74

CHAPTER- 2

GROWTH AND PROSPECTS OF CHEMICAL

INDUSTRY IN GUJARAT

75

2.1 INTRODUCTION OF CHEMICAL

The chemical industry is an indispensable and integral constituent of the

growing Indian industry. The mankind is immensely benefited, right from its

inception till date, by the use of chemicals and life, without chemicals, is

unimaginable and inconceivable. The wide range of chemical products play

vital role in catalyzing not only the economy of the country, but also making

the life-style of human beings comfortable and sophisticated. Apart from the

above, chemicals are essentially contributing in several other fields, viz.,

health, agriculture, environment, forest, communications, pharmaceutical,

transport, power, textile, infrastructure, housing, etc. However, in spite of the

above, the word “chemical” denotes a negative connotation

The chemical Industry, one of the oldest in India, is critical to the economic

development of any country and has played an important role in the country’s

ongoing metamorphosis from an agrarian economy to an industrialized

economy. This industry occupies a pivotal position in meeting basic needs &

improving quality of life and is one of the most diversified sectors covering

thousands of commercial products. The industry is the mainstay of the

industrial & agricultural development of the country & provides building

blocks for several downstream industries, such as textile, paper, paint, soap,

detergent, pharmaceutical, varnish, etc. The chemical sector is predominately

based on feed stock derivatives from cracking of naphtha in oil refineries

providing the building blocks, such as Benzene, Toluene, Xylene, Cresols, etc.

The economic reforms of 1991 had a significant impact on the domestic

chemical industry. With the onset of liberalization, the hitherto protected

industry was exposed to international competition, which had been insulated so

far by keeping high tariffs and import substitution centric policies. With the

advent of liberalization, the role of the public sector substantially reduced, and

the focus of the industry gradually shifted from base chemicals to

petrochemicals, pharmaceuticals, specialty chemicals, construction chemicals,

dyestuff and a wide range of agro-chemicals

76

Indian companies have already begun innovating new substances, molecules

and products by registering their own patents and Intellectual Property Rights

(IPRs). The stage is now set for a major jump in this trend. Another positive

aspect is that there is a growing trend of entrepreneurship and product

innovation. The policy recognizes that entrepreneurship and innovation hold

the key and so seek to provide the necessary enabling environment to nurture

this evolution

This sector, though holds promise for the future, faces significant challenges

also. Lack of a strong base in R&D, an adverse international trade environment

and failure to build eco-friendly technologies in the industry enabling eco-

system are among the major barriers. A stage has now been reached where

sustaining growth trends are largely dependent on our ability to foster a strong

R & D and manufacturing base in the country. A holistic view, by evolving

interdependent and synergistic policies, can overcome the enormous challenges

Some other aspects also merit attention. Inadequate capability and production

of a number of key items indigenously is a weak area. With increasing demand,

without commensurate increase in domestic output, India had an import bill of

around US $ 18200 Million in 2010-11. Growth and sustainability of this sector

may also get affected by heavy dependence on imports. Absence of a strong

manufacturing and R&D base also pose perpetuating threats to India’s strategic

sectors and interests, which is a cause for rising concern. However, the silver

lining is the growing domestic market, and commitments to develop

infrastructure, upgrade technology and products.

In a nutshell, the principal policy objectives are to optimally leverage our

existing and developing infrastructure and capabilities to meet the growing

demands in all areas to foster innovation, catalyze manufacturing, green

technologies, encourage HRD and R&D through academic institutions &

industry and create a range of products that not only meet domestic needs but

also address global demand as a logical expansion of the industry

77

Concerns about environmental pollution due to chemical industries are gaining

attention, especially in public perception. Current efforts in these areas need to

be stepped up with appropriate arrangements for co-ordination across multiple

agencies involved, and make them effective in meeting new and emerging

challenges. Department of Chemicals & Petrochemicals, and Department of

Environment & Forest would need to play a key role in this endeavor.

