Govt subsidy on new technology to give a boost to plastic packaging sector

Cost of processing and packaging food can be up to 40 percent lower than parts of Europe which, combined with India's resources of skilled labour, make it an attractive venue for investment. A high degree of potential exists for almost all user segments which are expanding appreciably-processed foods, hard and soft drinks, fruit and marine products.

PET (polyethylene terephthalate) & plastics has the maximum percentage share mix in the packaging material used for water and soft drinks. Bottled water represents a key segment of the global beverage market. Market stimulants for bottled water include rising population, consumer spending patterns, lifestyle trends, and growing levels of health consciousness, among others. PET is one of the safest materials for storing water and soft drinks and has a number of attributes that make it perfect for bottled water. PET bottles are robust, lightweight and recyclable.

Over the last few years, the packaging industry has evolved and become an important sector driving technology and innovation growth in the country; adding value to the various manufacturing sectors including agriculture and FMCG segments.

The water packaging sector does face a lot of challenges from rapid changes in technology, costly skilled manpower, lack of advanced technology etc. 

Factors such as inflation, fuel price hikes and a high overhead costs affect the whole bulk/HOD water category. The unorganized/regional brands are enormously increasing at the expense of branded products, thus affecting the category on an overall basis. New avenues for growth such as vending machines, QSRs and roadside stalls have increased the possibility of sustained growth for this category. 

PET packaging segment is seeing a strong and robust growth in this part of the world, with growing population and increase in disposable income levels; more demand for premium and high performance packaging products is also increasing. 

If I take an example of water, we are seeing strong growth in the 20 liter bulk water segment. This package, which used to be only an institutional pack, is now also being used as a take home pack and that is significantly driving volumes in this segment. 

Several brand owners who had moved to the rigid plastic segment due to economics are now also seeing a rise in demand for high quality, enhanced performance and premium plastic packaging. Such Plastic and PET packaging not only enhance the brand image but also due to high performance bring down the total cost of ownership for brand owners in India. 

However, initial challenge is to convince the brand owners to pay upfront premium to try high performance packaging, Normally, a new start up in this sector has to find enough capital to fund losses for first few years to seed the market, however once the product and performance is established then the average pricing can be built up. Special ‘new technology’ government subsidy (for an initial period of about 3-5 years) in this sector will give boost to such technologies and foreign companies coming to India. 

As part of the Make in India initiative, Finance Ministry should consider 0 percent import duty on capital goods and raw materials for companies which promote new breakthrough technologies. Fiscal incentives should be provided to start-up companies which have invested into world class manufacturing by bringing in foreign technologies and investment, ECB permissible for working capital funding. These reforms will give a big boost to the packaging sector and motivate more foreign players to partner up with domestic companies to invest and grow the Indian market. 
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Atit Bhatia is the managing director of Petainer Innopac Packaging