Chemicals & Petrochemicals

  • Expand all
SUMMARY
  • Sixth largest producer of chemicals worldwide and third largest producer in Asia. (by output) .
  • The size of Indian chemicals sector for the year 2015-16 was USD 142 billion.
  • During 2016-17, production of total major chemicals and basic petrochemicals stood at 25739 thousand MT, while that of major chemicals was 10234 thousand MT.
  • Total export of Chemicals and Chemical Products in 2016-17-USD 29 billion.
  • Chemicals sector also acts as a key enabling industry and provides support for variety of other sectors like agriculture, construction, leather etc.
REASONS TO INVEST
  • The Indian Chemical Industry is the 6th largest in the world and 3rd largest in Asia.
  • The Chemical Industry in India is expected to reach USD 200 billion by 2020.
  • India is also the sixth largest consumer of chemicals in the world.
  • Growth Drivers: Innovation, raw material availability, demand growth and low-cost production.
  • India has one of the lowest rates of per hour labour cost among major chemical producers.
  • India’s proximity to the Middle East, the world’s source of petrochemicals feedstock, enables India to gain advantage from economies of scale.
  • Strong government support for R&D.
  • Polymers and agro-chemicals industries in India present immense growth opportunities.
  • 100% FDI is permitted through automatic route. Additionally, chemicals sector is delicensed except for few hazardous chemicals.
STATISTICS
  • In 2015-16, Chemical and Chemical Products Sector accounted for 2.39% of the GVA in 2015-16, compared to 2.23% in 2014-15.
  • Chemical and chemical products sector accounted for 13.38% of GVA of manufacturing sector in 2015-16.
  • The size of the Indian Chemical industry in terms of value of output for the year 2015-16 was USD 142 billion.
  • The average Indices of Industrial Product (IIP) for the Chemicals and Chemical products stands at 116.5, witnessing a growth of 2.46% over previous year.
  • The production of major chemicals in 2016-17 was 10234 thousand MT.
  • In 2016-17, production of total major chemicals and basic petrochemicals stood at 25739 thousand MT, registering a growth of 3.86% over the previous year.
  • The country has four Naphtha and four gas based cracker complexes in the country with a combined annual ethylene capacity of 4.23 million MT. And, six aromatic complexes with a combined xylene capacity of 4.45 million MT. India’s combined capacity of propylene stands at 4.7 million MT.
  • India exported worth USD 29 billion of Chemicals and Chemical products in 2016-17, accounting for 10.3% of India’s total exports in the corresponding period.
  • During 2017-18 (upto December, 2017), 3 patents were filed, 62 research papers were published and 31 papers were presented in International Conferences.
FDI POLICY
  • 100% Foreign Direct Investment (FDI) is allowed under the automatic route in the chemicals sector, subject to all the applicable regulations and laws.
SECTOR POLICY

Fast Tracking of PCPIRs (Petroleum, Chemical and Petrochemical Investment Regions):

  • Under the PCPIR Policy, Government of India conceptualized PCPIRs in a cluster approach for promotion of Petroleum, Chemical and Petrochemical sectors in an integrated and environment friendly manner on a large scale.
  • Each PCPIR is a specifically delineated investment region having an area of about 250 sq. km with around 40% of the area earmarked for processing activities.
  • The Ministry of Chemicals & Petrochemicals has set up four PCPIRs in the states of Andhra Pradesh (Vishakhapatnam), Gujarat (Dahej), Odisha (Paradeep) and Tamil Nadu (Cuddalore and Nagapattinam).
  • These four PCPIRs are expected to attract investment of around USD 117 billion, generating employment for 34 lakh persons. Till date, investments worth USD 28 billion have been made employing around 2.93 lakh persons.

Setting up of Plastic Parks:

  • The scheme aims to set up need based plastic parks and development of a strong ecosystem along with provision of common facilities through cluster development approach. Government of India provides grant funding up to 50% of the project cost, subject to a ceiling of USD 6 million per project. And, the remaining project cost is to be funded by State Government or State Industrial Development Corporation.
  • Plastic Parks in States of Madhya Pradesh, Odisha, Assam & Tamil Nadu are being set up under the scheme of Plastic Parks.

Setting up of Centres of Excellence (CoE) in Polymer Technology:

  • The Department of Chemicals and Petrochemicals has set up five Centres of Excellence (CoE):
    • CoE for Sustainable Polymer Industry through Research, Innovation and Training (CoE-SPIRIT) at National Chemicals Laboratory, Pune
    • CoE for Green Transportation Network (GREET) at Central Institute of Plastics Engineering & Technology (CIPET), Chennai
    • CoE for Advanced Polymeric Materials at IIT, Delhi
    • CoE on Sustainable Green Materials at CIPET, Bhubaneswar
    • CoE for Sustainable Polymers at IIT, Guwahati.
  • A financial support of 50% of total project cost is being provided subject to an upper limit of USD 0.9 million over a period of three years.