Chemical industry is one of the oldest industries in India. It not only plays a

crucial role in meeting the daily needs of the common man, but also contributes

significantly towards industrial and economic growth of the nation

2.2 INTRODUCTION OF CHEMICAL INDUSTRY23.

The Chemical and Petrochemical Industry occupies an important place in the

country's economy, as the Chemical industry has grown at a pace

outperforming the overall growth of the industry. The Chemical Industry

produces a wide spectrum of products, which include Pharmaceuticals, Dyes,

Man-made Fibers, Plastics, Pesticides, Fertilizers, Cosmetics and Toiletries,

Paint, Auxiliary Chemicals and wide range of Organic and Inorganic

compounds for applications ranging from automobiles, textile industry,

engineering industry, construction chemicals and food additives to veterinary

and health care products.

The Indian Chemical Industry is currently US$ 50 billion and it is 12th largest

producer of chemicals in the world and 3rd largest in Asia. Chemicals are a part

of every aspect of human life, right from the food we eat to the clothes we wear

to the cars we drive. Chemical industry contributes significantly to improving

the quality of life through breakthrough innovations enabling pure drinking

water, faster medical treatment, stronger homes and greener fuels. The

chemical industry is critical for the economic development of any country,

products and enabling technical solutions in virtually all sectors of the

economy.

____________________________

23 Indian chemical industry – XIIth five year plan

78

Ensuring development of sustainable, green solutions in the fields of water

treatment, food production and healthcare are the key challenges for the future.

Fueled by an increasing focus of industry on improving its image, these trends

are shaping the priorities for R&D in the field of chemistry. In order to

emphasize the importance of the chemical industry in meeting the key

challenges for the future, the United Nations Organization has proclaimed 2011

as the ‘International Year of Chemistry’.

2.3 GLOBAL SCENARIO

The global chemical` industry, estimated at US$ 2.4 trillion, is one of the

fastest growing. Sectors of the manufacturing industry. Despite the challenges

of escalating crude oil prices and demanding international environmental

protection standards now adopted globally, the chemicals industry has still

grown at a rate higher than the overall-manufacturing segment.

As per industry reports the pharmaceutical segment contributes approximately

26% of the total industry output and approx. 35-40% is dominated by the

petrochemical segment.

Commodity chemicals is the largest segment in the chemicals market with an

approx. size of $ 750 billion while the specialty and fine chemicals segment

accounts for $ 500 billion.

Some of the major markets for chemicals are North America, Western Europe,

Japan and emerging economies in Asia and Latin America. The US consumes

approximately one-fifth of the global chemical consumption whereas Europe is

the largest consumer with approx. half the consumption. The US is the largest

consumer of commodity chemicals whereas Asia Pacific is the largest

consumer of agrochemicals and fertilizers.

79

2.4 CHEMICAL INDUSTRY SUB-SEGMENTS 24

A. Basic Organic Chemicals

1. Introduction

Organic chemicals industry is one of the most significant sectors of the

chemical industry. It plays a vital developmental role by providing chemicals

and intermediates as inputs to other sectors of the industry like paints,

adhesives, pharmaceuticals, dye stuffs and intermediates, leather chemicals,

pesticides etc. Methanol, acetic acid, formaldehyde, pyridines, phenol, alkyl

amines, ethyl acetate and acetic anhydride are the major organic chemicals

produced in India.

Formaldehyde and acetic acid are important methanol derivatives and are used

in numerous industrial applications. Phenol is an aromatic compound and

derived from cumene, benzene and propylene derivatives. Alkyl amines are

used in the manufacture of surfactants. Pyridine derivatives are used in the

manufacture of pharmaceuticals.

Ethyl acetate is the ester of ethanol and acetic acid and is manufactured for use

as a solvent. Acetic anhydride is widely used as a reagent. Natural gas/ naphtha

are mainly used as feedstock for the manufacture of these organic chemicals.

Alcohol is also an important feedstock for the industry, with sizable production

of acetic acid and entire production of ethyl acetate being based on alcohol.

The demand for organic chemicals in India has been increasing at nearly 6.5%

during this period and has reached the level of 2.8 million tones. The domestic

supply has however grown at a slower pace resulting in gradual widening of

demand supply gap which was primarily bridged through imports. Domestic

production declined at ~ 6%

____________________________

24 Indian chemical industry – XIIth five year plan Op.cit. pg.16.

80

CHART NO: 2.1

PRODUCTION OF MAJOR ORGANIC CHEMICALS (Mn Tons)

Source: Working group report on Basic chemical p.a. and imports grew at a rate

of 17-19% p.a. during the XIth Plan period.

