two corrections in excise duty structure, one in 2005 and another in 2006. Nylon has registered a positive growth due to excise duty correction in spite of the cenvat accumulation problem. PPFY has faired very poorly against the estimate. This may be mainly due to wrong estimate of PPFY demand. In the cast of ASF, it has also faired very poorly against the estimate. Two reasons can be attributed to this. (a) due to continuous price increase of raw-materials, the prices of ASF have gone up very high (b) due to availability of cheap cotton, the informal sector producing Acrylic Yarns is mixing large quantity of Cotton in Acrylic Yarns in place of ASF. Over all, synthetic fibres have met the 10th plan estimate. 10th Plan : Material Balance (Exh.13)

Table 5 - 10th Plan : Material Balance 2006-07

(kta) Installed Capacity

Production Domestic Demand

Exports Imports

PFY 2159 * 1550 1395 195 40 PSF 1292 ** 1102 800 300 20 ASF 154 120 100 20 0 PPFY 17 14 13 0 0 NFY 44 38 38 0 0 Caprolatum 120 117 119 0 2 A CN 33 40 130 0 90 PTA 2480 2480 2300 180 0 MEG 920 920 960 0 40 DMT 216 216 216 0 0

* Fibre Intermediates demnd includes non-fibre demand ** Instlled capacity as on March 31, 2007

It would be seen that the installed capacity at the end of 31st March 2007 will be much higher than the domestic demand for 2006-07. As the new capacities are coming up in both PFY and PSF in this year, the actual production will be lower than the installed capacity but still will be much higher than the domestic demand resulting in exports of PFY, PSF and ASF. Among the raw-materials, only PTA is likely to be surplus in 2006-07 while both ACN and MEG are likely to be deficit requiring imports. 11th Plan Assumption : The 11th Plan projections have been based on the following assumptions.

1) The GDP growth rate is estimated at 8.5% CAGR, population growth is estimated at 1.17% CAGR and percentage of PFCE spent on textiles is expected to go up from 5.3% in the terminal year of 10th Plan to 5.9% in the terminal year of the 11th Plan growing very slowly and steadily.

2) It is assumed that Excise Duty will be reduced to 4% on all basic products (Naphtha), on all raw-materials and Fiber

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Intermediates (PX, PTA, DMT, MEG, CAN, Caprolactum) and on all synthetic fibres and Filament Yarns (NFY, PPFY, APFY, PSF, VSG). The Government may in its own wisdom continue to keep the excise duty at 4% advolarem with the optional route for fabrics and garments.

3) In the competing economies both crude oil and Naphtha attracts an import duty ranging from 0% to 2% while in India the import duty on these products still continues to be at 5%. This creates unnecessary cost put on the basic input and this increases the cost of production of Fibre Intermediates, Synthetic fibres, fabrics and garments.

It is assumed that the import duties on crude oil and Naphtha will be

reduced to 0% or at a maximum of 2%. Import duties on Fibre Intermediate like PTA, DMT, MEG, CAN, Caprolactum and on all chips whether Polyester or Nylon will be reduced to 7.5%, while the import duty on all Synthetic Fibres and Filament Yarns will continue to be maintained at 10% or at the peak level. It is essential to keep the import duties on synthetic fibres at the peak level as there is history or dumping of these products from the neighbouring Asian countries to India. Moreover, there is a history of under-invoicing of these products and this Association has reported with evidence such matters to the concerned authorities in the Ministry of Finance and DCPC. In spite of the Association continuously writing to the Chairman, CBEC, Member Customs, DRI Anti Enforcement Directorate, the under invoicing has not stopped. This is not only hitting the Industry very severely but also affecting the rightful revenue to the Government. Unless this menace is brought to an end immediately through stringent measures, entire growth and profitability of the industry will be adversely affected by such nefarious activities. The Industry is unable to comprehend why no action is taken in spite of evidence being given to the concerned authorities in the Government.

4) Import duty on Catalyst & Chemicals, additives, spares etc.

Most of the Chemical reaction requires importing catalysts & chemicals,

additives etc. as these are not produced locally. They are mostly imported. The logic of keeping higher import duties on these products in the name of “Domestic Industry Angle” does not have any meaning. If the import duty on PX which is a domestically produced product can be reduced to 2%, there is no logic whatsoever to protect the producers of Catalysts, Chemicals Additives, Spin Finish, Spares etc. In the name of indigenous angle. The Industry strongly feels that the import duties on these products must be reduced to 5% with immediate effect.

5) It is also estimated that at least Rs. 90000 crores of new

investments will come in the downstream industry like Spinning, Weaving, Knitting, Processing and Garmenting. This investment is necessary if the fabric output has to go up from the current 55000 million square meters to 95000 million square meters to meet the

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Textile Vision and also to meet the target of US $ 95 billion in the 11th Plan.

Investment needs to be attracted in the textile sector as this

will create additional jobs of 8 to 10 million. TUF in the Textile Industry needs to be extended to the 11th Plan. Measures to entice the investors are required to be taken if the National objective of creation of job is to be met.

It is interesting to note that Textile Industry alone can create

at least 8 to 10 million new jobs in the 11th Plan which will account for 20% of the Government’s target to create 50 million new jobs in the 11th Plan. 6) It is assumed that the transaction cost will be reduced by doing

away with a plethora of procedures and documents to be signed and produced for exports. It is also assumed that power will be made available to Synthetic Fibre Industry and downstream textile Industry at Internationally competitive prices i.e. around US$ 6 cents per unit. In India power is made available to the Synthetic Fibre and Textile Industry in general at prices ranging from US$ 10 cents to US$ 12 cents per unit i.e. Rs. 4.60 to Rs. 5.5 per unit. Power constitutes 30% of the variable conversion cost in the synthetic fibre sector.

7) It is assumed that SEZs and EPZs will be promoted at a faster pace

to create zones of excellence to promote exports.

8) FTAs are meant to achieve mutual benefits for the trading partners. Unfortunately this does not appear to be happening. India should have taken a lot of initiatives in attracting US and EU to FTAs and not GCC-6, Asean, South Korea, China etc. We seem to be pursuing a wrong track. The Industry is unable to understand the benefits coming to the country from such FTAs like India-ASEAN, GCC-6, Indio-China, Indo-Korean etc.

However, if these FTAs have to be signed, precaution needs to be taken for the :

a) correction of inverted duty structure b) preventing dilution of RoO & c) Non-inclusion of products with dumping history in the staged

reduction or eliminaton of tariff category. These products must remain in the Negative list.

Demand Estimates for 11th Plan The demand for Textiles and Garments comes from the following three sectors :

1) Household sector 2) Non household sector

145

3) Demand for exports. The demand for synthetic fibres is derived from the demand of fabrics and garments and hence it is necessary to make the assessment of demand for fabrics and garments in the above three sectors.

Table 6 - Econometric Model PFCE on T & C

2004-05

2005-06

2006-07

CARG 2007-08

2008-09

2009-10

2010-11

2011-12

GDP (‘000 Cr)

2393 2586 2753 8.5 % 2987 3240 3516 3815 4140

PFCE as a % of GDP

66.7 67 67 67 67 67 67 67

PFCE (‘000 Cr)

1597 1733 1844 2001 2171 2355 2556 2774

% PFCE on T & C

4.7 5.3 5.4 5.5 5.6 5.7 5.8 5.9

PFCE (‘000 Cr)

75.0 91.8 99.6 110 121 134 148 163

Table 7 - T & C Derived Demand Mn Sq.mts 2004-

05 2005-

06 2006-

07 2007-

08 2008-

09 2009-

10 2010-

11 2011-

12 Household Demand

27436 29589 31951 35287 38816 42986 47477 52289

Non-household demand

11935 12532 13158 13816 14507 15232 15994 16794

Export Demand 9144 10495 12049 13495 15114 16928 18959 21234 Total Demand 48515 52596 57158 61968 68437 75146 82430 90317 Household demand A Regression Analysis was done for the period 1993-94 to 2003-04 to analyse the demand growth for fabrics and garments. Various variables were considered in this Regression Model like GDP growth rate, population growth rat, percentage of PFCE (Private Final Consumption Expenditure) spent on Textiles, income elasticity, expenditure elasticity, price elasticity, cross elasticity etc. Out of this, three variables met with F&T tests and these are GDP growth rate, population growth rate and per capita PFCE spent on Textiles. The second and third variables were considered to calculate the total PFCE spent on textiles in the country. Thus the Regression Model came out with two variables which have met the F & T Test and these are GDP growth rate and total PFCE spent on textiles in the country. While the GDP growth rate is assumed at 8.5% for the 11th Plan and population growth rate assumed at

146

1.17%, the percentage of PFCE spent on textiles is likely to go up from 5.3% in 2005-06 to 5.9% in 2011-12. Thus the total PFCE spent on textiles will go up from Rs. 99600 crores in 2006-07 to Rs. 163,000 crores in 2011-12 registering a growth of 63%. This will translate into the total household demand growing from 31951 million square meters in 2006-07 (terminal year of 10th Plan) to 52289 million square meters in 2011-12. Table 8 – Fabric Demand (Variety): Household Mn Sq.mts 2004-

05 2005-

06 2006-

07 2007-

08 2008-

09 2009-

10 2010-

11 2011-

12 100 % Cotton 10975 11828 12781 13846 15036 17291 18588 19982 Blended & 100 % Non-Cotton

16133

17787

18787

20353

22103

23761

25543

27458

Khadi, Wool & Silk

329

355

383

415

451

483

516

552

Sub-total 27437 29970 31951 34614 37590 40409 43440 46698 Non-household demand The Regression Model also showed that the Non-household demand will grow at about 5% CAGR during the 11th Plan. Table 9 – Fabric Demand (Variety): Non Household Mn Sq.mts 2004-

05 2005-

06 2006-

07 2007-

08 2008-

09 2009-

10 2010-

11 2011-


7175

7534

7911

8306

8722

9158

9616

10097

Khadi, Wool & Silk

312

328

344

361

379

398

418

439

Sub-total 11934 12532 13158 13815 14507 15232 15994 16794 Export Demand The Textile Industry and the Textile Ministry very strongly believe that the demand for fabrics and garments including made-ups for exports will grow at about 12% CAGR volumetrically and 20% CAGR value-wise. Thus, the total demand for fabrics in the 11th Plan will go up from 57,158 million square meters in 2006-07 to 90,317 million square meters in 2011-12. On these figures one needs to add 7% to 8% which is the production un-reported in the country. This is a contribution from the “informal sector” to the economy.

Table 10 – Fabric Demand (Variety): Exports Mn Sq.mts 2004-

05 2005-

06 2006-

07 2007-

08 2008-

09 2009-

10 2010-

11 2011-


3016

3469

3989

4588

5276

5909

6618

7412

Khadi, Wool &

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Silk 136 136 136 136 136 152 171 191 Sub-total 9144 10495 12049 13836 15891 177971 19933 22325 The fabric demand has been further classified into different varieties and the details are placed at Exhibits 18, 19, 20 and 21. These exhibits show the following : a) In the house-hold sector, the share of blended and 100% Non cotton

fabrics is 60%. Similar is the trend in the Non-household sector. These figures clearly show that both in the Household and Non-household sectors, the consumers prefer synthetics and blends over cotton. Thus, high excise duty is a direct burden on the common man and this needs to be reduced.

b) In the export front, cotton dominates as that accounts for 66% against only 32% share of synthetics and blends. Cotton is available almost 15 to 20% cheaper in India and the figures perhaps are indicative that the dominance of cotton in the exports is based on cheap cotton in India.

The moot question is whether this export competitiveness of the Cotton Textile Industry is at the cost of farmers? Cheaper prices of cotton by 15 to 20% is a direct hit to the farmers. The farmers also do not get their inputs at the international prices. Moreover, the farm holding in India is only about 1 to 1.5 hectares per farmer family. With the cheap prices of cotton and low yield in the rain fed area, more than 2/3rd of the cotton farmers get less that US$ 1 per capita per day as their income. Cotton Technology Mission is not able to address this issue. This National issue needs to be addressed.

Table 11– Total Fabric Demand Varieties Mn Sq.mts 2004-

05 2005-

06 2006-

07 2007-

08 2008-

09 2009-

10 2010-

11 2011-


26324

28790

30687

33247

36101

38828

41777

44967

Khadi, Wool & Silk

777

819

863

912

966

1033

1105

1182

Sub-total 48515 52997 57158 62265 67988 74564 80574 87111 Derived Demand for Fibres Based on the demand for fabrics and garments, the demand for fibres has been derived and has been shown in Exhibit 22. These figures exclude the demand for exports of fibres, Spun Yarn and Synthetic. It is estimated that an additional 1500 KTA of fibre and Yarns will be required for direct exports.

148

Fabric Demand

Mn Sq.Mtr

Yarn Required

KTA

Fibre wise Demand in KTA

Fibre Demand*

100% Cotton 40962 4819 Raw Cotton

6046 (355 lac bales)

100% Non Cotton 29229

2784

PSF

1181

Blends 15738 1574 VSF 473 Khadi/Silk/Wool 1182 148 ASF 120 Total 87111 9325 PFY 2509 NFY 50 PPFY 25 VFY 67 * Additionally 1500 KTA of fibre and yarn required for exports. Material Balance in the 11th Plan Material balance has been shown which compares the capacity of synthetic fibres and their raw-materials with the estimated demand. This, however, excludes figures for direct exports of fibres, Spun yarns and Filament yarns. It is derived that India will need 350 KTA to 800 KTA of additional capacity of PFY. It will also need about 400 KTA of PSF to meet the export demand. India will be short of raw-materials like PTA, DMT, MEG, Caprolactum, PX, CAN etc. New capacities will be required to be created in the Fibre Intermediates Industry. All this will require additional 4 to 5 MMT of Naphtha.

Product Demand Estimate Capacity 2006-07 Addl. Capacity required

PFY 2509 2159 350 PSF 1181 1292 - ASF 120 154 - PPFY 25 17 8 NFY 50 44 6 VSF 473 263 210 VFY 67 57 10 PTA/DMT (as PTA equivalent)

3820 2661 1158

MEG 1476 920 556 Caprolactum 145 120 25 ACN 147 33 124 PX 2560 2180 380 Depending on the price relationship between Cotton & Polyesters a demand swing of 300 KTA can take place. Conclusion In conclusion, if all the steps mentioned in the document are taken quickly, it is possible for the synthetic fibre industry to help create additional 8 million jobs and also help Textile Ministry and Textile Industry to fulfill its Textile Vision.

149

Technical Textiles

150

TECHNICAL TEXTILES: AN OPPORTUNITY FOR INDIA

A) Background:

• Technical Textiles includes all textile products, which are used primarily for their performance or functional characteristics and not for aesthetic appeal such as fabrics for garments. Technical textiles use commodity yarn for low-end applications and high tenacity yarn for high performance products.

• This note begins by providing a macro-level global perspective on Technical Textiles and identifies India’s current position; thereafter, it provides details on Indian demand for high tenacity yarn used in tyrecord and non-tyrecord sector. This note also, includes key recommendations which if implemented will unleash India’s growth potential in Technical Textiles.

B) Global Scenario:

• The Global Technical Textiles industry is a US$100 Billion industry.

• Based on end-use applications, technical textiles are grouped under the following broad heads.

Application Area

Areas covered Key End-use segment

Agrotech Agriculture, Horticulture, Floriculture, Fishery

Cover, protection, fishing

Buildtech Building and Construction textiles

Protection, display, reinforcements, construction

Clothtech Technical components of shoes and clothing

Show components, sewing, insulation

Geotech Geotextiles, Civil engineering

Stabilization, separation, reinforcement, erosion control

Hometech Furnishing, household products

Curtains, furniture component, cleaning

Indutech Filtration, Cleaning Filtration, MRGs, cleaning electrical components

Medtech Hygiene and Medical Cleaning, cover, wound care, protection

Mobiletech Automotive, Marine, Railways, and Aerospace

MRGs, safety, floor covering, composites

Packtech Packing Bulk packing, disposables Sportech Sport and Leisure

equipment Luggage components, nets, sports equipment

151

• During the last five year period, World Technical Textile industry has registered ~ 3-4% CARG and is expected to grow at 3.5% CARG over the next five years. The developing regions, however are expected to grow at over 5-6% CARG.

• Developed regions, USA, W.Europe and Japan account for over 50% of the total global consumption. It is projected, by 2010, the Asian region will account for over half of world’s consumption.

B1) India – Current Status:

• Techncial Textiles is a sector capable of high growth. India’s share is currently only 4%. Furthermore, India is predominently in traditional low-end applications viz Clothtech and Packtech which accounts over 50%

W.Eur ope19%China

22%

Oher Asia18%

E.Eur ope4%

Other s3%

India9%

S.Amer ica5%

N.Amer ica20%

Indutech5%

Packtech21%

Mobiltech7%

sporttech8%

Buildtech6%

Geotech1.8%

Hometech5%

Medtech5%

Protech3%

Clothtech36%

Agtotech2%

Source : Expert Committee on Technical Textile

Buildtech11%

Geotech2%

Hometech14%Medtech

10%

Mobiltech16%

Indutech14%

sporttech6%

Packtech11%

Protech0.1%

Clothtech8%

Agtotech8%

Demand by Region - 2010 Demand by End-use - 2005

152

• India has excellent capability as in some segments of Techncial Textiles , India has already achieved significant global position. In Nylon Tyrecord, today, India is the second largest consumer in the world and In Belting Fabric, India exports to over 30 countries. The following table gives, some high performance techncial textile products and India’s current position :

Products Preferred fibre

1 CurrentIndia’s position vs

World

Tyrecord High tenacity nylon & polyester **** Mechanical Rubber Goods (Conveyor–belts, transmission belts, Hose)

High tenacity polyester & Nylon ***

Air bags High tenacity nylon No presence Safety seat –belts High tenacity polyester No presence

Automobile upholstery Polyester Nylon Poly-propylene

***

Note : *****: Significant presence, ***: Medium, *: In-significant

Products Preferred fiber

India’s Position

Auto floor covering Poly- propylene ***

Automobile

insulation

Glass fibre

Polyester

Natural fibre

*

Filtration fabric Non-woven material made of Poly-

propylene

Nylon

Polyester

*

Ropes and cords High tenacity Poly-propylene,

Nylon, Polyester

***

Roofing felts Polyester non-woven *

Reinforcing roofing

scrim

Polyester *

Building carcasses Poly-propylene

Nylon

*

153

Awnings High tenacity Polyester *

Display fabric High tenacity Polyester *

Tarpaulins High tenacity Polyester *

Protective fabric

(medical)

Non-woven *

Wound dressing Knitted fabric of Nylon, Rayon *

Surgical items Nylon

Polyester

Poly-propylene

*

Geotech Poly-propylene

Polyester

*

Luggage /Bags High tenacity Nylon & Polyester *

Artificial turf

(sports)

Nylon

PVC

Poly-propylene

Tents High tenacity Nylon & Polyester *

Fishing nets High tenacity Nylon ***

• Before discussing growth opportunities in overall Techncial

Textiles, given below is the growth opportunites in Tyrecord and Industrial(high tenacity) yarn Industry, a sector in which India holds a global position.

C) Tyrecord Industry:

3 • Indian Tyre Industry predominantly uses Nylon 6 tyrecord fabric

made from high tenacity nylon yarn. Over the last five years, global Nylon 6 Tyrecord industry registered ~ 4% CARG. This global growth however has largely come from India and China. Today, India is the 2nd largest consumer of Nylon Tyreocrd cord fabric in the world. Indian Tyrecord consumption has registered a growth of 8% CARG during 2005-06 over 2000-01

154

• The growth of tyrecord consumption has a strong co-relation

with the country’s overall economy growth. Assuming that in the coming years,the Indian economy is expected to grow at 7~8% Tyrecord demand is likley to grow at 7.8% CARG, of which Nylon 6 Tyrecord demand is expected to grow at 6.9% CARG. In case of Polyester tyrecord (used in passenger and Light commercial vehicle radial tyres for carcass reinforcement), the consumption was negligible in the past five years. The passenger car segment is expected to grow in double digit and with radialization in passenger car tyre segment at 85%, Polyester tyrecord demand is expected to grow at 21% CARG.

N6 Tyre Cord Consumption Polyester Tyrecord Consumption Unit Kilo tons per annum Unit kilo tons per annum

646174

79 84 91

35455565758595

00

-01

'01

-02

'02

-03

'03

-04

'04

-05

'05

-06

PTY4%

N696%

9387

99105 113

121

35

55

75

95

115

135

06

-07

07

-08

08

-09

09

-10

10

-11

11

-12

7

5

8

1011

12

2

4

6

8

10

12

14

06

-07

07

-08

08

-09

09

-10

10

-11

11

-12

Tyre cord consumption Share by Yarn type

155

C1) Industrial (high tenacity) yarn demand for non-tyre application:

• In developed countries, the share of Industrial yarn(high tenacity) used for non-tyre application is over 50% against 10-15% in developing countries.

• As an economy grows, the share of non-tyre application in Industrial yarn also goes up. Keeping this in perspective, the demand for Nylon High tenacity yarn and polyester yarn has been estimated. Nylon Industrial yarn (non-tyre) is expected to grow at 21% and Polyester Industrial yarn (non-tyre) at 27%.

• Some key end uses of Nylon Industrial yarn are air bags,

mechanical rubber goods, ropes fishing net twine etc. Polyester Industrial yarn is used in mechanical rubber goods, coated fabric for dynamic and static cover, display fabric ,seat belts etc. ,

D) Growth potential for India – Technical Textiles

• Compared to developed countries and China, India’s per capita consumption of Techncial Textiles is negligible. The above data indicates that there is a large scope for India in Techncial Textiles. As the Indian economy steams ahead, per capita

149

1619 22 24

048

12162024

06

-07

07

-08

08

-09

09

-10

10

-11

11

-12

201727

3442

51

21222324252

06

-07

07

-08

08

-09

09

-10

10

-11

11

-12

9.87.3

2.30.7

India China W.Europe USA

Nylon Industrial yarn consumption Polyester Industrial yarn consumption

Technical Textile – Per capita consumption Kgs

156

consumption will also grow. For India to reach China’s current level, an investment of over Rs.44,000 cr is needed. This level of investment is expected to generate direct and indirect employment of 2 ~ 3 million.

• The Expert Committee on Technical Textiles estimated growth for all segments of Technical Textiles for the period 2007-12. All the segments are expected to witness double-digit growth in the coming years.

Technical Textile Segment

Estimated Growth rate : 2007-12

Agrotech 8 Buildtech 15 Clothtech 12 Geotech 15 Hometech 16 Indutech 12 Mobiltech 15 Meditech 12 Packtech 20 Protech 17 Sporttech 12 Oekotech 12

E) Need for high performance Fiber capacity in India:

3.1

• The base fiber/yarn used for high performance Technical Textile products is High tenacity yarn. In the Technical textile value chain, higher margin / value addition is at Fiber / yarn stage rather than in fabric / fabric processing stages. This following chart illustrates, how value addition has moved over the years.

RM-Yarn

yarn-Fabric

Fabric-Dipped fabric

0

10

20

30

40

50

60

70

80

90

100

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Ex- Tyrecord Industry – Value addition

157

• Today, India is self reliant for its needs of major feed stocks used for fiber making. Hence, key to competitiveness in Techncial Textiles is self-sufficiency in fiber / yarn used for manufacture of Technical Textile products.

F) Key recommendations:

3.2

• Encourage investments in high performance fiber/yarn through Technology Up-gradation Fund.

• Regulatory frame work and standards for use of :

⎯ Geotextiles for construction ⎯ Fire retardant textiles in public places (exhibition hall,

cinema hall etc.) ⎯ Air bag in passenger car ⎯ Nonwoven disposables in healthcare

• Create awareness on benefits of Technical Textiles particularly in

Agriculture sector

• Create Standards for Technical Textile to ensure strict performance and safety of users

• Rationalization of duty structure across the value chain to

eliminate anomalies and accumulation of Cenvat

• Partnership programs for education and training to build application-engineering resource.

• Address of generic competitive issues such as labour Reforms, Power reforms, rationalization of duty etc to enable a competitive platform.

-----

158

Report of the Sub-group on Research & Development and

Human Resource Development for 11th Five Year Plan (2007-2012).

159

CONTENTS Chapter 1 Research and Development Initiatives by Government by Department of Scientific Industrial Research (DSIR), Government of India. CHAPTER 2 R&D Vision for the 11th Plan by Indian Centre for Plastics in The Environment Project Proposal –Polymeric Flow Improver additives for Blends of diesel – bio-diesel and lube oil by IIP, Dehradun CHAPTER 3 Availability and future Requirement of Human Resources and Strategies. From CIPET. CHAPTER 4 Plastic Recycling Trends and technologies by Shriram Institute for Industrial Research, Delhi CHAPTER 5 Alternative Feed stocks from Renewable Sources by Shriram Institute for Industrial Research, Delhi Methane to Olefins (MTO), through methanol route By Gas Authority of India, New Delhi CHAPTER 6 Plastic Processing Equipment Scenario by Shriram Institute for Industrial Research, Delhi

160

CHAPTER 1

Research and Development Initiatives by Government (by Department of Scientific Industrial Research (DSIR), Government of India.) The Department of Scientific & Industrial Research (DSIR) is the administrative department for promotion of Research and Development by Industry. The department operates a scheme entitled ‘Recognition of In-house R&D Units of Industry,’ which benchmarks the research and development activities in the industry. As on date, there are about 1200 in-house R&D centers recognized by DSIR out of which 500 R&D centers are carrying out research and development activities in Chemical and Allied Industries. The most R&D intensive companies are in the drugs & pharmaceutical sector. These companies are carrying out research activities for development of patent non-infringing processes for APIs and new drug delivery systems, which enables them to market their products in the international markets. The Indian pharmaceutical industry is showing potential for conducting research for development of new drugs. About 15 companies are carrying out research & development to develop new drugs. A number of Indian companies have built up impressive R&D infrastructure and expertise in chemical research, pharmaceutical research, fermentation research as well as new drug discovery research and research in novel drug delivery systems. The therapeutic areas in which these companies have developed lead molecules are malaria, urology, metabolic disorders, cardiovascular indications, cancer, diabetes, dyslipidemia, obesity, inflammation and pain, staphylococcal infections, respiratory infections, skin infections, anti-migraine, anti-TB, anti-psoriasis and cerebro-vascular. There are collaborative R&D programmes between CSIR laboratories and industry. DSIR can provide catalytic support for such initiatives. The DSIR had been operating a scheme entitled ‘Technology Development and Demonstration Programme’ (erstwhile PATSER – Programme Aimed at Technological Self Reliance) wherein the department has been part funding innovative technology development projects of the industry including petrochemicals industry. The notable projects supported include development of technology for Tetra Bromo Biphenol-A (TBBA) on pilot plant level; development of process for manufacture of 1-Bromo-3-Chloro Propane (B.C.P.) & 1, 3-Dirbomo Propane (D.B.P.) in pilot plant; development of membrane technology natural gas separation. In these projects, the department mainly supports the innovative component of the technology development process. The Department of Chemicals and Petrochemicals may complement some of the projects along with the industry so as to multiply the effect of technology development process undertaken by the industry along with the DSIR. There is a need to have a thrust on the research & development for the capital goods for plastic processing and petrochemical industry. A concerted effort needs to be made for development of such capital goods by supporting the manufacturers of machinery for petrochemical industry

161

and plastic/polymer processing industry. DSIR can actively participate in such development projects. Fiscal Incentives and Support Measures for promoting R&D in Industry are placed below: Joint initiatives may be worked out by DSIR and the Department of Chemicals & Petrochemicals for developing innovative approaches in industrial R&D to encourage industry to aggressively undertake technology/intellectual property acquisitions.

