HomeIndustry TrendsJJM may push up demand for plastic pipes

JJM may push up demand for plastic pipes

Use of plastic pipes has become widespread both in rural India (for irrigation and housing) and in Urban India (for plumbing). However, last financial year was bad one for the industry due to lockdown and also steep increase in PVC prices.  According to some leading manufacturers, this has affected country’s PVC consumption which has seen de-growth by around 16% in volume during FY21. For example, Supreme Industries, one of the leading manufacturers of PVC pipes had a de-growth of around 3% in PVC piping system by volume.

Volatile PVC price

PVC is the predominant raw material in the Plastic Pipe business. However, the price of PVC has remained volatile during last 15 months or so. The prices of PVC were in downward trend from mid-March 2020 till first half of May 2020. Overall prices of PVC had gone down by R 13.50 / kg during that time. Thereafter PVC prices changed their direction and started increasing month after month up to April 2021. The prices almost doubled from the lows of mid-May 2020.

Fortunately, for the consumers, PVC price trend has changed once again – this time moving Southwards. PVC prices have fallen by 4,4% in the first quarter so far and dealers expect further correction in the price in the coming days.

Early release of funds under JJM

In addition to price correction, recent decision of the Central government to release Rs 6000 crore to 15 states for implementation of the Jal Jeevan Mission in FY22 for tap water connections in rural areas will be a boost for the industry and may help in demand revival. This is the first tranche of the four to be released instalments this financial year. The states will have to match similar contribution from their side. The budgetary allocation for JJM has seen a quantum jump from Rs11500 crore in FY21 to Rs50000 crore in FY22.

Jal Jeevan Mission  

Announced in the Independence Day speech by the Prime Minister in 2019, JJM aims to ensure access of piped water for every household in India. The mission’s goal is to provide to all households in rural India safe and adequate water through individual household tap connections by 2024. This mission for which the government has earmarked Rs 3.5 trillion rupees, will also implement source sustainability measures as mandatory elements, such as recharge and reuse through grey water management, water conservation and rain water harvesting.

Additional funds for water & sanitation

In addition, there is also Rs 26,900 crore assured fund available under the 15th Finance Commission led grants to rural local bodies for water & sanitation, matching state share and externally aided projects. Hence the total investment can easily be more than Rs one lakh crore p.a. till FY24. This quick release, that too in the beginning of the financial year clears the air on actual spending as against high allocation made in the Budget.

East & North account for major chunk

There are approximately 118.2mn households that are yet to be provided tap water connections in the country. Region-wise analysis of the requirement shows that nearly 1/3rd of the investment will go to the East and North-East regions (33%) followed by the Northern region (30%). In fact, North, North-East and Central regions together will account for 74% of the total envisaged expenditure. Pipes being bulky items their transportation over a long distance will involve huge transportation expenditure. Therefore, manufacturers of pipes located in these regions are likely to reap the benefits of the JJM. On the other hand, West has the least opportunity with only 6% of the tap connections pending. No wonder Supreme Industries has announced its second plant while Astral will open its first plant in next one year in eastern India with greenfield capacity.

In addition to JJM, several other government programmes like Swachch Bharat Abhiyan, Sanitation and affordable houses to all and development of 100 smart cities on all India basis – all are growth drivers to the industry. Further, the Finance Minister, in the FY22 Union Budget speech, announced the launch of Jal Jeevan Mission (urban) with an aim to provide tap water connections to 28.6mn urban households in 4,378 urban local bodies, and liquid waste management in 500 AMRUT cities. However, Covid-led lockdown in various parts of the country is a dampener in the short term. Also, there is a threat of third wave which if happens may throw the industry’s calculations haywire. Otherwise, it will be a smooth ride on the road of success for the industry, at least for next couple of years.

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