Methanol

Methanol is a very versatile chemical primarily produced in India from natural

gas and naphtha. Alternative routes for production of methanol are coal and pet

coke. Coal and petcoke route is however not yet commercialized. Current

methanol consumption is 1.5 million tones. The demand is growing at 10% and

is expected to continue to be met through imports. The two major end-use

segments for methanol are chemical and energy. In the chemical segment,

methanol is used for production of formaldehyde, acetic acid, di-methyl

terephthalate (DMT) and a range of solvents. The consumption of methanol in

the energy segment is substantial as blending component for petrol and methyl

tertiary butyl ether (MTBE), tertiary amyl methyl ether (TAME) and di-methyl

ether (DME). In India, the usage pattern for methanol has remained unchanged

over a period of time with formaldehyde sector accounting for bulk of the

consumption. Considering the diverse uses of methanol and its potential for use

in the energy sector, the industry estimates that current demand growth of 10%

would be sustained with relatively higher growth in the energy segment.

1.55 1.55

1.25 1.281.38

2006-07 2007-08 2008-09 2009-10 2010-11

Production of major organic chemicals (Mn Tons)

81

Substantial opportunities for domestic industry in this sector. The current

production capacity in the country is 0.385 million tonnes thereby creating gap

of 2.115 million tonnes which would primarily met through imports from

Middle East and China. Investment opportunity exists for a world scale

capacity of over 2 million tonnes.

Acetic Acid

Acetic Acid is primarily used for production of purified terephthalic acid

(PTA), vinyl acetate monomer (VAM), and acetic anhydride and acetate esters.

In India, production of acetic acid is primarily based on alcohol.

Acetic acid is primarily produced through alcohol or methanol route. Alcohol

route in Indian context is gradually becoming unviable due to high prices and

limited availability of this feedstock. At present bulk of acetic acid is imported

with domestic production accounting for less than 30% of demand.

Formaldehyde and Phenol

Domestic demand for formaldehyde and phenol is estimated to be 0.25 million

tonnes each. Both these segments have been growing at a moderate pace with

formaldehyde showing growth rate of 3% with primary outlet in the form of

phenol. Formaldehyde is used largely in the laminate sector. Phenol is also

used for production of caprolactam and bisphenol-A which have wider

application base.

Ethyle acetate and acetic anhydride

Ethyl acetate demand is around 0.23 million tonnes which is met through

domestic production. Ethyle acetate demand is driven by use as solvent for

printing inks, paints and in pharmaceuticals as well as exports. India also

exports significant volumes of ethyle acetate. Acetic anhydride demand is

estimated to be 0.08 million tonnes. India is self sufficient in acetic anhydride

production with little trade.

82

Alkyl Amines

Alkyl Amines include ethylamines, methylamine, isopropylamines,

butylamines, ethyl hexyl amines. The total capacity of these products is

125,000 tonnes. The capacity utilization in India is to the extent of around 80%

and to a large extent, Indian industry is self-sufficient in these amines. These

amines are mainly used in the manufacture of pharmaceuticals, agro-chemicals,

paints, rubber chemicals etc. The growth of these amines is to the tune of 8%

per annum.

B. Specialty Chemicals

Specialty chemicals are defined as a “group of relatively high value, low

volume chemicals known for their end user 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

chemicals provide the required ‘solution’ to meet the customer application

needs. It is a highly knowledge driven industry with raw materials cost

(measured as percentage of net sales) much lower than for commodity

chemicals. The critical success factors for the industry include understanding of

customer needs and product/ application development to meet the same at a

favorable price-performance ratio.

Key driving industries for growth of Specialty Chemicals

(i) Automotive Sector

Automotive sector in India is growing in excess of 10% and is likely to produce

25 million vehicles from current level of 14 million. The focus would be on

affordable cars driving the demand for automotive components made out of

plastics and use of paints and coatings in this sector. There are over 10 large

producers of cars and vehicles in the country and most of the global majors

have presence in this segment.

