Guest author: Tanish Dadhania | Regional Sales Manager – West India | SIMONA AG
Chemical Industry is one of the oldest industries in India, which contributes significantly towards industrial and economic growth of the nation. Since this industry has numerous forward and backward linkages, it is called the backbone of the industrial and agricultural development of the country and provides building blocks for many downstream industries.
The Indian Chemical Industry has witnessed robust growth in the past decade and has been ranked 6th largest in the world and 3rd largest in Asia according to United Nations Industrial Development Organization (UNIDO). It is expected to register a growth of 8-9% in the next decade and double its share in global chemical industry to 5-6% by 2021.
Government recognizes Chemical Industry as a key growth element of Indian Economy. In Chemical Sector, the Indian Government allows 100% FDI. Manufacture of most of chemical products is delicensed except life hazardous. Its share in manufacturing sector GDP is ~16% and Government has target to increase it to at least 25% by 2025.
The Chemicals Industry in India is the largest consumer of its own products, consuming 33% of its output. With promising growth trends in the Chemicals Industry, this internal consumption is also set to rise.
Indian Chemical Industry’s main growth segments are Petroleum and Petrochemicals, Chlor-Alkali, Pesticides, Specialty Chemicals and Pharmaceuticals & Bulk Drugs.
Petrochemical Industry mainly comprises of Polymers, Synthetic Fibers, Fiber Intermediates and Plastic Processing. They find wide application in domestic as well as industrial sectors.
The Indian Petrochemical Industry originated in 1970’s and saw rapid growth during the 1980’s and 1990’s. However, it faced setbacks in 2008 due to surge in prices of crude oil. Growing at a CAGR of 14%, Petrochemical Industry in India is likely to reach USD 100bn by 2020 from the current size of about USD 40bn.
The Chlor-alkali Industry is the oldest and largest segment of the inorganic Chemical Industry. It comprises of Caustic Soda, liquid Chlorine and Soda Ash. Globally the size of the Chlor-Alkali Industry is 170mn tones (USD 70bn). The size of the Indian Chlor-Alkali sector at 7mn tones is 4% of World Market.
Global consumption of Chlorine in 2009 is estimated at 55mn tones. Chlorine is used in manufacture of Paper and Pulp, Ethylene Dichloride (EDC), which is used for producing Polyvinyl Chloride (PVC), manufacture of chlorinated Paraffin Wax, Fertilizers and Pesticides. India has more than adequate capacity to meet domestic demand of both Caustic Soda & Chlorine.
Soda Ash is used as a raw material for a vast number of key downstream industries such as Soaps, Detergents, Glass, Silicate, Specialty Chemicals. Increasingly it is being applied for climate change mitigation and environmental management applications such as Flue-gas Desulphurization and mitigating the impact of acid rain on inland water bodies.
There are five manufacturers of Soda Ash in India, having installed capacity to the extent of 3.16mn tones. Of these, four are located in the state of Gujarat and one in Tamil Nadu. The main reason for concentration of Soda Ash facilities in Gujarat is the availability of key raw materials, salt and limestone.
India is the 4th largest producer of Pesticides after USA, Japan and China. India is the 3rd largest producer of Pesticides in Asia. The Indian Pesticides Industry has been growing at 8-9% per annum over the past five years.
Specialty Chemicals are the relatively high value, low volume chemicals known for their end-use applications and/or performance enhancing properties. In contrast to base or commodity chemicals, Specialty Chemicals are recognized for ‘what they do’ and not ‘what they are’. Specialty Chemical Industry growth typically follows the growth of major key end markets.
Pharmaceuticals and Bulk Drugs: Large scale chemical production of APIs (Active Pharmaceutical Ingredients) was started by the national sector in the mid-1970’s which accelerated in the next decade.
Today, India is in a position to meet three-fourths of its requirement of Bulk Drugs and almost entire requirement of formulations. From a turnover of INR 100mn in 1947, drug production today is worth approximately INR 280,000mn (USD 6.5bn).
Numerous initiatives have been proposed in the 12th five-year plan (2012-2017) to boost the growth of Indian Chemical Industry including:
- Set-up of a technology up-gradation fund of USD 80mn which will make the industry greener and more intolerant towards environmental pollution.
- Proposal to establish an autonomous USD 100mn Chemical Innovation Fund to encourage commercialization efforts for innovations.
- Providing incentives for the use of bio-based raw materials which will alleviate the chances of a chemical disaster.
- Regulatory support against cheap imports to allow the domestic market to flourish without too much pressure.
While the Government has surely been supporting Chemical Industry in many ways, it is still a challenge for the Government to boost the growth for Chemical Industry due to increase in environmental concerns. Nonetheless, future of Indian Chemical Industry seems encouraging.
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