Chemicals & Petrochemicals

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SUMMARY
  • The Chemical industry in India  provides several building blocks and raw materials for many industries, including textiles, paper, paints, soap and detergents, pharmaceuticals, agrochemicals etc.1
  • The Chemical industry (including fertilizers and pharmaceuticals) in India stands at US$ 178 Bn as of 2019 which is expected to reach US$ 304 Bn by 2024-25 at an annual growth rate of 9.3%.2
  • The global chemical industry is estimated to be worth US$ 4.7 Tn.3 The Chemical industry in India contributes 3.4% to the global chemical industry.4
REASONS TO INVEST
  • India's Chemical Industry ranks at the 6th position in the world and 4th position in Asia in terms of size.5
  • A large part of the growing Chemical industry is currently served through manufacturing done outside the country.6
  • India ranks 17th in the world export of chemicals (excluding pharmaceutical products) and ranks 7th in the world imports of chemicals (excluding pharmaceuticals products).7
  • The value additions in the petrochemicals chain offer immense possibilities and cater to the needs of textiles and clothing, agriculture, packaging, infrastructure, healthcare, furniture, automobiles, information technology, power, electronics and telecommunication, irrigation, drinking water, construction and a variety of other articles of daily and specialized usage amidst other emerging areas.8
  • The Indian market offers a large population and a strong export demand.9
  • In recent times, there has been a global shift towards Asia as the world’s chemical manufacturing hub.10
  • Rise in GDP and purchasing power generates huge growth potential for the domestic market.11
  • Availability of a large pool of skilled science professionals.12
  • India offers world class engineering facilities and strong R&D capabilities.13
  • The per capita consumption of chemicals is lower in India, compared to western countries, therefore presenting immense scope for new investments.14
STATISTICS
  • The Chemical industry in India is expected to grow at 9.3% per annum to reach US$ 304 Bn by FY 2025.15 The growth is expected to be driven by rising demand in end-use segments for Specialty Chemicals and for petrochemical intermediates.16
  • In 2017-18, the Chemical and Chemical Products industry accounted for 1.69% of the GVA, compared to 1.07% in 2016-17.17
  • The production of major chemicals and petrochemicals in 2019-20 (upto September) was 13,871 thousand metric tonnes (MT).18
  • The production of major chemicals in 2019-20 (upto September) was 5,817 thousand metric tonnes (MT).19
  • Alkali chemicals account for 71% of the total production of major chemicals in 2019-20 (upto September 2019).20
  • The production of Basic Major Petrochemicals in 2019-20 (upto September) was 5,817 thousand metric tonnes (MT).21
  • Polymers account for approximately 59% of the total production of basic major petrochemicals in 2019-20 (upto September).22
  • The value of chemicals and chemical products exported for the period 2019-20 (upto September) stood at US$ 148.3 Bn.23
  • The share of export of Chemicals and Petrochemicals is 12.5% of the total national export in 2019-20 (upto September).24
FDI POLICY
  • 100% FDI is allowed under the automatic route in the Chemical industry, except in the case of hazardous chemicals.
SECTOR POLICY

Petroleum, Chemicals and Petrochemical Investment Regions (PCPIRs)