83

(ii) Construction Chemicals

Construction industry in India is growing in excess of 16% p.a. and is likely to

reach $ 100 billion by the end of the XIIth Five Year Plan period. The

construction chemical industry in India accounts for only 0.4% of the total

construction spends and has a potential of reaching 1% which is the norm in

developed economies. The key products for this sector would be in the areas of

painting and coating materials, reinforcing fibers, admixtures and other

construction chemicals. The key success factor for construction chemical

industry would be developing products and adopting advanced coating, ceiling

and reinforcing material like polyurethane base coating, silicone base and

polymer base re-enforcing material.

(iii) Water Chemicals

The next major segment in India would be the water chemicals segment with

potential for a range of chemicals for conserving this critical resource. The

demand for water is likely to grow substantially, putting pressure on supply of

water for irrigation, drinking and industrial usage. This is where water

chemicals will play a vital role. Water treatment chemicals are used for a wide

range of industrial and in-process applications such as reducing effluent

toxicity, controlling Biological Oxygen Demand (BOD) & Chemical Oxygen

Demand (COD) and disinfecting water for potable purpose. Apart from use in

potable water, the customer base is widespread across diverse industries

ranging from large power plants, refineries and fertilizer factories to

pharmaceuticals, food and beverages, electronic and automobile companies.

(iv) Textile Chemicals

The growing demand for textiles and apparel will drive the demand for textile

chemicals in India. A range of processing aids, dyes & pigments cater to this

segment and with increasing demand from both for domestic as well as for

export market, demand for textile chemicals is expected to rise.

84

(v) Personal Care

With growing affluence, Indian consumers are able to spend more on hygiene

and personal care products. Increasing consumption is driving demand for wide

range of cosmetic chemicals, health care products as well as hygiene products

using specialty chemicals, polymers and oleo chemicals. India is also becoming

major arm for oleo chemicals derived from organic sources and is participating

in the global market. This segment is expected to grow at a rapid pace

surpassing the growth of other segments in this sector.

C. Chlor Alkali

Globally the size of the chlor-alkali industry is 170 million tonnes ($70 billion).

The size of the Indian chlor-alkali sector at 7 million tonnes is 4% of world

market. 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. Caustic soda is used in various applications such as finishing

operations in textiles, manufacture of soaps and detergents, alumina, paper and

pulp, control of pH (softening) of water, general cleansing and bleaching. The

aluminums industry is the biggest demand driver for caustic soda. Chlorine is

used in multiple sectors such as manufacture of polymers like PVC, bleaching

applications, plications, paper and pulp and textile industry. Soda ash is used as

a raw material for a vast number of key downstream industries such as soaps &

detergents, glass, silicates, specialty chemicals, etc

Soda ash

Soda Ash is an important inorganic chemical and constitutes one of the vital

industry segments of the Indian Chemical industry. It 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.

85

Pesticides

Agriculture is an important sector of the Indian economy and vital for the food

and nutritional security of the nation. Ensuring food security for more than 1

billion Indians with diminishing cultivable land resources is a herculean task.

This necessitates use of high yielding variety of seeds, balanced use of

fertilizers, judicious use of quality pesticides along with education of farmers

and use of modern farming techniques. In order to meet the needs of a growing

population, agricultural production and protection technology have to play a

crucial role. Substantial food production is lost due to insect pests, plant

pathogens, weeds, rodents, birds, nematodes and during storage.

Pesticides industry has developed substantially and has contributed

significantly towards India’s agriculture and public health. In value terms the

size of the Indian pesticide industry is $3.8 billion in the year 2011. India is a

predominant exporter of pesticides to USA, Europe and African countries.

Today, the domestic industry is characterized by over-capacity, low capacity

utilization and unsustainable levels of production from many units and low

investments in R&D. Besides, the formulation market is highly fragmented

with large number of small formulators. Globally, there is a growing trend

towards low dosage, high potency molecules and as such, market for usage of

high volume pesticides is declining.

With the advent of the integrated pest management (IPM) technique, the use of

bio pesticides and genetically modified (GM) seeds has increased globally.

