Why one of India's biggest sugar makers is getting into the plastics business

Balrampur Chini Mills Ltd has announced the biggest investment in its history -- Rs 2,000 crore -- into setting up a plant to manufacture easy-to-biodegrade plastics. What lies beneath its optimism?
Why one of India's biggest sugar makers is getting into the plastics business

Leading sugar producer Balrampur Chini Mills Ltd has announced a bold investment -- the biggest in its history -- of Rs 2,000 crore into bioplastics, compounds that break down in the soil within days and not centuries like regular plastics.

The sugar manufacturer, which has been exploring expansion options in allied areas over the past few years, will set up a 75,000 metric tonnes per annum Poly Lactic Acid (PLA) plant near its existing plants.

PLA, used for packaging, textiles, automotive components etc., is emerging as an eco-friendly alternative to traditional plastics.

In some applications, it is reported to be more durable than traditional plastics, despite being made from renewable feedstock like sugarcane and corn.

However, most of the plastics today are made from petroleum, and are simply dumped in landfills after use, where they can leach harmful chemicals into the soil and water. Sometimes, they also end up in the sea, where they create greater havoc by turning into microplastics that pose a direct threat to the food security of humans.

These microplastics, which can pass through cell membranes, are ingested by marine fauna, and lead to internal abrasions, blockages and damages. Worryingly, such chemicals accumulate at higher doses as they move up the food chain - such as in larger fish.

If left unaddressed, it is believed that microplastics could soon pollute the seas to such an extent that humanity will no longer be able to consume any type of seafood, posing a threat to the food security of the world.

To address such threats, India has introduced measures to curb the use of non-degrading, traditional plastic, particularly single-use items such as polythene covers.

While many supermarket chains have already switched to biodegradable plastic covers, their supply is still extremely limited, making them relatively expensive.

Increasing awareness, particularly in advanced markets, has also led to bioplastics consumption growing at a steep 15% in recent years.

Market reports estimate the industry shall exceed $10 billion by 2030. However, this is a tiny fraction of the overall plastics industry.

"The global primary plastic production is currently around 400 million tonne per year, with a market value of over $1 trillion," pointed out Vivek Saraogi, Chairman and Managing Director of Balrampur Chini, explaining the company's decision to enter this segment. "This is the plastic used in main applications of life. Despite their usefulness, traditional fossil-based plastics represents the linear and are not a circular economy,"

To lead the venture, Balrampur Chini has roped in Stefan Barot as President (Chemicals) and a member of the senior management personnel. Barot brings over 35 years of diverse global experience, including 13 years in the bioplastic sector, and was the chairman of European Bioplastics, a Berlin-based association of companies in the bioplastics sector before this.

Strong Demand

The company is betting on government continuing to crack down on non-degradable plastics, driving demand for more ecofriendly variants.

Explaining the timing of the company's initiative, Vivek Saraogi said he expects "a lot of tailwinds coming from the government" into the sector soon.

Moreover, existing production-linked incentives in UP and Central policies offer capital subsidies, tax benefits etc. to bioplastics makers like Balrampur Chini.

More beneficial policies exclusively for bio-alternatives are also likely in the pipeline, the company added.

Other helpful policies could be around stipulating minimum bio-content in certain plastics, liability for waste collection and climate change-linked monetary incentives. Saraogi said he believes the government is firmly behind the transition.

In the field of ethanol -- which is also made from sugarcane -- legislative support has led to swift growth. Balrampur Chini is optimistic of similar policy backing in bioplastics as well.

"If you see the API (active pharmaceutical ingredients) scheme, the micro-chip scheme, the defense incentives, the climate change focus of our prime minister towards a bio-based economy etc., we are very clear that there is a scheme which is going to be lucrative," Saraogi said, adding that demand will outstrip supply.

While FMCG bigwigs like Amul are already embracing PLA-based products, the company feels that enforcement of plastic bans and emergence of bioplastic standards will compel laggards to follow suit. The output will help in import substitution and will also be used for exports.

The company also noted that, besides government mandates, consumer pull and rising awareness is also aiding the growth of biodegradable plastics.

“The world and India is already moving towards PLA in its compounds,” highlighted Avantika Saraogi, Executive Director of BMC. “For example, for years, Starbucks has been using PLA in its cups, straws, stirrers, liners and paper cups even before any legislation."

Low Costs

Besides strong demand, the company also expects to benefit from lower costs as it ramps up capacity at its operations. It believes that positioning the PLA facility adjoining one of its existing sugar mills shall lend critical feedstock security.

This also eliminates transport expenses and eases logistics for key input sugarcane syrup, bagasse biomass etc and guarantees stability in production costs. In contrast, European and American competitors incur high starch/sugar shipping expenses.

"Our raw material is going to be at our doorstep with zero transport cost," Saraogi said.

Additionally, harnessing bagasse (sugarcane fibre) for captive renewable power generation slashes Balrampur Chini’s energy overheads versus PLA makers relying on cost-volatile fossil fuels.

"Our energy needs are again at our doorstep. We've seen how gas pricing can be erratic, so there lies our advantage," Saraogi sai, adding that such advantages can enable the company to emerge as a significant supplier of PLA prices to overseas markets.

The company is also working on creating a wider supporting ecosystem to aid the adoption of the chemical.

Towards this, it has acquired a minority stake in bioplastics compounding firm Konkan Speciality Pvt Ltd that can blend its PLA into customizable formulations.

Downstream partners play a vital value addition role for the bioplastics industry by modifying polymer properties for suitable end-applications in flexible packaging, coatings etc. They expand the scope of niche bioplastics utilization across domains by creating tailored plastics.

Balrampur Chini management expressed confidence that handholding partners like Konkan Speciality will accelerate traction among plastic goods manufacturers, FMCG players and other potential business consumers.

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