  • The Government of India has conceptualized PCPIRs as clusters that provide investors with a transparent and investment friendly policy and facility regime. PCPIRs have high-class infrastructure and provide a competitive environment conducive for setting up businesses.
  • Each PCPIR is a specifically delineated region spread over an area of about 250 sq. km. These areas will have manufacturing facilities, along with associated logistics and other services. The required infrastructure along with a non-processing area will be developed, to include residential, commercial and other social and institutional infrastructure.
  • The minimum processing area for the PCPIR will be about 40% of the total designated area, i.e., around 100 sq. km.
  • The Ministry of Chemicals & Petrochemicals has set up four PCPIRs in Dahej (Gujarat), Vishakhapatnam-Kakinada (Andhra Pradesh), Paradeep (Odisha), and Cuddalore and Nagapattinam (Tamil Nadu).25
  • The projected investment on full realisation of PCPIRs is US$ 1091.4 Bn.26
  • As of November 2018, investments worth US$ 261.8 Bn have been and committed and more than 300,000 persons have been employed in direct and indirect activities related to PCPIRs.27
  • The following progress has been made in PCPIRs28 (as of December 2019):
    • Dahej PCPIR:
      • Area: 444 sq. km.
      • Actual investment made/committed: US$ 12.2 Bn
      • Employment generated: 132,000 personnel
    • Vishakhapatnam-Kakinada PCPIR:
      • Area: 640 sq. km.
      • Actual investment made/ committed: US$ 6.2 Bn
      • Employment generated: 111,000 personnel
    • Paradeep PCPIR:
      • Area: 284.15 sq. km
      • Actual investment made/committed: US$ 6.43 Bn
      • Employment generated: 38,000
    • Cuddalore and Nagapattinam PCPIR:
      • Area: 246.90 sq. km.
      • Actual investment made/committed: US$ 1.2 Bn
      • Employment generated: 13,950

For more details on the PCPIRs, refer to PCPIR Policy.

 

PCPIR projects for National Infrastructure Pipeline (NIP):

  • 14 projects worth US$ 2.5 Bn by Odisha PCPIR
  • 5 projects worth US$ 0.49 Bn by Gujarat PCPIR

 

Plastic Parks

  • The Department of Chemicals and Petrochemicals has formulated the scheme for setting up Plastic Parks with the objective of synergizing and consolidating the various units of the Indian Plastics Industry.29
  • The units will be consolidated through the cluster development approach. The Government of India will provide grant funding of up to 50% of the project cost subject to a ceiling of US$ 5.7 Mn.30 The remaining project cost is to be funded by the State Government or State Industrial Development Corporation.
  • Plastic Parks in States of Madhya Pradesh, Odisha, Jharkhand31, Uttar Pradesh32, Assam & Tamil Nadu are being set up under the scheme of Plastic Parks.

For more details, refer to Scheme for Setting Up Plastic Parks.

National Policy on Petrochemicals 

  • The National Policy on Petrochemicals aims to achieve sustainable development for the petrochemical industry by promoting research and development and human resource planning and development to cater to the needs of the industry by adopting a mission mode approach.33
  • A programme on Petrochemical Development is required to improve existing petrochemical technology and research in the country and to promote the development of new applications of polymers and plastics. Centre(s) of Excellence (COE) are being set up for this reason and will be one of the components of the programme.
  • COEs will be set up in existing educational and research institutions working in the field of polymers, and include the following:
    • Updating and modifying products for new uses
    • Innovative product technology and product designs
    • Improving production processes to make them more efficient
    • Development of biopolymers and biodegradable polymers
  • The COEs are expected to emerge as internationally recognised centres for the analysis and dissemination of existing global knowledge, provide authoritative, strategic and timely information to organizations and companies to use in the development and implementation of their projects/programmes, which engaging in path-break R&D efforts.34
  • 5 COEs have been set up in Pune, Chennai, Delhi, Bhubaneshwar and Guwahati.

For more details, refer to National Policy on Petrochemicals.

Chemicals Promotion Development Scheme

The aim of the Chemicals Promotion Development Scheme (CPDS) is promotion and development of chemical and petro-chemical industry by extending financial support to conduct of seminars, conferences, exhibitions, conducting studies/consultancies, for facilitating growth as well as analysing critical issues affecting the chemical and petrochemical industry.

For more details, refer to Chemical Promotion Development Scheme.

Central Institute of Plastic Engineering and Technology

The Central Institute of Plastic Engineering and Technology (CIPET) has been set up to develop manpower in different disciplines of Plastics Engineering and Technology. The CIPET has a variety of activities and programs focusing on skill training, technology support, academics and research.

