THE government is considering a proposal to slash the 16% excise duty—tax on production levied at factory gate—on plastics by half to drive up consumption of plastics in various sectors like agriculture, packaging, irrigation, geo-textiles, healthcare, lifestyle, automobiles and infrastructure.
The move is expected to spur price reduction in polymers used in a variety of industries from auto accessories to medical devices. This would achieve the twin objective of fighting inflation as well as increasing the percapita consumption of plastics outlined in the new petrochemicals policy. The idea is to drive up demand for the Rs 55,000 crore plastic processing industry, which 33 lakh people depend on for their livelihood.
The finance ministry is favorably considering the chemicals and fertiliser ministry’s
recommendation, but the final decision could be influenced by overall revenue considerations, said an official. Now the government gets Rs 7,300 crore revenue from the plastics processing industry, said the source. Exporters get refund of various levies that they pay for the nearly $1.9bn turnover.
The government is also considering to slash the 5% customs duty on naptha for producing materials other than polyethelene and polypropylene to meet the domestic demand for naptha. Now producers find it more attractive to export than to meet the local demand. Naptha attracts nil duty for making these two polymers. The intention is to boost the plastic processing industry which has about 22,000 units and 15 rawmaterial producers.
China has successfully created a world class plastic processing industry. It controls half of the global footwear market and a little less than three-fourths of the global toys market. The neighbour exports 7.5 million tonnes of processed plastic every year. The government also wants the per capita consumption of plastics to considerably go up from the present 4.5 kg which compares poorly with the world average of 25 kg and 30 kg of China.