Plastic manufacturers may be slashing their production by about 30 per cent this fiscal in the wake of rising input costs, impact of the rupee slide against the dollar and tighter access to finances.

The All India Plastics Manufacturers Association feels that the manufacturers have no room left to increase their product prices to counter the increase in input prices. Many smaller units are even considering a shut down, which could lead to higher non-performing assets for banks, it fears.

“We may have to cut our production by about 30 per cent this year if things do not improve,” Arvind Mehta, chairman of the association’s governing council said.

This sector, which has about 50,000 units sprinkled all across the country, with 90 per cent being in the SME category, produces about 8 million tonnes of different plastic products for a wide array of industries. With a major slice of these units struggling to brook the rising input costs and the impact of the depreciating rupee, a production cut appears the only way out, especially as domestic demand is also seeing a downward trend.

Input costs

Polymer raw material, that used to cost Rs 90 a kg about three months ago, is today Rs 120 a kg, Mehta told Business Line .

The Rs 50,000 crore industry, which grew at 14 per cent last year, is expected to grow at 8-10 per cent this year owing to the economic downturn, the association feels. To make matters worse, the industry is facing competition from neighbouring countries, which are flooding the domestic market due to low import barriers.

A study by trade body Assocham last month had estimated that the domestic demand for plastic could double from the existing 10 million tonnes in the next three years.

amitmitra@thehindu.co.in

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