E. Dyestuffs

Colors are an integral part of human perception and life. Much before the

invention of synthetic dyestuffs, natural and vegetable colors were in use in

India for centuries. Perkin’s development of the 1st synthetic dye in 1856 led to

the birth of European dyestuffs industry and use of synthetic dyes widely

extended to all textile substrates. The well-developed textile industry in India

86

soon started use of synthetic dyes and depended on imported organic dyestuffs

till 40’s. The start up of Arlabs Ltd. (the 1st dyestuffs company) in 1940,

followed by other dyestuffs companies in 50’s and 60’s led to the establishment

of the indigenous industry. In the development phase that followed

subsequently, India slowly emerged as the supplier of dyestuffs and

intermediates, particularly in reactive, acid, direct and VAT dyes and some key

intermediates.

Color adds to the very existence and intrinsic value of human tribe. Synthetic

dyes contribute heavily for the use of color. Color has an inherent element of

value addition to a wide variety of products like textiles, leather, paper, food

products, cosmetics, plastics, paints, inks and high-tech applications like

optical data storage (CDs, DVDs), solar cells, medical diagnostics (CT Scan,

angiography), security inks, lasers, photo dynamics etc.

The basic raw materials used for the manufacture of dyestuffs are benzene,

toluene, xylene and naphthalene (BTXN). The technology employed by the

dyes sector has been well received in the international market. Some of the

units have established joint ventures abroad using their indigenous technology.

The per capita consumption of dyes in India is 50 gms as compared to 400 gms

in Europe, 300 gms in Japan which shows that there is tremendous potential for

the Indian market to absorb additional production.

Alcohol based chemicals

Alcohol is a key feedstock for the manufacture of basic chemicals. Alcohol

based chemical industry occupies an important place in the Indian chemical

industry and is a key contributor to the growth of the sector. The current size of

alcohol based chemical industry is $1.1 billion (Rs. 4,850 crores).

Industrial alcohol in India is produced from sugarcane molasses. Molasses is

the by-product of the manufacture of sugar from sugarcane juice. Thus, alcohol

production in India is heavily dependent on production of sugar and sugarcane.

The major sugarcane producing states in the country are Andhra Pradesh,

Gujarat, Karnataka, Maharashtra, Tamil Nadu, Uttar Pradesh, and Uttaranchal.

87

Alcohol has two major uses - potable use by diluting and blending etc. and

industrial use for production of various chemicals. Alcohol is now also used for

blending with petrol.

A large number of alcohol based products are manufactured in India. Some of

the important alcohol based chemicals are acetic acid, acetic anhydride,

acetaldehyde, ethylene glycol, glyoxal, pyridine/ picoline, pentaerythritol,

ethylene oxide derivatives etc. The major user industries of these chemicals

include synthetic fibres and synthetic yarn, drugs & pharmaceuticals,

agrochemicals, personal care products, dyestuffs, pigments, flavours &

fragrances etc. There are about 20 major units engaged in the manufacture of

alcohol based chemicals.

2.5 COMPETITIVENESS OF INDIAN INDUSTRY 25

A. Export competitiveness

There is a global demand for Indian chemical products due to their high quality

and competitive pricing. India’s expertise in developing low cost yet high end

chemical products is the key growth driver for Indian chemical exports. India

exports significant volumes of generic agrochemicals and pharmaceuticals.

40% of India’s agrochemicals sales as well as 60% of pharmaceuticals sales are

through exports. This is primarily due to Indian strengths in contract

manufacturing leveraging its low operational costs.

The introduction of the Indian Patent Act, 1970 (which provided patents based

on manufacturing process of the product rather than based on new product as

was the global norm) enabled Indian drug manufacturers to develop existing

bulk drugs through varying production processes.

This led to increasing interest of MNCs in India which was viewed as a

potential low cost manufacturing base. Thus, while the process patent era

helped Indian companies to gain supremacy in generics, the product patent era

encouraged new drug-discoveries over the long term.

____________________________

25 Indian chemical industry – XIIth five year plan Op.cit. pg.87.

88

After creating a niche for themselves in the domestic market, several Indian

players turned their sights on exports. Consequently, the share of exports in

total bulk drug production soared and India became a major exporter of

pharmaceuticals. However, the government, as a member of the World Trade

Organisation (WTO), agreed in 1995 to adhere to the product patent regime

from 2005.

Dyes and Pesticides exports are nearly 50% of the production achieved mainly

because of technological improvements and skilled manpower.

