Since the Chemical Industry is providing material to almost every other industry, it is an essential part of every economy which is also the case for India. The Indian Chemical sector is well-established and the 3rd largest producer of Chemicals in Asia. The Government of India wants to increase the sector’s GDP share, which is currently at 7%. Therefore, anti-dumping duty probes on some Chemicals, e.g. Methyl Acetoacetate for China and US or Purified Terephthalic Acid for five countries including China and Malaysia, were already imposed in order to support local manufacturing and exports. The sub-sector of Petrochemicals plays also a vital role to national growth. Thus, India’s Government plans to set up hubs to boost the Chemical and Petrochemical industries. How does this plan look like and what are other initiatives to surge the growth of these industries?
Chemicals and Petrochemicals produce an annual output of $200 billion, and both industries are recently growing at a share of 11-12% per year. To ensure the growth in future, the Government stated in its 12th 5-year plan for the Chemical Industry to invest in a supporting infrastructure, ensure feedstock availability, provide support for new technologies, invest in technology up-gradation and to strengthen R&D in the sector. Additionally, it wants to launch a National Chemical Policy soon, which would amongst other facts support R&D in the sector. By 2021, the sector could consequently reach a size of $350 billion.
As part of the Chemical Industry, Petrochemicals have been one of the fastest growing industries in India. India has 22 operating refineries. The Indian Government wants to set up Petrochemical hubs close to refineries in each State, which would include Petrochemical complexes and crackers. This would facilitate logistics and reduce logistic costs in the sector as refinery’s products can directly be processed in the adjoining hubs where also the Petrochemical companies and companies of other downstream industries would be present. This should also help to handle infrastructural and environmental issues of the sector, as centralized establishments in contrast to a widely scattered industry makes managing those issues easier.
Union Minister of Chemicals and Fertilizers, A. Kumar said that focusing on a cluster approach would help the industry to establish green- and brownfield petrochemical projects. For this, the Government would provide common facilities to reduce set-up costs of the industry. But he also mentioned that the industry players should do something themselves to become a more competitive sector in feed stock, procurement of natural gases and production of end products, and not only rely on incentives. Anyhow, the Government could help in long term pricing contracts with other countries for natural gases.
The proposal for the Petrochemical hubs is expected to create 10,000,000 jobs and attract large investment of international as well as national companies. With those establishments, the refineries will become nerve centres of the industry and make the refineries major points of value addition and not only being fuel producing places. It is planned that the Government will provide infrastructure to the hubs, such as railways, highways, water and communication. One of the major challenges will be receiving the clearances for the hubs from the Environmental Ministry. But A. Kumar said that his Ministry would give their support if companies adhere to environmental standards.
Another challenge is Human Resources. The Government has set up plans to start with five new institutes of Chemical Engineering and Technology (CICET) soon and wants to establish more of those specialized institutes afterwards. Those will be specialized institutions for Chemical Engineering and Technology courses which should train more people in Chemical and Petrochemical themes. Role models for these institutes would be the Central Institutes of Plastic Engineering and Technology (Cipet).
The goal is to double the industry’s output value to $400 billion in 2021. The low per capita consumption of Chemicals allows space for growth in India. Large foreign players of the Chemical Industry, such as AkzoNobel, BASF and Dow Chemicals, are already present in India. The new Petrochemical hubs make it more attractive for investors to enter or expand in the Indian Petrochemical and Chemical industries, so that India transforms from a consuming to a producing economy in regards to the Chemical and Petrochemical sectors.
To read more about the Chemical Industry, click Chemical Industry Newsletter.