Biodegradable Packaging For Food Products
Biodegradable Packaging For Food Products
Biodegradable Packaging For Food Products
Biodegradable Packaging
for Food Products
Manufacturing Unit
Project Concept 3
Market Potential 5
Growth Drivers 7
Gujarat – Competitive Advantage 8
Project Information 10
- Location/ Size
- Infrastructure Availability/ Connectivity
- Key Players
- Potential collaboration opportunities
- Key Considerations
Project Financials 15
Approvals & Incentives 16
Key Department Contacts 18
Page 2
Project Concept
The concept
The project envisages setting up of Biodegradable Packaging for Food Products
Manufacturing Unit based on the raw material strength of Gujarat.
The manufacturing unit can focus on production, processing, marketing, exports, etc.
The rapid increase in non-biodegradable food packaging waste has caused adverse
environmental concerns. This has led to the development of polymers made from renewable
resources for food packaging.
Natural polymers derived from agricultural products (such as starch, proteins, cellulose and
plant oils) are the major resource for developing renewable and biodegradable polymer
materials.
The polylactic acid (PLA) and the polyhydroxybutyrate acid (PHB) are two of the biopolymers
targeted for use in the food industry as packaging material.
Vendors are introducing biodegradable and sustainable forms of packaging to cater to the
growing demand for eco-friendly packaging products. The Coca Cola Company launched its
Plant Bottle, which is partially made from bio-based plastics, while Danone is using PLA for its
yoghurt cups.
Page 3
Project Concept
Types of bioplastics
Bioplastics are used as alternatives to conventional fossil fuel based plastics and are increasingly
being used in Food Contact Materials (FCMs).
Biodegradable Made from both natural and fossil resources and are biodegraded by
plastics microorganisms in their natural environment.
Wood pulp is used to create paper and can be recycled into other paper
Wood fibers products. But UK-based Innovia Films takes wood pulp and creates a
cellulose-based film that is similar to plastic.
Page 4
Market Potential
Source: “Global Biodegradable Packaging Market 2016 Analysis and Forecast to 2022”, WiseGuyReports
$0 0%
2014 2015F 2016F 2017F 2018F 2019F
Page 5
Market Potential
Page 6
Growth Drivers
Page 7
Gujarat - Competitive
Advantage
Gujarat has more than 30,000 operative food processing units .
The Ministry of Food Processing Industries (MoFPI) has given approval
to Gujarat Agro Mega Food Park for setting up a Mega Food Park project
Huge food in Surat district.
Past
processing 10 cold chain projects are being implemented under MoFPI assistance.
industry
In 2015, the Government of Gujarat (GoG) gave approval to set up five
new units of agro-food processing sector in Sabarkantha, Kheda, Rajkot,
Kutch and Vadodara district at an investment of INR1.44 billion.
In 2016, the GoG granted 25 acres land for setting up India’s second
Indian Institute of Packaging (IIP) in Gujarat.
India’s The decision was made as the Government agreed that Gujarat needed
second a packaging institute since it is an industrially advanced state.
packaging IIP is expected to be set up in Ahmedabad or Gandhinagar and will offer
Past to
institute training, diploma and postgraduate diploma courses. The Indian Institute
of Packaging offers:
open in
Gujarat A two years full time Post Graduate Diploma in Packaging (PGDP)
A three months full time Certificate Course in Packaging (ITC)
Diploma under Distance Education Programme in Packaging (DEP)
for 18 months correspondence course.
The GoG announced its “Agri Business Policy” in 2016, which promotes
the food processing industry and developing the entire value of chain of
Agri Policy exporting locally grown farm produces.
Past
2016
As part of the policy the government has announced a 25% subsidy or
maximum of INR50 million for food packaging houses on the total cost of
establishment of any such unit.
Page 8
Gujarat - Competitive
Advantage
Other advantages
Flourishing economy
Gujarat contributes 7.2% of the Nation’s GDP and shows leadership in many areas
of manufacturing and infrastructure sectors. Gujarat’s SDP (State Domestic Product)
at current price registered a growth of 11% during the year 2014-15.
