 Hello and welcome to this special discussion where we look at the working of India's petrochemicals industry. We look at why this sector has been dominated by just a few players. Why is this industry monopolistic in character? And we're going to also look at how this sector may change in the near future with the entry of a new player. I'm very happy to welcome Om Prakash Singh, an engineer by training, currently an advisor to the non-government organization called the Centre for Financial Accountability. Om P, thank you so much for giving us your time. Let's start our conversation by you giving us a broad overview of India's petrochemicals industry. Now we know petrochemicals or plastics or a range of plastic products like PVC, polyvinyl chloride, HDPE, high density polyethylene, LDPE, low density polyethylene. They are used widely for a wide range of products, soaps, detergents, explosive, rubber, spades, besides everything from bottles to containers and buckets. We have several small units, thousands of them downstream units, but a few players at the top were making the petrochemical products. How do you see the working of India's petrochemicals industry in the context of various commitments that have been made by the government of India to international organizations? Because manufacturing petrochemicals is highly carbon intensive, so I'd like you to talk a little bit about India's international commitments and where the petrochemicals industry fits into these commitments. Thank you for having me here. So like you said, petrochemicals industry in India is very monopolistic or oligopolistic in nature with couple of players at the top who make the feedstock for all the other midstream industries which convert that into products that we use every day. Now if you look at the industry, the pesticide and the fertilizer part is primarily owned by the government, PSUs. PSUs stand for public sector undertakings, but the petrochemical that goes into making materials like plastic which you gave examples of, they are primarily manufactured by the private sector and within that it is mainly reliance that is making most of the feedstock. In fact they have monopoly on LDP, the low density polyethylene. And you're talking here about reliance industry is limited, which is actually India's biggest privately owned corporate entity, I would say a conglomerate headed by one of India's richest men Mukesh Ambani, who's also one of the world's richest men. Please continue. And the Jamnagar Refinery Complex is one of the world's biggest refinery complex. They say it's the biggest. They do say it's the biggest. And so a lot of the policies are framed in a way that benefits the industry in both financial as well as regulatory terms, non-financial regulatory terms. So very recently we observed that there were duties that were imposed on certain chemicals that reliance makes which are feedstocks rather and their own industry. Those duties were removed by the government. I'm going to stop you here. I want you to talk and elaborate on these issues in greater detail. The duty structure on raw materials like PTA purified pterothalic acid or MEG monoethylene glycol. But can we first talk a little bit about what are India's commitments to the rest of the world and where India's petrochemicals industry. I mean, how it fits in or does not fit in into India's commitments. Yes, please. So India has committed to reduce its carbon intensity for the GDP by 45% by 2030. They have also said they will be net zero by 2070. To that effect, after the Paris Agreement, they have actually increased the taxes on petrol and diesel. Even though we all know petrol and diesel are inelastic commodities. So just by increasing the price, the consumption will not go down. Or not go down proportionately. Not go down proportionately. You are talking about petrol, diesel. Yes. Their tax is at more than 60% today. Whereas plastic and other petrochemicals, which will be affected by pricing, they are to some large extent price sensitive. And this is seen in multiple studies across the world, not only in India. That if the price goes up, then the consumption goes down. The taxes are only around 12% to 18%. And they are within the GST framework. While we know that the emissions, both in terms of CO2 as well as methane, from the petrochemical industries as bad as when crude oil or gas is used as a fuel. So petrochemical they are saying is essentially use of crude or natural gas to make materials. Whereas when we use them as fuel, that's where the government has focused. Government in fact is trying to reduce the import of crude oil by increasing the ethanol blending in our petrol vehicles. And main reason given is that we want to reduce our import dependence. We all know that we import about 85 to 87% of our crude oil. But at the same time, the government is promoting the petrochemical industry. They have set up something called the Petroleum Chemical and Petrochemical Investment Regents. Where up to 20% viability gap funding is being offered. Please explain what you mean by this. By themselves, the petrochemical industry may not be profitable. And therefore, large players are reluctant to invest in petrochemical by themselves. So government has to step in and create the enabling infrastructure by which it becomes viable for this industry to sort of have a positive return on investment. And so almost 20% in our study we have found is provided by the government as viability gap funding. And that's where the support or the subsidy in a way starts for this industry. The other is of course like I mentioned taxation. They only taxed at 12% to 18%. Whereas the kind of impact they have on climate or the environment is perhaps higher than when crude oil is used as fuel. Yet the government also says we are doing away with one time use plastic. I mean the government claims that it's doing its best or trying very hard to encourage people to give up plastics, use biodegradable and natural products. But do you see a certain hypocrisy in the position of the government? Absolutely. First of all, the definition that the government uses for single use plastic itself is flawed. They think that only when the single use plastic is used by the end user, which is