FISCAL INCENTIVES AVAILABLE FOR SCIENTIFIC RESEARCH

The government has provided a number of fiscal incentives and other support measures for promoting R&D in industry and increased utilization of locally available R&D options for industrial development. These include the following: i. Write off of revenue expenditure on R&D; vide (Section 35 (1)

(i) of Income-tax Act). ii. Write off of capital expenditure on R&D in the year the

expenditure is incurred; (vide Sec.35 (1) (iv) of Income Tax Act). iii. Weighted tax deduction of 125% for sponsored research

programmes in approved national laboratories, Universities functioning under the aegis of the Indian Council of Agricultural Research (ICAR), Indian Council of Medical Research (ICMR), Council of Scientific and Industrial Research (CSIR), Defence Research & Development organization (DRDO), Department of Electronics, Department of Biotechnology, Department of Atomic Energy, Universities and IITs is available to the sponsor. The Head of the concerned National Laboratory or the University or the Indian Institute of Technology can give the requisite approval of the sponsored research programs with effect from 1 October 1996. Prior to this DSIR was the nodal scientific department to administer this incentive. (Section 35 (2AA) of the I.T. Act).

iv. Weighted tax deduction @ 125% (raised to 150% by the

Finance Act 2000) on R&D expenditure to companies engaged in the business of bio-technology or in the business of manufacture or production of drugs, pharmaceuticals, electronic equipment, computers, telecommunication equipment, automobile and its components, chemicals, manufacture of aircraft's and helicopters in government approved in-house R&D centres. Expenditure on scientific research in relation to drugs and pharmaceuticals, shall include expenditure incurred on clinical drug trials, obtaining approvals from any regulatory authority under any Central, State or Provincial Act and filing an application for a patent under the Patents Act, 1970 (39 of 1970). (Section 35 (2AB) of the Income Tax Act – provision available upto 31st March, 2007).

162

v. Tax holiday for ten consecutive assessment years beginning

from the initial assessment year to companies with main object “The Scientific and Industrial Research and Development” approved after the 31st day of March 2000 but before 1st April 2007 (Section 80-IB (8 A) of Income Tax Act).

vi. Income-tax exemption @ 125% to donations made to approved

Scientific and Industrial Research Organisations (Section 35 (1)(ii) and 35(1)(iii) of the Income Tax Act).

vii. Accelerated depreciation allowance for investment on plant and

machinery made on the basis of indigenous technology (Rule 5(2) of I.T. Rules).

viii. Customs duty exemption to public funded R&D institutions and

privately funded scientific and industrial research organisations, both for capital equipment and consumables needed for R&D. (Notification No.51/96-Customs, dated 23rd July 1996).

ix. Excise duty exemption to public funded R&D institutions and

privately funded scientific and industrial research organisations, both for capital equipment and consumables needed for R&D. (Notification No.10/97-Central Excise, dated 1st March 1997).

x. Excise duty exemption for 3 years on goods designed and

developed by a wholly owned Indian company and patented in any two countries out of: India, USA, Japan and any one country of European Union (Notification No.15/96-CE dated July 23, 1996, amended vide Notification No.13/99-CE dated February 28, 1999).

xi. Exemption from customs duty on imports made for R&D projects

funded by Government in industry. (Notification No.50/96-Customs dated 23 July 1996).

xii. Exemption from Price Control of Drugs (Prices Control) Order for

drugs, which have been developed indigenously or produced through a process, developed through indigenous R&D. (Proforma available on DSIR web site).

xiii. Pharmaceutical reference standards are allowed to be imported

duty free as per notification No. 26/2003 – Customs dated 1st March 2003 (entry substituted at S.No 138 of the table in the said notification).

xiv. Goods specified in list 28 (comprising of analytical and specialty

equipment) for use in pharmaceutical and biotechnology sector are allowed to be imported duty free {as per notification No. 26/2003 – Customs dated 1st March 2003 (entry substituted at S.No 248 of the table in the said notification)} provided

163

a. The goods are imported for research and development purposes by an importer registered with DSIR for installation in the R&D wing of the importer within six months of the date of importation on submission of a certificate from the jurisdictional assistant commissioner of central excise or the Deputy commissioner of central excise to the assistant commissioner of customs or Deputy commissioner of customs at the port of importation. The goods imported should not be transferred or sold for a period of seven years from the date of installation.

b. The goods are imported for use in the manufacture of

commodities and the total value of goods imported does not exceed 25% of the FOB value of exports made during the proceeding financial year and installation in the factory of the importer within six months of the date of importation on submission of a certificate from the jurisdictional assistant commissioner of central excise or the Deputy commissioner of central excise to the assistant commissioner of customs or Deputy commissioner of customs at the port of importation. The goods imported should not be transferred or sold for a period of seven years from the date of installation.

****

164

CHAPTER 2

R&D Vision for the 11th Plan

(by Indian Centre for Plastics in The Environment)

Creating Centers of Excellence linked to Core Competencies

o Hydrocarbon Value Chain o Polymer Value Chain

Promotion of Industrial R&D Consortiums with Government Participation

Revenue generation with value to nation with IP focus

Key Drivers for R & D:

• emphasis on Up Gradation of Current Technologies • Intellectual Property Rights • Productivity Improvement: Investment in existing

Manufacture of polymer products & upgrading existing Technology. • Feedstock Securitization, & Value Enhancement • Human Resource development India can be front runner both in upstream & down stream development of polymer which include raw materials, additives, catalyst and machinery

Ways & Means of Strengthening R&D

• Infrastructure Development is very essential for R & D Growth in the country. This includes

o Creation of World class R&D centre’s for improved efficiencies and

speed.

o World-class knowledge centre’s with digital access to latest scientific and technical literature and patents.

o Networking of all research labs/institutes for integrated research.

• Need of highly knowledgeable, skilled and qualified

professionals

o Schemes for promoting higher education. E.g. Ph.D. o Retain scientific talent for research. o Attract best Indian professionals from abroad for research.

• Basic research • Partnership with Universities/Institutes across boundaries to

accelerate development.

165

• Commitment to build a synergy between educational institution & Polymer industry

• Applied Research o Trained professionals for technology management. o Foster a climate for best innovation processes.

• IPR Policies in conformance with International practices. • Creating a pool of specialized professionals/lawyers with necessary

experience and expertise in IPR. • Strict enforcement of IPR compliance. • Speedy resolution of IPR issues in the legal system.

• Programs to sustain continuous knowledge up gradation.

o Improve participation in National/International conference. o Create online/e-based knowledge up gradation portals. o Making re-certification mandatory for practicing

professionals. • Collaborative research for leapfrogging technologies.

o Research collaborations with best institutes on frontier

technologies.

o Avoid sequential R&D development. Embrace quantum jumps in technologies to speed up R&D growth.

o R&D funding as a percentage of GDP to be benchmarked with the global best.

R & D for Good Manufacturing Practices Adoption

• Adherence to international quality management systems like ISO, DNV certification.

• Best in-house practices 5S, lean manufacturing, Six-Sigma.

• Development and strict enforcement of quality standards as

per international practices that are a benchmark.

• Training of Personnel in the following o Regulatory issues governing personnel, materials, equipment

and processes. o Develop documentation such as SOPs and environmental

compliance records. o Material handling procedures. o Process control and process validation.

• National Conferences/Seminars focused on good

manufacturing practices to be organized by engineering societies (like IIChE).

• Globally adopted Change Management practices.

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Human Resource Needs – Industry Input

• Polymer Scientists/Technologists are needed at various levels.

o Polymer Science/Technology to be introduced as an

undergraduate degree program in more number of institutions.

o Only a few IITs have Polymer Technology at M.Tech/Ph.D.

level. Should be expanded to other IITs and premier academic institutes & establish centre of excellence in existing institutions.

o Motivation of young talents to pursue Plastics / Polymer

Science & Technology at Graduate & Post Graduate Levels.

o R & D Carried out by Indian Scientists must be patented under current IPR rights, Procedure must be made easy so that hard work done by Indian Scientist should not remain un utilized.

o Continuous revision of Polymer Engineering/Science curriculum at UG/PG levels to include emerging and advanced research areas like nano-technology, bio-polymers etc.

o There is a resource crunch in small scale industry for conducting R & D & human resource lack., Further to add there is a need to focus on upgrading technology through schemes from DSIR.

R&D Focus – Industry Input

• Revolutionizing Agriculture with Polymer Applications. Plasticulture shall be the thrust area

• High Performance Packaging Technologies for Water and Food Security

• Safe Health Practices through Plastic Medical Accessories. • Maximize Plastics Utilization through Recycling. • Polymers for Energy Efficiency. • Innovative Plastics Processing Technologies like Solid State

Extrusion, PO micro-pellet etc • New Process Technologies for High Performance Polymers. E.g.

Green processes, Supercritical technologies. • Thrust on New platforms: Bio-Nano Sciences as enabler for

Improved Polymers, Advanced Materials • Need to have a thrust on research & development in Capital Goods

for Plastic Processing & Petrochemical; industry since there is very less R & D initiatives in this area.

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• Development of Dies & Moulds is an important area where more thrust is needed. Currently the lead time in manufacturing and long delivery of schedules are the constraints resulting in imports of Finished products.

DSIR- Industry interaction

• DSIR scheme on technology promotion on development and utilization (TPDU) in tenth year plan for close interaction between industry and DSIR including funding.

• Technology development and downstream programme for strengthening the interface between R & D establishments and academic institutions. DSIR support to provide full/ partial financial support

• Knowledge alliances and networking. Initiative to add value to IPR from various forms of know-how/ knowledge.

• Enhance industry’s share in the national R&D expenditure substantially and facilitate setting up of start-ups for research and technology development.

• Strengthen those existing private industrial units whose product development is based on in-house innovative R&D, in sectors other than Biotechnology which include materials science with focus on polymers.

• Making availability of funds to the industry through programmes like New Millennium Industry Technology Leadership Initiative (NMITLI).

• Generation & Management of Intellectual Property Rights Awareness, Development, Protection & Utilization and Enforcement Programme”

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Project-Proposal for XI Five Year Plan (2007-2012)

Indian Institute of Petroleum, Dehradun (CSIR) Title of the Project: Development of New Generation Polymeric cold flow improver additives for blends of diesel – biodiesel and lube oil – vegetable oil based lube oil blends. Introduction: There has been a considerable interest in developing biodiesel as an alternative fuel in recent years due to renewable resources. It is composed of alkyl esters of saturated and unsaturated fatty acids. Worldwide much research work is going on in the area of cold flow improver in the blends of biodiesel with diesel i.e. 2-20% and beyond. Since diesel has different composition and it varies with blending of different refinery streams, its cold flow improver additives are tailor made for specific type of diesel only. Since biodiesels are methyl esters of fatty acids the molecular composition will change drastically and the cold flow additives available in the market may not be effective for this purpose. Bio-diesel characteristics

Cetane Number 50-60 Lubricity (without S) High Flash Point >100°C Miscibility with diesel Good Composition Similar type of molecule

having average chain length C18 (methyl ester of fatty acid)

Clout Point, Cold Filter Plugging Are within close range Point, Pour Point

(whereas the molecular composition of diesel is widely varied e.g. n-alkanes, iso-alkanes, naphthanic, aromatic molecules of different chain lengths) The cold flow additives are very specific in nature and its effectiveness depends on its solubility in the diesel and nucleation temperature to modify wax crystals. If the similar type of additive is used for cold flow improver of diesel-biodiesel blends of different ratios it may not work.

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Similarly in the area of lube oil of vegetable oil origin its pour point depressant additive and VI improvers also need to be modified and it is true for blends also. Name of the Lab. : Indian Institute of Petroleum, Dehradun, India Duration : 5 years (2007-2012) Scope of work (Polymeric Additives) Polymeric additives preparation and evaluation of different microstructures to be used as: Cold filter plugging point improvers Pour point depressant additive

For (i) Biodiesel (ii) Diesel – Biodiesel blends of 2-20% and beyond. Similarly Pour point depressant additive

For (i) Lube oil of vegetable oil origin and their blends with lube

oil (ii) Viscosity index improver additive

Envisaged Achievement / Outcome Development of different additive packages Specific Alliances / partnership / collaboration User industries, Additive producing companies Financial Resource Deployment : 41 Lakh

(Rs Lakh) 2007-

2008 2008-2009

2009-2010

2010-2011

2011-2012

Total Project

HEADS Capital 8.0 4.0 3.0 2.0 - 17.0 Recurring 6.0 4.0 5.0 7.0 2.0 24.0 Grand Total

14.0 8.0 8.0 9.0 2.0 41.0

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CHAPTER 3

AVAILABILITY AND FUTURE REQUIREMENT OF HUMAN RESOURCES AND STRATEGIES”

I. Preamble : Synthetic Plastics materials have become cogent to satisfy the varied requirements of mankind including high performance engineering applications. Plastics have improved the quality of life in modern society and have become a natural choice in multiple applications by virtue of its own merit. A cursory glimpse on the prevailing scenario indicates that significant growth potential exists for Indian Plastics Industry due to strong pattern of growth in the end users segment consuming processed plastics. Packaging, consumer electronics, agriculture, automobiles, construction and processed food are among the largest end user segments, which are growing at 10 to 15% in the past five years and are expected to continue to grow at similar rates in the next 5 to 10 years. In addition, the plastics is finding increasing applications in aforementioned industries and therefore, expected to trigger higher consumption of plastics in the forthcoming 5 to 10 years. India is expected to become the third largest consumer of plastics behind China and USA within this decade. It is estimated that the plastics processing industry employs around 2.5 million people through direct and indirect employment and contributed around Rs.6,000 crores tax revenue to the Govt. in 2004-05. Source : ICRA India continues to surge ahead with stronger growth with plastics trebling every decade. India ranks 8th in the world in total Plastics consumption with the per capita consumption of plastics in the country around 4.3 kgs., as against world average of 26 kgs. It is estimated that the consumption of polymer would reach around 12.5 million tonnes in the year 2010 by attaining a per capita consumption level of 12 kgs. and further increase to 22 million tonnes in the year 2015. The scope for such high demand is corroborated by virtue of large visible gap between per capita consumption of polymers in India in comparison to the world average. It would result in a huge demand supply gap and will require more than doubling the current polymer capacities in the country. The estimated consumption of polymer by the year 2010 would require 30,000 more processing units to be commissioned with an investment of US$ 10.00 billions. Globally the demand for plastics is projected to touch around 260 million tonnes per annum by the year 2010, setting up an opportunity for large no. of plastics processing industry. The scenario, opportunities and visible challenges in the era of globalization are the indicators of the fact that cutting edge for an industry lies in achieving the techno-commercial competitiveness in terms of quality, cost effectiveness and delivery. Thus Skilled and competent human resource is the vital input for achieving the techno-commercial competitiveness stated above. In the era of knowledge economy, with an intrinsic look to our own strength, we can find an opportunity in our uniquely large work force. While India faces an unemployment crisis,

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ironically many countries are projected to face work force shortage in the same period due to variety of social reasons. It is apprehended that the work force shortage may slow down economic growth in such countries and may have other adverse socio-economic implications. Such challenges to other countries presents a great opportunity for India. By adopting suitable HRD strategies, India can target this shortage by providing skilled and competent work force. II. Vision, Mission and Recommendation of Task force on HRD: In the era of globalisation and liberalisation the activity of human resource development for plastics industry segment is governed by the vision of development of high value added, quality plastics products at globally competitive price and innovation of newer applications/ products with focus on sustainable development. In order to achieve the envisioned objectives, the Task force on petrochemicals, GOI, set the mission as enumerated below : ® Identification of core areas and creation of mass production

facilities at Global level. ® To become globally competitive in the regime of reduced tariff and

non-tariff barriers. ® Environmentally responsible products/ processes /technologies. ® Innovations through R&D. ® Proactive participation of stakeholders in facilitating sustained

growth. ® Increase per capita consumption of plastics to about 12 kgs &

synthetic fibres to 2.5 kgs and be among top 3 consumers of plastics in the world by 2010.

As per the recommendation of Task Force on HRD in year 2000, the requirement of direct technical manpower has been assessed @ 7 persons/100 tons increase in plastics consumption. Task Force also envisaged that by 2010, the assessment of employment generation would be @ 3 persons/100 tons increase in plastics consumption due to automation in machinery & technology upgradation.

III. Plastics Industry Overview :

In order to have clarity on availability and future requirement of HRD, the present scenario of plastics industry in India is depicted in the table Major raw materials producers 15 Nos. Processing Units (approx.) 22,000 Nos. Estimated turnover of organised segment Rs.250 billion Capital Assets of processing Units Rs.130 billion Virgin Raw material produced (approx) 4.7 million tons Total raw material (incl. Recycled) consumed 6.9 million tons Export value of plastic goods (approx.) Rs.35 billion Revenue to Government approx Rs.30 billion Source : Task force on Petrochemicals sector

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The aforementioned scenario of plastics & allied industry is instrumental in generating direct or indirect employment to the tune of 2.5 million.

Present Status of employment in Plastics & Allied Industries Since most of the Plastics Industries are in small and medium scale, the majority of employment is distributed among the categories comprising of skilled/unskilled operator & technicians and marketing/trading workforce. With the advent of increasing consumption pattern and enhanced automation in plastics sector, it is anticipated that progressive trend would be observed in requirement of high ended technical, managerial and R & D personnel, during the forthcoming decades.

IV. The Growth Projections In order to assess the future requirement of human resources, an idea of global polymer consumption by 2010, is inevitable, as given below :

Marketing/trading

38%

Managerial2%

Maintenance & Mould makers

1%Supervisory

3%

operators (skilled &

semiskilled)20%

opertors (unskilled)

35%

R&D1%

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Rank Country 1988 (MMT) Country 2000 (MMT) Country

2010 (MMT)

2010/ 2000

1 USA 16.6 USA 27.3 USA 38.9 3.6%

2 Japan 6.4 China 14.4 China 31.3 8.1%

3 3.3 Ger

many

4.3 Japan 9.1 India 12.5 14.0%

4 China 3.7 Germany 6.4 Japan 11.5 2.3%

5 Italy 3.1 S Korea 4.7 Germany 9.4 3.9%

6 CIS 2.0 Italy 4.7 S Korea 7.4 4.8%

7 France 2.4 France 4.1 Italy 6.8 3.8%

8 UK 2.2 UK 3.5 Brazil 6.7 7.8%

9 Taiwan 1.9 India 3.4 CIS 6.2 7.0%

10 S Korea 1.8 Brazil 3.4 France 6.1 9.1%

11 India 1.6 Taiwan 3.3 UK 5.2 4.1%

A careful study of Compounded Average Growth Rate of various plastics materials indicates that the share of India’s consumption in world consumption is expected to increase in all polymer segments except for polyester fibre as indicated in below mentioned table:

Compound Average Annual Growth Rate (%) 2005 - 2015

India's Share of World Consumption (%)

World India 2005 2015

Polyester Fibre 4.8 5.2 7 7 Polystyrene 3.6 6 1.7 2

PVC 3.7 6 3 4

Polypropylene 4.8 8.4 3 4.7

LLDPE 6.3 10 4 6

HDPE 4.2 8 3 5

LDPE 1.7 6.7 1.5 2.5

Global demand for polymers is estimated to increase at 5% per annum to reach 227 MMT by 2015. Polymer demand in India is expected to grow at 13-14% p.a. and will account for 9% of global polymer demand by 2015 against the 4% of global polymer demand in 2004. The total polymer demand in India by 2015 is estimated to be around 22 MMT. The growth projections for plastics by the year 2015 are :

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Raw material consumption - 22 Million tons.

Turnover to reach - Rs.1300 billion.

Export value to reach Rs.450 billion.

Revenue to Government - Rs.160 billion

Total Employment - 8.5 Million (average @ 5 person/100 tons increase in polymer consumption) i.e. Additional creation of 6 million jobs in plastics sector

V. (a) Type of Manpower requirement by Plastics Processing

3.3.1.1.1.1.1 Industry ® Plastics/Polymer Technologists with Research & Development

Temper. ® Engineers with techno-managerial & plant engineering

competencies ® Design & Development Engineers with CAD/CAM/CAE competencies ® Plastics Processing and Quality Control Engineers ® Mould Design Engineers ® Mould & Machine Maintenance Engineers ® Mould Development Engineers The manpower requirement by the plastics processing industry may be arranged in a hierarchical structure feeding the specific segments as indicated below

Mould & Process Engineers

Production & QC Engineers

Techno-managerial

Plant Engineers

R & D

Skilled work force

Apex Programme (level V)

Industry Specific Programme

(Level III & IV)

Foundation Programme (Level II)

Skilled Operator/Technician Programme

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b. Scenario of Human Resource Development The human resource development activity is undertaken through three tier Education system in the country comprising of development of

® Plastics Technologist/Scientist (through university education system)

® Plastics Engineer/ Production Engineer/ Processing Engineer

or Supervisors (through technical/vocational education institutions like CIPET)

® Mould & Die Makers/Technicians/Machine operators (through

technical-education at CIPET, Indo-German Tool rooms, NTTF, etc.

The University education system offers Degree, Post Graduate Degree & Ph.D. programmes in polymer/plastic technology through Institutions like, IITs, HBTI, UDCT, Engineering colleges (around 30 institutions). CIPET has also introduced PG Degree in Plastics Engineering/Technology in the year 2003 and encouraging responses of industry has been received by 100% placement for first batch. Besides University System, the Institutions are offering courses in specific areas of plastics technology to impart specialised skills. These Institutions are CIPET (15 centres across the country), IPI (All India presence), NTTF, GTTC, IGTR, CTTC, CITD, etc., (specialized courses in tool & die making) The Diploma Level and ITI institutions offering Diploma & Plastics processing operator trade certificate are Government and private polytechnics (around 60 polytechnics in the country), ITIs (around 100 across the country)

c. CIPET’s contribution for HRD CIPET, as an Institution has played significant role in providing manpower “The Vital Input” to Indian Plastics Industry by establishing a brand equity in “Human Resource Market” and acquired status of preferred destination for Campus Recruitment by reputed Plastics Industry in India & Abroad. As on date, CIPET has developed more than 27,000 plastics professionals in various disciplines of Plastics Engineering & Technology, since its inception. Pass outs of early batches opted for enterpreneurship as their career option, thus created the job opportunities for fresh students. At an average 90 to 95% aspirants offered employment through on campus/off campus recruitment during the year 2004-05 and 2005-06. The courses offered, skills imparted and employment profile of CIPET pass outs are presented below :

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Courses Offered Skills imparted Employment Profile

M.TECH

Specialised high-ended skills for carrying out R&D, technology development work in the industry

Plastic Technologists, Specialist, R&D professionals in petrochemicals as well as downstream industries

PGD-PE

Techno-managerial & plantengineering competencies fortaking up responsibilities inproduction & applicationdevelopment.

Plastics Engineer, Application Development Specialist, Production Engineer, etc.

PGD-Cad PE Core competency for design & development of plastics products & mould

Plastics product Engineer, Design Engineers, CAD Engineers, etc.

PGD-PPT Skills on plastics processing and Testing

Production Supervisor/ Quality Supervisor, Shift Engineer, etc

PD-PMD Technical acumen for Plastics Mould Design

Mould Designers/ Mould Supervisors

PD-MM Diagnostics acumen and maintenance competencies for Machine & Mould

Maintenance supervisor

PD-PMT/ DPMT Skill on Mould Development Mould Designers/ Mould Supervisors/ Mould Maker / Mould Technicians

PD-PPT Skills on Plastics Product Manufacturing

Plastics Processing supervisor/ technicians

VI. Interventions proposed In order to improve the plastics education in the country, interventions of Govt. of India is proposed through following steps :

Commitment to rebuild the education system with creation of synergy between institute and industry, motivate young talents to pursue plastics/ polymer science and engineering courses (Dept. of Chemicals & Petrochemicals as Nodal department for Plastics Sector)

To establish Centre of Excellence in Polymer/ Plastics Technology in existing institutions like IITs, NITs, CIPET, etc. and strengthening S&T linkages through co-operation and networking

To grant Institute of National Importance/ Excellence to CIPET, as a support to the HRD initiatives in Plastics Sector.

A. Strategies : Prima facie, the nature of action required for education and training for creation of human asset would involve the following :

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1. Investment in plastics and polymer education infrastructure and faculty to increase supply of skilled professionals with relevant skills.

