Traders creating artificial scarcity of plastic raw material, allege manufacturers, processors

Some processors are trading in plastic, making a quick buck without engaging in their main business- processing of plastic

Some traders are creating an artificial shortage of raw material used to make plastic, resulting in a spike in prices, plastic manufacturers and processors alleged on Sunday. Plastic emerged a hero in the battle against the pandemic as PPE kits were made out of it for Covid warriors worldwide. But some profiteers have plunged the industry into crisis for narrow interest, officials of manufacturers and processors said.

S Dandekar of APC Polymers Pvt Ltd said, "Plastic raw materials such a PVC, Polyethylene (PE) and Polypropylene (PP) and ABS are being sold in the open market at a substantial premia by a section of large and MSME plastic traders and a few processors-turned-resellers. Their unethical ways have triggered panic in the plastic raw materials market, pushing prices significantly above the list prices offered by resin manufacturers." PVC, he said, is being sold at a premium of Rs 15-25 per kg based on grades, PEs at a premium of Rs 4 per kg, and PP at Rs 4 per kg over and above the manufacturers' list prices for PVC (high K) Rs 108 per kg, PEs Rs 87-108 per kg and PP Rs 96-97 per kg.

As per the modus operandi, these traders and processors are buying very large quantities from domestic, as well as overseas resin manufacturers, claiming substantial volume-based discounts, and selling it to processors at a substantial profit. Some of the processors are not converting raw materials into final products. Instead, they are reselling it to other processors at huge premia, thereby making a quick buck without even engaging in their main business of making plastic products.

This has resulted in an artificial scarcity of plastic raw materials and increased incidences of higher prices and squeezing margins for genuine processors, the official said. Another official at a large manufacturer said the plastic raw material producers, which include large PSUs and private sector companies, are serving their contract and non-contract customers every month, providing material at almost import parity prices.

Over the past few months, international prices which dropped following a steep fall in crude prices have been recovering from the low levels reached during the peak of Covid-19 crisis. Domestic prices too must directionally align with import prices, but Indian polymer manufacturers have shown considerable restraint in pricing, keeping in mind the fragile demand and the nation's economic situation, he said.

In sharp contrast, some traders and processors are selling a part of their volumes in the open market at huge profits and artificially shoring up prices by hoarding raw materials, he said adding to hide their unscrupulous act, they are blaming the resin producers for the higher prices. An industry official said the domestic sales of polymers by all producers in October-November have surpassed that of the average monthly sales of 2019-20.

PP sales rose 10 per cent to 2,382 kilotonnes while PE supply rose 15 per cent to 2,507 kilotonnes. PV supplies were up 12 per cent to 731 kilo tonnes. Also, import of plastic raw materials is freely allowed and import duty on most polymers is well below 10 per cent. Last month, plastic manufacturers and processors represented by more than 10 associations had written to the Prime Minister demanding constitution of a regulatory authority to curb undue profiteering.

The industry associations have also demanded to stop imposing anti-dumping duty, mandatory BIS standards, decrease import duty on raw material and ban/restrict export of raw material from the country to enable the plastic industry to survive and remain competitive with other countries like China.