Plastic pipes industry - market share is shifting-min
India’s Plastics industry with a market size of Rs 1.8 trillion is one of the biggest in the world. Industry volumes are estimated at 16MMTPA (in FY17), which is expected to touch 22 MMTPA by 2020. However, per capita consumption of plastic in India is one of the lowest in the world 11kg against 100kg in developed markets. This throws a light on the future potential of the market
Indian plastic pipes industry is now a happening place. Capacity expansion by existing players, entry of new players, acquisition and consolidation and demand migration – all are happening in the industry at the same time.
However, the most exciting part of the whole episode is the shifting of market share which is likely to take place from unorganised sector to organised sector post several administrative, statutory reform measures taken by the government. Given the fact that Indian plastics industry is highly fragmented where unorganised sector accounts for 44% of the total market, has enthused existing players to go for expansion and is also attracting new players into the field.
In the past, high indirect tax incidence, liberal tax administration/monitoring and a short supply chain had supported the dominance of unorganized players who have been able to capture nearly half of the total market share. However, in the coming days, unorganised players may find it difficult to hold on to this market share due to changes in administrative procedures under GST using technology platform and effective implementation of e-way bill which are likely to help to hasten the shift towards formal trade. However, according to some market players, shift has already started taking place even before the demonetisation and introduction of GST. For example, in 2012, organised players had market share of 45% which they were able to increase to 56% in 2017. Now-a-days, consumers prefer to buy products from organised players due to growing brand awareness, rapid growth of organised retail in recent years and ability of the organised players to provide much superior products in terms of quality and performance.
However, implementation of GST from 1st July 2017 and its wider acceptance and further introduction of e-way bill system will help to plug the loopholes like bill-to-ship-to and un-recorded purchases which will eventually narrow down the gap in price between products in unorganised market and the organised market. Also, GST has taken away the geography-based exemptions that existed during the erstwhile regime thus providing level playing field for manufacturers irrespective of their location. Further, data analytics will gradually address the loophole of managing the input-output ratio over the medium term.
Under GST, the government will be able to employ technology to track end-to-end credit flow in the value chain. Further, bilateral validation of invoices, online integration of data and big data analytics will go a long way in addressing the loopholes in erstwhile tax administration. Inter-state e-way bill was introduced from April 1, 2018 to track the movement of goods on a technology platform. Post introduction of e-way bill system transporters are now hesitant to transport goods without an invoice, given increased fears of getting caught. Further, various states have gradually introduced e-way bill for intra-state transportation of goods. This should ensure better compliance and gradually increase GST collections.
India’s Plastics industry with a market size of Rs 1.8 trillion is one of the biggest in the world. Industry volumes are estimated at 16MMTPA (in FY17), which is expected to touch 22 MMTPA by 2020. However, per capita consumption of plastic in India is one of the lowest in the world 11kg against 100kg in developed markets. This throws a light on the future potential of the market.
There are four main components of the Plastics industry, viz., Pipes, Consumer Products, Packaging, and Industrial Products. The size of pipes segment is estimated to be around Rs 300 billions of which 40% is accounted for by the unorganised sector. Agriculture and construction are the two main user industries of pipes segment. As these two industries represent 25% of the GDP, growth of the pipe industry is expected to be in tandem with the GDP growth.
Expecting sunny days ahead for the industry, major players in the industry are beefing up their production facilities and re-visiting their marketing strategies. For example, Astral has unveiled few new launches in the piping space in the coming months. Finolex ventured into the fast-growing CPVC pipes market under the Finolex Flow Guard Plus brand post tie-up with Lubrizol last year. Further, industry also has seen several new players venturing into the field in recent times like, Skipper, HIL and HSIL. All these indicate that there is huge potential lying ahead for the industry and at the same time there will be more players joining the race to take advantage of the rising demand.