2. Investment in plastics and polymer training institutions to upgrade skill sets with specific reference to vocational skills & behavioral dynamics.

3. Strengthening of plastics and polymer education curriculum to include practical knowledge, know-how and understanding of global requirement.

4. Creative funding mechanism to achieve the quality education in plastics engineering and technology.

5. Standards and bodies for setting the bench marking and to certify skills to ensure employability.

In order to implement the strategies, for HRD to meet the domestic as well global requirements, alignment to guiding principles, consultation between participating agencies is inevitable for effective approaches, especially for professional and vocational education. Some of the road blocks in implementation of education reforms includes isolated approach, lack of continuity and accountability, no uniform well accepted implementation plan, which leads to inconsistency and fiscal constraints. Technical education supports the development of the individual to engage in economic activity, therefore, the curriculum should be responsive to market needs and recognised world over. The skill and competence based training and education prepares individual for the job market. The strategies to be adopted and action areas for improving various education providers are enumerated below : B. Actions :

1. University/Professional Education :

a. Government • Enhancement in the number of Institutions and their capacity to create

requisite number of professionals by implementation of IT enabled tools.

• By establishing a mechanism for private investment in R & D activity

and to commercialise the research. • Increase in autonomy of existing Institutes in the field of curriculum

design, managing infrastructure and retention of faculty. • Improve quality of education and promote relevance through

modification of curriculum, upgradation of infrastructure and faculty training.

• Financial support for internet facilities to promote familiarity and

incorporation of IT in core education.

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b. Private Sector : • Promote scientific research and experimentation in relevant areas. • Improve functioning of government run institutions by providing

knowledge and expertise. • Provide inputs into the skill requirements for the new ly trained

persons/professionals. 2. Technical Education Institutions :

a. Government • Introduction of courses in the emerging areas • Formulation of schemes to expand, develop and retain the faculty in

technical institutions. • Networking of Institutions to optimise resources and faculty exchange

programmes. • Enhancing quality of education, through infrastructure upgradation and

faculty training. b. Private Sector : • Affiliate Institutions for facilitating resources in terms of faculty, inplant

training and technical projects. • Advance feed back to policy making sectors in relation to upcoming

requirement of professionals and scientific research. • Extending facility through back ward integration for specialised human

resource development. 3. Skill Development Training : a. Government : • Formulating a scheme of continuing education for providing the

opportunity to employees of plastics industry to upgrade their technical knowledge.

• Introducing flexible learning system (CBT) for knowledge upgradation. • Facilitate and augment existing Institutes to commence e-learning

programmes. • Providing generous funding support to Institutes engaged in the field

for creation of infrastructure. b. Private Sector • Collaborate with the Institutions through Industry Institute interaction

for improving the functioning by providing knowledge and expertise. • Facilitate inplant training of longer duration. • Providing advanced inputs regarding skill requirement of new

professionals enabling to orient the curriculum.

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Chapter 4

PLASTIC RECYCLING TRENDS AND TECHNOLOGIES

Introduction Plastics have moulded the modern world and transformed the quality of life. There is no human activity where plastics do not play a key role from clothing to shelter, from transportation to communication and from entertainment to health care. Plastics, because of their many attractive properties, such as lightweight, high strength and ease of processing, meet a large share of the material needs of man, and that too at a comparatively lesser cost and causing lesser environmental implications. The unique characteristics of plastics like durability, formability, light weight and versatility have enabled their usage in almost everything which help make life easier and better. With increasing production and consumption, emerges the issue of waste management. In a typical composition of Municipal Solid Waste (MSW), it is estimated that plastic waste constitutes 5-6 %. The long life and desirability of plastics, which have made them a material of choice for many applications is seemingly a disadvantage when it comes to their disposal. However, when handled properly, plastics do little damage to our environment. Plastics have the advantage that they can be easily reprocessed and recycled. Plastics waste recycling constitutes one of the main components of integrated plastics waste management system. Recycling has several societal and economic implications. Recycling extends disposal capacity, saves money in disposal costs, conserves natural resources, creates jobs and provides a reliable, cost effective feedstock to the industry. Types of Plastic Recycling Plastic Recycling can be classified into four categories: Primary recycling, which consists of manufacturing of new plastic products having equivalent properties to the discarded plastic items. Most clean, thermoplastic manufacturing waste can be recycled in a primary sense- remelted and reformed, in case it does not get contaminated. Secondary recycling, which involves the manufacturing of the products with properties inferior to the original products. Tertiary recycling involves the processes, which utilize waste plastics by altering a polymer’s chemical structure to manufacture monomers, basic chemicals or fuels. Tertiary recycling can be divided into three basic categories:

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• Depolymerisation processes that require clean, single plastics waste and produce monomers or other basic inputs that can be used in the production of new resins

• Tertiary processes that are applicable to mixed and contaminated

plastics waste streams and utilize waste plastics as a substitute for crude oil in refinery operations and as substitutes for basic chemicals in refinery recycling and pyrolysis.

• Dissolution processes that can be applied to mixed and

contaminated waste streams to selectively remove individual resins or classes of resins for further processing and recycling.

Some tertiary technologies allow recovery of nearly pure polymers or their constituents from a waste mixture, and the reaction conditions destroy contaminants, allowing the recovered material to be used in food packaging applications. Quaternary recycling stands for incineration of plastics waste with heat recovery, either as part of the municipal waste stream or as a segregated waste. Plastics Recycling-Indian Scenario Plastics recycling presents a unique scenario in India. The annual turnover of Plastic industry in India during the year 2005-06 in terms of volume is 4.2 MMT which turns out to be Rs. 25,000 cr., whereas the assets contribute Rs.47,000 cr. The contribution of Plastic industry to the exchequer is Rs. 6000 cr. and is a very critical and indispensable part of Indian economy. India’s per capita consumption of plastics is of the order of 4 kg, against the world average of 20 kg. The consumption of plastics is expected to grow at a healthy rate of 15% per annum compounded during this decade and is expected to reach a per capita consumption level of 8.5 kg by 2010A.D. Since India has the lowest per capita consumption of plastics, the plastics waste generation is also low as compared to the world. Material recycling of plastics is estimated to be 60% in India, whereas Europe, China and Japan recycle 7%, 10% and 12% of plastic waste respectively. In India, the recycling units are dispersed between the formal and the informal sector. Almost 2300 recycling units are spread over the length and breadth of the country employing more than 3 lakh people and recycling about 1.3 MMT of plastics per year. The turnover of plastics recycling industry in India is Rs. 5, 000 cr. This can be attributed to the presence of widescale informal sector involved in recycling, which comprises of wastepickers, kabariwala, and scrap dealers, bulk buyers and recyclers. The systematic approach of collection, separation and gradation of plastics waste for further recycling and production of a range of consumer items following the indigenous and innovative methods of grinding, washing and granulating using locally available machinery has been an established

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practice in India for more than three decades. The recycling machinery, which includes grinders, film shredders, agglomerators, washing machinery, granulators, extruders including complete recycling plants are readily available in India. The commercial sector that spans outlets that distribute / or sell products to consumers represents a significant potential source of plastic for recycling. Items like packaging films, trays, soda and milk crates, food pails, industrial drums and stretch film are usually recovered. The electronics and information technology industries also have a lot of scope to implement plastic recovery programs for durable goods, such as computers, automobiles, appliances, building and construction products. The process of recycling of waste plastics into products of varying usefulness mostly involves the following essential steps:

• Collection /Segregation. • Cleaning & Drying. • Sizing / Chipping. • Agglomerating / Colouring • Extrusion / Palletisation • Fabrication into end Product.

Each of the above steps involves a series of operations. Collection / Segregation: The basic principle of plastic / polymer processing is that the polymeric materials under process are required to be compatible with each other, if more than one type of plastic materials are involved, otherwise phase separation may take place. The advanced technology of separating / segregating different types of waste plastics involves ‘Floatation Process’. In this process, the property of varying densities of different plastics is made use of for segregating different types of plastics. However in the Indian context, this separation or segregation process, in many cases, are done by manual means utilizing the availability of cheap and expert labour force. In case the waste is contaminated with embedded metals, proper method of separating the metals / other contaminants is required. Cleaning & Drying: The scale of cleaning depends on the type of waste. Generally, industrial waste does not require significant cleaning operation, whereas, post-consumer waste requires proper cleaning. Whenever a cleaning operation is involved, it is to be ensured that the water or any other cleaning material used should be discharged after ascertaining that the discharge does not contain any objectionable substance. A proper Treatment Device may have to be deployed – like a

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water treatment plant / effluent treatment plant. For drying, a suitably designed drier is used. Many industries situated out side the metropolises, use open space for natural drying of the cleaned waste. Sizing / Chipping: The cleaned plastics waste is then required to be properly sized so that these may be fed into the extruders for processing and palletizing. The sizing operation depends on the type and shape of the waste plastics. During this process, attention is required to separate any powdery material from the sized / chipped plastics. Agglomerating / Colouring In the next operation the sized plastics waste is mixed with colour master batch in high-speed mixers / agglomerators and the output is ready for extrusion into pellets. Extrusion / Palletisation This is the most important part of the process wherein the sized / chipped plastics are plasticised and regranulated to make the plastics material ready for fabrication. The type and size of the extruder depend on the type and volume of the plastics waste. Fabrication into end Product Finally the reprocessed plastics granules are used as raw material for producing end products using fabrication machines like Injection Moulding / Extrusion etc., depending upon specific requirement. Fig. 1 illustrates a flow chart of complete life cycle of plastics. It is evident that recycling constitute significant steps in the life cycle of plastics. Fig. 1 The technologies for primary and secondary recycling (also called Mechanical recycling) of different types of plastics used in different applications are as follows: 1. The most notable success stories of Indian plastic recycling industry

which usually result in high value addition of plastics waste include : conversion of battery cases to luggage, milk pouches to Barsati films, plastic woven sacks to Niwar Pattis aand animal covers, plastic carry bags to mats and other waste into box strapping and footwear.

2. Plastic lumber made from recycled plastics: Plastic lumber made by

using recycled plastics is very attractive, ecofriendly and cheap application. Plastic lumber based different products of various lucrative designs and looks like fencing furniture, pellets, staircase, railing etc. are usually made. Mostly recycled HDPE is used for making these types of lumbers. The plastic lumbers are not only environmental friendly (saving wood) but also a viable alternative to traditional hardwood lumber.

3. Vinyl Siding to Mobile Home Skirting and extended products: Vinyl

Regrind from vinyl windows and siding profiles can be used to manufacture strong and durable uv-stabilized walls and partitions that

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can withstand strikes from 1,360 kg of drop hammer. Vinyl siding scrap can be ground up, sold and converted into extruded products such as gutters and pipes.

4. Bottles to fibers: Old reclaimed bottles can be converted into fibers

that can then be transformed to yarn for making new clothing.

5. Intravenous fluid (IV) bags to floor tiles: Disposables used in the medical market present a recycling challenge and most plastic used in this market is incinerated, although much of it is not hazardous and can be recycled, such as IV solution bags. A number of industrial and commercial products including floor tiles can be made out of recycled IV bags.

6. Wire and cable scrap can be converted to sound –deafening panels for

use in cars, truck and flaps and floor mats. 7. Computers to Highways: The discarded machines can be and are being

successfully recycled into roads. Recycled computers and plastic

VIRGIN PLASTICS

PLASTIC PRODUCTS

CONSUMERS

POST CONSUMER WASTE

ENVIRONMENT

BURNING LANDFILLING

RAGPICKERS KABARIWALAS

WASTE DEALERS RECYCLER RECYCLED PRODUCTS

OPEN MARKET ( FOR VARIOUS APPLICATIONS)

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electronic housings are used to form new and proven filler for highway underlayments and pothole filler mix.

8. Monitors to keyboards: IBM has successfully achieved closed loop

recycling of PVC monitor housing into PVC computer keyboard backs at 100% recycled content.

9. Automotive and appliance shredder residues: Plastics recovered from

automotive and appliance shredder residue can be put to use in many areas, as a concrete additive, and fuel reductant for steel mill blast furnace, in pyrolysis and gasification and energy recovery through co-combustion with MSW.

10.Toughening of Bitumen: Waste plastics have been found to play a

great role in modification of bitumen in an economical way. Bitumen has extensive application in road surfacing. However, it has disadvantages of brittleness at low temperatures, which cause road surfaces to get damaged quickly during winters or rainy seasons. Plastics waste when incorporated into bitumen increases its impact strength manifolds. The modified bitumen has high elongation, increased flexibility at low temperature, better surface abrasion resistance, elevated softening point and superior fatigue resistance. Polyolefins which form a considerable portion of packaging waste have been found to be compatible with bitumen and the bitumen-plastic matrices have much higher binding power and impact strength than bitumen alone.

Some notable examples of tertiary recycling (also called as chemical recycling) of plastics waste are as follows: 1. Recycling of Polyethylene terephtahalate (PET): The esterification

and polymerization reactions used in the manufacture of PET packaging resins are reversible. Hence, it is possible to break up the polymer chains and recover the monomer/ oligomers or basic raw materials by subjecting the PET waste to chemical agents under heat and pressure. Two major chemical recycling processes that are being used commercially are glycolysis and methanolysis. Others like hydrolysis and alcoholysis are also being studied.

2. Teflon to Fluorolubricants: Teflon finds extensive applications as

Teflon sheets, tapes and ropes and is a difficult to process plastic. Due to extremely high melt flow viscosity, Teflon is processed by a special technique called sintering, which involves conversion of Teflon powder into various items under temperature and pressure. Thus Teflon being collected in the waste can hardly be reprocessed except that it may be converted into powder by grinding and sent back to Teflon processing unit, which may utilize this powder for mixing in the fresh polymer. However, if Teflon is exposed to high gamma radiation, it loses its molecular weight due to chain scissions. This is reflected in loss of tensile strength and material turning in to a soft powder having much higher impact strength. It

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is thus possible to convert these lubricants into greases by dispersing them into a suitable media. Such greases are likely to replace similar materials being used in space and atomic energy areas where reliable high performance materials are required.

3. Recovery of Nylon from carpet waste: Carpet cuttings and

trimmings are the commingled waste consisting of nylon, polypropylene and wool. Nylon can be recovered by contacting the commingled waste with a solvent, which selectively dissolves the nylon and then recovering it from the solution using an anti-solvent. The recovered nylon can be used for molding operations.

Quaternary Recycling /Energy Recovery Through Recycling: Waste plastics contain significant resources of energy that can be recovered through combustion processes. In most cases, the calorific value of waste plastics is comparable to or higher than coal. The plastic waste can be burned on its own or can form a part of mixed combustible fraction for use in solid fuel based boilers and plants. Incineration of plastic waste allows steam for heating or for electricity generation as well as heat recovery from fire gases. Energy recovery also offers a positive recycling route for any plastic that cannot be sensibly recycled by mechanical means due to excessive contamination, separation difficulties, polymer property deterioration etc. Plastics are also considered a benefit in MSW incineration as a fuel that is low in ash and moisture. Process Engineered Fuel (PEF) can be made by using preselected post use plastic scrap as well as wood, sawdust or scrap paper , removing glass or metal contaminants, grinding to a uniform size, drying to control moisture content and then densifying by cubing or pelletization. Densification makes the final product easier to transport and handle, and assures consistent Btu value. Densification of plastics waste can be carried out either by extrusion or by compression. Various shapes such as pellets, cubes, briquettes, lumps or rods can be formed for PEFs. These are suitable for fuel substitution by co-combustion in normal boiler plants or other industrial furnaces.

New Technologies in Plastic Recycling A number of steps are involved in plastics recycling, viz. Collection, separation/sorting, reclamation and fabrication into end product. One of the main factors restricting higher performance in plastics recycling is related to the separation of plastic waste. The separation of plastics into desired categories, as well as the elimination of contaminants, is an ongoing technological development process reflecting the economics of entire recycling operation. The aim in developing automatic and continuous separation technology is to minimize the handling of waste and achieve a more efficient reclamation process. Manual sorting, by far the prevailing technology, is tedious, subjective and slow.

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• Resin separation from contaminants or from undesired materials to obtain the targeted stream includes a number of processes adapted for plastics waste separation. These are:

• magnetic separation for the removal of ferrous materials, • electrostatic methods for non-ferrous, mainly aluminum separation, • air separation via cyclones used to separate paper, and flotation

tanks or hydrocyclones used to separate various resins based upon specific gravity.

• Separation technologies based on the principle of different specific

gravities were reported by the U.S. Bureau of Mines using different flotation media, that is, water, calcium chloride and alcohol solutions, to separate LDPE, HDPE, PP, PS and PVC.

• Separation techniques related to the physical properties of resins have

been developed. Swedish National Waste Department process, in which a differentially heated conveyor separates rigid plastic containers by resin, is one such process.

• Refakt of Germany, using the same principle, employs a heated belt

and separates PET from PVC. Mixed granules of both resins travel on a conveyor belt through a chamber heated to a temperature such that PET granules fall off the end of the conveyor and melted PVC granules stick to the conveyor and are subsequently scraped off.

• Melt filtering separation process using an extruder also uses the

difference in melt temperature to separate two resins (both might by clear and transparent).

• Optical methods from the simplest to the most sophisticated are also

implicated in separation technology. The measurement of transmitted light is used to differentiate among clear, translucent and opaque plastic containers, and thus articles made of clear PET, green PET, translucent HDPE and opaque HDPE can be sorted. The optical system at the Centre for Plastics Recycling Research (CPRR) at Rutgers University includes photoelectric emission diode sensors designed to measure container color. The sensors detect changes in the intensity of transmitted light and pass a message to control the diverting mechanism. The system operates as a sequence of detection and separation operations, starting with the removal of clear bottles followed by colored, translucent and opaque, which are removed last.

• Pure clear PET flakes are separated from colored flakes using a

technology employed originally to separate rice from dark contaminants. The system developed by Toyo Rice Cleaning Machines uses a halogen lamp and two optical detectors with air jets that direct dark particles in a different direction from the pure stream. The same principle was used by the UK-build Sortex machines.

• Partek’s color-sorting technology is a similar technology, with major

emphasis on the uniformity of granules being separated. Chips of the same size are produced and clear chips are separated from dark.

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• Another optical system for mixed plastic bottle sorting is being

developed at the National Optical Institute (NOI) in Quebec, Canada. The NOI system has the objective of separating plastic bottles of PVC, PET or other origin.

• PVC, because of its large chlorine atom portion, is the easiest polymer

to detect instrumentally. This led to the first automatic detection and separation of vinyl resins from plastics waste and used as the first step in the separation of vinyl resins from commingled plastics waste. The removal of chloride containing polymers from the mix is also essential for further processing in major cases.

• In addition to optical methods, electromagnetic radiation, x-ray,

infrared (IR) and ultraviolet –based sensing devices are being used for multi-resin automatic container separation.

• An approach to the use of electrostatic phenomenon different from that

used in separating nonferrous metals from plastics is based on triboelectrification when two objects of different physical properties are brought together, they acquire charges of opposite sign.

• Plastic separation based on this technology has been researched by the

Warren Spring Laboratories, UK, the University of Athen, the College Park Research Centre in Maryland and others.

• The University of Western Ontario, London is working on an original

method of separating plastic particulate of different resins using this technology. Plastic particles (pellets) of opposite charge, a charge acquired in a fluidised bed are separated by allowing them to fall between two high-voltage electrodes, the basis for the separation tower. A sequence of repeated separations can take place if more than two resins are involved.

• Solvent separation of mixed plastics is being developed at the

Rensselaer Polythechnic Institute (RPI). Some work has also been carried out at Cornell University, where hot mixed solvents were used. The RPI system is based on the differential dissolution of plastics. One solvent at different temperature dissolves different cuts of resin regrind. Dissolution is followed by extraction and flash volatilization to remove the solvent. PVC and PS are separated in the first cut. In the second cut, LDPE is extracted, the third cut gives PP and HDPE and the final cut yields PET. The first experimental solvent was tetrahydrofuran. Xylene as a solvent requires lower temperatures.

Recycling of Commingled Plastics New Plastic Alloy from Plastic waste (New Generation Plastic, France): 1. Homomicronization: It takes a wide assortment of plastics-such as

ABS, PVC, PC, PA, POM, PE etc and homogenizes them into a plastic

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alloy that is easily molded. The mixing together of different plastics is a new approach. Current recycling technologies rely on sorting and separating and require expensive additives. This technology blends immiscible polymers through thermomechanical, ultra-high shearing reactor technology. NGPs recycled plastics performed better than virgin ABS on a series of material tests.

2. Solid State Shear Pulverization (S3P): This Process for plastics

recycling has been developed that eliminates sorting by type or by color. This is a one-step process for recycling unsorted pre or post consumer plastic waste. S3P subjects polymers to high shear and pressure while rapidly removing frictional heat from the process to prevent melting. S3P can convert multi-colored, unsorted (commingled) waste, industrial plastic scrap and virgin resins to a uniform light colored, partially reactive powder of controlled particle size distribution. These powders are suitable for direct melt conversion by all existing plastic processing techniques. The resulting powders can be used in a variety of consumer goods and special appliance parts to business equipment and furnishings. Samples made from either single polymers or from commingled mixtures with S3P process often show enhanced mechanical properties (e.g. tensile strength, elongation and flexural strength) as compared to samples which did not undergo the S3P process.

3. Sandwich Molding: It is a molding method that sandwiches recycled

materials between layers of virgin materials, making it possible to create upto 30% of the contents from the recycled materials. Canon has started development of “thin walled multilayer injection molding technology’ in collaboration with manufacturers of molding machines. This technology aims at wall thickness of less than 1.8mm and at least 80% of the content using recycled materials.

Need for Upgradation in Plastic Recycling Industry Several concerted efforts both by the government and the industry are required for the upgradation of Indian Plastics Recycling industry. The government can help by: • Allocating dedicated recycling zones/parks with common waste

management system, thus reducing the informal sectors employed in recycling and promoting the adoption of safe and better technologies for recycling.

• Implementing buy back schemes benefiting the consumer as well as the producer.

• Imposing preferential Excise duty favorable to the manufacturer. The initiatives to be adopted by the industry include: • Development and adoption of new and safe technologies for recycling • Providing better working environment • Providing training and new skills to the workers for recycling of plastics Both the industry and government need to work together towards the upgradation of plastic recycling industry.

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CHAPTER 5

ALTERNATIVE FEEDSTOCKS FROM RENEWABLE SOURCES INTRODUCTION Petrochemical feedstock has been in use for the past many decades. Petroleum is a versatile material and is a key ingredient for thousands of day to day products, including the plastic used in products ranging from garbage and grocery bags to computers, cars, telephones and even furniture. Unfortunately, the reserves of petroleum has to come to an end sooner or later in near future. Besides that, currently used petroleum-based products particularly the plastics have several environmental disadvantages : The manufacture of these products causes emission of toxic by-products into the environment Indiscriminate disposal of these petrochemical based products, which do not break down or are non-biodegradable, has led to diminishing landfill space, in and around populated cities. This is a high time now for not only finding an environment friendly product which can replace plastic but also several other products which are derived from the petroleum based feedstock. The only option is alternative feedstocks which have the potential for a commercially viable alternative to the petrochemicals as a fuel or as basic raw material for making polymeric materials and other industrially important chemicals. ALTERNATIVE FEED-STOCKS Sustainability, industrial ecology, and green chemistry are new principles that are guiding the development of the next generation of materials, products and processes. The alternative bio-based feed-stocks (Agricultural and plant origin) hold great promise for achieving the goals of sustainable development and implementing the principles of industrial ecology. The alternative feed-stocks and products offer value in the sustainability by being part of the biological carbon cycle, especially as it relates to carbon-based polymeric materials such as plastics, water soluble polymers, lubricants, biodiesel, and detergents. Life cycle analysis (LCAs) of these biopolymer materials often show reduced environmental impact and energy use when compared to petroleum-based materials. All alternative feedstocks are annually renewable agricultural and biomass feedstocks and can be obtained either by direct extraction from biomass (cellulose, starch, proteins, fibers, and vegetable oils) or alternatively, the renewable resources/biomass feedstock can be converted to bio-monomers by fermentation or hydrolysis and then further converted by chemical synthesis to biodegradable polymers like polylactic acid.

