Fast-moving consumer goods (FMCG) companies, which reported healthy operating profit margins for the first half of the current financial year, may face an erosion in margins in the coming quarters due to rising raw material prices. In addition, on 17 September 2009, the Ministry of Environment and Forests released a draft notification that seeks to ban the use of recycled or biodegradable plastic for storing, carrying, dispensing or packaging foodstuffs.
This means that FMCG firms can use only ‘virgin’ plastic in a natural shade for packaging foodstuffs. Pigment dyes cannot be used to colour the plastic.
The proposed law will also ban the use of paper-laminated plastics for packaging soaps, hair dyes, snacks and shampoos. This means FMCG companies will have to use plastic bottles instead of sachets, which will increase their packaging costs.
The notification also stipulates that all plastic packaging materials should have a code or mark engraved which reveals the type of plastic used—virgin, recycled or bio-degradable plastic—and they should be less than 12x18 inches (30x45 cms) in size and less than 40 microns in thickness.
If the notification becomes law, it will have a huge impact on the Rs7,500- Rs8,000 crore plastic packaging industry.
“Many of us feel that what has been proposed in the draft notification is not consistent with what is required. It will increase the cost of FMCG products and will make them unaffordable for the common man,” said Mr Venkatrangan, head of commercial, Paper Products Ltd.
The government has sought feedback from the industry within 60 days after the notification was released. However, FMCG companies claim to have received a copy of the notification only 15 days back and they now have only a week to put forth their views on the proposed law.
“We are approaching ISTMA (Indian Soap & Toiletries Makers' Association) with our suggestions, as the proposed law can have unintended consequences. The government has welcomed our suggestions so that we come out with a solution that is eco-friendly and also does not impact the FMCG industry,” said HK Press, vice-chairman, Godrej Consumer Products Ltd.
ISTMA will forward the suggestions of various industry players to the Confederation of Indian Industry (CII) which will then take up this issue with the government.