primarily street vendors and small shop owners, that is called SUP or single use plastic. So the carry bags or the cutlery, balloons and all of these things they have put in the ban list straws. Straw is the only material that also gets used by large FMCG companies, the fast moving consumer goods industries. Otherwise if you see all their packaging in single use, whether they use multi-layered packaging for biscuits or chips or Amazon delivers their products in plastic bags. It doesn't matter if they are more than 120 micron, it is still single use plastic. If it comes to me, I will cut open the packet and I will throw it. Or they use thermocall for packaging refrigerators and other white goods. All of that is single use plastic. In fact, there is data to show that the items that are on the ban list constitute almost 2-3% of the overall plastic that is made. Whereas single use plastic is more than 50% in the country. So bulk of the single use plastic is exempted from the ban. Interestingly, what the government has also done through the EPR and the plastic based management tools. What do you mean by EPR? EPR is extended producer responsibility where the producer of that material is responsible for dealing with it after its usage as well to the end of life. Now if they implement EPR in letter and spirit, then for example Nestle would be responsible for the Maggie packet that gets discarded after the Maggie is consumed by the consumer. But there what the government has said. Or Amul. Or Amul would be responsible for the. Bag after the bag could be taken out of the bag. What happens to the bag after? Yes exactly. So all of these industries would be responsible for the packaging that because I as a consumer am not buying that plastic packaging. I am buying the milk or I am buying the Maggie noodles or I am buying the biscuits or chips. I am not buying the plastic. The industry is choosing to provide it to me in that plastic packaging because it benefits them. I actually as a consumer have health impacts because of the packaging that they use because the plastic that is used for packaging can have anywhere between 10,000 to 16,000 chemicals. Many of them are carcinogenic in nature. A lot of them have endocrine disrupting. I mean yes carcinogenic essentially means cancer causing. A lot of them disrupt the endocrine system in the body and I am consuming that. Some of these chemicals can also enter through the skin. I don't necessarily have to eat it. So all of that is actually harmful for me and therefore I as a consumer don't want that plastic. I want to produce what is inside the packaging. Correct. That is what I am purchasing. So the government claims is doing a lot but it's actually doing it. Doing the opposite. Is the opposite or little or nothing? No it's actually the opposite. So that's where I am coming to. When they came out with the extended producer responsibility rules under the plastic waste management rules amended 2018. And 2021 they said the EPR is to the extent that the industry or the company has to collect back that same package of plastic from the market. So Nestle has to buy back. It uses a certain amount of plastic. Single use plastic. Therefore it should buy back from the market. Equal amount of plastic. In the form of waste. That may not have the Nestle brand on it. So they can go ahead and buy any plastic and then they need to burn it in a waste energy plant or a cement kiln. Now burning it they are saying will be categorized as recycling. Nowhere in the world you burn fossil fuel. Plastic is essentially fossil fuel. You burn it and you say you have recycled it. So that's the first problem. The second is that once you burn it the energy that it generates is called renewable energy. Now again nowhere in the world you burn fossil fuel and you call it renewable energy. Why have they done that? Because by itself you cannot give subsidy to this industry. But once you categorize that as renewable energy you can subsidize them. So there is more than hypocrisy in what the government is doing. Absolutely. In fact as some of you have argued you are actually the small vendor. The small shopkeeper is being told you can't use single use plastic. But the big players, the big users, the fast-moving consumer goods companies, the Nestleys of the world, the Unilever, Coca-Cola, Pepsi-Cola, National Dairy Development Board, Amulet, etc. They are getting away relatively lightly. Yes. There is another dimension to the working of this industry. The feedstock as you pointed out. They are just a few companies in the business. Reliance Industries Limited in 2002 when Atal Bihari Vajpayee was the Prime Minister of India acquired the public sector company Indian Petrochemicals Corporation Limited. That's IPCL. After this acquisition Reliance Industries became a major, a monopolist in the production of a wide range. You talk about LDPE, low-density polyethylene, polyethylene itself, polypropylene, polyethylene terephthalate, PET PET, which is used for making plastic bottles and containers, as well as PVC, polyvinyl chloride. The other player is of course one of India's biggest public sector companies, Indian Oil Corporation. And the others are really in the margins. Yes. I'm talking about Mitsubishi in Haldia, their affiliate. What we have seen for a long time now and there is a book by Hamish McDonald, the Australian journalist called The Polyester Prince. He's provided a detailed and a very compelling narrative of how government regulations and rules and customs duties pertaining to imports of raw materials that are essential for producing these plastic products, how they've been manipulated, changed to benefit Reliance Industries Limited. And even now when you see two widely used intermediates, MEG, that is Mono ethylene glycol and PTA, purified terephthalic acid. These products, the import of these products, the duty structure, the way anti-dumping duties are levied or not levied by the Department of Commerce, the DGTR, the Director, Red General of Trade Remedies, all seem to be biased in favour of these major players, notably Reliance Industries Limited and also Indian Oil Corporation. What are your comments? So, if we go back to the 1980s when Reliance was still in the government's