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Bio-monomers can also be microbially transformed to biopolymers like the polyhydroxyalkanoates. Surfactants, detergents, adhesives, Vegetable oil based lubricants, urethane foams and water-soluble polymers can be engineered from alternative feedstocks. CLASSIFICATION OF ALTERNATIVE FEED-STOCKS (BIOBASED POLYMERS) Biobased polymers may be divided into three main categories based on their origin and production: Category 1. Polymers directly extracted/removed from Plants and Animal Examples are polysaccharides such as starch and cellulose and proteins like casein and gluten. Category 2. Polymers produced by classical chemical synthesis using renewable Alternative feedstock. Example: Polylactic acid, a biopolyester polymerized from lactic acid monomers. The monomers themselves may be produced via fermentation of carbohydrate feedstock. Category 3. Polymers produced by microorganisms or genetically modified bacteria. To date, this group of biobased polymers consists mainly of the polyhydroxyalkonoates, but developments with bacterial cellulose are in progress. In general, compared to conventional plastics and other chemicals that are derived from mineral oil, biobased polymers have more diverse chemistry and architecture to tailor make the properties of the final product. 1. Polymers directly extracted from biomass The most common polymers obtained from biomass, are extracted from marine and agricultural plants and animals. Polysaccharides such as cellulose, starch, chitin and proteins such as casein, whey, collagen and soy are by nature, hydrophilic and somewhat crystalline, causing processing and performance problems, especially in relation to packaging of moist products. On the other hand, these polymers make materials with excellent gas barriers. The principal polysaccharides of interest for material production have been cellulose, starch, gums, and chitosan. Similarly, the more complex polysaccharides produced by fungi and bacteria are xanthan, curdlan, pullulan and hyaluronic acid, which will receive more interest in the future. STARCH Starch is a low cost widely available natural polysaccharide, with an annual production of about 30 billion tons worldwide. Corn is the primary source of starch, although considerable amounts of starch is produced from potato, wheat and rice. Starch is economically competitive with petroleum and has been used in several methods for preparing compostable plastics. However, a challenge to the development of starch

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materials is the brittle nature of blends with high concentrations of starch. Overcoming the brittleness of starch while achieving full biodegradability in blends can be accomplished by the addition of biodegradable plasticizers. Common plasticizers for hydrophilic polymers are glycerol and other low molecular weight – polyhydroxy – compounds, polyethers and urea. Plasticizers lower the water activity, thereby limiting microbial growth. When starch is treated in an extruder by application of both thermal and mechanical energy, it is converted to a thermoplastic material. The principal uses of starch has been: Addition of starch in polyolefinic films for making them biodegradable. Fermentation to lactic acid and subsequently polylactic acid. Dow Cargill is the biggest producer of polylactic acid produced from corn starch. CELLULOSE Cellulose is the most abundantly available carbohydrate in the nature. Nearly 40 % of the plant material is made up of cellulose a linear polymer of anhydroglucose. Cellulose is a cheap raw material, but difficult to use because of its hydrophilic nature, insolubility and crystalline structure. To make cellulose or cellophane film, cellulose is dissolved in an aggressive, toxic mixture of sodium hydroxide and carbon disulphide (“Xanthation”) and then recast into sulphuric acid. The cellophane produced is hydrophilic and, therefore, moisture sensitive, but it has good mechanical properties. It is, however, not thermoplastic owing to the fact that the theoretical melt temperature is above the degradation temperature, and therefore cannot be heat sealed. Cellulosics is the general term for a group of plastics which are derived from cellulose. Some of the commercially important cellulose products are: ♦ Cellulose acetate ♦ Cellulose nitrate ♦ Cellulose propionate ♦ Cellulose acetate butyrate ♦ Ethyl cellulose Cellulosics are used in the manufacture of a wide variety of products which include: Shoe heels, eyeglass frames, toothbrush handles, pen & pencil barrels, piano keys, beads, toys, fisherperson’s floats & tackle, cutlery handles, combs, steering wheels etc. GUAR The guar or cluster bean is native to India, where the young beans are used as a vegetable. They are also used as a livestock feed, and for producing guar gum, which is used as a thickener and emulsifier in commercial food processing. Guar gum is used in dressings, sauces, milk products, and baking mixes. It is also used in paper manufacturing, textiles, printing, cosmetics, pharmaceuticals and a score of other industries.

• Guar gum is used in dressings, sauces, milk products, and baking mixes as it has almost 8 times the thickening power as cornstarch.

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• Guar gum is used in paper manufacturing, textiles, printing, cosmetics and pharmaceuticals, oil drilling, mining and explosives as follows. In cosmetics industry it is used as thickener in toothpastes,

conditioner in shampoos. In food industry Guar gum is used as Gelling, viscosifying,

thickening, clouding, and binding agent. It is also used for stabilization, emulsification, preservation, water retention, enhancement of water soluble fiber content etc.

In pharmaceutical industry it is used as binder in tablets. Guar gum is also consumed as a dietary fiber. In textile industry Guar gum is used in sizing, finishing and

printing. In paper industry it is used to improved sheet formation,

folding and denser surface for printing.

In explosives industry Guar gum is used as waterproofing agent mixed with ammonium nitrate, nitroglycerin etc.

In oil and gas drilling it is used as well fracturing.

LIGNIN Lignin is a naturally occurring polyphenolic macromolecule, which is an integral part of the woody material in plants. It may constitute about 20-30 % of the total woody material. On a rough estimate, nearly 50 million tons of lignin remains as unutilised waste and only 6 % of the lignin goes into relatively simple material applications, whereas the rest is utilised for energy needs. The lignin can be utilised to produce:

Alkoxylated lignin, which can react with isocyanates to produce polyurethane solids and foams, which can be used as engineering plastics.

Lignin can be blended with starch to making biodegradable films. Alkylation of lignin may lead to production of bioplastics Lenox Resources, a US based company, has developed a novel

technology for the production of high-performance, high-value plastics from lignin. The bioplastic developedfinds use in the automotive, construction, foundry, urethane foam, packaging and plastic industries.

MOLASSES India is the leading producer of sugar in the world and produces approximately 18 million tons annually. Cane molasses an important by-product of sugar industry is produced approximately 6.75 million tons annually. Some of the industrially important chemicals made from molasses are: ♦ Ethyl alcohol ♦ Oxalic acid ♦ Yeast ♦ Citric acid ♦ Ephedrine-hydrochloride

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Molasses can be utilised for manufacturing lactic acid by fermentation. Lactic acid in turn can be polymerised to Polylactic acid, which is one of the prominent materials used in biodegradable sutures. VEGETABLE OIL Biodiesel is produced by processing of non-edible oil seeds. The trans-esterification of vegetable oils produce fatty acid alkyl esters, which are excellent renewable substitutes for diesel fuel. The locally available promising plants are jatropha, mahua, neem, rice bran oil, palm oil, etc. Jatropha oil is well-known that can be transesterified into biodiesel. Castor Oil Castor oil has various applications in different industrial sectors which include: paints, coatings, plastics, transport, cosmetics, textiles, surfactants, dispersants, cosmetics, lubricants, and leathers. One of the major products derived from castor oil is the Rilsan B, (Nylon) developed by Atochem (France). This 100% castor-based product has numerous applications such as rotating glass car-wipers, ski boots fixatives, and for use in air-brake systems on trucks. Many new uses, based on biodegradability of castor oil derived products, are expected in the future. Soybean oil Alkyd resins, which today constitute about 35% of all resins used in organic coatings, were developed and grew because of the plentiful supply of low-cost soybean oil and highly refined fatty acids from tall oil. Unfortunately, the market share enjoyed by the soybean oil in the alkyd resin coatings has remained the same since the initial introduction while the newer synthetics have captured and expanded the alkyd resin coating markets. Both the triglycerides and free fatty acids can be epoxidized to give epoxidized soybean oil (ESO). The transesterified fatty acid ester is currently being promoted for soy based diesel fuel applications. However, both of the epoxidized soybean oils can find application in high value added products like composites, epoxy based thermoset materials, and as plasticizers. Epoxidized soybean oil is the preferred plasticizer for PVC. It not only confers thermal stability on PVC but plasticizes it. In spite of these excellent qualities, ESO has very little growth. Nylon 9 can be synthesized by chemically transforming soybean oil into an amino carboxylic acid (9- aminonanoic acid) followed by polymerization. Nylon 9,9 can also be prepared by converting soybean oil to the C-9 dicarboxylic acid and C- 9 diamine followed by polymerization. Nylons are the high value engineering thermoplastics. Another nylon polymer, Nylon-13,13 can be prepared from erucic acid which is a major constituent of industrial rapeseed oil.

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Scientists all over the world are working on preparation of Nylons (hydroxylated nylons) and have developed novel ozone based chemistry to convert vegetable oils to oxidatively and thermally stable fluid products which can function as lubricants and utilised as a platform to make polyols, urethanes, and polyesters. Vernonia seed oil Oil extracted from the seeds of Vernonia plant and oil esters can be used in PVC compositions as a plasticiser. GLYCEROL Glycerol is produced as a major byproduct in the production of bio-diesel. The country will have surplus glycerol once the biodiesel production starts at commercial level. Glycerol is a clear, colorless liquid with a slightly sweet taste. It is obtained entirely from natural, renewable resources. Glycerol is used as an ingredient in cosmetics, medicines, toothpaste, esters, liquid soaps, tobacco products, and food products. It is also used extensively as an intermediate in the production of polyester, polyurethane, and alkyd resin formulations. Some of its uses in different areas are:

Pharmaceuticals Glycerol, USP grade finds extensive use as a solvent, as a moistening agent and as a humectant in pharmaceutical products. The non-toxicity of Glycerol is of highest importance. In addition, it can be used as a lubricant, a sweetening agent, a penetrant, an antifreeze agent and as a reactant. In pharmacy, Glycerol is an ingredient of many tinctures, elixirs and ointments. It is also used as glycerite of starch in jellies and ointments. Cough remedies, both syrups and lozenges often contain Glycerol, as do many throat sprays and gargles. Completely water-dispersible multi-vitamin preparations as tonics are also made using glycerol. Glycerol finds ready use in many types of burn therapy. In dermatology a supersaturated solution of sulfanilamide in Glycerol has proved a successful remedy for many types of acute, infectious skin conditions. Glycerol is also used in ear infection remedies, anesthetics, suppositories, instrument sterilization solutions and instrument lubricants. NitroGlycerol is employed in medicine as a heart stimulant. Glycerol is used in dentistry as a solvent or as a suspending medium for materials such as antiseptics, oral medications, root canal pastes, polishing compounds and mouthwashes. Toothpastes may contain from 10 to 20 percent of Glycerol. In the field of optometry, Glycerol finds its most frequent use as an ingredient of preparations for soothing or treating the eyes. Cosmetics Being nontoxic, nonirritating and practically odorless, U.S.P. Glycerol is very widely used in cosmetics, both for its soothing and softening effect upon the skin and as a vehicle and humectant for the cosmetic. The

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following list give an idea of the amounts of USP Glycerol used in these preparations: Preparations % Skin toning lotions 15 Dry skin lotions 10 Shaving soaps 2 Brushless shave-creams 5 Beard softeners 5 Deodorant pastes 20 Depilatory pastes 10 Eye washes 3 Facial clays 5-10 Liquid powders 5-8 Glycerol is used extensively in the manufacture of vanishing creams, which are oil-in-water emulsions. Glycerol is useful as a humectant, and in addition, it helps to assure smooth application of the cream and prevents “rolling” on the skin. Emulsifiers Partial glycerol esters, monoglycerides, namely mixtures of glycerol mono-and di-esters, of various fatty acids, may be defined as products derived solely from reacting Glycerol with a great variety of liquid and solid fats, fatty acids and certain waxes of relatively low unsaponifiable matter. Commercial products are actually mixtures of monoester and diester together with lesser amounts of triester and free Glycerol. The monoester portion is responsible for the surface activity since this portion of the mixed ester is oil soluble and readily dispersible in water or aqueous fluids, to which very small amounts of primary emulsifying agents have been added. The monoester is considerably more effective in reducing interfacial tension as compared to the diester which contributes very little in this respect. Edible grades esters are prepared by reacting pure Glycerol and bleached, refined and steamed deodorized fats or fatty acids. The mono-and diglycerides made from suitable fatty acids find considerable use in the field of food as emulsifiers, stabilizers, suspending and thickening agents. Derivatives or partial esters are also prepared from lower carbon content acids and certain inorganic acids, such as acetic, boric, propionic, phosphoric and other lower molecular weight acids. Such products are glyceryl borate, glyceryl biborate, glyceryl phosphate, glyceryl propionate. Glyceryl partial esters of stearic acid are made from single-pressed, double-pressed or triple-pressed stearic acid. The commercial name for this product is ‘Glyceryl Monostearate’ or GMS. When glycerol monostearate is added to the basic ingredients during the manufacture of margarine, the final product is more stable and has less tendency to spatter during heating. This material is also used in candy, chewing gum and ice cream and as a protective coating for edible hygroscopic powders. Glycerol monolaurate in addition to being an emulsifying agent for edible materials, is a lubricant in the drum drying of

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such products as Irish moss. Glycerol monoricinoleate is not edible but is an excellent emulsigying agent, suitable as a plasticizer for synthetic rubbers and as a solvent for oil-soluble dyes, which can then be emulsified in water.

Resins Ester gum is the name applied to the Glycerol esters of rosin. It is made by esterifying glycerin with 8.5 to 10.5 parts of rosin. It contributes gloss and adhesive qualities with a fairly high degree of water resistance to lacquer formulations, varnishes, and paint and printing ink vehicles. It also finds its way in volume to wax formulations, products of the textile industry, and is used in the manufacture of chewing gum. Glycerol-based alkyds are widely used for surface coatings because they retain their original gloss and appearance throughout a long protective life. They can be rapidly applied by all known methods and quickly cured either by air-drying or baking. They have replaced fast-drying lacquers and varnishes, and at the other extreme provide the basis for valuable heavy-duty weatherproof paints.

Foods and Beverages The solvent power of Glycerol results in its use in many flavors and extracts. Such use frequently allows the elimination of part or all of the alcohol commonly used. It has been used in vanilla and citrus flavors, in coffee, fruit and spice extracts of many kinds. It may be used in chocolate syrups to increase their body and smoothness. Glycerol is a solvent for many food colors e.g. carmine and cochineal. The addition of Glycerol to distilled liquors improves their smoothness. Glycerol enters into flavoring materials and curing salts and as a plasticizer, into the many casings and coatings developed for the meat processing industry. Glycerol applied to dried fruits by dipping or spraying will reduce stickiness and inhibit surface crystallization of sugar. Five per cent of Glycerol in jam gives protection against crystallization. Cellophane and Paper Glycerol is widely used as a plasticizer for cellophane. It is used as a softening agent for paper towels, tissue and napkins and in sealing compositions for cardboard. Explosives Glycerol itself is not explosive but can be nitrated to form the explosive, glycerol trinitrate, commonly known as nitroGlycerol. The invented blasting gelatin is a solution of nitroGlycerol in nitrocellulose. Today different dynamites are produced for a variety of specific uses, such as coal and metal mining, tunneling, quarrying, stripping, seismic prospecting, and oil well shooting.

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Tobacco The major use for Glycerol in the tobacco industry lies in cigarettee manufacture, although some is used in processing cigar filler, pipe and plug tobacco and snuff. Glycerol serves both as a plasticizer and as a humectant in the treatment of tobacco for cigarettes. It also acts as a solvent and retainer of added flavors.

Textiles It is utilized in spinning and weaving operations as a lubricant and conditioning agent for wool, cotton, silk, rayon and nylon. It finds ready use in sizing compositions. It prevents these mixtures from becoming too dry and dusting out. It promotes uniformity of sizing by assuring a thorough penetration of size into the cloth fibers. In woolen sizing, Glycerol helps to increase yarn softness and workability. Glue and Gelatin The horn-like hardness of glue and gelatin can be modified to almost any extent by the addition of Glycerol and water. Bottle caps, gelatin foil and capsules are made of gelatin plasticized with Glycerol.

Photography Glycerol is principally used in photography as a plasticizer for films and prints. If these are given a final rinse in a 5 or 10 per cent Glycerol solution before being dried, the gelatin coatings on them will be plasticized and will not crack easily. When used in the solutions for processing color-film, it adds to their solvent and penetrating power. Lubricants Glycerol finds many uses as a lubricant where an oil-type compound is not satisfactory. Lubricants for carbon dioxide and oxygen compressors are based on Glycerol as it is less soluble than oil in liquid carbon dioxide and more resistant to oxidation. The glycerol is being used as a lubricant for machinery handling foods, cosmetics and pharmaceuticals. Glycerol – containing lubricants can be employed under extremely low temperature conditions because of the low freezing point of Glycerol.

Adhesives and Cements Glycerol is an useful plasticizer for adhesives that are flexible, such as bookbinding glue, glue for leather belts, veneer glue and cellophane adhesives. Some cement compounds contain Glycerol. Chief of these is the waterproof and acid-resistant litharge glycerol cement.

Urethane Polymers Glycerol is an important and essential building block in polyethers for urethane polymers. Glycerol based polymers have found some uses, such as in rigid urethane foams.

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Wrapping and Packaging Materials Meat casing and special types of papers, need a plasticizer to give the products pliability and toughness

Miscellaneous Uses Glycerol has many other uses, such as in antifreeze fluids for automatic sprinkler systems, defrosting for glass, de-icing, and in electrolytic fluids for making galvanized cloth and lightning arrestors. It is found in cement compounds, particularly in Glycerol-litharge cements for tubs and sinks, valve repair, still and distilling unit repair and anti-acid corrosion, pipe joint cement, furnace cement, and re-threading compounds. Other uses include embalming fluids, masking and shielding compounds for paint spraying, soldering compounds, high pressure rod packing, lubricants for air brakes, the manufacture of mercury thermometers, engine gauges, electrical equipment, and oil refinery equipment. Glycerol is found in cleansing materials such as soaps and synthetic detergents. It is used as a wetting agent in emulsifiers, wax emulsions, and skin protectives. In laboratory and research work glycerol is utilized in the manufacture of reagent chemicals, basic dyes, and miscellaneous chemicals and insecticides; in asphalt compounds, coal-tar thinners, ceramics, photographic products, fire retardants, modeling clay, leather and wood treatments and adhesives. Glycerol can be used for manufacturing a wide variety of industrial chemicals; viz: ♦ Acrylic acid ♦ Epichlorohydrin ♦ Ethylene SUGAR High value products can be derived from sucrose. Sucrose esters are especially promising. Microbial production of natural biodegradable plastics, using sucrose as the carbohydrate source is an exciting new area. It is envisioned that the sugar factory of the future will be an integrated producer of a range of low to high value products, whose manufacture is scaled up or down as needed. Among bulk carbohydrate commodities, sucrose is second only to cellulose and far exceeds in output all other commercial carbohydrates combined. It is estimated that only 1.7% of annual sucrose production goes to non-food uses. Sucrose and its co-products lend themselves to possibilities in many areas: • Fine chemicals • Pharmaceuticals • Polymers • Building and structural materials • Fermentation or enzyme substrate for chemicals production

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• New food products and sweeteners

• Cogeneration/fuel/biodiesel/ethanol • Transformation of cane or beet plant to make other products

The sucrose molecule is very reactive. Sucrose is both chemically and enzymatically reactive. It has 8 hydroxyl groups available for reaction. Some of the high value food products from sucrose are : Sucralose Sucralose is a chlorinated sucrose molecule which is 600 times sweeter than sucrose, with the same taste as sucrose but which did not break down in the body. Testing showed the compound to be safe for human consumption. In 1991, Canada became the first country to approve its use in foods. In 1998, sucralose was approved by the FDA for use in the United States; it is now used in at least 28 countries. McNeil Specialty Products Company, New Brunswick, New Jersey, sells sucralose under the brand name Splenda. At least 120 products sold in the U.S. use sucralose as a sweetener. Olestra Olestra is a sucrose-based fat substitute, developed by Proctor and Gamble in the early 1970s. It was approved for food use by the FDA in January 1996 after years of testing. To make it, sucrose is reacted with fatty acids to produce a liquid sucrose polyester. Olestra is sold by P&G under the brand name Olean. Olestra has properties similar to liquid vegetable oil but without the calories. Fructo-oligosaccharides Fructo-oligosaccharides represent a new product category of food additive and nutraceutical. Also known as FOS, FOS are a new health food made by fermentation or enzymatic transformation of sucrose. FOS are said to be good for "abdominal health" in that they promote the growth of Bifidobacteria in the gut, which are supposed to confer many benefits to the body. Sucralfate Sucralfate, brand name, Carafate, is a sucrose aluminum hydroxide sulfate complex used as an ulcer medication for humans and animals. It is not absorbed by the body and has unique ulcer-fighting characteristics, acting like and "ulcer bandage," actively assisting in healing. Polysucrose Polysucrose, commercially known as Ficoll 400 (registered name of Pharmacia) and Dormacoll in Germany, is crosskinked sucrose, a copolymer of sucrose and epichlorhydrin, with a molecular weight of about 400,000. It is used to make density gradients for cell separation and as a diagnostic. Polysucrose may also have some nutraceutical or food additive potential.

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Isomalt Isomalt is an unique, excellent tasting sugar-free bulk sweetener. Isomalt is made from sucrose and looks much like table sugar. Isomalt is a mixture of two disaccharide alcohols: gluco-mannitol and gluco-sorbitol. Isomalt can be used in products such as hard candies, toffees, chewing gum, chocolates, baked goods, nutritional supplements, cough drops and throat lozenges. Isomalt can be heated without losing its sweetness or being broken down. Therefore, it is predominantly used in products that are boiled, baked or subjected to higher temperatures. Specialty sucrose esters (Surfactants and emulsifiers) Sucrose esters have many food and non-food uses, especially as surfactants and emulsifiers, with growing applications in pharmaceuticals, cosmetics, detergents and food because they are readily biodegradable, non-toxic and mild to the skin. Sucrose esters can be made into mild, biodegradable, non-ionic detergents, with anti-bacterial and other properties built in. Sucrose acetate isobutyrate (SAIB) Sucrose acetate isobutyrate (SAIB), is used both in food and industrial applications. It is used in automotive paints, as a clouding and stabilizing agent in beverages, in nail polish and hair spray, among other uses. Sucrose thermal oligosaccharide caramel Sucrose thermal oligosaccharide caramel (STOC), is prepared using controlled pyrolysis of sucrose. Amorphous sucrose, heated with citric acid produces fructoglucan in 30% yield. It functions as a feeding supplement for enhancing growth of broiler chickens and may have application as a possible non-caloric food bulking agent or fat substitute. Sucrose can be Co-reacted with other carbohydrates for example, a controlled thermal reaction between sucrose and cyclodextrin produced fructosecyclodextrin compounds with the ability to enhance the solubility of inclusion complexes. These may have applications as flavor and vitamin carriers in foods. Sucrose epoxy Sucrose epoxy materials can form metal-to-metal, metal-to-glass and fiber-to-fiber bonds. Large markets for sugar based adhesives are foreseen in nonwoven textiles, wallboard, home insulation and other materials of construction. Sucrose hydrogels (sucrogels) The products are super-porous and fast swelling, with potential use in controlled release drug delivery. Since super porous sucrogels can be made in any size and shape and with attractive properties, they can find many industrial applications. Biodegradable plastic (bioplastic) An area generating excitement concerning environmentally friendly "green chemistry" is the production of natural biodegradable plastics by microorganisms. Various bacterial species produce biodegradable plastics as storage polymers within their cells. Between 50-60 percent of a

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microorganism's body weight can be bioplastic, and in some cases, as much as 90%. Bioplastics have the advantage that they can be processed on the same equipment for making conventional plastics. Sucrose and molasses are a preferred carbon source Metabolix, Inc., Cambridge, Massachusetts, currently produces the only commercial bioplastic, Biopol used for medical containers and other high value applications. Ethanol Sugar is the raw material for production of bio-ethanol. Use of bio-ethanol has excited the scientists all over the world for the past many decades. Brazil in the world is a leading producer of ethanol for using as a fuel. Ethylene Oxide Ethylene oxide manufactured from ethanol has the principle use in the manufacture of ethylene glycol and higher alcohols which find important applications in automotive antifreeze, explosives, cellophane, polyester resins, synthetic fibers and rubbers, and hydraulic fluids, The higher alcohols such as di- and tri- are used as plasticizers, humectants, lubricants, and solvents. It is an important intermediate in the manufacture of glycol ether solvents, ethanolamines and nonionic detergents. As a pharmaceutical intermediate it is used in the synthesis of choline, thiamine and procaine. In mixtures with carbon dioxide and halogenated propellants, finds wide use as a fumigant, fungicide and sterilizing agent. Hydroxymethylfurfural (HMF) HMF is an industrially important chemical made from fructose; fruit sugar. HMF can be converted into plastics, diesel-fuel additive, or even diesel fuel itself. CHITIN & CHITOSAN Chitin is a naturally occurring macromolecule present in the exoskeleton of invertebrates and represents the second most abundant polysaccharide resource after cellulose. In general, chitosan has numerous uses; flocculant, clarifier, thickener, gas-selective membrane, plant disease resistance promoter, wound healing promoting agent and antimicrobial agent. Chitosan, readily forms films and, in general, produces materials with very high gas barrier, and it has been widely used for the production of edible coating. Furthermore, chitosan may very likely be used as coatings for other biobased polymers lacking gas barrier properties. However, as with other polysaccharide-based polymers, care must be taken for moist conditions. PROTEINS Proteins can be divided into proteins from plant origin (e.g. gluten, soy, pea and potato) and proteins from animal origin (e.g. casein, whey, collagen, keratin). A protein is considered to be a random copolymer of amino acids and the side chains are highly suitable for chemical modification which is helpful to the material scientist when tailoring the required properties of the packaging material. Due to their excellent gas

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barrier properties, materials based on proteins are highly suitable for packaging purposes. However, like starch plastics mechanical and gas properties of proteins are influenced by the relative humidity due to their hydrophilic nature. One of the ways to modify protein properties is by chemical modification. proteins contain a wide variety of chemical moieties which may help tailoring protein properties towards specific applications. Casein Casein is a milk-derived protein. It is easily processable due to its random coil structure. Upon processing with suitable plasticizers at temperatures of 80–100 °C, materials can be made with mechanical performance varying from stiff and brittle to flexible and tough performance. Casein melts are highly stretchable making them suitable for film blowing. In general, casein films have an opaque appearance. The main drawback of casein is its relatively high price. Casein was used as a thermoset plastic for buttons in the 1940’s and 50’s. It is still used today for bottle labelling because of its excellent adhesive properties. Gluten Gluten is the main storage protein in wheat and corn. Wheat is an important cereal crop because of its ability to form a viscoelastic dough. Mechanical treatment of gluten leads to disulfide bridge formation formed by the amino acid cysteine which is relatively abundant in gluten. Processing temperatures are, depending on the plasticizer contents, in the range of 70– 100 °C. Mechanical properties may vary in the same range as those for caseins. Gluten plastics exhibit high gloss (polypropylene like) and show good resistance to water under certain conditions. They do not dissolve in water, but they do absorb water during immersion. Due to its abundance and low price, research on the use of gluten in edible films, adhesives, or for thermoplastic applications is currently being carried out. Soy proteins Soy proteins are commercially available as soy flour, soy concentrate and soy isolate, all differing in protein content. Soy protein consists of two major protein fractions referred to as the 7S (conglycinin, 35%) and 11S (glycinin, 52%) fraction. Both 7S and 11S contain cysteine residues leading to disulphide bridge formation and processing is, therefore, similar to gluten with similar mechanical properties. The most successful applications of soy proteins were the use in adhesives, inks and paper coatings. Keratin Keratin is by far the cheapest protein. It can be extracted from waste streams such as hair, nails and feathers. Due to its structure and a high content of cysteine groups, keratin is also the most difficult protein to process. After processing, a fully biodegradable, water-insoluble-plastic is obtained. However, mechanical properties are still poor compared to the proteins mentioned above.