Page 9
Project Information
The MoFPI, in order to give boost to the food-processing sector by adding value and reducing
food wastage and loss at each stage of the supply chain, is implementing the mega food park
scheme in the country since 2008.
A mega food park, located in an area of at least 50 acres, works on a cluster-based approach
based on a hub and spokes model.
Infrastructure is created for primary processing and storage near the farm in the form of
primary processing centers (PPCs) and collection centers (CCs) located in production
areas.
Common facilities and enabling infrastructure are located at a central processing center,
like modern warehousing, cold storage, IQF, sorting, grading, packaging, pulping, ripening
chambers, tetra-packaging units, roads.
42 mega food parks have been sanctioned by the central government to be set up in India, of
which 23 are under implementation.
May be Readily
Clean Water Supply Difficult + Time Taking Readily Available
Available
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Project Information
Gujarat Agro Infrastructure Mega Food Park is an industrial estate which provides infrastructure
and mechanisms to strengthen the agricultural value chain by bringing together farmers, food
processors and the end consumers such as wholesalers, retailers & exporters.
The MoFPI Approved Project - Hence easier release of subsidy funds of MoFPI Schemes to
food processing Units.
Zero stamp duty on land lease (Exclusively to Gujarat Agro Infrastructure Mega Food Park)
Term loan at concessional rate of interest from NABARD under food processing fund
exclusively available to units in food parks
Lower import duty on imported machinery
Exemption from income tax for 5 years from commissioning date.
Benefit under Government of Gujarat's "Scheme of Assistance to Manufacturing Sector"
Short start-up time – Ready availability of non-agriculture converted plots & sheds
Offers offers ancillary support system for processing & warehousing facilities such as grading,
pulping, packing, sorting, temporary storage
Provides ready infrastructure to food processors which can save time to set up their units
Page 11
Project Information
Infrastructure availability
Logistics & connectivity
Rail Road
Air Port
Surat domestic airport is well connected to The nearest port is Hazira which is 25 km
various parts of the country. The city is from Surat.
located ~275 kms from the international Additionally, Hazira port is well connected to
airport at Ahmedabad. Mundra port and Jawaharlal Nehru Port Trust
(JNPT) – India’s largest container port
Proposed Thus, it provides a convenient textiles-related
In January 2015, Airports Authority of India trade gateway to International (Europe,
gave an in-principle approval for cargo Africa, America and the Middle East) and
terminal at Surat airport worth INR70 million. domestic markets.
The terminal is expected to be operational in
2017.
In February 2016, Surat Airport Action
Committee filed an online petition for an
international airport at Surat.
Utilities
Water Power
Water for industrial purposes can be obtained The main source for the power supply is
from four sources viz. Gujarat Water Supply Torrent Power Limited in Surat
and Sewerage Board (GWSSB), an irrigation
canal, dams, and surface reservoirs.
Page 12
Project Information
ITC X Kolkata
ITC X Kolkata
Ecolife X Chennai
Page 13
Project Information
Manufacturing of bioplastics
PLA is the most common bioplastic in use today. First, corn or other raw materials are fermented
to produce lactic acid, which is then polymerized to make PLA.
The range of applications for bioplastic is growing, from materials used in automobile interiors to
packaging for foods and cosmetics, agricultural sheeting, and household appliances.
Fermentation
Condensation
Lactic acid is fed into a reactor and converted
into a type of pre-plastic under high temperature
and in a vacuum.
However, to make the process more efficient
researchers suggest using zeolite (a porous
Lactide
mineral composed of aluminium, silicon, and
oxygen) as a catalyst in the reactor to guide the
chemical process that converts lactic acid into
lactide.
Polymerization
Page 14
Project Information
Key considerations
High cost of production
Raw materials used in the manufacturing of green packaging such as
PLA, PHA, starch, and PBS have volatile prices. The widening of the
1 demand-supply gap has led to substantial increase in the cost of raw
materials. The relatively higher price of bioplastic polymers with respect
to traditional plastics is a significant restriction for widespread use of
these materials.
Lack of commercial progress in developing biobased plastics and
chemicals and restricted availability of gas feedstock are also driving up
prices of bioplastic polymer.
