The thrown away bags are first washed and sorted before being turned into plastic sheets, which are then remodelled into fashionable handbags.
Mrs Ahuja and her husband were already involved in waste management and after they had thought of the plastic bag recycling idea they established a non-governmental organisation called Conserve to launch the project, using their life savings to fund it.
Plastic bags cause such a problem in India that one state, Himachal Pradesh, has even banned them but now in Delhi, the Ahuja's employ rag pickers to scour the city's rubbish dumps.
Some women cut the handles of the plastic bags to make them into sheets, whilst others wash them in water and detergent and hang them to dry on a clothes line. The bags are then moulded together to form single sheets of thick, durable plastic, which can be stitched into bright, colourful handbags.
Conserve has now become a highly successful business that employs 300 people and already has a turnover of around $150,000.