Hebei Lansheng Biotech Co., Ltd.
ShangHai Yuelian Biotech Co., Ltd.

How to make “Atmanirbharta” a reality for the Indian chemical sector : A perspectiveqrcode

−− Indian chemical industry will require between US$75bn and US$100bn in capital investment to create new manufacturing facilities

Jun. 29, 2021

Favorites Print
Forward
Jun. 29, 2021

3.jpgBy S S Acharya, Managing Director, Mott MacDonald India & Ajey Nandurkar, Project Finance Lead, Mott MacDonald India


Like many other sectors of the economy, the global chemical industry has been adversely impacted by the COVID-19 outbreak, resulting in disrupted supply and plant closures. Its recovery is still uncertain, with US and parts of Europe still under the grip of the pandemic. The turmoil in these markets islikely to be felt globally, including in India.


There are clear imperatives for India to take effective measures to safeguard its future, as the chemical and petrochemical industry contributes 18% of manufacturing output and 14.35% of total exports.


India’s chemical and petrochemical industry has been steadily growing at a compound annual growth rate of 10% for the past ten years. Coveringmore than 80,000 products, the chemical industry is currently worth around US$178bn and is projected to reach US$300bn in the next five years, as part of the Indian Government’s overarching vision of a US$5tn economy by 2025. Favourable policy making from the government is a key step to realising this vision.


Past reforms have supported a dramatic rise in India’s ranking on the World Bank’s Ease of Doing Business Index – it leapfrogged from 100th in 2018 to 63rd in 2019. Coupled with favourable policies and ever-rising demand, these reforms have transformed the chemical industry into a major segment of the manufacturing sector.


The COVID-19 pandemic has compelled leaders and businesses to execute measures to not only contain the virus, but also to safeguard livelihoods. The Indian government recently announced a series of stimulus packages to revive the economy after months of COVID-19 response measures, and policy frameworks are expected to be further strengthened to recover from the current damage, as well as ward off threats of future pandemics.


Re-shaping India through collaboration


One such initiative is ‘Atmanirbhar Bharat’, or ‘Self-reliant India’, a long-term policy initiative which infused about US$280bn into the economy, encouraging industries, businesses, and people to play an inclusive and collaborative role in re-shaping India.


While there are many stakeholders who will reap the benefits of Atmanirbhar Bharat, the most important among them are industry and the government. The relationship between the two is critical to progress policy framework that meets the overall requirements of the chemical sector. Though widely praised, the Atmanirbhar Bharat initiative must meet several key industry requirements if the government’s vision of self-reliance is to be achieved.


To move away from dependence on importsand focus on exports, the chemical industry will require between US$75bn and US$100bnin capital investment to create new manufacturing facilities in India, as well as additional investment for feedstock facilities. Equally important isinvestment in support infrastructure, such as efficient ports network, and reliable and affordable power and water supplies to ensure efficient and uninterrupted operations.


The supply chain disruption during pandemic phase created severe adverse impact for units dependent on imports of intermediates and feedstocks, especially from China. Moreover, China’s chemical industry structure is changing due to stricter environmental policy and this may also impact the supply chain in future. Under this drive for attaining self-sufficiency, the Indian chemical industry must safeguard itself by creating local capacities for these crucial intermediates and specialty chemicals. The clearance process for new facilities must be faster if the sector is to meet the needs of the changing marketplace.


The plan for the growth and investment in the chemical and petrochemical sector ought to be made prudently and in harmony with measures to protect the environment. India currently only has 54 companies using the International Council of Chemical Associations ‘Responsible Care’ certification logo. A more stringent environmental policy is required.


Gaining an advantage in the global market


Amid the prevailing uncertainty, the global chemical industry is looking at solutions to come out strong from this crisis and Indian companies are taking steps to align with global market changes. Several organisations are turning their focus to forward and downstream chemical opportunities, which may lead to an increased focus on petrochemicals, intermediates,and specialty chemicals. Higher investment in the sector could ease feedstock challenges and boost self-sufficiency.


To remain competitive in the global market, many players are consolidating at an increased pace, often through high-profile mergers and acquisitions. For India, this could help fortify a competitive advantage. Companies are embracing digital technologies to improve efficiency and productivity. Also, in line with the global trend, many players in India are placing increased emphasis on sustainability and climate resilience.


