Plexconcil (Plastics Export Promotion Council), under the aegis of the Department of Commerce, Government of India, has released its set of pre-budget expectations from the finance ministry for the upcoming budget session of 2024. 

A significant expectation is to renegotiate the India-ASEAN FTA imposing Basic Customs Duty (BCD) of 10-15% on import of value-added plastics from 5-10%. Value added plastics products incur a mere 5-10% duty when imported under the India-ASEAN Free Trade Agreement (FTA), as opposed to the 10-15% Most Favored Nation (MFN) rates. 

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.

Hemant Minocha, chairman, Plexconcil, said, “While the import duty on polymers stands at 7.5%, the ASEAN arrangement offers lower rates of 5% 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 USD 800-million. Increase in import duty from 5% to 15% could bring additional revenue of USD 80-million.”

Furthermore, the Council has also been seeking to increase BCD on value-added imports from 10% to 15%. 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, Plexconcil said, “The expected increase in revenue is substantial. In the fiscal year 2022-23, value-added plastics imports amounted to USD 7-billion. A 5% incremental rise in customs duty would translate to a revenue surge of USD 350-million, 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% decrease in imports, a 239% increase in exports, and an overall enhancement in the quality of domestically available toys. 

The government's proactive efforts fostered a more favorable manufacturing environment for the Indian toy industry. Over the six-year period from 2014 to 2020, these concerted endeavors resulted in a doubling of manufacturing units, a reduction in reliance on imported inputs from 33% to 12%, a Compound Annual Growth Rate (CAGR) of 10% in gross sales value, and a general improvement in labor productivity.