An unparalleled resource of educated, hard-working, skilled and ambitious

workforce is the hallmark of India’s human capital. India has the world’s

largest population in the 0-24 year’s age group with an employee workforce in

the organized sector of ~ 37 million. Number of new jobs created in the

organized sector every year range between 4-5 million. With over 380

universities, 11,200 colleges and 1,500 research institutions, India has the

second largest pool of scientists and engineers in the world. Over 2.5 million

graduates are added to the workforce every year including 300,000 engineers.

Around 170 institutes, including IITs, NITs and University Chemical

Engineering Departments offering programmes in chemical engineering churn

out approximately 11,000 chemical engineers every year. As of 2010, each

year, Indian universities churn out ~150,000 chemistry post graduates.

Labour costs in manufacturing are lower in India than most other developing

countries. The available skilled, highly productive and English speaking

resource pool is a major source of competitive advantage for India. A strong

base for innovation through its network of 200 national laboratories and 1,300

R&D units, However, India is lagging in terms of R&D compared to other

nations. Currently, overall number of patents filed by India (overall industry

level patents including chemical industry) is 1/10th of the number of patents

filed by China and 1/15th of those filed by USA.

89

2.6 PRESENT STATUS OF THE CHEMICAL INDUSTRY26

With Asia’s growing contribution to the global chemical industry, India

emerges as one of the focus destinations for chemical companies worldwide

due to high domestic demand, significant knowledge pool and favorable

demographic dividend. The Indian chemical industry, estimated to be $108

billion, is at the threshold of accelerated growth. Indian chemical sector ranks

6th in the world and 3rd in the Asia. It is also one of the largest industrial

sectors in the Indian economy and an important employment generator.

The Indian Chemical Industry comprises both small and large-scale units, and

presently, there are about 40,000 chemical manufacturing units located in the

country out of which about 80% are covered in the small scale sector. This

sector provides employment to about 3.3 million people. There are no

quantitative or other restrictions on the import of chemicals except for few

chemicals which are covered under the obligations as per International

Conventions.

Indian chemical industry exports dyes, pesticides and specialty chemicals to

the developed world and to the developing countries which form about 3%

share in the global market and contributes significantly to the foreign exchange

basket of the country. The fiscal concessions granted to small scale sector in

mid-eighties led to the establishment of a large number of units in the Small

Scale Industries (SSI) sector.

In the chemical sector, 100% FDI is permissible under automatic route.

Manufacture of most chemical products inter-alia covering organic/ inorganic

chemicals, dyestuffs and pesticides is de-licensed. Entrepreneurs need to

submit only IEM (Industrial entrepreneurs Memorandum) with the Department

of Industrial Policy & Promotion to set up chemical manufacturing.

____________________________

26 Draft National Chemical Policy (Draft Ncp-2012) Government of India Ministry of Chemicals & Fertilizers Department of Chemicals & Petrochemicals pg.7.

90

Only the following items are covered under the compulsory licensing list

because of their hazardous nature:

Hydrocyanic acid & its derivatives

Phosgene & its derivatives

Isocynates & di-isocynates of hydrocarbons

The basic customs duty on most chemical feedstocks is 2.5%. Import Duty on

most of the chemical products is at 7.5% ad valorem. In general, the central

excise duty rate for chemical sector is about 10%.

Need for consolidation of Acts and Rules

At present, there are multiple legislations in India governing the chemicals

industry that fall under the purview of different Ministries as given below:

TABLE NO: 2.1

NAME OF MINISTRY ITS ACTS AND RULES

Ministry Act Ministry of Environment & Forests Environment Protection Act,1986

Ministry of Labour Factories Act,1948

Ministry of Commerce & Industry The Explosives Act, 1984

Ministry of Home Affairs The Disaster Management Act, 2005

Dept. of Chemicals & Petrochemicals The CWC Act, 2000

Ministry of Rural Development Land Acquisition. Act, 1894

The REACH (Registration, Evaluation, Authorizations and Restriction of

Chemicals) legislation, enacted by the European Union with the main aim of

protecting human health and environment from the hazardous effects of

chemicals and to have a sustainable chemical policy replaces around 40

different environment related legislations. Several other countries such as

Australia, Canada, Japan, China, etc. are also adopting a similar policy to retain

91

their position in the global market. India may also have to pursue similar

measures.