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2. Polymers produced from classical chemical synthesis from

alternative feedstock

Bio polyesters are produced from bio-based feedstock (Starch) using classical chemical synthesis. To date, polylactic acid is the most promising polymer with the highest potential for a commercial production of renewable packaging materials. However, a wide range of other biopolyesters can also be made. All the conventional packaging materials derived from petroleum today can be produced from renewable sources like starch. Hydrolysis of corn starch or cellulosic materials yields simple sugars that can be readily fermented into lactic acid. L-Lactic acid is produced by the bacterial fermentation of corn sugar. Purac Biochem BV currently produces an estimated 80% of the worlds lactic acid. Cargill and Purac have a 50-50 joint venture to produce a 70 million lb/yr lactic acid. The conventional route to high molecular weight PLA is through the dilactone of lactic acid. Polylactide polymers are primarily used in biomedical applications. 3. Polymers produced directly by natural or genetically modified

organisms Poly(hydroxyalkanoates) (PHAs), of which poly(hydroxy-butyrate) (PHB) is the most common, are accumulated by a large number of bacteria as an energy and carbon reserves. Due to their biodegradability and biocompatibility these biopoly-esters may easily find industrial applications. The properties of PHAs are dependent on their monomer composition, and it is, therefore, of great interest that recent research has revealed that, in addition to PHB, a large variety of PHAs can be synthesized by microbial fermentation. The monomer composition of PHAs depends on the nature of the carbon source (Molasses) and microorganisms used. PHB is a typical highly crystalline thermoplastic whereas the medium chain length PHAs are elastomers with low melting points and a relatively lower degree of crystallinity. A very interesting property of PHAs with respect to food packaging applications is their low water vapour permeability which is close to that of LDPE. Recent application developments based on medium chain length PHAs range from high solid alkyd like paints to pressure sensitive adhesives, biodegradable coatings and biodegradable rubbers. Technically, the prospects for PHAs are very promising.

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To date, bacterial cellulose is rather unexploited, The material has been used as an artificial skin, as a food grade non-digestible fiber, as an acoustic membrane, and as a separation membrane. BIODEGRADABLE NATURAL EMULSIFIERS / SURFACTANTS

Biodegradable natural emulsifiers / surfactants obtained from bio-feedstock (plants, Bacteria etc) can be an attractive alternative to synthetic surfactants in various applications. A few of them are: Almond Glycerides Almond triglyceride is used as an emulsifier and mildness additive in cosmetics. It has similar characteristics to Glyceryl Cocoate but is more anti-irritant than Glyceryl Cocoate It retains many of the benefits of it’s parent oil (almond) and when added to shampoos it will still contribute conditioning and glide to hair, as well as a conditioned feel to skin. Coco Betaine Coco Betaine, is one of the most commonly utilised surfactants in the personal care industry. This mild, derived from Coconut, surfactant, is considered to be high foaming, with good flash foam. Coco Betaine can be combined with almost any other surfactant in shampoo, shower Gel and Bubble Bath formulations. Glyceryl Cocoate Glyceryl Cocoate is a nonionic surfactant derived from coconut that is used as an emulsifier and mildness additive. It behaves in a very similar manner to Polysorbate 80 but with a lot of added benefits. It is well suited for use in blooming bath oil applications, or for solubilising vegetable oils into surfactant systems. Polyglucose Polyglucose is a new generation of surfactants. This nonionic surfactant is extremely mild and gentle and is naturally derived from sugar. Recommended for sensitive skin, facial products, shampoo and body wash. Sucrose Cocoate This naturally derived Sugar Ester from Coconut Oil provides effective cleansing and make-up removing, without stripping the natural oils on the surface of the skin. Biosurfactants A large variety of microorganisms produce potent surface-active agents, which vary from low molecular weight surfactants glycolipids to the high molecular weight surfactants which are generally either polyanionic heteropolysaccharides containing covalently-linked hydrophobic side chains or complexes containing both polysaccharides and proteins.

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Fatty acids The fatty acids produced from alkanes by microbial oxidations have received maximum attention as surfactants49. Besides the straight-chain acids, microorganisms produce complex fatty acids containing OH groups and alkyl branches. Some of these complex acids, for example corynomucolic acids, are surfactants.

Phospholipids These are major components of microbial membranes. When certain alkane degrading bacteria or yeast are grown on alkane substrates, the level of phospholipids increases greatly. Phospholipids from hexadecane-grown Acinetobacter sp. have potent surfactant properties. Saponins Saponins are natural surfactants, or detergents, found in many plants, but they are most abundant in the desert plants Yucca and Quillaja. Extracts from these plants are commonly used as foaming agents for beverages such as root beer. These biochemicals also have commercial applications such as ore separation in industrial and mining operations, and are useful in products such as photographic emulsions, cosmetics, and shampoos. Legumes, such peas and soybeans, also contain small quantities of saponins, which are proving their worthiness as phytochemicals. In the diet, phytochemical saponins have a wide spectrum of activity as antifungal and antibacterial agents, lowering of blood cholesterol, and inhibition of cancer cell growth. CONCLUSION The alternative feed-stocks (bio-based polymers) have become more relevant with the changing times and to substitute petroleum based feedstock not only to reduce dependence on petroleum but to get rid of environmental problems associated with indiscriminate disposal of plastics. This is high time that, an aggressive approach is adopted to exploit the potential of the renewable resources as an alternative feedstock for producing plastics, chemicals and many other industrially important products like Adhesives, coatings, detergents etc. The importance of the renewable feedstock lies in the fact that, they are produced from renewable resources and also can be recycled. Biobased polymers have different categories according to different production methods and different applications. The two potential applications of contemporary importance for bio based polymers are the packaging,

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which is closely followed by biomedical applications.

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Methane To Olefins. ( MTO ) , through methanol route.

(by Gas Authority of India, New Delhi) Background : Presently Olefins are produced from rich Natural gas which is having higher % of Ethane, Propane, Butane . The Petrochemical plants at Dahej & Pata are processing rich natural gas for recovery of C2 + component and cracking the same to produce Ethylene. As more quantities of LNG are being imported, the natural gas available for feed stock is becoming leaner. It is thus required to explore technology with alternate of feedstock for the production of Ethylene. The option of producing olefins from the lean gas without extraction and cracking facilities is an emerging process. Conversion of natural gas to methanol is an established technology and various process licensors are available for the conversion of natural gas to methanol. However further conversion from methanol to Olefins is also an emerging technology. Processes available for MTO: Two processes are currently in place are :

A) UOP’s Methanol to Olefins (MTO) technology, B) Lurgi’s Methanol to Propylene Technology.

Eurochem technologies Singapore is sponsoring a natural gas to Petrochemical complex in the Lekki Export processing Zone in Nigeria. The complex would consume : Gas consumed PP ( Polypropylene) HDPE( High Density

Polyethylene) 6.23 MMSCMD 400 KTA 400 KTA

And this project is currently in the engineering and procurement phase and slated to go on stream in end of 2006. MTO process is said to be an economical method of producing Methanol which can be converted to Olefins , primarily Ethylene and Propylene where cheap natural gas comprising of mainly methane is available .This in turn provide much lesser cost of production and higher return on investment than naphtha/ gas cracking process. The conversion rate from methanol to Ethylene & Propylene is in the range of 85 – 90 %. The German technology group Lurgi has developed a new process for production of propylene by conversion from Methanol. A pilot plant has already been test run and a full size plant is being set up by Lurgi jointly with Statoil, Norway.

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Two more demonstration plants of Lurgi’s are being set up in Trinidad & Iran. GAIL’s activity : GAIL (India) Ltd is actively considering the possibility for its existing Petrochemical plant at Pata & future plant in Assam & Kerala through MTO technology due to the following reasons : 1. Feed stock for Pata Petrochemical plant is becoming leaner due to increase in LNG supply in HBJ line. 2. There is a shortage of feedstock for Assam Petrochemical Plant. 3: The Kerala Petrochemical plant is based on LNG feedstock which is lean in nature. For a capacity 800 KTA Olefins plant , with MTO technology, the breakeven price of natural gas would be around $ 3.0 / MMBTU.

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CHAPTER 6

PLASTIC PROCESSING EQUIPMENT SCENARIO IN INDIA

Plastics play an indispensable role in a wide variety of markets, from packaging, building, construction to transportation; consumer and institutional products; furniture and furnishings; electrical and electronic components; and others. This enormous variety of end uses for plastic materials is what gives the industry its remarkably dynamic character.

Some companies concentrate their efforts mainly on the larger end-user markets, but many others find it safer to spread their business over a number of application areas. The type of products a company makes defines its marketing efforts. Packaging is the largest end use followed by building/construction, automotive and electrical/electronics.

Extrusion is the primary process used in plastics since most packaging and building/construction products sold in are extruded. Injection moulding, the next most important process, is used for most complex parts. Blow moulding is also extensively used in the manufacture of packaging products. Other processes used are mainly thermoset moulding processes such as compression and transfer moulding and reaction injection moulding.

PROCESSING EQUIPMENT Plastic Processing Equipment sectors in India is intimately related to the Polymer Manufacturing industry. Indian processing sector is showing about 10-12% growth recently since last few years when the polymer consumption is growing at 8-10% since 2000.The volumes of polymer consumption have reached a level of about 5 million tons in the year ending March 2006 (Table 1) and is expected to reach a level of 8.5 million tons by the year 2010 estimated at a healthy growth rate of 15%. Indian processing equipment business is estimated at about Rs.1000 crore (US$ 225 million) in 2005-2006. The present installed capacity of about 11-12 million tons cannot be considered as sufficient. Generally the processing sector operates at about 50-60% of the installed capacity. In fact, the equipment sector has to continue growing at a higher rate compared to the growth of polymer in order to keep a balance in a positive level and hence, a tremendous boost needs to be given to this sector to take challenges of the enhanced processing requirement of plastics materials in the years to come.

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Table 1 Polymer Consumption in India - 2005-06

Polymer KT %

LDPE/EVA 275 6 LLDPE 550 11 HDPE 920 19 Total Polyethylene 1745 36 PP 1300 27 Total Polyolefin 3045 63 PVC 1000 21 PS 225 5 SAN/ABS 90 2 PET

Film 135 3

Bottle 100 2

Total PET 235 5 Total Commodity 4595 95 Engg. Thermo Plastics (ETP) Polyamide 35 1 Polycarbonate 72 1 Polyacetal 8 0 PET/PBT 7 0 Others 3 0 Total ETP 125 3 Thermoset 100 2 Grand Total 4820 100

As is evident from Table 2, projected demand for injection-moulding machines is expected to increase by 61 % in 2010,while its 76 % for extrusion. The need for blow moulding machines will almost double by 2010. Table 2 Machine 1999 2006 2010 (estimated) Injection Moulding 27600 32350 52200 Extruder 14000 16700 29400 Blow Moulding 4400 5050 11700 Packaging is a very important sector of polymer processing equipment industry. Major Investments required in the packaging sector. It can be seen from table 3 that at a modestly estimated growth rate of 15% the requirement of number of machines will be doubled 5 years hence.

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Table 3 1997-98 2001-02 2006-07 2011-12

(estimated) No. of Machines 10402 14000 18000 36204 Installed Capacity(Kt) 2200 3260 4710 9463 Investment (Rs. Cr.) 2100 3500 5600 11263 INDIGENOUS EQUIPMENT The Indian equipment suppliers generally range in size from medium to small. Domestic equipment suppliers enjoy the lion share of 75% by value. The Indian equipment suppliers also export their machinery to many countries, with the prime region for export being Africa and Middle Eastern countries. Indian die and mould manufacturers, though meet most of the local requirements and occasionally export to the economically developed regions are, unlike the primary equipment suppliers belong to mostly in the small scale sector. India has progressed well in the areas of PVC pipe and PP/HDPE raffia. In fact, India is possibly producing international quality machines for raffia sector. The present PVC pipe equipment is almost at par with international standards, at least in the area of quality. However, It has to match the throughput level of the global standard. Both these end-use sectors account for about 1.5 million tons of polymer consumption (more than 25% of the total consumption in 2005-2006). PE film sector accounting for more than 825 KT (about 15 % of the total consumption in 2005-2006) is mostly produced from local equipment. Only 5 layer and 7 layer film equipment is being imported into the country. Tubular quenched PP film (about 215 KT) is entirely produced on Indian equipment whereas BOPP film (more than 100 KT) entirely depends on imported equipment. Though extrusion sector in India consumes about 60% of the total polymers. However, injection moulding equipment are required in larger numbers due to their relatively lower output and requirement of different sizes for different types of moulded products. Injection moulded products accounting for almost 700 KT in 2005-2006 (about 13% of the total consumption) is partially produced from domestically manufactured equipment. Specific technical products demanding stricter dimensional control are often produced on imported equipment. Some large automotive products such as bumper fascia, PP furniture are predominantly produced on imported machines although some local machines are also used. The latest trend is to import machines even in smaller sizes from China because of economy. Blow moulding containers essentially made from HDPE (175 KT of the total made consumption in 2005-2006 financial year) and PET (more than 100 KT) are mostly produced on domestic equipment. Only large drums used for industrial packaging are from imported equipment.

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MAJOR MACHINERY MANUFACTURERS INDIA 1. ASB International Pvt. Ltd.,Mumbai

Product /Services: Injection stretch moulding machines & Moulds 2. Ferromatik Milacron India Ltd. ,Ahemdabad

Product /Services: Injection moulding & extrusion blow moulding machines & Moulds

3. DGP Windsor India Limited, Mumbai Product /Services: Injection moulding & blow moulding machines & extrusion Machinery.

4. Feamould Machines Pvt. Ltd. ,Thane Product /Services: Full range of extrusion machinery, multilayer plants 5. Kabra Extrusiontechnik Ltd. Mumbai

Product /Services: Single screw & Twin screw extruders, R-PVC pipes/profiles/pellets

6. Fixpan Machines Pvt. Ltd, New Delhi Product /Services: Manufacturers of rotomoulding machines 7. K.L.Thermoformers Pvt. Ltd, New Delhi. Product /Services: Thermoforming machines, skin and blister packing

machines, automatic vacuum forming machines etc., 8. Ajay machine (I) Pvt. Ltd.

Product / services: Film plant, co-extruder plant (multilayer), tubes strapping, blow moulding, injection moulding.

9. Brimco Plastic Machinery Pvt. Ltd. Product / services: Extrution plants,

10. Cincinnati Milacron Pvt. Ltd., Ahmadebad Product / services: Injection moulding machine

11. Con Hyde India Pvt. Ltd. Kolkata Product / services: Injection moulding machine

12. Engel India Mach. & Tools (1987) Ltd. Kolkata Product / services: Injection moulding machine, extruders

13. Hikon H.K. Industries, New Delhi Product / services: Extrusion machinery

14. Kalimata Plastic Industries, Mumbai Product / services: Multilayer and monolayer blown film.

15. Kolsite Maschine Fabrik Ltd., Mumbai Product / services: Extrusion machinery for monolayer / multilayer film, Tapes, Woven Sacks, box strappings, tubings, monofilaments.

16. Quality Engineering Works, Kolkata Product / services: Injection moulding, blow moulding, extrusion plants.

17. L & T – Mcneil Ltd., Chennai Product / services: Rotational moulding machine

18. Larsen & Toubro Ltd., Chennai Product / services: Injection moulding machines

19. Lohia Starlinger Ltd., Kanpur Product / services: Tape extrusion lines for woven sacks

20. M Plast (India) Ltd., Noida Product / services: Rotational moulding machines, Injection moulding machine, extrusion plant for cast film, blown film, pipe, coating etc.

21. Machinecraft, Mumbai Product / services: Vaccum forming machine, Continuous thermoforming machine, extrusion lines.

22. Mafatlal Battenfeld, Mumbai Injection moulding machine, Blow moulding machines, Extrusion machine for film and sheet.

23. Niranjan Plastics, Mumbai Product / services: Injection moulding machinery, Blow moulding machinery.

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24. Rajoo Engineers Ltd., Rajkot Product / services: Monolayer and multilayer blown film, Pipe and profile line, Sheet line, Thermoforming machine.

25. Rotomould India Pvt. Ltd. Baroda Product / services: Rotomoulding plants, Extruders,

26. Samarpan Fabricators Ltd., Thane Product / services: Thermoforming and Blister forming machines.

27. Sidel India Pvt. Ltd., Mumbai Product / services: Stretch blow moulding machine. 28. Wonderpack Industries Pvt. Ltd., Mumbai

Product / services: Vacuum forming machinery, Skin and Blister packing machinery.

INDIGENOUS MOULDS & DIES Indian moulds & tools manufacturers are focused on providing precision moulds, dies, tools, jigs, fixture for plastics products. They also provide technical solutions to small and medium sized industries who want and need to use the low cost moulds with high quality for profitably in order to grow their businesses. These mould makers are specialized in the following areas :

Fully automatic injection moulds Automatic blow moulds Compression moulds Hot runner and semi hot runner moulds Hydraulic core puller system moulds Rotational core system moulds Split injection moulds PET preform moulds PVC Pipe fitting moulds Bottle moulds Electronic items mould Surgical items mould Pharmaceutical products mould Automobile parts mould Diagnostic products mould Plastic test specimen moulds etc.

However many Indian plastics processors prefer to import dies and moulds from countries like Tiwan and China due to better value for their money i.e. better cost / quality ratio. Moreover there are limited activity in this area in the organized sector and most of the mould makers belong to small scale unorganized sector. As a consequence, the moulder do not generally have enough confidence on them and prefer to import. Thus there exists a huge gap in the demand and supply in the domestic front. In view of the surge of demand envisaged in the coming 5 years, steps have to be taken to reinforced this sector so that more and more sophistication in mould making technology is adopted in our country and more organized efforts are encouraged.

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IMPORT OF EQUIPMENT It is estimated that imports constitute about 25% by value of the total equipment required in the country. While the Indian equipment suppliers presently have adequate capability to meet the Indian requirements, imports particularly from China and Taiwan have increased in the recent few years due to price economy. It is believed that about 1300 injection moulding machines have been imported from China in 2005-2006. Imports from Europe, particularly from Germany, are steadily decreasing because of higher cost. Some imports from Italy, particularly in the areas of cast film line still continue. Equipment for special end product such as BOPP film, heat shrinkable film and rigid PVC foams are imported and will continue to be imported in future. There are no plans for availability of local equipment at least in the two areas of BOPP and rigid PVC foam. Even the double bubble equipment for PP heat shrinkable film is not likely to be manufactured in the near future. One of the prime reasons for lack of availability of these plants is that all these end products require special technologies that are not presently available with the Indian suppliers. Besides, PVC foam market is rather small and the end product is mainly for exports questioning the viability of the fabrication of these plants. The processors can avail the facility of easy and economical imports. BOPP film lines are generally imported from Europe, the leaders in the World. China makes 40,000 injection-moulding machines per annum .In 2001 a factory called chen De were making 400 machines per month. Today they are making 800 machines per month. These are used locally and exported. Unofficial figures indicate that in last one year about 1000 injection moulding machines have been imported to India from China. Even Indian machinery manufacturers are planning to import screw, barrel, twin screws, dies, mould etc from China and, to assemble and make machines in India. Chinese see India as a huge market for them. This is a major challenge for Indian plastic machinery manufacturers are feeling the heat of competition from Chinese plastic machinery manufacturers. For compounding and finished products Chinese equipment are preferred due to lower cost compared the leading supplier from Italy and Europe. PVC calendaring equipment is also imported in India. Interestingly, compounding equipment in the areas of PVC, silane based crosslinked PE, and the Engineering Thermoplastics as well as other thermoplastic compounding with reinforcements such as glass fiber are predominantly based on the imported equipment. Typically they are intensive mixers, Kokneaders, continuous mixer and twin-screw equipment. While there are no plans to manufacture kokneaders, internal mixers of smaller capacities are available from Indian suppliers. Twin screw-compounding equipment, co-rotating for thermoplastic compound and counter rotating for PVC compounds, are available from several Indian producers. Most of the calendering equipment in India is second hand because of very high cost of the new ones. PVC calendered products constitute more

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than 120 KT (about 2% of the total plastic consumption in India in 2005-2006) INJECTION MOULDING – NEW HORIZONS New, extended processing methods have been sweeping industry, with ample benefit to immediate end users. In many ways, these have been existing in Europe, North America and the other advanced territories. These new technology have slowly started entering the Indian moulding industry showing signs of growth of a giant magnitude. Employing each of these techniques in the Indian shopfloor calls for a higher initial investment, that can be justified only by a near to 100 % utilization which produce large volumes. Hydraulic drives are increasingly been replaced by electric drives but the higher initial investment is prohibiting the conventional moulder embrace this technology. High degree of unmatched dimensional consistency and accuracy coupled with very attractive energy consumption has attracted the trendsetters in the industry to experiment the all-electric machines in their shopfloor. There is a need for the buyer to carefully evaluate the technology deployed in all-electric machines, in terms of power, response, reliability, serviceability and versatility in handling different materials. Since these drives are new to Indian moulding community, the merits and demerits have to be carefully weighed against the comfort level experienced with time tested hydraulic drives. INTERNATIONAL SUPPLIERS OF EQUIPMENT International equipment suppliers have entered India either by joint venture or through 100% ownership. Some technology tie- ups have also taken place. Some of the prominent International players present in India include.

ASB Nissei Battenfeld Brampton Cincinnati Milacron Frankische Rohrwerke Krah Reifenhauser Sidel Windmoller & Holscher

FUTURE OF PROCESSING INDUSTRY IN INDIA The Indian processing equipment suppliers should be properly reinforced to gear up for meeting the increasing volume demand of the Indian polymer industry in future. The imports should only fill the quality and technology gaps present with the Indian equipment suppliers which should be bridged at the earliest. Low cost equipment mainly from Asian region will also play an important role in the future. It is great that Indian equipment suppliers have risen to the technological challenges when required. For instance, 3 layer PE film equipment used is from Indian suppliers. 5 layer PE film plant is also being made available by a few suppliers. CPVC pipe although not required in larger quantity, can be

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manufactured on Indian equipment. Only the larger volumes as well as technology barrier in some areas (rigid PVC foam, core foam PVC pipe, 7-& 9 layers PE film, BOPP film etc) would restrict the Indian manufacturers to enter these new areas. Indian processing equipment are generally of lower throughput and need to be developed in the area of economically viable size in order to meet the increasing pressures due to globalization and increasing demand. While sophistication has been developed by the Indian suppliers, they need to enhance it further. The use of robot in injection moulding sector is not yet developed. It would be required when the Indian labour cost increases to match with international levels which is a not very distant proposition. AREA OF DEVELOPMENT IN PLASTIC EQUIPMENT Some of the other technology developments that require increased attention of the Indian Machinery producers are:

Blown film machinery for 7, 9 or even higher Layers Electrical Injection Moulding machines u-PVC Window Systems equipment Profiled and Solid Wall PE/PP pipe manufacturing Gas assisted injection moulding machines Adoption of Mucel technology Multi layer cast film machinery Foam Sheet Lines Pultrusion equipment Robots in plastic processing Sretch blow moulding machines Online thermoforming machines Silicone injection moulding machines Intricate multi cavity moulds Modern mould making tools & accessories

CONCLUSION Based on the current growth trends of plastic industries, future expansion and augmentation of petrochemical complexes, there is tremendous scope for the development of downstream plastics manufacturing sector in India .The development of downstream plastics manufacturing units, mostly SMEs , would facilitate in creation of job opportunities ,contribution to the national economics development .In the era of liberalization, one of the main determination for success in the global arena is technology prowess coupled with availability of skilled and trained human resources. The growth rate of the Indian plastics /polymer industry pegged between 12% -15%, which is higher than that of China and almost double the growth of GDP in India. It is forecast that India’s growth rate will be 14% and will account for 9% of global polymer demand by 2015. India’s consumption would be about 22 million tons as compared to global consumption of 227 Million tons by 2015. As a consequence more processing equipment will be in need which will increase pressures on

217

imports if indigenous technologies for equipment manufacture are not developed. In view of the above it is apparent that concerted effort needs to be given by the processors, indigenous equipment manufacturer and government so that the challenges that India is going face in coming years due to globalization and high demand of plastic materials are met.

