It was only about a year ago that Nikhel Morris and his wife Somali Kothari quit their city jobs to plunge into a venture close to their hearts — recycling plastic and rubber wastes into fuel.
It made perfect sense as India imports the majority of its fuel needs. At the same time the country struggles to recycle plastic and rubber wastes.
Their tiny venture at Wada, on the outskirts of the western Indian city of Pune, found ready finance from the State Bank of India (SBI). Everything seemed on track until the pandemic arrived, plunging prices of recycled fuel and disrupting waste collection.
“We are still optimistic, but we are now worried about repayments,” says Morris, adding that SBI has agreed to restructure their loan from five years to seven years in light of the situation.
The onset of the global pandemic has created a paradox for scores of small recycling units like theirs. They are struggling to survive at a time when mountains of plastic and rubber wastes are growing bigger amid the need for greater sanitisation material for packaging due to covid.
Prices of recycled fuel, which is also called light diesel oil, have dropped to around Rs 22-24/kilo from around Rs 32.50/kilo on March 22, just before the lockdown. The drop has come as demand from industries like steel and cement have evaporated following the pandemic.
Low demand, low capacity utilisation
Most of the units making recycled fuel are manufacturing at a fraction of their capacities because of the low demand from downstream industries. Prices of the recycled fuel also have a linkage to crude oil prices which have dropped from an average of around $57/barrel last year to around $37/barrel this year.
Besides low demand, the recycling units are also having to cope with fall in waste material supplies because of a shortage of workers. This is leading to more burning of the waste or simply greater mounds of them, straining the environment.
Hyderabad-based Recykal, which is a digital company specialising in supply and management of wastes for several companies including leading FMCG firms, is caught in a bind because of low demand and low supplies.
The breakdown in transportation amid the nationwide lockdown impacted the industry further because it affected storage of plastics, said Abhishek Deshpande, co-founder of the firm.
“We resumed services last month and things are improving, but the situation is still challenging because recyclers can’t afford to pay as much as before for plastic wastes,” Deshpande said.
The business was again picking up, but it will take time to become normal, he added.
India has around 30,000 units in the plastics sector that is dominated by small and medium enterprises, but still imports around Rs 48,000 crores of plastic products.
The nation consumes around 22 million tons of petrochemicals annually, out of which over 70% is plastics.
The growth rate of India’s plastics industry is one of the highest in the world. The consumption of plastic products are bound to increase in coming months, and thereby generate more plastic wastes.
Plastic use increasing
According to a submission by the central government in parliament, India’s 60 major cities generate around 25,940 tons of plastic a day. Of this, some 60% is recycled, mainly by the informal sector, while the rest — averaging 9,400 tons – ends up in the environment.
Recently, UFlex, one of India’s largest packaging companies, told indoasiancommodities.com earlier that while the need for packaging and thereby use of plastic was increasing amid covid, they had put in strong practices for recycling to prevent harm to the environment.
Mansukh Mandaviya, India’s Minister for Chemicals and Fertilizers, recently urged the industry to tap into business opportunities in plastic-based industries such as medical devices.
However, government policies will need to be tweaked to simultaneously support the development of the recycling sector in the current environment, according to industry players.
For example, along with plastics, many of the recycling units also depend on junked rubber products, which can be collected free from overseas markets with the only cost incurred is on shipment of the material.
But direct imports of such rubber tyres is not allowed by the industry, though they are permitted to buy from other agencies.
Industry executives say that the higher costs incurred hurts their profitability.
“We are not able to get enough tyres. and whatever is available is at very high cost. Our buying rate is very high and the selling rate is low. If the government supports us, then we can fulfil the need for LDO (Light Diesel Oil) within the country,” said Ankit Jain, director at JSPT Recycle Industries Pvt Ltd Mumbai.