After price rise seen in metals post first lockdown such as Copper, Aluminium and Steel used by manufacturing industries like electrical wires and cables, transformers, motors etc. another important raw material category, polymer compounds which includes LDPE, HDPE, LLDPE, XLPE etc. may experience price rise.
Government of India makes BIS Mandatory for Polymers in India
Department of Chemicals and Petrochemicals under the Ministry of Chemicals and Fertilizers issued an order dated April 15, 2021 that makes it mandatory for petrochemical producers of certain kinds of polymers to meet the new criteria set by Bureau of Indian Standards (BIS). The deadline for order implementation is 12th October 2021.
The order is applicable raw material used for three kinds of polyethylene materials, Low-Density Polyethylene (LDPE), Linear Low-Density Polyethylene (LLDPE) and High-Density Polyethylene (HDPE).
This is first time in India when BIS is looking to regulate the quality of polymers used in India.
BIS has denied possibility of any extension in implementation of these mandatory quality norms for assessing the quality of polymers used in India.
Effect of Mandatory BIS Regulations on Indian Polymer Industry and It’s Consumers
Many Indian polymer manufacturers have postponed their raw material import purchase orders amid expectations that these shipments may reach Indian ports after 12th October, 2021 i.e. the date of implementation of BIS quality norms. This is because consignments reaching India after the scheduled BIS implementation date may have to go through stringent inspection, delays or detention which would increase the import cost accordingly.
This BIS order is thus expected to increase delivery pressures on domestic Indian raw material manufacturing (for polymer) industry, since many manufacturers may find it challenging to meet the deadline for BIS standards as well as to meet increased demand due to above mentioned delays in imports.
These polymers viz. LDPE, HDPE, LLDPE and XLPE (derived from PE) on which the BIS regulations would be applicable are extensively used in electrical wires and cables, plastic-ware manufacturing and other industries. All these manufacturing industries and the end consumers are expected to get affected due to the supply shortage and a likely steep price increase.
Current Demand-Supply Gap for Polymers in India
Even when the above factors were not in play, the domestic polymer manufacturing industry was not able to meet the Indian demand.
According to data compiled by the apex polymer industry body, Plastics Exports Promotion Council (Plexconcil) for the financial year 2019-20, Indian polymer producers managed to supply 1.6 million tonnes of high density polyethylene per annum as against its annual demand of over 2 million tonnes, thus, rendering the country into a huge 0.4 million tonnes of deficit or 20%. Similarly, the availability of locally produced LDPE is estimated at 193,050 tonnes as against its annual requirement of 369,900 tonnes, resulting in deficit of 48%.
In a statement given to Financial Express Online on 21st April 2021 Mr. Arvind Goenka, Chairman of Plastics Export Promotion Council (PLEXCONCIL) said “The rationale of the order was to curb imports and improve the quality of plastic products in the country. But, this Order will accomplish neither goal”.
He further explained “Setting the quality standards on the raw materials would still allow cheap quality plastic finished goods to be imported into the country. In fact, the additional compliance will increase the cost of domestically produced polyethylene and as a result of the finished products putting domestic manufactures at a disadvantage over importers”. The domestic prices of PE derivatives have already increased about 4-5% in the last one month. Our assessment is that if the Government doesn’t extend the BIS deadline, prices for polymers may increase by further 10-15% or in coming months.