Skill Development:

  • Provision of Grant-in-aid to educational/research institutes for setting up Centre of Excellence (CoE) with a view to improve existing petrochemicals technology and promote development of new applications of polymers and plastics.
  • Under the Chemicals Promotion Development Scheme (CPDS), government provides Grant-in-aid for creation of knowledge products through studies, survey, data bank, promotion materials etc. to facilitate development of the sector.
  • To strengthen civil and technical infrastructure, research and development capacities and academic and training initiatives, budgetary allocations are made towards CIPET (Central Institute of Plastic Engineering and Technology).
FINANCIAL SUPPORT

R&D Incentives for Industry and Private Sponsored Research:

  • A weighted tax deduction is given under section 35 (2AA) of the Income Tax Act.
  • Weighted deduction of 200% is granted to assess for any sums paid to a national laboratory, university or institute of technology, or specified people with a specific direction and that the said sum is used for scientific research within a program approved by the prescribed authority.

Manufacturers with an in-house R&D Centre:

  • Section 35 (2AB) of the Income Tax Act, 1961 provides weighted tax deduction of 150% of expenditure incurred by a specified company, on scientific research in the in-house R&D centers as approved by the prescribed authority. This does not includes expenditure on the cost of any land or building.
  • The weighted tax deductions of 150% are effective till 31st March’2020. Consequent upon that, the weighted tax deductions will be 100%.

State Incentives:

  • Apart from the above, each state in India offers additional incentives for industrial projects.
  • Incentives are in areas like subsidized land cost and relaxation in stamp duty exemption on sale/lease of land, power tariff incentives, concessional rate of interest on loans, investment subsidies/tax incentives, backward areas subsidies, special incentive packages for mega projects etc.

Export Incentives:

  • Export promotion capital goods scheme.
  • Duty drawback scheme.
  • Merchandise Export from India Scheme.

Area-based Incentives:

  • Incentives for units in Special Economic Zones (SEZ)/National Investment and Manufacturing Zones (NIMZ) as specified in respective Acts or setting up projects in special areas like the North-east, Jammu & Kashmir, Himachal Pradesh & Uttarakhand.

KEY POINTS IN THE UNION BUDGET 2018-19:

  • Total budget allocation made towards Department of Chemicals & Petrochemicals during the year 2018-19 is USD 30 million.
  • Under the Union Budget 2018-19, allocation made towards certain Central Government Schemes/ Projects are : Assam Gas Cracker Project (USD 1,538), Chemical Promotion and Development Scheme (USD 0.46 million ) and for promotion of Petrochemicals ( USD 8.53 million ) .
  • In the Union Budget 2018-19, CIPET (Central Institute of Plastic Engineering and Technology) has been allocated USD 12.86 million.
INVESTMENT OPPORTUNITIES

Agro-Chemicals:

  • The Indian agrochemical industry is worth USD 4.9 billion, and around 50% of it is export oriented.
  • India is the fourth largest producer of agrochemicals after US, Japan and China.

Specialty Chemicals:

  • The Indian Specialty Chemicals industry is worth USD 28 billion, and accounts for nearly 20% of the total chemical industry.
  • Indian specialty chemicals grew at a CAGR of 14% over FY10-FY15 and slated to grow 13% over FY15-FY20.
  • Indian specialty chemicals is expected to account for 5% of Global Specialty Chemicals by 2020.

Colourant Chemicals:

  • The Indian colourant industry registered a growth rate of 10% over the period FY 2010-15 and is expected to grow at a rate of 11% over the period FY 2015-20.
  • For the FY 15, the size of the Indian colourant industry stood at USD 5400 million. This is poised to increase to USD 9100 million by FY 20.

PROMINENT INDUSTRIAL CLUSTERS / SEZS AND MAJOR UPCOMING PROJECTS IN PCPIRs:

Gujarat PCPIR:

  • Total area- 453 sq. km.
  • Processing area- 248 sq. km.
  • Investments made- USD 13 billion
  • Projected Employment- 8,00,000

Andhra Pradesh PCPIR:

  • Total area- 640 sq. km.
  • Processing area- 270 sq. km.
  • Investments made- USD 6.7 billion
  • Projected Employment- 8,00,000

Odisha PCPIR:

  • Total area- 284.15 sq. km.
  • Processing area- 123 sq. km.
  • Investments made- USD 6.9 billion
  • Projected Employment- 6,61,354

Tamil Nadu:

  • Total area- 256.83 sq. km.
  • Processing area- 104 sq. km.
  • Investments made- USD 1.24 billion
  • Projected Employment- 7,37,200
FOREIGN INVESTORS
  • Mitsubishi Chemicals Corporation (Japan)
  • BASF (Germany)
  • ADEKA (Japan)
  • Akzo Nobel (Netherlands)
  • DuPont (USA)
  • Syngenta (Switzerland)
  • Croda (UK)
  • DyStar (Germany)
  • Henkel (Germany)
  • Rhodla (Belgium)
  • Wacker Metroark (Germany)
  • Gomaco Corporation( USA)
SOURCES
  • Print