Guest author: Tanish Dadhania | Regional Sales Manager – West India | SIMONA AG
Indian Chemical Industry is one of the oldest industries in India, which contributes significantly to the industrial and economic growth of the nation. Since the Indian Chemical 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 Invest India: Investment Promotion and Facilitation Agency. It is expected to register a growth of 13-14% over the next 5 years while petrochemicals have registered a growth of 8-9% over the same period. and the Indian chemicals industry is projected to reach $ 304 bn by 2025.
The government recognizes the Chemical Industry as a key growth element of the Indian Economy. In the Chemical Sector, the Indian Government allows 100% FDI. The manufacture of most of the chemical products is delicensed except life hazardous. Its share in the manufacturing sector GDP is ~16% and the Government has a target to increase it to at least 25% by 2025.
The Indian Chemical Industry is the largest consumer of its 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 the 1970s and saw rapid growth during the 1980s and 1990s. However, it faced setbacks in 2008 due to a surge in prices of crude oil. Growing at a CAGR of 10%, the Petrochemical Industry in India is likely to reach USD 100bn by 2022.
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 the World Market.
The global consumption of Chlorine in 2009 is estimated at 55mn tonnes. Chlorine is used in the 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 tonnes. Of these, four are located in the state of Gujarat and one in Tamil Nadu. The main reason for the 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 the 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 are 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 Indian 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-1970s 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 the increase in environmental concerns. Nonetheless, the future of the Indian Chemical Industry seems encouraging.