business and the fibre business and not yet producing polymers and petrochemicals, they were in support of reducing these duties so that they can import this at a lower cost from outside and therefore start getting a foothold in the fabric business or the government's business through the Wimmel brand and some of the other brands. They were competing in Bombay Dying directly then and they were successful in influencing the government to reduce the duties so that they benefit from that business. Once they did the backward integration by setting up the Jamnagar Refinery and buying out IPCL, they then decided to reverse the duty structure and start imposing these duties back so that other players do not do what they have done and do not benefit from a similar... Effectively shutting out potential competitors. Entrepreneurs, innovation as we call it. So they have basically killed the innovation in the industry after having done it themselves. And that's really not what capitalism in true form should be. This is basically a classic example of crony capitalism where the industry influences the policy to benefit themselves and monopolize the business. And so we see that playing out in the 80s and then again in 2000s when they got the monopoly and then very recently the government decided to do away with some of these tariffs and Reliance started feeling the pinch because the yarn and the fiber as well as the government business which is basically 40,000 micro, small and medium enterprises, MSMEs. And then employing hundreds of thousands of people. The largest employer after agriculture in the country. They benefited from the removal of these duties. But then Reliance felt threatened because they thought they will lose the business in the near future and so they have gone after this duty and they have been able to get either through the government or through court orders these duties reinstated in the name of trying to protect the country and the interests of the country. But actually you're making the business of these 40,000 MSMEs very difficult. They're losing business. They're losing competitiveness. And therefore MSMEs have already struggled during demonetization through GST implementation through the lockdowns and these sort of practices will further make it difficult for them to survive. And I think this has been the policy of the government to monopolize each of these businesses. We were talking about street vendors. When I put certain restrictions on the plastic that they use but don't put restrictions on packaged food like Maggie what essentially I'm doing is I'm taking some business away from street vendors and giving it to these corporates and making them larger. And so this is playing out from MSMEs to Reliance. It is playing out from street vendors to Nestle, Unilever, Coca-Cola and Amul and it is happening in ways that we don't necessarily see directly. OP, you've just mentioned this in passing. There are at least 12,000 units that are making products using petrochemicals and these in turn outsource to other small, micro, small and medium enterprises and as we have just discussed literally hundreds and thousands, hundreds of thousands of people, lakhs of people, they depend on these. I mean they are employed with this in this sector. Now we've seen a running battle of late with these associations that represent these smaller and medium sized units and the big players saying look why are you protecting Reliance? We are importing as you pointed out almost 90% of our total requirements of crude oil. In the case of various kinds of plastic products and raw materials we are perhaps importing a smaller proportion but we are nevertheless importing it and by protecting the likes of Reliance Industries Limited and Indian Oil Corporation you are actually depriving these smaller units of a cheaper source of raw material to make all the products that they are making including textiles, blended fabrics besides all these plastic products whether it be buckets and bottles or a whole wide range of products but invariably these players too are fighting a losing battle most of the time. All their pleas to the government, to the department of commerce, to the DGTR that is the director general of trade remedies more often than not tend to fall on deaf ears. They even lose to the courts because of just the muscle power and the influence that Reliance has on the policy space and the regulation space. So I absolutely agree it's a losing battle and the monopoly is only going to get stronger and there is one paper by Viral Acharya who is a former deputy governor of RBI How these big five guys are causing the inflation that the country is seeing today. And Viral Acharya mind you is no left wing socialist. He is about as right as right they come. And this paper that you are talking about was made for the Brookings Institution in the US. That's the one. That's right. So he is a pro market, he is completely capitalist. Reliance, Airtel and Adani. Adani yes. Yeah these five conglomerates. They are contributing to inflation. Yes please continue. So this knowledge is now available with the government that these people are causing inflation but they're still supporting and increasing their size and their power and heft in the market and that's absolutely against the people of the country and it's if I may use the term it's anti-national what the government is doing but they still continue to do that. And as you say it's directly affecting the livelihood of their different estimates. One of them is 10 crore, 100 million. Some people say 150 million people they are directly impacted their livelihoods. As you said earlier the manufacture of textiles generates the largest numbers of jobs in India after agriculture. What do you think is now going to happen when the Adani group enters the picture? It's planning a major project in Mundra in Gujarat. I've had a detailed discussion with Swati Seshadri of the Centre for Financial Accountability on the subject and she's talked in some detail about the environmental consequences of this project and this is using the cheapest but also the dirtiest technology in converting coal to polyvinyl chloride and you're importing the coal. Mr Adani's conglomerate is importing the coal