1

Investing in India’s Future:Petrochemicals

Sub-group review meeting 11th Plan on Chemicals and petrochemicals

27th October 2006, Delhi

2

Contents

World Petrochemical Industry

Indian Petrochemical Industry

Plastics: Vital to National Interest

China Model

Downstream Plastic Industry & issues

Upstream Issues

Summary and Conclusion

3

World Chemical Market : 2.5 tr. USD

Global Chemical Market : Growing @ 1.5 times GDP

Textiles10%

Petrochemicals39%

Performance chemicals

16%

Pharmaceutical chemicals

16%

Agrochemicals11% Other fine

chemicals1%

Inorganic chemicals

7%

Petrochemical dominate with share ~40%

4

Petrochemical Shift

PX Ethylene

ME

AP

NA

SA

WE

EE

2000 2005 2010

ME

AP

NA

SAWEEE

2000 2005 2010

98 116 151Capacity MMT

17 26 38

. . . Petrochemical Industry is shifting to Asia and Middle east

33%

77%

56% 50%

5

China: Global Sink for Polymers (PO+PVC)

China's PO+PVC Apparent Demand & Import (Million tonnes)26

.5

28.6

30.8

32.5

34.5

34.5

34.7

35.1

36.1 39

.0

41.6

7.6

9.2

9.8

10.7

11.2

11.0

11.2

11.0

11.4

12.4

13.6

28.7%32.1% 31.8% 33.0% 32.4% 32.0% 32.1% 31.4% 31.9% 32.6%31.6%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Global TradeChina Demand% Global Trade

China constitutes 1/3 of Global polymer trade

6

China Polymers Imports (PO+PVC)

China's PO+PVC Apparent Demand & Import (Million tonnes)15

.4

17.9

20.4

22.6

24.4

26.4 29

.2

31.7 34.4

36.8 39.4

7.6

9.2

9.8

10.7

11.2

11.0

11.2

11.0

11.4

12.4

13.6

50% 51%48% 47% 46%

42%38%

35% 34% 34%33%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Polymer DemandPolymer ImportImport dependency

China imports 38% of Polymer Consumption

7

Price of subsidised natural gas across GCC

(US$/mmbtu)Saudi Arabia 0.75Oman 0.80UAE* 1.15Kuwait 1.00-2.00Qatar 1.70-2.00Bahrain 2.00Source: CM AI, 2005

*Price for Abu Dhabi

Price of Feedstock (Ethane)

In contrast, Indian manufacturers have to pay US$ 4.6-4.75/mmbtu for natural gas – current spot prices for Indian imports are in the range of US$ 9-11/mmbtu

8

Petrochemicals Competitive advantage

Market Access

LogisticsEconomies

of Scale

Operating Costs

Competitiveadvantage

Feedstocks

Project Management

9

Feedstock

• Ethane @ 0.5-1.5 $/mmbtu– Advantage of 285 – 385 $/MT

• Propane / butane @ 30% discount to Naphtha export netbacks in KSA– Advantage of 160 – 260 $/MT

• Naphtha @ export netback– Advantage of 50 $/MT

Market Access

LogisticsEconomies

of Scale

Operating Costs

Competitiveadvantage

Feedstocks

Project Management

Middle East has advantaged feedstock

Natural Gas Price (US$/mmbtu)

0

2

4

6

8

1019

9019

9119

92

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

US

S Arabia

Prices of Naphtha & Crude Oil ($/MT)

0

100

200

300

400

500

600

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

*

Naphtha Crude oil

10

0

50

100

150

200

250

300

350

400

Advantage Disadvantages

($/M

T)

Import Duty

Market Access

Port, LC charges

Freight

Utilities

Net Feedstock

Ethane Cracker : Sustainable Advantage

Net Advantage = 250 $/MT

Polyethylene

Existing Ethane Cracker have clear sustainable advantage

11

Ethylene Regional Capacities & additions

Major ethylene capacity addition in ME and Asia

2005 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010

N America 34.7 35.3 35.6 35.6 35.6 35.6 0.6 0.3 0.0S America 4.6 5.1 5.1 5.2 5.3 5.6 0.5 0.1 0.1 0.2W Europe 23.6 23.9 24.1 24.5 24.7 25.0 0.2 0.2 0.4 0.3 0.3E Europe 6.7 7.2 7.2 7.2 7.2 7.2 0.5Africa 1.4 1.7 1.8 1.8 2.0 2.2 0.3 0.1 0.2 0.2M East 11.8 14.2 16.5 18.2 24.2 29.5 2.4 2.2 1.7 6.1 5.3Asia 33.4 35.8 38.7 40.2 44.1 45.3 2.4 2.9 1.5 3.8 1.3Global 116.3 123.2 129.0 132.7 143.2 150.4 6.9 5.8 3.7 10.5 7.2

Region Capacities Capacity additions

M East51.9%

Asia 34.9%

Rest of World

Million ton

12

6.3

17.7

5.6

0.9

1.0

1.3

0.5

0.8

M East

N America

S America

W Europe

E Europe

Africa

Asia

Feedstock pole

Market pole

Ethylene Capacity additions 2006-10

Investments flow to: Where market exist

and / orthere is feedstock advantage

China

13

Global MNC JV - driving growth in EOS

. . . which have skipped India due to its non-conducive investment climate

Exxon Mobil

BP

Chevron? Mitsui

Basell

Shell

Borealis

DOW

ChevronSumitomo

Exxon Mobil

14

Contents




China Model


Upstream Issues


15

Valu

e A

dde d

Oil & Gas E & P

Petroleum Refining

Olefins Aromatics

Polymers FiberIntermediates Chemicals

Fibers

Textiles

Raw Material

Building Blocks

Main Products

Consumer FacingProducts.

Infrastructure, Agriculture,

Lifestyle, Packaging,

etc

Detergents, Fertilizers,

Paints, Pharma

High value addition across various sector

Structure of the Petrochemical Industry

16

• Current Status

• By 2011-12– Polymer Consumption total 12.5MMT– Total Employment 7 million– Additional Employment 3.7 Million– Investment Potential (U/S & D/S) Rs 84000 Crores

India Plastics Industry: A Snapshot

Major Raw Material Producers Nos 15Processing Units Nos 22,000Number of machines Nos 55,000Turnover ( Processing Industry) Rs. Crs 55,000Capital Asset ( Polymer Industry) Rs. Crs 85,000Raw Material produced approx. MMT 4.7Raw Material consumed approx. MMT 4.6Employment Direct / Indirect Million 3.3Export value approx. USD Bn 1.9Revenue to Government approx. Rs. Crs 7300

Employment Potential in next 5 Years 3.7 Million

17

Indian Petrochemicals Industry

• Post reform in 1991 there was major investment in polymer industry

• There was pent up demand which resulted in major investments in early 90s

. . . Major investments tapered off by 2001-02

0.23

1.28

1.68

1.98

2.402.51

1.66

1.97

0.53

2.12

0.26

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

Capacity (mmt)

Ethylene

P-Xylene

GrowthNo

Capacity Addition

18

Polymer capacity addition

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1990

-91

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

Capacity (mmt)

PS PVC PP

LLD/HDPE LDPE Demand

..from 2001 Capacity growth only through Debottlenecking

19

Polyolefin and PVC consumption

Low per capita Consumption in India

Per Capita GDP($) Vs PO+PVC (Kg) Consumption

US

JapanWestern Europe

Canada

South Korea

Turkey

South Africa

Australia

Developed74.7

China

India

BrazilRussia Mexico

Indonesia

Thailand

Developing13.5

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

0.0 20.0 40.0 60.0 80.0 100.0

20

2001-02 taskforce Recommendations• Taskforce came up with recommendation for

– Increasing Investment in petrochemical sector– Increasing the domestic demand– Increase the competitiveness of downstream industry by

technology up gradation– Achieving environmentally sustainable growth in

petrochemical industry• Taskforce projected following capacities are required

CapacityAdditional Demand

Deficit/ Surplus

Avg /unit size

No. of Plants reqd.

C22001/02 2363 2715 -3522006/07 2363 4933 -2570 700 42011/12 2363 8647 -6284 700 9All Polymers2001/02 4207 3651 5562006/07 4687 5338 -651 200 32011/12 4687 9197 -4510 200 23

. . . With the action shifting to EOS these were possible

21

But….nothing happened

• No capacity addition took from 2001 onwards

• Demand Nose-dived • Downstream remained

uncompetitive• Demand for 9 crackers of

700KT and 23 polymer plants of 200KT reduced considerably

. . . Actually there was slowdown in petrochemical industry in India

. . . India lost out on investment and employment where EOS boomed

0%

5%

10%

15%

20%

25%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

India Polymer GrowthIndia GDP

94-00 95-00 00-05 94-00 95-00 00-05 94-00 95-00 00-05Global 6.1 5.5 4.1 3.8 3.9 4.1 1.6 1.4 1.0China 16.1 16.0 10.5 9.3 12.5 9.3 1.7 1.3 1.1India 13.6 12.4 6.6 6.3 6.2 7.8 2.2 2.0 0.9

Avg Polymer Demand Avg GDP Growth (%) Avg Elasticity of polymer demand

22

Petrochemical Capacity Addition IX and X plan

..Low capacity addition in X plan

% Growth in capacity

CARG% Growth in

capacityCARG

97-98 01-02 02-03 06-07

Ethylene 1208 2409 2409 2575 7% 1.3% 99% 18.8%

Propylene 639 1524 1548 2010 32% 5.7% 139% 24.3%

LDPE 202 160 160 205 28% 5.1% -21% -5.7%

LLD/HDPE 620 1530 1510 1700 11% 2.1% 147% 25.3%

PP 560 1370 1450 1895 38% 6.7% 145% 25.1%

PVC 783 778 790 1085 39% 6.9% -1% -0.2%

PS 140 354 354 430 21% 4.0% 153% 26.1%

01/02-97/98

X Plan

06/07-01/02

IX Plan

23

Petrochemical Demand Growth IX and X plan

..Low Demand growth in X plan

% Growth in Demand CARG % Growth in

Demand CARG

97-98 01-02 02-03 06-07

Ethylene 1251 2166 2695 4041 87% 13.3% 73% 14.7%

Propylene 619 1570 1449 2243 43% 7.4% 154% 26.2%

LDPE 238 219 200 253 15% 2.9% -8% -2.0%

LLD/HDPE 732 1471 1407 1971 34% 6.0% 101% 19.1%

PP 614 1084 1129 1763 63% 10.2% 76% 15.2%

PVC 687 852 879 1341 57% 9.5% 24% 5.5%

PS 129 176 152 239 36% 6.4% 36% 8.0%

01/02-97/98

Xth Plan

06/07-01/02

IXth Plan

24

Imports & Exports of Polymers

-500

-400

-300

-200

-100

0

100

200

300

400

500

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06


Polyethylene Polypropylene

Polyvinyl chloride Polystyrene

Source: DGCIS

-500

-400

-300

-200

-100

0

100

200

300

400

500

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06


-200

-150

-100

-50

0

50

100

150

200

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06


-100

-80

-60

-40

-20

0

20

40

60

80

100

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06


Unit: Kt

..Industry became the net exporter

25

Contents




China Model


Upstream Issues


26

Indian Agriculture – Critical Issues

• Low crop productivity – 40 to 60% of world average.

• Only 40% of land area irrigated with conventional irrigation methods.

• Heavy pre and post harvest losses – food grains (10-20%) / fruits and vegetables (30-35%)

• Farmers’ share merely 30 – 35% of totalrealisation.

• Progressively lakhs of hectares of agricultural land getting uncultivable because of water logging and soil salinity.

Prevent colossal waste of agriculture products

27

Plasticulture

• Micro-irrigation - Precision Farming in agriculture• Key Focus Areas

– Drip Irrigation, Micro sprinkler system, Sprinkler irrigation systems

• Packaging for agriculture produce to be encouraged to boost agricultural productivity and reduce damage during transportation and storage saving Rs 23,000 crores p.a.

Plasticulture Can bring second Green revolution

Saving in infrastructural investments 37422Savings in electricity 3404Savings in fertilizers consumption 16178Incremental benefits from yield increase 57712Total benefits to the Indian economy 114716Additional employment generated (million) 17.4Source: Report of The Task Force on Microirrigation, Govt. of India

Benefits (in Rs crores) from Micro Irrigation During 11th Five-Year Plan

Plastics - The best packaging medium

Resource Conservation: Efficient Packaging...

200 % Increase

100% Increase

150 % Increase

300 % Increase

0 100 200 300 400 500

Cost of Packaging

Energy Consumption

Volume of Waste

Weight of Packaging

Source: GVM, Germany-1987 / 91 (APME)

Without plastics

With plastics

29

Wooden Crates are Simply not available anymore !!

Savings over 10 yrs. ~ Close to 20 million trees

Yearly consumption -15 million Crates

50 million Plastic Chairs

Wood Conservation: Imperative

30

Energy Conservation

• Plastic pipes : – The most energy efficient

means of transfer of material– Lower energy requirement as compared to

contemporary materials.• Plastic profiles for housing sector• Plastic Meter boxes, Wires/cables &

wire/cable coatings :– Effective method to arrest pilferage

Plastics helps in energy conservation

31

Case Study: Ahmedabad Municipal Corporation (AMC)

• AMC has 5 french wells having pumps which draw 800,000 gallons of water per hour (on average)

• MS pipes, used in these wells were causing frictional losses and less draw of water

• AMC replaced 8” MS pipes in one of the wells with 10” PVC pipes• The flow rate increased from 370 m3/ hr to 540 m3/hr• Encouraged with this result, AMC decided to replace 8” MS pipes in

balance 4 wells with 10” PVC pipes• Result : Savings of 1.7 million kwh of electricity per year, reducing

electricity charges by About Rs 4.5 million

PVC Pipes: Energy Savings

32

PVC Windows Aluminium WindowsNo. of windows (Guest rooms) 58 58Glazing configuration 6 + 12 + 6 (Clear) 6mm clearArea of one window 7.45 Sq.M 7.45 Sq.MGlass area 6.16 Sq.M 6.83 Sq.MFrame area 1.29 Sq.M 0.62 Sq.MRelative heat gain (RHG) 567 W/m 2 x 6.16m2 663W/m2 x 6.83 m2through glass 3492.72W 4528.29 W

1.4 W/m2.K x 8 K x 1.29m2 16 W/m2.K x 8 K x .62m214.44 W 79.36 W

3492.72 W +14.44 W 4528 W + 79.36 W3507.16W 4607.65W

i.e.3.51 KW i.e.4.61 KWFor 58 windows 203.58 KW 261.38 KW

Annual Usage 2920 hours 2920 hours203.58 KW x 2920 hr. 261.38 KW x 2920 hr.

594454 KWhr. 763230 KWhr.

Annual Savings 1,68,776 KWhr. (Units)

Assuming, 10 hours of a/c usage per day and 80 % occupancy rate:

Annual power consumption to compensate the heat gain

Direct energy transfer (DET) through frameTotal heat gain

PVC Window Profiles: Energy Savings

Case Study: Hotel Taj Blue Diamond, Pune

33

PVC Window Profiles: Energy SavingsCase Study: Indian Institute of Techonology, Delhi

Rs 51,76,40034,545Delhi

Cost of energy per unit

Extra Cost @ Rs800/sqmt

Energy saved by PVC window (KWH/yr)

City

Pay Back Period with power cost of Rs 5 per Unit is around one yearFor Floor Area of 735 m2, and Window Area of 220 m2

34

Plastic in Medicare

Life saving affordable solutions for Masses

35

Infrastructure Growth

• Bharat Nirman Yojna– Irrigation of 10 mn ha land– Water supply to 74000 Habitations

• Rs 4680 Crore Budget for RGNDWM• Electrification of 80,000 villages• Aggressive power reforms under APDRP• Two million houses every year under

NHHP.• Mega high way development projects &

port connectivity• Commercial exploitation of huge off

shore natural gas reserves • Thrust on connectivity – revolution in

communication technology

Economical solution to infrastructure projects

36

Additional manpower Required


64517 153976 1363259 157390 215678 742591 247600Cumulative Employment 700503 136325904-05Indirect Employment Upstream 317993 681630Downstream 2384948 5112221 3.7 MillionTotal Employment 3338927 7003134 Additional Employment 3664207


..Additional employment 3.7 Million

37

Contents




China Model


Upstream Issues


38

Through growth friendly policies and Foreign investment

China Model

• Reduction and simplification of indirect taxes which were reduced from over 30 per cent in 1994 to a VAT of 17 per cent currently

• Calibrated reduction of import duties• Creation of an environment that fosters high labour productivity

through liberal labour laws • Absorption of best practices from foreign-invested companies• Creation of Special Economic Zones (SEZs) that have acted as a

major magnet for investments (domestic and foreign) due to their investor friendly environment, their world-class infrastructure, the fiscal benefits they offer and

• The maintenance of low interest rates to stimulate investment.

39

China Exports 7.5 Million ton of processed plastics which is 25% of total

Consumption

50% of World’s Footwear and 70% of Toys!!

40

China SEZ

• 4 SEZs in 1978, to over 500 economic zones currently• Of the total FDI China receive -these zones received 75 %• China even has zones as small as around 3,000 acres in size

– The Waigaoqiao zone in Shanghai; – The Beijing Development Authority – BDA in Beijing that have attracted above $3.5 billion of investment each.

• Provide tenant companies with several benefits: – Quick approvals– Ready office and plant infrastructure– World-class transport infrastructure– Attractive financial incentives– Fiscal benefits– Ready access to the large domestic market.

Source CII McKinsey Report

China has successfully implemented SEZ policy we need to follow same in India

41

‘E’ For Energy ‘E’ For Environment

• Energy saving in the construction sector - of national importance• Improve residential environment, save energy and resources• Promote technical advancement in Construction• Implement the strategy of sustainable development.

June 20, 2002. Ministry of Construction

Follow China Model

China : Mission “E”

42

Through Mandation and Regulation

China Model

• Development Objectives - 2005– Plastics Pipes –

• 70% of drainage pipes• 20% of urban sewerage pipes• 60% of water supply, hot water supply, urban / town

supply pipes• 50% of urban gas pipes • 80% of cable casing pipes shall adopt plastics pipes.

– Plastics Doors & Windows –• 25% of national doors & windows market in R-PVC• EPS Insulation in buildings for energy conservation

43

Contents




China Model


Upstream Issues


44

Downstream Plastic Processing

Sector

Consumption Virgin +

Reprocessed (KT)

Operating rate Size (MT)

Machines (Nos)

Investment (Rs Lacs)/ Machine

Project Investment 1.75 times Machine

Manpower Direct/

Machine

Total Investment Rs Crores

Total Employment

(Nos)Monolayer 693 54% 200 6099 30.0 52.5 16 3200 97590Multilayer 306 60% 1400 664 84.6 148.1 20 983 13280Pipes 82 37% 1200 620 59.1 103.4 14 641 8680PP/HD Woven Sacks 531 59% 2000 1200 197.6 345.8 60 4150 72000Extr. Coating 79 39% 1200 344 79.7 139.4 20 480 6880PPTQ Film 209 55% 360 1693 14.8 25.9 10 439 16930PVC Pipe 578 32% 1400 2880 72.5 126.8 18 3652 51844Injection Moulding 1,400 46% 155 36257 31.8 55.6 6 20154 217542Blow Moulding 288 49% 150 5628 10.1 17.7 5 995 28140Monofilaments 55 49% 360 986 10.8 18.9 5 186 4928Calendered Sh. 69 35% 3760 34 741.9 1298.3 120 441 4080BOPP Film 85 72% 10800 21 3451.8 6040.7 210 1269 4410Fibres & Fil. 55 88% 1800 69 456.7 799.3 36 552 2484PVC Wire & Cables 73 27% 360 864 14.2 24.9 3 215 2592PVC Blown Film & Sheet 52 66% 600 338 23.4 41.0 7 138 2366Sheet Lines 30 27% 1200 249 57.9 101.4 10 252 2490Other Extrusion ETC. 203 26% 1600 2438 32.0 56.0 20 1366 48751Reprocessing Pelletisers 1,051 87% 1169 5100 5.3 9.3 10 475 51000Total** 4,789 65,484 39,588 635,986**Consumption Excluding ReprocessedIndirect Employment Upstream 0.5 317993

Downstream 3.75 2384948Total Estimated Employment 3338927 3.3 Million

..Current employment 3.3 Million

45

Sub optimal Unit size

Output/Unit (MTA)

170

588

673

682

1,111

1,333

0 200 400 600 800 1000 1200 1400

India

Canada

Brazil

China

Germany

U.S.A.

. . . Downstream units have no reason to grow in size

46

India : Highest indirect taxes

17%

10%

5%

10%

10%

5%

10%

5%

7%

10%

30.86%

China

Indonesia

Japan

Malaysia

Philippines

Singapore*

South Korea

Taiwan

Thailand

Vietnam

India (ED:16.32% & VAT 12.5%)

For long term boost to demand; Indirect taxes should be lowered

47

Removing structural constraints

• Time bound De-reservation of all articles of plastic to encourage upgradation & expansion of the processing units for enhancing their international and domestic competitiveness to compete against cheap imports.

• Adopt the cluster approach for the development of small scale units

• They need access to good infrastructure and finance at low interest rate

• Unless they have the respectable size and competitiveness it is impossible for them to access competitive finance

Potential Implication : Demand growth with competitiveness

48

Excise duty reduction

• Reduction in excise duty from 16% to 8% on Articles of plastic will boost the consumption

• Time bound SSI de-reservation will boost the government revenues further and will improve the competitiveness of Indian Industry

• Consumption growth is expected to jump from current 5% levels to 18-20%

• A comprehensive Macroeconomic study is being awarded to premier research institute for total assessment of impact on Indian economy

. . . This should bring total tax incidence down

49

National Program on Plastic Technology

• Plastic Development Council (PDC):– Apex body at national level to coordinate & Encourage

Developments– Constituted under IDR Act,1951– Members from Government & Industry– Major initiatives:

• Encourage replacing natural / scarce / High energy consuming materials with plastics

• Development of new products / applications in plastics• Generate additional employment initiatives• Administer Plastic Technology Development Fund

Focal point for plastics

50

R&D

• Plastic Technology Upgradation Fund (PTUF)– Technology Upgradation, Cost reduction & Quality

improvement - imperative to compete with international players

– Cess of Rs.100/MT of polymer production and imports to be levied for mobilizing the funds

– Specific portion of the PTUF to be utilized for R&D, projects on waste management, recycling and developments on biopolymers & biodegradable polymers

– Fund to be managed by fully Empowered Committee (EC) in proposed Plastic Development Council (PDC)

– EC to comprise of members from Industry / Business and S&T community.

– EC to monitor Allocation, disbursement, prioritization, utilization & Control of the funds

In line with technology Up-gradation Fund Scheme for Textiles (TUFS)

51

HRD

• Very few educational organizations offer courses / training in the field of plastics technology and processing

• Expert committee to identify gaps & avenues for greater participation

• To develop technical / managerial skill sets to meet growing demand

• Support organizations / institutes & networking • Strengthen CIPET in the fields of Teaching,

Training, Consultancy & as Certifying Agency• All IIT’s to be considered as centres of excellence in the field of

Polymer / Plastic S&T

Skilled manpower requirement to double by 2010

52

HRD

• Networking and industry interface to be encouraged– At premier institutes like IIT’s, NIT’s etc. for R&D and

innovative assignments– To be funded by government

• Development of Engineering Plastics Applications – High Value Engineering Plastics - Potential substitute

for metals in high performance applications – Major usage in industries like Telecommunications,

Automobiles, Consumer Durables Infrastructure and transportation etc

• National Awards for Technology Innovations– Institutionalize awards for outstanding contribution in

technology development– Fund of Rs. 50 Lacs to be made available

For overall development of the Industry

53

Polymers: A comparison

14 Years19924.6 MillionTTotal

14 Years19921.6 MillionTPP

13 Years19932.0 MillionTPE

14 Years19921.0 MiilionT PVC

LagChinaTodayIndia

2006 Polymer Consumptions

2.1 1.6 1.1

8.8 8.5

11.9

PE PP PVC

IndiaChina Same Demography

Unstoppable growth for Next 15

years

India Missing on Growth opportunity

54

Summary on Orders of J.P.M.A. 1987

JPMA should be diluted (800KT Plastics)

• Enacted in 1987 for interests of Jute farmers / mill workers.

• Meant to be a temporary measure, was to be phased out by 1994.

• Continues for over 19 yearsadversely impacting consumers and imposing heavy cost on economy.

• Higher cost of Jute bags vis a visPP/ HDPE woven sacks

• Excessive seepage loss and quality degradation in Jute bags

• Loss of Excise revenue (Jute goods exempted from Excise duty)

55

Contents




China Model


Upstream Issues


56

Feedstock issues

• Feedstock prices in ME constant at $0.75/Mmbtu • With new Refinery Capacity in India: adequate Naphtha for

feedstock of the petrochemical industry• Inverted duty structure : 5% import duty on crude oil encourages

refineries to export Naphtha rather than selling it domestically• Necessary to eliminate duty on crude oil or to treat Naphtha supply

to domestic petrochemical industry as deemed exports• Availability of gas for meeting demand from the fertilizer and

power sectors : Petrochemicals to be treated at Par

Inspite of feedstock Disadvantage Petrochemical Industry can grow based on Domestic market

57

Import duty reduction polymer

00/01* 01/02** 02/03 03/04@ 04/05@@ 04/05# 04/05## 05/06 06/07$Import Duty (%)Naphtha 6.05 10.10 10.10 10.10 10.10 10.30 5.15 5.15 0.00

Ethylene 23.12 20.54 20.54 20.54 15.15 15.45 10.30 5.15 5.24Propylene 23.12 20.54 20.54 20.54 15.15 15.45 10.30 5.15 5.24EDC 23.12 20.54 20.54 20.54 15.15 15.45 10.30 5.15 5.24VCM 23.12 20.54 20.54 20.54 15.15 15.45 10.30 5.15 5.24Styrene 23.12 20.54 20.54 20.54 15.15 15.45 10.30 5.15 5.24

LDPE 46.38 41.68 36.39 31.11 20.20 20.60 15.45 10.30 5.24LLDPE 46.38 41.68 36.39 31.11 20.20 20.60 15.45 10.30 5.24HDPE 46.38 41.68 36.39 31.11 20.20 20.60 15.45 10.30 5.24PP 46.38 41.68 36.39 31.11 20.20 20.60 15.45 10.30 5.24PVC 46.38 41.68 36.39 31.11 20.20 20.60 15.45 10.30 5.24PS 46.38 41.68 36.39 31.11 20.20 20.60 15.45 10.30 5.24

* Effective duty rate includes effect of SCD/SAD/Surcharge where ever applicable**Surcharge removed from the FY 2001-02@Peak rate of duty reduced from 30% to 25% FY 2003-04@@Peak rate of duty reduced from 25% to 20% FY 2004-05, SAD removed#Education Cess at the rate of 2% FY 2004-05$Special CVD @4% levied FY 06-07

Drastic reduction in import duty on Petrochemicals

58

Lowest import duty in India

271000 Naphtha 0% 0% 0% 3% 0% 6.0%390110 LDPE 5% 30% 8.75% 15% 10% 9.1%390110 LLDPE 5% 30% 8.75% 15% 10% 6.5%390120 HDPE 5% 30% 8.75% 15% 10% 9.1%390210 PP 5% 30% 8.75% 15% 10% 8.6%390410 PVC 5% 20% 8.75% 15% 10% 8.6%390311 PS 5% 20% 8.75% 15% 10% 8.6%Differential with Naphtha 5% 30%/20% 8.75% 12% 10% 4.1%/3.6%

Thailand 2006

Philippines 2006

Indonesia 2006

China 2006

Code Product India 2006

Malaysia 2006

India has the lowest Duty and duty differential between Polymers and Naphtha in ASEAN

59

Prices across Petrochemical Chain

00/01 01/02 02/03 03/04 04/05 05/0606/07

(Apr'06-Jul'06)05/06-00/01

06/07-00/01

06/07-05/06

Crude (Dubai) ($/Bbl) 25.85 21.61 25.87 27.03 36.52 52.82 65.19 104% 152% 23%Crude (Dubai) ($/Mt) 188 157 188 197 266 385 475 104% 152% 23%Naphtha 252 201 253 275 386 481 593 91% 135% 23%

Ethylene 566 416 470 554 1010 924 1141 63% 102% 23%Propylene 470 390 541 589 920 967 1120 106% 138% 16%EDC 303 180 359 306 495 324 318 7% 5% -2%VCM 522 373 503 582 783 644 681 23% 30% 6%Styrene 693 477 706 739 1181 1037 1182 50% 71% 14%

LDPE 729 577 639 742 1180 1103 1229 51% 69% 11%LLDPE 672 539 579 683 1024 1076 1223 60% 82% 14%HDPE 651 538 571 672 992 1055 1233 62% 89% 17%PP 658 541 678 755 1055 1123 1243 71% 89% 11%PVC 638 466 597 677 894 785 816 23% 28% 4%PS 809 548 771 817 1249 1121 1211 39% 50% 8%

Source: Platts

SE Asian Price ($/Mt) % Change

Increase in crude not passed down value Chain

60

PCPIR

Strength• Area of around 250 sq. kms • For the establishment of

manufacturing facilities for domestic and export led production in petroleum, chemicals & petrochemicals.