For more details, refer to 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 the expenditure incurred by a specified company, on scientific research in the in-house R&D centres as approved by the prescribed authority. This does not include expenditure on the cost of any land or building.
  • The weighted tax deductions of 150% are effective till 31st March’2020. Consequent to 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 2020-21

  • The total allocation towards the Department Chemicals and Petrochemicals is US$ 28.97 Mn.35
  • The total allocation towards the Central Institute of Plastic Engineering and Technology stands at US$ 13.03 Mn.36
  • The allocation towards the Promotion of Petrochemicals stands at US$ 7.13 Mn.37
INVESTMENT OPPORTUNITIES

Agro-Chemicals

The Indian Agro-Chemicals market is worth US$ 2.5 Bn.38 There is a huge opportunity for the Indian market to grow fast with the expected CAGR being pegged at 8%.39 India holds the second place in the world accounting for 7.7% of global agricultural output.40 

The Agro-Chemical industry in India requires41:

  • newer and safer products
  • integrated agrochemical plants
  • export oriented plants.42

Fine & Specialty Chemicals

India produces many fine and speciality chemicals, which have very specific uses and are essential for increasing industrial production. These special chemicals find wide usage as food additives and pigments, polymer additives, anti-oxidants in the rubber industry, etc.43

Indian specialty chemicals industry is expected to account for 5% of Global Specialty Chemicals by 2020.

