How policy and fiscal benefits can boost India’s bioplastics industry

Robust regulatory framework and monetary incentivization is necessary for development of bioplastics manufacturing and infrastructure in India.

In brief

• Establish India as a bioplastics hub: The report “Incentivizing Bioplastics, a Biopolymer” advocates for a comprehensive national bioplastics policy to position India as a leading center for bioplastics, supported by fiscal incentives such as capital subsidies up to 50% on eligible investments over five years
• Implement a robust regulatory framework: Essential components of such a framework should include mandatory use of bioplastics, Quality Control Orders (QCOs), import restrictions, and rationalized GST rates to foster industry growth
• Support and promotion: Government must back for R&D, job creation, and infrastructure development. The report suggests educational campaigns and funding through the Swachh Bharat Mission to promote bioplastics and composting initiatives

To establish India as a leading bioplastics manufacturer a report by EY and ASSOCHAM, titled “Incentivizing Bioplastics, a Biopolymer”, recommends a national policy with capital subsidies and government support for infrastructure and R&D. The report outlines a strategic vision for transforming India’s bioplastics industry through targeted government interventions and regulatory changes along with educational campaigns and leveraging India’s agricultural strengths to enhance sustainability and environmental performance.

The report highlights India's pivotal role in the plastics industry, marked by its vast market and production capacity, yet shadowed by the environmental challenges posed by traditional plastics. Bioplastics, with their compostable properties, present a promising solution to the escalating plastic waste crisis which is causing environment and health concerns. The objective of the report aligns with the recently notified BioE3 (Biotechnology for Economy, Environment and Employment) policy which aims to foster high performance bio-manufacturing in India to facilitate a shift from chemical-based industries to sustainable bio-based models, promoting a circular bioeconomy and working towards achieving net-zero carbon emissions. The said policy recognizes biopolymers as one of the strategic sectors for sustainable growth which aligns with India’s vision of a cleaner, greener, and more prosperous future.

“The government must play a key role and take firm actions to ensure bioplastics succeed and grow in India. Government-backed fiscal incentives and regulatory policies are paramount in overcoming initial market entry challenges, such as high production costs and mandating their use” said Deepak Sood, Secretary General, ASSOCHAM.

Reflecting on the report’s findings, Bipin Sapra, Tax Partner, EY India said, “The ban of identified single use plastics in 2022 needs to be implemented in full for the creation of a demand for sustainable alternatives such as bioplastics. By allowing grants, subsidies and apt regulatory framework, the Indian government can incentivize businesses to invest in bioplastic production, research and development. These incentives will not only bolster the economic viability of bioplastics but also foster innovation, paving the way for superior and more cost-effective bioplastic products to emerge in the marketplace.” 

Formation of a national bioplastics policy

The EY – ASSOCHAM report emphasizes the need for the Government of India to develop and implement a 'National Bioplastics Policy' to establish India as a leading destination for bioplastics manufacturing. Such a policy is crucial for enhancing domestic capabilities in the production, application, and recycling of bioplastics. It may include provisions for composting and waste segregation at the municipal level. By fostering a clear and supportive regulatory environment, the policy could stimulate innovation and investment, positioning India more competitively in the international market. By the year 2040, goal may be to achieve a transformation in India’s consumption patterns by replacing 50% of single-use plastics with compostable alternatives, thereby significantly reducing the environmental footprint.

Incentives and fiscal support

The analysis suggests that substantial fiscal support is necessary to drive the growth of the bioplastics sector. It highlights the importance of offering capital subsidies of up to 50% on eligible investments over five years. The report also recommends introducing strategic incentives to encourage the phased adoption of bioplastics and rationalizing GST rates on these materials to 12%. These measures, at the central level, are proposed to help offset initial costs and promote wider adoption.

State governments may introduce a sector-specific scheme offering fiscal benefits, including a 50% capital subsidy, 7% interest subvention for seven years, SGST reimbursement of investment for 14 years, power rebates, and land subsidies.

Establishment of a bioplastics cluster

Establishing a ‘bioplastics cluster’ aims to focus on the recovery phase of bioplastics, promoting a circular economy. The government may support this by funding R&D, fostering academic-industry partnerships, and incentivizing advanced bioplastic technologies. Key infrastructure investments and job creation are also crucial.

The cluster will benefit both major industry players and MSMEs. Implementing these recommendations will help India integrate bioplastics into its environmental and economic strategies, leveraging its biomass potential and moving towards a circular economy.