• International experience key determinants for attracting investments into such regions– Feedstock availability– Port availability– Cost-efficiency in process

industry– Ancillarisation– Development of external

linkages– State-of-art infrastructure

development

Weaknesses• Compared with other potential

petrochemical hubs in the region i.e. GCC & China, India lacks far behind in both the feedstock advantage and domestic demand.

• Low Import duty on polymers and articles of plastic, ever-rising number of FTAs, and higher excise duty are the major threats to the proposed foreign investment into PCPIR

PCPIR Growth very important for Manufacturing growth of 20%

61

Contents




China Model


Upstream Issues


62

Key Conclusion

• Plastics are key to National economy and indirectly support many sectors– Agriculture : Water conveyance, Plasticulture etc– Infrastructure : Geotextiles, Plumbing, Wires and Cables etc – Healthcare: Syringes, Blister Packs, Aprons, Blood bags etc– Packaging : Retail,Cement, Fertilizers etc– Lifestyle: While Goods, automobiles

• Plastics helps in – Agriculture: Plasticulture will lead to second green revolution– Resource conservation: Energy and Ecology – Infrastructure and Public Health

• China has successfully adopted Plastic mandation model in national Interest for employment generation and resource conservation

• Indian plastic Industry has potential to generate 3.7 Million Jobs in XI Plan

• In X plan plastic Industry has faced a slowdown in due to apathy of Government

Considerate view required for the National Growth

63

Key recommendations• Early announcement of National Petrochemical Policy• Setting up of Plastics Development Council• Setting up of Technology up-gradation fund in line with Textile• Rationalization of excise duty on polymers and Articles of plastics from 16%

to 8%• Rationalization on VAT on Article of plastic from Various slabs to 4%• Mandatory use of BIS Specification : Domestic and Imported articles• Export Incentives for Plastic processing and Machinery sector• Fiscal Benefits to SMEs in Plastic Processing Sector• Creation of Plastic Parks• Support required for JPMA Dilution• Mandate and Promote

• Wood substitutes in Various sectors• Energy conservation (China Model)• Water conservation• Infrastructure applications• BIS standards / quality

To encourage investment and create employment

64

Difference between Make and Break

5 Million Ton Polymers, 3.7 Million jobs, $8 Billion Investment

MAKE% Growth in

Demand CARG% Growth in

Demand CARG02-03 06-07 07-08 11-12

Ethylene 2695 4041 4757 9202 128% 18% 50% 11%Propylene 1449 2243 2705 5768 157% 21% 55% 12%LDPE 200 253 273 371 47% 8% 27% 6%LLD/HD 1407 1971 2365 4905 149% 20% 40% 9%PP 1129 1763 2151 4764 170% 22% 56% 12%PVC 879 1341 1556 2816 110% 16% 53% 11%PS 152 239 275 481 101% 15% 57% 12%

BREAK% Growth in

Demand CARG% Growth in

Demand CARG02-03 06-07 07-08 11-12

Ethylene 2695 4041 4381 6062 50% 8% 50% 11%Propylene 1449 2243 2438 3410 52% 9% 55% 12%LDPE 200 253 263 307 22% 4% 27% 6%LLD/HD 1407 1971 2129 2896 47% 8% 40% 9%PP 1129 1763 1921 2712 54% 9% 56% 12%PVC 879 1341 1462 2063 54% 9% 53% 11%PS 152 239 258 351 47% 8% 57% 12%

X Plan XI Plan11/12-06/07 06/07-02/03

X Plan XI Plan11/12-06/07 06/07-02/03

65

Revenue Implications

No Calc 2006-07 Calc 2007-08 2008-09 2009-10 2010-11 2011-12Consumption (kT) 1 4913 5922 7138 8604 10370 12500Demand growth 2 5% 21% 21% 21% 21% 21%avg c.I.f. price ($/MT) 3 1100 1350 1350 1350 1350 1350FE Rate (1$=Rs) 4 46.00 46 46 46 46 46avg price in Rs 5 3*4 50600 3*4 62100 62100 62100 62100 62100ID 6 5.10% 5.1% 5.1% 5.1% 5.1% 5.1%ID (Rs/MT) 7 2581 3167 3167 3167 3167 3167Import Price with ID/Domestic Price (Rs/Mt) 8 4+7 53181 4+7 65267 65267 65267 65267 65267

Excise Revenue from RM (Rs/MT) 16.32% 9 9*(ED-16.32) 8679 9*(ED-8.16) 5326 5326 5326 5326 5326

Excise Revenue from RM (Rs Crores) 10 1*9 4264 1*9 3154 3801 4582 5523 6657Avg price of plastic goods with 40% value addition (Rs/Mt) 11 8*VA 74453 8*VA 91374 91374 91374 91374 91374

Additional Excise revenue with 16% ED (Rs/Mt) 12 11*(ED)-9 3472 11*(ED)-9 2130 2130 2130 2130 2130

Additional Excise revenue with 16% ED (Rs Cr) 13 12*1 1706 12*1 1262 1521 1833 2209 2663

Net Excise Revenue to GOI due to SSI exemption (Rs Cr) - 25% of above 14 13*0.25 426 13*0.75 946 1140 1375 1657 1997

Total Excise Revenue 15 10+14 4690 10+14 4100 4942 5957 7180 8654Revenue Impact -590 252 1266 2490 3964

Assessment of Excise Revenue Loss/Gain from Plastic Industry if Excise Duty on Articles of Plastics and Polymers is reduced from 16% to 8% and Removal of SSI Exemption

First year Cost to Exchequer : Rs 590 Crores

66

Elastomers and Surfactants

% Growth in Demand

CARG% Growth in Demand

CARG

02-03 06-07 07-08 11-12

LAB 295 371 392 490 32% 5.7% 26% 5.9%

EO 72 96 103 141 47% 8.0% 33% 7.5%

Rubber 809 1177 1261 1664 41% 7.2% 45% 9.8%

Natural Rubber 620 816 853 1017 25% 4.5% 32% 7.1%

Synthetic Rubber 189 361 408 647 79% 12.4% 91% 17.6%

Elastomer and surfactants Demand Growth in X & XI Plan

X Plan XI Plan

11/12-06/07 06/07-02/03

67

Linear Alkyl Benzene (LAB)

Demand-Supply Balance(in KT)

0

100

200

300

400

500

600

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

Capacity Production Demand Surplus/Deficit

Current Surplus: Decreasing exports

68

Ethylene Oxide (EO)


0

50

100

150

200

250

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Capacity Production Demand

Surplus Capacity: Production= Consumption

69

Natural Rubber


-200

0

200

400

600

800

1000

1200

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Production Demand Surplus/Deficit

Production= Consumption

70

Synthetic Rubber


-600

-400

-200

0

200

400

600

800

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

CapacityProductionDemandSurplus/Deficit

Less Capacity: Demand Met through imports

71

Technical Textiles –

An opportunity for India

72

Technical Textiles Technical Textiles –– An OverviewAn Overview

1397116714 18230 19683

23774

12710798

81

93

0250050007500

10000125001500017500200002250025000

1995 2000 2003 2005 20100

25

50

75

100

125

150

Volume('000 tonnes) Value US $ bn

Volume Growth CARG %

1995-2005 : 2.8%

2005-2010 : 3.5%

A US$ 100 Billion plus global market; expected to grow at 3.5% CARG

Source : David Rigby Report

73

Technical Textiles Technical Textiles –– Share by applicationShare by application

Buildtech11%

Geotech2%

Hometech14%Medtech

10%

Mobiltech16%

Indutech14%

sporttech6%

Packtech11%

Protech0.1%

Clothtech8%

Agtotech8%

2005: 19,683 kta 2010: 23,774 ktaSource : David Rigby Report

Buildtech11%

Geotech2%

Hometech12%

Indutech14%

Medtech10%

Mobiltech14%

Packtech15%

sporttech6%Protech

1%

Clothtech7%

Agtotech8%

Volume Growth CARG %

1995-2005 : 2.8% 2005-2010 : 3.5%

Mobiltech and Indutech are the large segments, driven by Automobile & Industrial Growth

74

Technical Textiles Technical Textiles –– Share by RegionShare by Region

W.Europe22%

China16%

Oher Asia15%

E.Europe4%

Others8%

India4% S.America

5%

N.America26%

2005 est : 19,683 kta

Source : David Rigby Report

2010: 23,774 kta

W.Europe19%China

22%

Oher Asia18%

E.Europe4%

Others3%

India9%

S.America5%

N.America20%

Asia will account for over half of world’s consumption by 2010

75

Technical Textiles Technical Textiles –– Some Indian ProductsSome Indian Products

TYRE CORD FABRIC TYRE CORD FABRIC

76

Technical Textiles Technical Textiles –– Some Indian ProductsSome Indian ProductsChafer FabricChafer Fabric

Cross-section of a Radial Tyre.

CHAFER FABRIC.

77

Technical Textiles Technical Textiles –– Some Indian ProductsSome Indian ProductsA 2A 2--ply cut edge belt showing the construction details. ply cut edge belt showing the construction details.

Cross Section of a CutCross Section of a Cut--Edge Belt Edge Belt Showing the Straight Warp Fabric Showing the Straight Warp Fabric used in it. used in it.

Conveyor Belt in the Nauru Mining Operation Conveyor Belt in the Nauru Mining Operation

78


Fabric

A twin Rubber hose showing the high tensile fabric used in it foA twin Rubber hose showing the high tensile fabric used in it for reinforcement. r reinforcement.

A Rubber hose for oil discharge showing A Rubber hose for oil discharge showing the high tensile fabric used in it for the high tensile fabric used in it for reinforcement. reinforcement.

Fabric

RubberisedRubberised mattress for mattress for Industrial Application. Industrial Application.

79


Awnings. Awnings.

Display fabricDisplay fabric

TarpaulinTarpaulin

, Static cover, Static cover

80

IndianIndian TyrecordTyrecord Demand Demand –– past growth trendspast growth trends

2005-06 over 2000-01 : CARG 8%

646174

79 84 91

35455565758595

00

-01

'01

-02

'02

-03

'03

-04

'04

-05

'05

-06

PTY4%

N696%

Tyrecord Demand Share by FiberUnit : KTPA

81

IndianIndian TyrecordTyrecord demand demand –– 20062006--1212

Robust Economic Growth would lead to high Tyrecord demand

9387

99105 113

121

35

55

75

95

115

135

06

-07

07

-08

08

-09

09

-10

10

-11

11

-12

Nylon 6 tyrecord consumption

75

810 11

12

2468

101214

06-0

7

07-0

8

08-0

9

09-1

0

10-1

1

11-1

2

Polyester tyrecord consumption

8.4%Total tyrecord

21.0%Polyester

6.9%Nylon 6

CARG 2011-12 over 2006-07

Unit : KTPA Unit : KTPA

82

Indian Industrial Yarn for NonIndian Industrial Yarn for Non--Tyre Application demand Tyre Application demand –– 20062006--1212

14

9

1619

2224

048

12162024

06

-07

07

-08

08

-09

09

-10

10

-11

11

-12

Nylon industrial Yarn Demand

2017

2734

42

51

2

12

22

32

42

52

06-0

7

07-0

8

08-0

9

09-1

0

10-1

1

11-1

2

Polyester Industrial Yarn DemandUnit : KTPA Unit : KTPA

CARG : 21% CARG : 27%

Note : NIY demand includes Fishnet twine, ropes, Mechanical Rubber Goods. Also includes Air bag demand (assumed use of Air Bag mandatory by 2007-08)

PIY demand includes, MRG, Coated fabric , Seat belt etc.

Use of PIY for Woven Geo-textile is not included in the estimates.

Industrial yarn : High tenacity yarn (>5.5 gpd)

83

Technical Textiles Technical Textiles –– India share by applicationIndia share by application

Indutech5%

Packtech21%

Mobiltech7%

sporttech8% Buildtech

6%

Geotech1.8%

Hometech5%

Medtech5%

Protech3%

Clothtech36%

Agtotech2%

2003-04 :Rs 19130 cr

Currently, India is predominantly in traditional low end applications, which account for over 50%( Clothtech,Packtech)

Source : Expert Committee on Technical Textiles, India

India should focus on high performance end applications for better results

84

Technical Textile Technical Textile -- Per Capita ConsumptionPer Capita Consumption

Unit : kgs

Economic Growth

InsignificantPosition To

SignificantPosition

India’s share isnegligible

If Cost Competitive

Huge opportunities for India due to its own ..9.8

7.3

2.30.7

India China W.Europe USA

85

669

2337

Current China level

Potential volume -Over 1668 kta

Required investmentRs 43700cr

($9715million)

Approach for IndiaApproach for India

Over Rs. 45,000 Crore investment needed to get to current China level

Generates Direct employment ~ 1 million and indirect employment 1-2 million

86

Indian Technical Textiles Indian Technical Textiles –– Growth estimatesGrowth estimates

12Industech

16Homestech

15Geotech

12Clothtech

15Buildtech

8Agrotech

20Packtech

12Meditech

15Mobiltech

12Oekotech

12Sporttech

17Protech

Estimated Growth rate : 2007-12Technical Textile Segment

Source : Expert Committee on Technical Textiles

High potentional in all segments of Technical Textiles

87

Man made fibres & portfolio in Technical TextilesMan made fibres & portfolio in Technical Textiles

Dominance of polyester and polypropylene in Technical Textile Applications

Polyamide7%

Other16%

Cotton7%

Acrylic1%

Viscose6%

Glass15%

Polyolefins24%

Polyester24%

Source : David Rigby

88

L-Y

Yarn-GF

GF-DF

0102030405060708090

100

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Higher margin/value addition is at fiber/yarn stage Higher margin/value addition is at fiber/yarn stage than in textile conversion/processingthan in textile conversion/processing

Ex : Tyre cord industryIndex

Fibre production is key to competitiveness

89

Crude

Naphtha

BTX Cracker

PX

DMT/PTA

Polyester

Ethylene Propylene

MEG ACN

ASF

Benzene

Capro-lactum

Nylon

PP

PPFY/PPSF

Wood

RGWP

Viscose

Raw Material Security Raw Material Security

Self Reliant

Import dependent

India better placed with most Raw materials

90

Technical Textiles : Cost of production(COP) India Vs ChinaTechnical Textiles : Cost of production(COP) India Vs China

1171

879

China India

A. Energy cost Index

B. Labour Cost Index

143

136

China India

C. Productivity Index

3.5

3.8

China India

Power & labour reforms could help India get ahead of China

Source : LMC, UK & World Development Indicators

91

Key RecommendationKey Recommendation

Encouraged investments in High Performance Yarn by extending Technology Upgradation Fund

Regulatory framework in use of :

- Geotextiles for road construction

- Fire retardant textiles in public places (exhibitions hall, Cinema Hall etc)

- Airbag in Passenger Cars

- Non-woven disposables in healthcare

Create awareness – benefits of Technical Textiles particularly in Agriculture

Creation of Standards for Technical Textiles to ensure strict performance and safety of users

Rationalization of duty structure across the value chain to eliminate anomalies and accumulation of Cenvat

Partnership progams for Education and Training to build Application Engineering Resource

92

PLASTIC RECYCLING TRENDS AND TECHNOLOGIES

PLASTIC WASTE RECYCLING

Main component of integrated plastic waste

management

Societal and economic implications

Extends disposal capacity, saves money in disposal

costs

Conserve natural resources

Create jobs

Provides a reliable, cost effective feedstock to the

industry

TYPE OF PLASTIC RECYCLING

Primary recycling New plastic products having equivalent properties to discarded plastic items

Secondary recycling Products with properties inferior to original products

Tertiary recycling Altering chemical structure to manufacture monomers, basic chemicals or fuels

Quanternary Incineration for energy recovery

INDIAN SCENARIO - PLASTICS INDUSTRY

Annual Turnover (2005-2006)

Plastic industry Rs. 25, 000 Crore

Assets Rs. 47, 000 Crore

Volume 4.8 MMT

Contribution to the exchequer Rs. 6000 Crore

Per capita consumption 4 Kg. (World: 20 Kg)

Growth rate 15%

Per capita consumption by 2010 8.5 Kg.

Critical and indispensable part of Indian economy

INDIAN SCENARIO - PLASTICS RECYCLING

Recycling 60 % of plastics waste

Recycling units 2300

Recycling volume 1.3 MMT

Employment 3 Lakh

Attributed to large scale informal sector comprising

of waste pickers, kabariwalas, scrap dealers, bulk

buyers and recyclers.

PROCESSES OF RECYCLING PROCESS

Collection / Segregation

Cleaning and Drying

Sizing / Chipping

Agglomerating / Coloring

Extrusion / Pelletization

Fabrication into end products

LIFE CYCLE OF PLASTICS

Recycling plays significant role in the life cycle of plastics.

VIRGIN PLASTICS

PLASTIC PRODUCTS

CONSUMERS

POST CONSUMER WASTE

RAGPICKERS KABARIWALAS

WASTE DEALERS RECYCLER RECYCLED PRODUCTS

ENVIRONMENT

BURNING LANDFILLING

OPEN MARKET ( FOR VARIOUS APPLICATIONS)

TECHNOLOGIES - PRIMARY & SECONDRY RECYCLING (MECHANICAL RECYCLING)

INDIAN SUCCESS STORIES

Battery cases Luggage

Milk pouches Barsati films

Plastic woven socks Niwar pattis & animal covers

Plastic carry bags Mats

Other plastic waste Box strapping and footwear

TECHNOLOGIES - PRIMARY & SECONDRY RECYCLING

Vinyl siding Mobile Home Skirting

Bottles Fibres

Intravenous fluid bag Floor tiles

Recycled plastic Plastic lumber

Wire & cable scrap Sound -deafening panels, flaps and floor mats

Computers Highways (filler)

Automotive & appliance shredder residues

Concrete additive, fuel reductant for blast furnaces

Polybags Toughened bitumen for road

Recycling of PET Recovery of monomers by

Glycolysis

Methanolysis

Hydrolysis

Alcoholysis

Teflon Fluorolubricants by gamma radiation

TECHNOLOGIES - TERTIARY RECYCLING

Carpet waste Recovered nylon by selective dissolution

TECHNOLOGIES - QUATERNARY RECYCLING

Process Engineered Fuels

Post use plastic scrap + wood / saw dust / scrap

paper grinding Drying Densification

Pellets, cubes, briquettes, lumps or rods for fuel

substitution

Incineration for heat recovery or electricity

generation

INCINERATION - SOURCES OF ENERGY

MATERIAL TYPE HEAT ENERGY (MJ/Kg)

Polyolefins 50

Coal 30Rubber 30Wood 15Paper 15Textiles 13

NEW TECHNOLOGIES FOR RECYCLING

To develop automatic and continuous separation

process to minimize handling of waste and achieve

more efficient reclamation process

RESIN SEPARATION

Magnetic separation for removal of ferrous

materials

Eelectrostatic separation for non-ferrous

materials, mainly aluminium

Air separation via cyclones to separate paper,

flotation tanks or hydrocyclones to separate

various resins based upon specific gravity

NEW TECHNOLOGIES OF RECYCLING

COMPANY / INSTITUTION METHOD / EQUIPMENT

Centre for Plastics Recycling Research, Rutgers University

Photoelectric emission diode sensors to measure color of contaminants for segregation into clear, translucent and opaque plastic

UK- Build Surtex Machines Halogen lamp and two detectors with air jets that direct dark particles in a different direction from pure stream. Pure clear PET flakes separated from colored flakes

Partek Color sorting technology. Clear chips separated from dark

NEW TECHNOLOGIES OF RECYCLING


National Optical Institute

Quebec, Canada

Optical method, separates plastic

bottles of PVC, PET or other origin

US Bureau of Mines Different flotation media, i.e.

water, calcium chloride and

alcohol solution to separate LDPE,

HDPE, PP, PS & PVC

Swedish National Waste

Department

Differentially heated conveyor

separates rigid plastic containers

by resin

NEW TECHNOLOGIES FOR RECYCLING


Refakt, Germany Heated belt for separation of PET from PVC, PET granules fall off the end of conveyor and melted PVC granules stick to the conveyor and are scraped off

Warren Spring Laboratories, U.K., University of Athen, College Park Research Centre, Maryland

Electrostatic Phenomenon Plastic pellets of opposite charge are separated by allowing then to fall between two high - voltage electrodes, which are the basis for the separation tower

University of Western Ontario, London

Rensselaer Polytechnic Institute, Corneu University

Solvent separation Differential dissolution of plastics at different temperatures

RECYCLING OF COMMINGLED PLASTICS

HOMOMICRONIZATION Blending of immiscible polymers through thermomechanical, ultra high shearing reactor technology. Plastics such as ABS, PVC, PC, PA, POM and PE etc. are homogenized into a plastic alloy that is easily molded: (New Generation Plastic, France, NGP)Recycled plastic performs better than virgin ABS

SOLID STATE SHEAR PULVERIZATION (S3P)Subjecting the polymer to high shear and pressure while rapidly removing frictional heat to prevent melting. S3P can convert multi-colored, unsorted waste to a uniform light colored, partially reactive powder of controlled particle size distribution; which can be directly melt converted to new products

RECYCLING OF COMMINGLED PLASTICS

SANDWICH MOLDING

Recycled materials are sandwiched between layers of virgin

materials

UPGRADATION OF PLASTIC RECYCLING INDUSTRY

Government Level

Allocation of dedicated recycling zones / parks with common

waste management system

Implemeting buy back schemes

Imposing preferential excise duty

Industry Level

Development of new and safe technologies for recycling

Providing better working environment

Providing training and new skills to workers

SRI EXPERIENCES

LIFE CYCLE STUDIES OF PLASTICS WASTE RECYCLING IN DELHIComplete survey of plastic waste recycling industry in and around Delhi was conducted and a comprehensive report was submitted to Department of Environment, Govt. of Delhi PROCESS ENGINEERED FUELS (PEFs) FROM PLASTIC WASTES Process engineered fuels with different calorific values have been developed from plastic and agri wastes, which may be used in boilers, furnaces and kilns

SRI EXPERIENCES

ROAD CONSTRUCTION

Composition comprising bitumen, concrete and

plastic wastes were developed for road construction

having better properties than the conventional

bituminous road

VALUE ADDED PRODUCTS

Plastic furniture made from waste material with good

durability and aesthetics have been developed

Poly pallet developed at SRI was found excellent

substitute of wood pallets for stacking of sacks

NEW PROJECTS WHICH CAN BE UNDERTAKEN

Development of plastic and concrete rail road tiles to

replace wood and concrete tiles

Development of polymer modified concrete

Development PET and HDPE blends using

compatibitizer for good chemical resistance and

processing characteristics

NEW PROJECTS WHICH CAN BE UNDERTAKEN

Utilization of waste PS foam as an additive in light

weight cement or soil additive (to retain moisture

and minimize compaction)

To study the oxidation of polymer backbone using

transition metal catalysts to monomers and oxidized

products of monomer

Tertiary recycling of waste PET by Glycolysis,

Methanolysis, Hydrolysis and Alcoholysis in to

monomers and conversion into value added products

115

“Research & Development and

HRD interventions in the Petrochemical sector”

116

Vision envisioned by Task Force on Petrochemicals, GoI

Development of high value added, quality petrochemical products at globally competitive price.

Innovation of newer applications/ products with focus on sustainable development

117

Mission statement of Task Force on Petrochemicals, GoI

Identification of core areas and creation of mass production facilities of Global level.

Globally competitive in the regime of reduced tariff and non-tariff barriers.

Environmentally responsible products/ processes /technologies.

Innovations through R&D.

Proactive participation of stakeholders in facilitating sustained growth.

Increase per capita consumption of plastics to about 12 kgs & synthetic fibres to 2.5 kgs and be among top 3 consumers of plastics in the world by 2010.

118

Task Force recommendation on R&D

Industry to invest 1.5 - 2.0% of sales turn over in R&D to remain globally competitive.

Develop new products to meet the current and future needs(Innovation).

Develop New production process through new production technology(Indigenous development of state-of-art processing machinery).

Use the modern computational technique for analysing processes.