FOREIGN INVESTORS
  • Mitsubishi Chemicals Corporation (Japan)
  • Akzo Nobel (Netherlands)
  • DuPont (USA)
  • Syngenta (Switzerland)
  • Croda (UK)
  • DyStar (Germany)
  • Henkel (Germany)
KEY ACHIEVEMENTS
  • Union Minister for Chemicals and Fertilizers, Shri D.V. Sadananda Gowda launched the Phase-II of the Direct Benefit Transfer of Fertilizer Subsidy (DBT 2.0) in July, 2019. The  new initiatives of DBT 2.0 are DBT Dashboards, PoS 3.0 Software and Desktop PoS Version. The Department of Fertilizers (DoF) has implemented the Phase-I of DBT system in fertilizer subsidy pan-India in Fertilizers w.e.f. March 201844
  • National Institutes of Pharmaceutical Education and Research (NIPER) witnessed hike in allocations from INR 135 crores (Budget Estimates 2018-19) to INR 150 crores (Budget Estimates 2019-20)45
  • The National Pharmaceutical Pricing Authority (NPPA), in a meeting on 26th February, 2019, invoked extraordinary powers in public interest, under Para 19 of the Drugs (Prices Control) Order, 2013 to bring 42 non-scheduled anti-cancer drugs under price control, through Trade Margin Rationalisation. As per data available with NPPA, the MRP for 105 brands would be reduced up to 85%46
  • Contract for coal gasification plant for urea project at the erstwhile Talcher unit of FCIL was awarded on 17th September, 2019.47
  • Under its diversification programme, FCI Aravali Gypsum and Minerals India Limited (FAGMIL) has taken up a project to establish a white cement plant near village Nohra Dhar in Sirmour district of Himachal Pradesh, at a project cost of approximately INR 605 crores48
  • In phase-I of the scheme, four Plastic parks in the States of Assam (Tinsukia), Madhya Pradesh (Raisen), Odisha (Jagatsinghpur) & Tamil Nadu (Thiruvallur) are approved for implementation till 2019-2049
SOURCES
  1. About Chemicals, Department of Chemicals & Petro-chemicals,  https://chemicals.nic.in/chemical
  2. “Annual Report 2019-20", Department of Chemicals & Petro-chemicals,  https://chemicals.nic.in/sites/default/files/English%20Annual%20Report%20date%2024-2-2020........pdf
  3. “India Chem 2018", FICCI, http://ficci.in/spdocument/23036/Knowledge%20paper-India%20Chem%202018-ficci.pdf
  4. "Summit on Global Chemicals and Petrochemicals - Manufacturing Hubs in India", FICCI,  https://invest-india-revamp-static-files.s3.ap-south-1.amazonaws.com/s3fs-public/2019-11/PCPIR_Rejuvenation_Study_Report%202019.pdf
  5. “Annual Report, 2019-20, Department of Chemicals & Petro-chemicals”,  https://chemicals.nic.in/sites/default/files/English%20Annual%20Report%20date%2024-2-2020........pdf
  6.  “Department of Chemicals & Petro-chemicals”, Indian Chemical Industry, Five Year Plan 2012-17, https://chemicals.nic.in/sites/default/files/XIIth%20Five%20Year%20Plan-Yr%202011_0.pdf
  7. “Department of Chemicals & Petro-chemicals”, About Chemicals, https://chemicals.nic.in/chemical
  8. “Department of Chemicals & Petro-chemicals”, About Chemicals, https://chemicals.nic.in/chemical
  9. “Department of Chemicals & Petro-chemicals”, About Chemicals, https://chemicals.nic.in/chemical
  10. “Department of Chemicals & Petro-chemicals”, About Chemicals, https://chemicals.nic.in/chemical
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  12. “Department of Chemicals & Petro-chemicals”, About Chemicals, https://chemicals.nic.in/chemical
  13. “Department of Chemicals & Petro-chemicals”, About Chemicals, https://chemicals.nic.in/chemical
  14. “Department of Chemicals & Petro-chemicals”, About Chemicals, https://chemicals.nic.in/chemical
  15. “Annual Report, 2019-20, Department of Chemicals & Petro-chemicals”,  https://chemicals.nic.in/sites/default/files/English%20Annual%20Report%20date%2024-2-2020........pdf
  16.  “FICCI”, India Chem 2018, http://ficci.in/spdocument/23036/Knowledge%20paper-India%20Chem%202018-ficci.pdf
  17. “Annual Report, 2019-20, Department of Chemicals & Petro-chemicals”,  https://chemicals.nic.in/sites/default/files/English%20Annual%20Report%20date%2024-2-2020........pdf
  18.  “Annual Report, 2019-20, Department of Chemicals & Petro-chemicals”,  https://chemicals.nic.in/sites/default/files/English%20Annual%20Report%20date%2024-2-2020........pdf
  19. “Annual Report, 2019-20, Department of Chemicals & Petro-chemicals”,  https://chemicals.nic.in/sites/default/files/English%20Annual%20Report%20date%2024-2-2020........pdf
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  21. “Annual Report, 2019-20, Department of Chemicals & Petro-chemicals”,  https://chemicals.nic.in/sites/default/files/English%20Annual%20Report%20date%2024-2-2020........pdf
  22.  “Annual Report, 2019-20, Department of Chemicals & Petro-chemicals”,  https://chemicals.nic.in/sites/default/files/English%20Annual%20Report%20date%2024-2-2020........pdf
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  29. “Department of Chemical and Fertilizers”, Scheme for setting up Plastic Parks, https://chemicals.nic.in/sites/default/files/FPP260613.pdf
  30. “Department of Chemical and Fertilizers”, Scheme for setting up Plastic Parks, https://chemicals.nic.in/sites/default/files/FPP260613.pdf
  31. “Ministry of Chemicals and Fertilizers”, Government approves Plastic Park to be set up in Deoghar District, Jharkhand, https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1525364
  32. “Ministry of Chemicals and Fertilizers”, 4 Plastic Parks approved for implementation in Phase-I, http://www.pib.nic.in/Pressreleaseshare.aspx?PRID=1575582
  33. “Department of Chemical and Fertilizers”, Setting up of centres for Excellence in Petrochemicals Sector, https://chemicals.nic.in/sites/default/files/ceps.pdf
  34. “Department of Chemical and Fertilizers”, Setting up of centres for Excellence in Petrochemicals Sector, https://chemicals.nic.in/sites/default/files/ceps.pdf
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  39. “India Chem 2018 - Indian Agrochemical Market Scenario and opportunities”, Indian Chem, http://www.indiachem.in/brochure/Presentation%20by%20Mr.%20Harsh%20Dhanuka-%20Dhanuka%20Agritech.pdf
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