Make in India: Sector Survey – Chemicals

1 Year agoThe chemicals industry of India contributes 2.1% towards the nation’s gross domestic product (GDP) and accounts for 15.95% of India’s manufacturing sector.

 

Introduction

 

Chemicals industry occupies a pivotal position in meeting basic needs and improving quality of life. The industry is a key enabler for industrial and agricultural development of the country and provides building blocks for several downstream industries, such as textiles, papers, paints, varnishes, soaps, detergents, and pharmaceuticals. It is also among the most diversified industrial sectors and covers over 80,000 commercial products.1

The chemicals industry of India contributes 2.1% towards the nation’s gross domestic product (GDP) and accounts for 15.95% of India’s manufacturing sector.

 

Sector Overview

 

India is currently the 6th largest producer of chemicals in the world by sales value with combined chemicals sales worth of US$ 93 billion in 2015. It accounts for 2.2% of global share.1

India’s production of major chemicals stood at 9,632 thousand MT in 2014-15 with alkali and organic chemicals constituting more than 86% of production and 11,594 thousand MT for major petrochemicals production with polymer constituting around 57%. Indian export of chemicals and petrochemicals stood at US$ 27.43 billion in 2014-15 and constituted 9.4% towards total export.2

The government permits 100% foreign direct investment (FDI) in this sector under the automatic approval route. Manufacturing of most chemical products inter-alia covering organic/inorganic, dyestuff and pesticides is de-licensed.

Factors such as boost to speciality and agrochemicals chemicals due to rapid development in construction and agricultural sector, inadequate per capita consumption and strong demand from paints, textiles and diversified manufacturing base shall aid towards the development of Indian chemicals sector, the same is expected to grow at around 9% per annum and touch US$ 214 billion by 2019.3

 

New Initiatives & Vision for the future

 

Government of India has launched several schemes and initiatives to encourage growth of the sector which include:

  1. Petroleum, Chemical and Petrochemical Investment Region (PCPIR) scheme: concept of PCPIR is a cluster approach to promote petroleum, chemicals and petrochemical sectors in an integrated and environmental friendly manner on a large scale.
    • PCPIRs have already received investments worth US$ 24.68 billion till now, these PCPIRs are expected to attract investment in the tune of US$ 117.42 billion approximately.
    • PCPIRs are being developed in Andhra Pradesh, Gujarat, Odisha and Tamil Nadu and have already generated direct and indirect employment for 0.2 million people with total potential of 3.4 million.
  2. Plastic parks scheme: cluster development scheme aims at setting up of need based plastic parks, an ecosystem with state of the art infrastructure and common facilities. Under this scheme GoI provides grant funding up to 50% of project cost with a celling limit of US$ 5.97 million per project. 10 parks have been approved by central government and “in principle” approval has being given to 8 more in 2015.
  3. R&D and Skill Development initiatives
    • Focus on innovation and R&D by setting up “Centres of Excellence” to support chemical sector’s movement up the value chain from bulk chemicals to more value-added chemicals.
    • Offering investment allowances, tax deductions on acquiring plant and machinery. Additional incentives are being offered depending on the scale of investment for the industry sponsored R&D initiatives and set-up of dedicated in-house R&D facility.
    • Augmenting existing testing centres to act as certifying agencies for testing plastic products and raw material to meet BIS standards.
    • Establishing specialized vocational training centres in clusters for skill development.

Steps taken by the Indian government have ensured that this integral sector is poised for rapid development in the coming years. Also it is pertinent to note that chemicals (excluding fertilizers) ranks 7th in sectors attracting FDI equity with cumulative inflows of US$ 11.9 billion during April 2000- March 2016.4

The results of these initiatives can be seen in the increasing interest displayed by major companies to expand their business in this sector. Asian Paints is investing USD 300.63 million to build the world's largest paint manufacturing plant at Mysore, Karnataka. The proposed plant will have capacity of 600,000 kilolitres per annum, employing 900 people directly and 4,500 people indirectly.

 

Sources:
1 Annual report 2015-16, Department of Chemicals and Petrochemicals, Ministry of Chemicals and Fertilizers, Government of India
2 CEFIC, The European Chemical Industry Council, Facts and Figures
3 Tata Strategic Management Group and FICCI, India Chem event
4 FDI Statistics, Department of Industrial Policy and Promotion, Government of India


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