Fragmented marketplace
The global sustainable packaging market is characterized by the
presence of many global and regional abrasives manufacturers, which is
3 a major challenge for many players in this market.
In addition, the market has been witnessing intense competition globally
because of an increase in the number of new entrants, especially from
emerging countries such as China and elsewhere in APAC.
Page 15
Project Financials
Project cost
The total project cost of setting up a unit to manufacture sheets and bags dedicated to bioplastic is
expected to be ~INR56 crore. The manufacturing unit will have a capacity to produce 5,000 tonnes
of dedicated bioplastic film, sheets and other products.
Project specifications Details
Land required 7,200 square yard (6,020 sq. mt.)
Land cost (@INR550 per sq. mt. as of April 2016)* INR40 lakh
Annual capacity of the facility 5,000 tonnes
Approximate cost for setting up the plant ~INR56 crore
*Note: Land cost has been taken for Bardoli
Pay-back period
Annual production 5,000 tonnes
Average price per tonne1 INR1.45 lakh
Annual revenue of manufacturing unit INR72.5 crore
Growth rate of global biodegradable packaging market 17%
EBITDA margin2 ~13.7%
Time (years) 1 2 3 4 5 6 7
Revenue (INR crore) 72.5 84.8 99.2 116.1 135.9 159.0 186.0
EBITDA (@13.7% of rev.) 9.9 11.6 13.6 15.9 18.6 21.8 25.5
Undiscounted cumulative
9.9 21.6 35.2 51.1 69.7 91.4 116.9
cash flows
Total payback period ~4.5 years
Note: 1) Average price of PLA
2) EBITDA margin considered for Uflex aseptic packaging plant in Gujarat
Page 16
Approvals & Incentives
Approvals
MOFPI has a number of schemes for capital investment and other subsidies in the food
processing sector.
Gujarat Agro Industries Corporation, Ltd. (GAIC) is the nodal agency for the state of Gujarat for
implementing schemes of MOFPI. The entrepreneurs of Gujarat have to submit their application
to the nodal Agency. On receipt of all necessary documents as per guidelines, GAIC shall
process & forward/recommend the application to MOFPI for evaluation & consideration.
Page 17
Approvals & Incentives
Gujarat government announced its Agri Business Policy – 2016 with emphasis on promoting
food processing industry by developing the entire value chain of exporting locally grown farm
produces.
Capital investment subsidy @25% of eligible project cost subject to maximum INR50 million for
cold chain, food irradiation processing plants and packaging houses
Back ended interest subsidy @7.5% on term loan with maximum amount of INR40 million for a
period of 5 years for setting up infrastructure project in Agro & Food Processing sector
(including packaging houses)
Page 18
Approvals & Incentives
Excise duty on food-processing and packaging machinery has been brought down from 10% to
6% in the 2014-15 budget.
The Government of India has planned to set up 42 mega food parks across the country by 2019.
Under Section 80 IB(11A) of the Income Tax Act, 1961, new units (i.e. not formed by splitting up or
by way of reconstruction of an existing business) in the business of processing, preservations and
packaging of fruits or vegetables, meat & meat product, poultry, marine or dairy products are
permitted to claim deduction from Income tax. This tax incentive is available as 100% tax
exemption for the first 5 years’ of operation, and after that, at the rate of 25% of the profits being
exempted from tax; 30% in case of a company. This benefit is available only for ten years provided
that such business had commenced on or after 1.04.2001.
Under Finance Act, 1994, Service Tax is not leviable on items contained in the Negative List.
These services are processes carried out at an agricultural farm including tending, pruning,
cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading,
cooling or bulk packaging and such like operations which do not alter the essential characteristics
of agricultural produce but make it only marketable for the primary market.
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Agriculture and Co-operation Department
www.agri.gujarat.gov.in/index.htm
Industries Commissionerate
www.ic.gujarat.gov.in
This project profile is based on preliminary study to facilitate prospective entrepreneurs to assess a prima facie scope.
It is, however, advisable to get a detailed feasibility study prepared before taking a final investment decision.