India is the seventh largest producer of chemicals worldwide and third largest producer in Asia. The country’s chemical sector in 2016 accounted to $139 billion and is expected to grow to $403 billion by 2025. The total production of major chemicals including petrochemicals was 23.9 million tons during 2015-16, production of polymers stood at around 9 million tons during this period. Favorable sectoral policies and an increase in demand for speciality chemicals from booming sectors like agriculture, construction, etc. have expanded the scope of investment opportunities in the Chemical Industry in India.

The Indian Speciality Chemicals segment cumulatively constitutes a market of about $19.0-20.0 billion and is expected to grow to at 12% p.a. for the next few years. Government initiatives have created an investments friendly climate for the Speciality Chemical Sector – agro chemicals, Flavours & Fragrance Ingredients, Dyes & Pigments, Personal Care active ingredients, water chemicals, construction chemicals, Surfactants, Textile Chemicals and Polymer additives, Paints & coating chemicals etc.

The country’s focus of infrastructure development has led to a rise in demand for Construction Chemicals. According to a report by a leading market intelligence and consulting firm, Future Market Insights, India’s construction chemical market is expected to reach $1,890 million by 2020, with a CAGR of 17.2% during 2014-2020. The push in demand is also due to rising awareness of benefits of construction chemicals and thus increased adoption of advanced coating, ceiling and polymer-based reinforcing material in construction.

Agro-chemicals also remain one of the most important segments as we struggle every day to produce more food with the limited land available. For fertilisers, the GST rate was cut to 5% from the previously decided 12%. According the credit rating agency, ICRA, with GST rates being lower than the 6% tax levied earlier on fertilisers, the retail prices are likely to be marginally lower in majority of the states. Except a few states like Haryana, Punjab and Andhra Pradesh, where fertiliser were exempt from value-added tax (VAT) and attract only 1% excise duty, might see an increase in retail prices. However, for most parts of the country, this move is likely to boost demand and exports because of the enhanced competitiveness. The industry is also highly export oriented with 50% of its current production of agro-chemicals exported and this is likely to remain a key component of the industry. According to the Minister of Chemicals, Fertlisers and Parliamentary Affairs Ananth Kumar – “In a couple of years instead of being an importing country, India would be an exporting country in the field of urea and fertilisers,” A further indicator for this trend have also been the government’s efforts to revive fertilizer plants. The additional capacity of 6.5 million tons is supposed to compensate the current shortage in urea production and to help India to eventually shift from being a net importer to an exporter.

The petrochemical sector constitutes a major pillar in India’s economy. Minister of State, Union Petroleum and Natural Gas, Dharmendra Pradhan, estimates that the demand in the $50 billion worth petrochemical markets would jump from 30 million tonnes to 40 million tonnes by 2019-20, growing the market to around $65-$70 billion. He also stated that the government plans to set up petrochemical clusters in Eastern, Western and Southern India to spur the growth of the sector with a view to meeting the increasing demand for polymers and speciality chemicals across diverse industrial segments. According to the minister, the government will also introduce a new policy on biofuel to “incentivize the use of the cleaner fuel”. The target of the envisaged policy changes is to reduce India’s dependency on imported crude oil and is in line with the strategy to make energy production greener and sustainable. Furthermore, transport minister Nitin Gadkari said that “a request to the finance minister would be made to cut the GST on biodiesel to 5% from the current 18%”. This could give a further thrust for the use of biofuels. Moreover, upcoming petroleum, chemicals & petrochemical investment regions (PCPIR) & plastic parks provide state of the art infrastructure for the acceleration of the industry.

India’s chemicals sector offers plenty of investment opportunities. The geographical proximity to the Middle East, the world’s source of petrochemicals feedstock and its highly competitive cost structure makes India a very attractive location for global chemical producers. Additionally, the sector is strongly supported by the government through various schemes, the most famous one being the “Make in India” initiative. Moreover, the country has preferential investment policies, permitting 100% FDI for the sector except for a few hazardous chemicals. Trade in most of the chemicals is free except for those attracting provision of international conventions.

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