from mines that it own operates. It's coming to India to the port which he operates and then used in a plant which he owns. So you have these monopolies cutting across sectors. And it's going to be funded by public sector banks. SBI is going to be funded by a consortium of banks headed by the State Bank of India, correct? So it's ultimately using our money to create a duopoly. At best it will become a duopoly between the lands and Adani. And that of course that fight will be very interesting to see how it plays out and whether it benefits the people or it only continues to benefit the two of them is to be seen. But the PVC industry itself is like you said it's using the dirtiest straw material. Whether it's energy or material, coal is considered the dirtiest source and the output PVC is no good at all. It's one of the worst plastics that you can use. In many cities in Europe they've actually banned PVC for construction because when there is a fire most people don't die because of the fire. They die because of the toxic fumes that are in the immediate environment and PVC produces one of the most toxic fumes there is. And so they realize that during fires this can be a big hazard. So they are starting to ban PVC. Whereas in India we are promoting PVC not only in construction but also all the banners that we see around us they are made from PVC. What we call the flex banners and any election you will see the whole city gets splattered with these banners of political parties of all shades of... And they're all using plastic. They're all using plastic. That's right. My last question to you and we'll sort of conclude on the note on which we began. We are generating huge amounts of plastic waste. One estimate says that approximately 9.5 megatons of plastic waste are being generated every year. As the world's most populous country we are generating about... We are the fifth in the world in terms of generating the waste. And nearly half of this waste is ending up in landfills. It is polluting water bodies, rivers and definitely exacerbating the environment of this country. Now while you're talking about reducing emission intensity over the next seven years by 45% while you're talking about the whole idea of carbon neutrality in India in a net zero country, a goal by 2070 everything that the government is doing seems to be contrary to what it is claiming. So maybe you can conclude by telling us the viewers of this program and the government of India what needs to be done now. What needs to be done to stop this hypocrisy. I think the answers are fairly easy, not easy to implement but fairly easy to imagine. We as a country and our culture has been of reuse. I remember as a child we used to buy milk in containers that we could use again and again. We would buy a lot of other essentials in our cloth bags and so on from the neighborhood shop. So that does two things. One is it reduces the single use plastic and promotes reuse and better environment. And two it promotes the neighborhood businesses in a way that today is breaking that chain and we are moving towards big baskets or reliance stores and so on. So I think if the government pushes that single use plastic will be banned in true sense not in the limited sense that it has banned today and create systems, government will have to set up those systems of reuse in the market. Some of it will have to be at individual level, some of them will have to be at system level but if reuse is imposed on the country it will benefit the environment it will benefit the health of the people and it will bring back our traditional and cultural ways of living. Because when plastic entered it completely decimated those you know now in temples they are using plastic packaging which I cannot imagine in most larger temples don't allow it but smaller temples they don't have the understanding and so they have started allowing for these I mean most people don't even segregate their waste they don't segregate the waste but if we reduce single use plastic I think segregation as a problem itself will reduce as well of course because the waste is unsegregated it's mixed waste the government doesn't know what to do with it and then the whole machinery is fighting only at looking at what to do with the waste but if we stop generating that waste as we say close the tap or reduce it at source the problem will become much easier to solve at the tail end but this is not a problem that you solve at tail end for example when there was more sulphur in the tailpipe emissions we do not keep attacking the engine we also went and changed the refining process and said the sulphur in the petrol and diesel has to reduce the lead in the petrol and diesel has to reduce some amount of it you can do at the engine end but otherwise it has to be at the source the change has to happen at the source and so we have to reduce or remove those 16,000 chemicals that are added we have to reduce or remove the single use plastic from the market we have to promote reuse and we have to bring back our traditional systems of living our life has to go back to a more healthy a more environment conscious way of living well thank you OP I can only hope that the powers that be those who run this country the policy makers, the decision makers the big business conglomerates will listen to what people like you are saying and one can only hope that more and more people will become aware of the direction in which we are working and the utter hypocrisy of the government in claiming something to the public and claiming something to international organizations but doing just the opposite thank you once again OP for being with us and you've just heard and watched Om Prakash Singh advisor to the Center for Financial Accountability discussing the way the petrochemicals industry is working in India its monopolistic character how it's likely to change with the entry of the coal to polyvinyl project proposed by the Adani group and at the end of the day the utter double standards the utter hypocrisy of the government in claiming is doing something is doing a lot to protect the environment including controlling the use of single use plastic but in effect doing just the opposite thank you very much for being with us Namaskar