Parul
PLEXCONCIL, the Plastics Export Promotion Council operating under the Department of Commerce, Government of India, has unveiled its pre-budget expectations for the upcoming 2024 budget session, highlighting key areas for policy reform.
A significant expectation is to renegotiate the India-ASEAN FTA imposing Basic Customs Duty (BCD) of 10-15 per cent on import of value-added plastics from 5-10 per cent. Value added plastics products incur a mere 5-10 per cent duty when imported under the India-ASEAN Free Trade Agreement (FTA), as opposed to the 10-15 per cent Most Favored Nation (MFN) rates.
Unfortunately, partner countries in ASEAN do not reciprocate this advantageous treatment regarding India’s plastics exports. Consequently, the India-ASEAN FTA does not benefit the plastics processing sector, as the preferential rates for importing value-added plastics from ASEAN are detrimental to the domestic plastics processing industry.
Speaking on India-ASEAN FTA, Hemant Minocha, Chairman of Plexconcil, said, “While the import duty on polymers stands at 7.5 per cent, the ASEAN arrangement offers lower rates of 5 per cent for certain polymers. However, the Cost, Insurance, and Freight (CIF) rates provided by ASEAN-based producers are higher for Indian importers than that extended to other countries. This discrepancy eliminates any potential benefits for Indian importers, with the advantage instead being retained by the suppliers. Imports of value-added plastics from ASEAN are valued at a little over $800 mn. Increase in import duty from 5 to 15 per cent could bring additional revenue of $80 mn.”
Furthermore, the Council has also been seeking to increase BCD on value-added imports from 10 to 15 per cent. This measure will significantly benefit the domestic plastic processing industry, which sustains approximately 5 million employees throughout its value chain. The domestic sector currently faces minimal profits, hindering expansion and capacity enhancement reinvestment. To boost exports, diminish imports of value-added plastics, and foster growth, it is imperative to augment the processing capacity of plastics. The proposed increase in customs duty on value-added plastics will be crucial in fortifying the plastics processing sector.
Speaking on the financial implications of the increase in BCD, Sribash Mohapatra, Executive Director of Plexconcil, said, “The expected increase in revenue is substantial. In the fiscal year 2022-23, value-added plastics imports amounted to 7 billion dollars. A 5 per cent incremental rise in customs duty would translate to a revenue surge of 350 million dollars, providing a notable boost to government revenue. Additionally, import substitution has been pegged at approximately Rs. 37,500 crores and increasing BCD will drive the industry’s goals to replace cheaper imports with quality products that are made in India and further drive the economy.”
India’s toys industry could be seen as a benchmark of growth on account of the right intervention made by the government. The Indian Toy industry exhibited remarkable growth in FY 2022-23 compared to FY 2014-15, evidenced by a 52 per cent decrease in imports, a 239 per cent increase in exports, and an overall enhancement in the quality of domestically available toys.
The government’s proactive efforts fostered a more favourable manufacturing environment for the Indian Toy industry. Over the six-year period from 2014 to 2020, these concerted endeavours resulted in a doubling of manufacturing units, a reduction in reliance on imported inputs from 33 to 12 per cent, a Compound Annual Growth Rate (CAGR) of 10 per cent in gross sales value, and a general improvement in labour productivity.