Specific thrust on supporting R&D for development of degradable / biodegradable plastics, promoting scientific and state of art plastics waste recycling technologies

119

Proposed Interventions by Government of India in R&D

Creation of budget provision by Department of Chemicals & petrochemicals, Ministry of Chemicals & Fertilizers, GoI for R&D Projects in the areas of

Development of Biodegradable plastics.

Polymer composites & Nano-Composites.

Engineering Plastics, blends & alloys.

Product development for import substitution.

Design & Development of Innovative/ patent-able Plastics Processing Machinery.

Disposal of plastic waste by appropriate mechanism of waste collection, segregation, recycling.

120


Budgetary support to technical institutions for organising Seminars/symposia / conferences in the areas of biopolymers / biodegradableplastics, polymer composites and nanocomposites, process & quality improvement in plastic product manufacturing, innovative concepts of product and mould design and manufacturing.

Constitution of National Awards for Technology Innovation in the field of Plastics technologyand fostering scientific temper in the area of Polymer Science and Technology.

121


Joint Initiatives by Industries & Technical Institutions for commercialization of technology developed at Institutions.

Popularisation of technology related R&D funding schemes of financial institutions like SIDBI, ICICI, etc. for Joint R&D by Industry & Technical Institutions.

Creation of Plastic Technology Upgradation Fund (PTUF) for Technology uprgradation of Plant & Machinery of the existing SMEs (a draft scheme was proposed by CIPET to Administrative Ministry).

122

Proposed Interventions by Government of India for “Good

manufacturing practices”Launch of National programme on Development of Plastics Sector in the lines of recommendations of National Manufacturing Competitive Council, GoI.

CIPET is working out a project proposal under UNIDO - DIPP scheme of improving competitiveness of Indian plastics sector “National Programme for Development of Plastics Manufacturing Sector in India”

123

Proposed “National Programme for Development of Plastics

Manufacturing Sector in India”Objectives

To strengthen the competitive position of the Plastics Industry in India, increase its share in the world market by enhancing the manufacturing capacity, strengthening its technological and market development capacity.

Setting up of National technology development centre for testing and R&D activities on Biodegradable plastics in India

124


Manufacturing Sector in India”Programme Budget : US $ 1.3 Million

(approx Rs.6.00 Crores)Project Duration : 3 years

S.No. Stakeholders Contribution

(US $)1 Department of Industrial Policy & Promotion

(Min. of Commerce & Industry GOI) –Through IDF

400,000

2 Department of Chemicals & Petrochemicals,CIPET

400,000

3 UNIDO - ICAMT 200,0004 PlastIndia Foundation 75,0005 AIPMA 50,0006 Others Associations 75,0007 Industry 100,000

TOTAL 1,300,000

125


Manufacturing Sector in India”Programme Partners

Department of Industry Policy & Promotion (DIPP), Ministry of Commerce & Industry, GoIUNIDO - ICAMTDepartment of Chemicals & Petrochemicals, Central Institute of Plastics Engineering & Technology (CIPET), Plastindia FoundationSelected Industry Associations such as AIPMA, TAPMA, IPF, OPPI, and Association of Promotion of Plastics

126


Manufacturing Sector in India”Selected Clusters (Targeted units - 80 nos.)

Chennai (South)Kolkata/ Haldia (East)Pune (West) Delhi/New Delhi, NCR (North) in the country.

127


Manufacturing Sector in India”Implementation at unit level

Benchmarking of individual units with global standards.Technology audit of each unit for preparation of unit wise action plan based on Quality, Technology and other parameters such as Capability and willingness of the unit to grow, Financial status, export opportunities etc.Prepare an action plan for each unit containing details on the gaps and what needs to be done technically to overcome these gaps.

128


Manufacturing Sector in India”Implementation at unit level

To provide with time line chart for implementation of activities to overcome gaps identified.Assistance in implementing the action plan through handholding, organizing training programmes etc.Training programme on Quality, Implementation of ISO 9001 :2000 QMS.

129


Manufacturing Sector in India”Implementation at group level

Design modules for awareness programmes & conduct awareness workshop and seminars on Programme objectives and benefits in Cluster locations.Organising Seminar/Conference/Workshop etc on Emerging technology.Facilitate services of International Experts on various technological assistance required by the plastics manufacturing sector in India.Finalisation of Methodology in consultation with Stakeholders and as per the feedback of awareness programmes/workshops.

130


Manufacturing Sector in India”Market Development

Organise and promote capabilities of Indian plastics sector in the International trade-show/exhibition for boosting export of Indian plastics products as well as services.Promote exports of plastics products from India to Africa & Latin America.International Interactive programmes with plastic fraternity in target countries.Organise skill development programmes for units/ trainers from other countries in India.

131

Task Force recommendations on HRD

Manpower requirement in Plastics Industries -governed by industry growth in terms of Plastics material consumption

In year 2000, assessment of direct technical manpower requirement was @ 7 persons/100 tons increase in plastics consumption.

Task Force envisaged that by 2010, due to automation in machinery, technology upgradation, the assessment of employment generation should be @ 3 persons/100 tons increase in plastics consumptions.

132

Total estimated employment of work force - 2.5 millionMarketing/

trading38%

Managerial2%

Maintenance & Mould makers

1%Supervisory

3%

operators (skilled & semiskilled)

20%

opertors (unskilled)

35%

R&D1%

Present Status of employment in Plastics & Allied Industries.

133

CIPET’s Contribution for HRDCourse Type of skills imparted Level of Employment

M.TECHSpecialised high-ended skills forcarrying out R&D, technologydevelopment work in the industry

Plastic Technologists, Specialist,R&D professionals inpetrochemicals as well asdownstream industries

PGD-PE

Specialised and versatile skills fortaking up responsibilities inproduction, applicationdevelopment, product design, etc.

Plastics Engineer, ApplicationDevelopment Specialist,Production Engineer, etc.

PGD-CadPE

Specialised skills in plasticsproduct design & development

Plastics product Engineer, DesignEngineers, CAD Engineers, etc.

PGD-PPT Skills on plastics processing andTesting

Production Supervisor/ QualitySupervisor, Shift Engineer, etc

PD-PMD Skills on Plastics Mould Design Mould Designers/ MouldSupervisors

PD-MM Skills on Machine Maintenance Maintenance supervisor

PD-PMT/DPMT Skill on Mould Manufacturing

Mould Designers/ MouldSupervisors/ Mould Maker /Mould Technicians

PD-PPT Skills on Plastics Processing Plastics Processing supervisor/technicians

134

CIPET’s Contribution for HRD

Hierarchical Model for Technical Education in Plastics Sector

Apex Programme(Level V)

Industry Specific Programme(Level III & IV)

Foundation Programme(Level II)Diploma Course

Post Diploma

Post Graduate Diploma

M.Tech

ITI Trade Certificate Operator Programme(Level I)

135

Three tier Education system to Develop Manpower as:

Plastics Technologist/Scientist (through university education system)

Plastics Engineer/ Production Engineer/ Processing Engineer or Supervisors (through technical-education institutions like CIPET)

Mould & Die Makers/Technicians/Machine operators (through technical-education at CIPET, Indo-German Tool rooms, NTTF, etc.

Present status of Manpower development for Downstream

Petrochemicals (Plastics) Industries

136

University education system to offer Degree, Post Graduate Degree & Ph.D. programmes in polymer/plastic technology

IITs, HBTI, UDCT

Engineering colleges (around 30 institutions)

CIPET has introduced PG Degree in Plastics Engineering/Technology - 80 % Placement achieved in the introductory year.



137

Specialist Institutions for offering courses in specific areas of plastics technology

CIPET (15 centres across the country)

IPI (All India presence)

NTTF, GTTC, IGTR, CTTC, CITD, etc., (specialized courses in tool & die making)



138

Diploma Level and ITI institutions offering Diploma & Plastics processing operator trade certificate

Government and private polytechnics (around 60 polytechnics in the country)

ITIs (around 100 across the country)



139

Plastics Industry Overview (2005 - 06)

India ranks 8th in the world in total plastic consumption. However, Indian per capita consumption of around 4.3 kg is well below the world average of around 26 kg.The consumption of recycled plastic constitutes about 30% of total consumption.India is likely to be 3rd largest consumer of plastics after US and China by 2010.

Major raw materials producers 15 Nos.Processing Units (approx.) 22,000 Nos.Estimated turnover of organised segment Rs.250 billionCapital Assets of processing Units Rs.130 billionVirgin Raw material produced (approx) 4.7 million tonsTotal raw material (incl. Recycled) consumed 6.9 million tonsEmployed Direct & Indirect 2.5 millionExport value of plastic goods (approx.) Rs.35 billionRevenue to Government approx Rs.30 billion

Source : Task force on Petrochemicals sector

140

Global Polymer Consumption by 2010

Rank Country 1988(MMT) Country 2000

(MMT) Country 2010(MMT)

2010/2000

1 USA 16.6 USA 27.3 USA 38.9 3.6%2 Japan 6.4 China 14.4 China 31.3 8.1%3 Germany 4.3 Japan 9.1 India 12.5 14.0%4 China 3.7 Germany 6.4 Japan 11.5 2.3%5 Italy 3.1 S Korea 4.7 Germany 9.4 3.9%6 CIS 2.0 Italy 4.7 S Korea 7.4 4.8%7 France 2.4 France 4.1 Italy 6.8 3.8%8 UK 2.2 UK 3.5 Brazil 6.7 7.8%9 Taiwan 1.9 India 3.4 CIS 6.2 7.0%

10 S Korea 1.8 Brazil 3.4 France 6.1 9.1%16 India 1.6 Taiwan 3.3 UK 5.2 4.1%

141

Plastics Industry Overview (2015)

Compound AverageAnnual Growth Rate

(%) 2005 - 2015

India's Share of WorldConsumption (%)

World India 2005 2015Polyester Fibre 4.8 5.2 7 7Polystyrene 3.6 6 1.7 2PVC 3.7 6 3 4Polypropylene 4.8 8.4 3 4.7LLDPE 6.3 10 4 6HDPE 4.2 8 3 5LDPE 1.7 6.7 1.5 2.5

The share of India’s consumption in world consumption is expected to increase in all polymer segments except for polyester fibre

142

India’s Share in the Global polymer demand by 2015

Global demand for polymers is estimated to increase at 5% per annum to reach 227 MMT by 2015.Polymer demand in India is expected to grow at 13-14% p.a. and will account for 9% of global polymer demand by 2015.The total polymer demand in India by 2015 is estimated to be around 22 MMT.

2004 2015

India 4% 9%

RoW 96% 91%Source :Dept of Chemicals & Petrochemicals, GoI, IMaCS Analysis

143

Growth Projection - year 2015

Raw material consumption - 22 Million tons.Turnover to reach - Rs.1300 billion.Export value to reach Rs.450 billion.Revenue to Government - Rs.160 billion.Total Employment - 8.5 Million (average @ 5 person/100 tons increase in polymer consumption) i.e. Additional creation of 6 million jobs in plastics sector

144

Commitment to rebuild the education system with creation of synergy between institute and industry motivate young talents to pursue plastics/ polymer science and engineering courses (Dept. of Chemicals & Petrochemicals as Nodal department for Plastics Sector) To establish Centre of Excellence in Polymer/ Plastics Technology in existing institutions like IITs, NITs, CIPET, etc. and strengthening S&T linkages through co-operation and networkingTo grant Institute of National Importance/ Excellence to CIPET, as a support to the HRD initiatives in Plastics Sector.

Proposed Interventions by Government of India in HRD

145

\

ALTERNATIVE FEEDSTOCKS FROM RENEWABLE RESOURCES

146

Fast depleting

Down stream products non - biodegradable

Non - Renewable

Urgent requirement: Biodegradable products from viable alternative feedstocks from renewable resources

PETROLEUM FEEDSTOCK

147

ALTERNATIVE FEED STOCK

PLANT ORIGIN

Starch

Cellulose

Guar

Lignin

Sugar

Molasses

Oils

Glycerol

ANIMAL ORIGIN

Chitin

Chitosan

Casein

MICROBIAL ORIGIN

Polyhydroxy Alkanoates

(PHB and its co-

polymers)

148

STARCH

Source: Corn, potato, wheat and rice

Economically competitive with petroleum

Biodegradable starch modified polyolefinic films; main application

area, Packaging

Fermentation to lactic acid and subsequently polymerized to

polylactic acid. Dow Cargill is the biggest producer of PLA produced

from corn starch

149

CELLULOSE

Linear polymer of anhydroglucose

Hydrophilic in nature, insoluble and crystalline

CELLULOSE PRODUCTS

Cellulose acetate

Cellulose nitrate

Cellulose propionate

Cellulose acetate butyrate

Ethyl cellulose

150

GUAR

Polymer consisting of Galactomannan units

Hydrophilic in nature

APPLICATION AREAS

Food dressings

Sauces

Milk products

Baking mixes

Paper manufacturing

Textiles, printing, and cosmetics

Pharmaceuticals

Oil drilling

151

LIGNIN

Naturally Occurring Polyphenolic Macromolecule

PRODUCTS

Alkoxylated lignin, which can react with isocyanates to produce

polyurethane solids and foams, which can be used as engineering plastics

Lignin can be blended with starch for making biodegradable films

Alkylation of lignin may lead to production of bioplastics

152

SUGAR

APPLICATIONS AREAS

Fine chemicals and Pharmaceuticals

Polymer

Building and structural materials

Fermentation or enzyme substrate for chemical production e.g. ethanol, citric

acid, oxalic acid etc.

New food products and sweeteners

153

SUCRALOSE

Chlorinated sucrose molecule which is 600 times sweeter than sucrose

SUCRALFATE

Sucrose aluminum hydroxide sulfate complex used as an ulcer medication for

humans and animals

SUCROGELS

Controlled release drug delivery

SUCROSE ESTERS

Surfactants and emulsifiers; applications in pharmaceuticals, cosmetics,

detergents and food

SUGAR

154

SUCROSE ACETATE ISOBUTYRATE (SAIB)

Food and industrial applications, automotive paints, as a clouding and

stabilizing agent in beverages, in nail polish and hair spray

SUCROSE EPOXY

Adhesive for metal to metal, metal to glass and fibre to fibre, wallboard, home

insulation, NW textiles

POLYSUCROSE

Copolymer of sucrose and epichlorhydrin, used for density gradients for cell

separations, diagnostic, food additives

SUGAR

155

VEGETABLE OILS

Jatropha Oil

Castor Oil

Soyabean Oil

Linseed Oil

Biodiesel is produced by processing of seeds

Surfactants and dispersants, alkyd resins, cosmetics, textiles

Epoxidized soybean oil is the plasticizerfor PVC also confers thermal stability, alkyd resins

Alkyd resins

156

GLYCEROL

Major byproduct in the production of soap industry and bio-diesel

Used as an ingredient in cosmetics, medicines, toothpaste, liquid soaps, tobacco products, food products

Production of polyester, polyurethane, alkyd resins and nitroglycerine

PHARMACEUTICALS

Tincture, elixirs, ointments, syrups

Lubricant, sweetening agent, antifreeze agent

Tooth paste and dental care products

157

GLYCEROL

COSMETICS

Vanishing creams

EMULSIFIERS

Glyceryl Borate, Glyceryl Biborate, Glyceryl Phosphate, GlycerylPropionate, Glyceryl Monostearate

SURFACE COATINGS

Alkyds, Lacquers, varnishes, paints & printing inks

FOODS AND BEVERAGES

Used in vanilla and citrus flavors in chocolate syrups as a solvent for many food colors e.g. carmine and cochineal

158

CHITIN

Second most abundant polysaccharide after cellulose; present in exoskeleton of invertebrates

Used as flocculant, clarifier, thickener, gas-selective membrane, plant disease resistance promoter, wound healing promoter and anti microbial agents

CHITOSAN

Widely used in the production of high gas barrier edible coating

CASEIN

Bottle labeling adhesives, leather coating

ANIMAL ORIGIN

159

Bioplastics (polyhydroxy alkanoates) and their co- polymers

POLY(HYDROXY-BUTYRATE) (PHB)

Accumulated by a large number of bacteria (A. eutrophus) as an energy and carbon reserves

Sucrose and molasses are preferred carbon source. The only commercially available bioplastic, Biopol, used for medical containers and other high value applications

Highly crystalline thermoplastic

MICROBIAL ORIGIN

160

BIODEGRADABLE EMULSIFIERS / SURFACTANTS

ALMOND GLYCERIDES

Similar characteristics to Glyceryl Cocoate but is more anti-irritant than Glyceryl Cocoate used in cosmetics

COCO BETAINE

High foaming, with good flash foamGLYCERYL COCOATE

Nonionic surfactant used as an emulsifier and mildness additive

POLYGLUCOSE

Nonionic surfactant, extremely mild and gentle, derived from sugar

161

SUCROSE COCOATE

Cleansing and make-up removing without stripping the natural oils on the surface of the skin

SAPONINS

Natural surfactants or detergents found in many plants, but they are most abundant in the desert plants Yucca and QuillajaExtracts from these plants are commonly used as foaming agents for beverages such as root beer

BIODEGRADABLE EMULSIFIERS / SURFACTANTS

162

PROJECTS PROPOSED BY SRI

Development of Polylactides from starch

Development of polyglycolides from glycolic acid

Development of Polyhydroxy butyrate from molasses

Development of Bio Diesel from vegetable oils (Jatropha)

Development of epichlorohydrin from glycerol

Development of surfactants from sugar for food applications

SETTING UPOF

CENTRE OF EXCELLENCE IN BIODEGRADABLE PLASTICS

PLASTIC INDUSTRY IN INDIA

Consumption - 4.8 million tons / annum Over 96% (4.6 million tons) is accounted for commodity plastics Per capita consumption 4.8 Kg as against world average 20 KgProjected demand in 2010-11 : 8.5 million tons (Growth rate @ 15 %)Raw material prices are influenced by international demand and supply of

crude oil.

CAUSES OF CONCERN Depletion of petroleum reserves, a non renewable resource Demand - supply gap of crude Non - degradability of polymer

Accumulation in environment Release of hazardous chemicals on incineration

Indiscriminate littering Choking of drains Water logging Bad aesthetics Drop in agriculture yield

REMEDIESCreation of awareness for proper and scientific disposal Development of novel alternative materials

Using renewable natural resources Photodegradable Biodegradable

Modification of existing polymers to make them degradable

Biodegradable plastics are able to be broken down into simpler substances by micro organisms, therefore unlikely to persist in the environment

BIODEGRADABLE POLYMERSInherently Biodegradable Natural Polymers

Polysaccharides (Starch, Cellulose etc,)Proteins (Gelatin, Casein, Soy, Silk and Wool )Others (Lignin, Shellac, Natural Rubber)

Synthetic Biodegradable Polymers Polylactides and its copolymersPolyglycolides and its copolymersPolyalkylene esters (Polyhydroxy Alkanoates)Polyamide estersPolyvinyl esters

Modified Synthetic PolymersUsing additives for induced photo, oxo & biodegradation

SYNTHETIC BIOGEGRADABLE POLYMERSPOLYLACTIDE (PLA)Polyesters of lactic acid; properties similar to polystyreneGood transparency and processability

Used in packaging applicationsPOLYGLYCOLIDE (PGA)Made from the cyclic diester of glycolic acid Stiffness limits its applications

Used mainly in medical applicationsPOLY (DL-LACTIDE-CO-GLYCOLIDE)Contain 25-75mol% of dl-lactide Properties intermediate between the homopolymers

SYNTHETIC BIOGEGRADABLE POLYMERSPOLY HYDROXY BUTYRATE (PHB)Semicrystalline, high molecular weight polymer obtained from bacteriaProperties comparable to polypropyleneBrittleness limits its applicationsPOLY(B-HYDROXYBUTYRATE)-CO-(VALERATE) (PHBV)Incorporation of HV units in PHB reduces its brittleness HV content at 25% results in a soft and tough polymer having

polyethylene type feel

SYNTHETIC BIOGEGRADABLE POLYMERS

POLYCAPROLACTONE (PCL)Water soluble polymer, degrades via enzymatic hydrolysisLow melting temperature (600C) limits its use as a conventional plastic;

overcome by crosslinking MODIFIED SYNTHETIC POLYMERS Starch modified polyolefinsPhotodegradable polyolefinsOxo-degradable polymers

Incorporation of additives results in development of low molecular weight fragments which are subsequently eaten up by the microbes

OXO - BIODEGRADABLE PLASTICS (OBPs)

OBPs Made From

Degradation of OBPs

Special benefits of OBPs are:No adverse toxicological effects Can be easily composted Food compatible & complies with

FDA (USA)EFSA (Europe)

Do not emit methane gas

Polymer resin (PE/PP/PS etc)

Total Degradable Plastic Additives (TDPA)

Sunlight Microbes Mechanical Streess Air (oxygen)

LIFE CYCLE OF DEGRADABLE PLASTIC

BIOMASS

CO2 +H2O+ Humus

Renewable Plant

Starch

Oxo- Biodegradation

Oxo-Bio Degrable Plastic

TDPA Modified polyolefin

Fossilization

Fossil Fuel

Refining + Polymerization

Polyolefin Resin

Monomer

TDPA

Starch Modified polyolefin

Biodegradable Polymer

Photo Microbes

Microbes

STANDARDS ON BIODEGRADABLE POLYMERS

AMERICAN STANDARDS

ASTM D 6400-99 Covers plastics designed to be composted in municipal and industrial aerobic composting facilities

ASTM D 6002-96 For the assessment of compostability of environmentally degradable plastics

ASTM D 5338-98 Aerobic biodegradation of plastic materials under controlled composting conditions

ASTM D 6340-98Aerobic biodegradation of radio labeled plastic materials in an aqueous or compost environment

ASTM D 5209-92 Aerobic biodegradation on exposure to activated sewage sludge inoculumunder laboratory conditions


ASTM D 5988 – 96

Aerobic biodegradation in contact with soil and mature compost

under laboratory conditions

ASTM D 5488 –94 D

Labeling of packaging materials which communicate

environmental attributes to consumers, users or both

ASTM D 6954 / 04

Accelerating and measuring the loss in properties and molecular

weight by both thermal and photooxidation processes, measuring

biodegradation, and assessing ecological impact


EUROPEAN AND ISO STANDARDS

CEN/TC 261/SC 4N 99

Requirements for packaging through composting and

biodegradation

ISO 14855

Disintegration of plastics under controlled composting

conditions – analysis of evolved CO2

BIODEGRADABLE POLYMERS

AREAS OF APPLICATION

Agricultural Mulch films

Surgical Implants

Industrial Packaging

Wrappings

Milk, Food, Personal Care

Pharmaceuticals and Medical Devices

Recreational goods

WORLD SCENARIO

Corn-based plastics are already available in the world market. Dow Cargill,

NatureWorks LLC, Novamont, BASF, and Mitsubishi are the majors

BIODEGRADABLE POLYMERS

INDIAN SCENARIO

SPC Biotech Private Ltd., Hyderabad plans to manufacture high-end

biodegradable polymers

Earthsoul India, Mumbai manufacturing 100% biodegradable and

compostable plastic carrier bags

Other units dealing with bio-degradable plastics

M/s. OM Bio-Plast Pvt. Ltd., Pune

M/s. Degradable Polymer Technology, Pune

M/s. Bio-D Plastics, Gurgaon

M/s. Selan India, Ahmedabad

CHALLENGES IN THE FIELD OF BIODEGRADABLE POLYMERS

Selection of suitable renewable resource (Region specific)Commercial viability; cost effective raw materials, processes & productsLimited application mainly in packaging; diversified industrial applications have to be identifiedDevelopment of the model having multi-directional approaches including

Proper waste managementRecyclingBiodegradable polymers

CENTRE OF EXCELLENCE : CONCEPT

In India the demand of biodegradable plastics depends on Customer response to costsLegislation by governmentsThe achievement of total biodegradability

Need for setting up a centre of excellence in the field of biodegradable polymerMeet the challenges

Providing necessary inputs to policy makersCo-ordinate R & D activitiesEngage in resource building and data generation for enhancing the existing knowledge in the field of biodegradable polymers

CENTRE OF EXCELLENCE : CAPABILITY CENTER SHOULD BE CAPABLE OFConducting R & D work for developing Data generation related to Environment & Toxicology Carrying out Laboratory studies for establishing quality limits,method developoment & quality evaluationProviding Independent & unbiased opinion Providing Training to young scientistsConducting collaborative programs with national & international organizations

CENTRE OF EXCELLENCE : FOCUS AREAS

Research on raw materials, process development, processing & applicationStudies on polymer degradation and degradation productsBio-compatibility studiesStandardization of analytical methodsProviding inputs for drafting protocolEnvironment impact assessmentConferences and mass awareness programs on biodegradable polymers

ROLE OF SRI AS CENTRE OF EXCELLANCE

RESEARCH AND DEVELOPMENTSynthesis of bio-degradable polymersCharacterisation of bio - degradable polymersProcess Development for bio - degradable polymersProduct/Process for bio - degradable polymers

EVALUATION OF BIO - DEGRADABILITYCreation of facilities as per ASTM, European and E.U. standardsGeneration of Data and framing of national standards

PROPOSED APPROACHES

Developing the monomers from renewable resources by Enzymatic & Microbial processIdentification of suitable nontoxic, non-hazardous additives to initiate

Photo degradationMicrobial degradationOxo- degradation

Modification of existing non-degradable polymers into degradable ones by incorporation of natural polymers such as Starch, Cellulose, Protein etc.

PROPOSED APPROACHES

Development of starch - PE blends for food packaging application and

their evaluation for bio-degradation

Development of formulations for controlled degradation of

polyethylene

Synthesis of polylactide from starch

Synthesis of polyglycolide from glycolic acid

Development of polyglycolic acid, polylactic acid blends and

evaluation of their biodegradability

Synthesis of polyhydroxy butyrates from molasses

Documents

REPORT OF THE WORKING GROUP ON CHEMICALS AND PETROCHEMICALSplanningcommission.nic.in/aboutus/committee/wrkgrp11/wg11_petroch… · Subject- Constitution of a Working Group on Chemicals