Over the past few years, the government has enacted several reforms designed to encourage business growth by eliminating unnecessary regulations, simplifying bureaucratic processes, and making the overall process more transparent, responsive and accountable. However, since the chemical industry is highly fragmented and faces intense rivalry among competitors, it might not reap much benefit. Even after allowing 100% foreign domestic investment (FDI), India could not attract expected FDI in the chemical sector.


The government has enacted a Bureau of Indian Standards certification which prevents the dumping of cheap and substandard chemicals in the country. The proposed Production-Linked Incentive (PLI) for the chemical sector and a scheme to establish ‘centres of excellence’ in the petrochemical field, alongside the Chemical Promotion and Development Scheme, are likely to be effective steps towards increasing self-reliance.


The Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) policy, announced by the government in April 2007, encourages the development of global industrial corridors in an integrated and environmentally friendly manner. Gujarat PCPIR is a sterling example of the success of this initiative. This PCPIR houses units by prominent chemical and petrochemical players like Opal, ONGC, Gujarat Petronet, Reliance, BASF, GACL, Gujarat Flurocarbon, SRF, Hindalco, Lanxess, Welspun, and producing basic petrochemicals like Ethane C2, Propane C3, Butane C4; downstream petrochemical products – polymers and fibres, heavy chemicals,pigments and additives. It has become one of the fastestgrowing industrial clusters in the country, having attracted more than ₹1.12 lakh crore investment in 180 currently functional industrial units, and a further 650 units at various stages of construction. The industries set up in this PCPIR generated 45,000 direct jobs and 1.35 lakh indirect jobs.


The Gujarat Government is expecting a further investment of around ₹1.0 lakh crore once it is fully developed in the next five years. Similar success can be expected with three others planned PCPIRs, in Odisha, Tamil Nadu and Andhra Pradesh.


An encouraging start – but more needs to be done


Government readiness and policy plans have provided a canvas onto which the industry can begin to grow. But thereis still an opportunity to further accelerate growth in the sector through expedited implementation of initiatives such as PCPIRs and PLIs.


The current duty structure needs to be reviewed to address inverted duty issues such as duty differential across the value chain, alongside duty reduction of some feedstocks, specifically naphtha and hydrocarbons, such as ethane and propane. The domestic chemical industry needs increased research and development (R&D) spend, from the current 2-3% to 5-8% of revenues, in order to achieve cost and quality competitiveness. The government should implement supportive policies that incentivise industry focus on R&D.


With these strong measures in place, and suitable co-operation between industry players and the government, the “Atmanirbharta" initiative can become reality and help boost the Indian chemical sector into becoming an independent, enterprising, and resilient player on the global market.


[ Survey ]

Join AgroPages TOP 20 India Agrochemical Companies ranking list in FY2020-21

The ranking list of top 20 India agrochemical companies has been published by AgroPages for 8 years since FY2012-13. To understand Indian agrochemical market better and faster, we will make persistent efforts to keep on.
 

Top 20 Indian Agrochemical Companies in FY 2019-20: “In the midst of every crisis, lies great opportunity”


Join us in this year's list!

 

Note:

1. The list of rankings focuses only on Indian native enterprises, excluding the branches of multinational companies in India.
2. The list of rankings focuses only on the sales of pesticide products(TC & Formulation), excluding the sales of fertilizers and intermediates.
3. If you join this survey, we'll freely publish a PR news online for your company. 

We'll offer you the Company Directory in the upcoming 2021 India Pesticide Suppliers Guide magazine once the information adopted.

If any question, please contact: zorro@agropages.com

  1. 1. What are the sales of pesticide products(TCs & Formulations) in FY2020-21?
  2. 2. What do you think of the increase/decrease in sales this year compared with last year? Please describe briefly.
  3. 3. What are your company's actions to keep your business running during this tough time?
  4. 4. Please leave your information to submit the survey.

Picture 0/1200

More from AgroNews

Subscribe Comment

Subscribe 

Subscribe Email: *
Name:
Mobile Number:  

Comment  

Picture 0/1200

Subscribe to daily email alerts of AgroNews.