Apart from multiplicity of regulations, there are no specific Indian legislations

pertaining to:-

Registration of substances

Preparation of a national inventory

Restrictions on hazardous substances

Banning of certain substances

Detailed classification and labeling criteria and

Transport classification

Though some of these issues have been briefly considered under certain

legislations; they are yet to be addressed adequately in a comprehensive

scientific and coherent manner.

There is a need for adopting a holistic approach towards chemical legislations.

A centralized, nodal body, titled – ‘National Chemical Centre’, to be

established by DCPC, will be responsible, inter-alia, for working on

legislations as well as for monitoring their implementation. The multiple

legislations governing chemicals may be consolidated into one coherent and

comprehensive piece of legislation, which will simplify its implementation and

monitoring. This will also facilitate the creation of a chemicals inventory in the

country. There is a need to create REACH like legislation in India for safe use

of chemicals for protection of human health & environment.

Research and Development

Research and Development (R&D) is critical for the growth & development of

any sector. R&D helps the industry to remain competitive in the international

arena. To meet the evolving consumer requirements and to compete globally,

the industry would need to increase R & D spending substantially from existing

92

1-2% to at least 5-6 %. The industry has to gear up to face the challenges of

product patent regime. Various measures, which could be considered to

promote research in the chemical industry, are –

For focused indigenous development in the chemical sector, concentrated

efforts towards creating a suitable road-map to align technology, demand,

standards and regulations are required, after considered evaluation of available

and emerging technologies and the emerging trends

Promoting synergy of academia, R&D centres, manufacturers, and other

stakeholders for achieving collaboration and reorientation of their efforts for

creation of IPRs, and deployment of new products and services suited to Indian

environment. The qualified scientists could undertake research, which would

be expected to be initially funded, primarily by the State, and individual

companies could invest at a later stage. Further, the new Technologies/

research / patent/invention could be provided at subsidized rates to SME

industries.

Strengthening the links in the complete value chain from basic research to

Intellectual Property Rights (IPR) generation, product design and development,

product commercialization, and simultaneously achieving economies of scale,

thereby enabling the product to compete internationally. As effective

Intellectual Property Rights (IPR) systems are critical to promote investment in

innovation, India has already reformed IPR substantially in last decade by

becoming a signatory to the “Trade-Related Intellectual Property Rights”

(TRIPs). It has also introduced product patent protection for food,

pharmaceutical, chemical inventions, etc. However, enforcement of IPR in

India still remains a concern.

Creating a state-of-the art testing & laboratory infrastructure for carrying out R

& D, conformance testing, etc. This state-of-the-art labs/infrastructure would

be suitable not only for testing and certification, but also act as an aid in the

93

development of new products positioned in the vicinity of strong R&D clusters

and academic institutions, and would be available to engineering/academic

institutions to assist the scholars in real time chemical product development.

It is envisioned to position India as the R& D hub for the Indian sub-continent

and other neighboring countries, and accordingly, new schemes are required to

be formulated for this sector. These schemes could cater to the needs of several

major technologies like bio-technology, green technologies, renewable energy,

and clean technology including bio-fuels, efficient water management

technology to enable to manufacture chemicals at low affordable cost.

The profile of customers is undergoing a shift with middle class (annual

household income of Rs. 1-10 lakh) gaining prominence. The key needs of this

segment are food & nutrition, water, energy, healthcare, transport, education

and communication. Product innovations for meeting these needs could be

enabled by several major technologies like bio-technology, renewable energy.

To promote investments in upcoming technologies/ sunrise sectors, fiscal

incentives such as accelerated depreciation, tax benefits, subsidies, etc. could

be provided. The Government could facilitate technology tie-ups with global

companies, wherever needed. Besides attracting foreign companies to invest in

India, such partnerships will enable Indian companies to make a marked

change in technology and sales & marketing, thereby not only serving the

domestic market, but also increasing competitiveness for exports.

For realizing the above, the following steps / initiatives, in line with National

Innovation Strategy to support innovation, could be initiated for the Chemical

Sector:-

94

2.7 CHEMICAL STANDARD DEVELOPMENT ORGANISATION

(CSDO)27

To enable the growth and development of a globally competitive, high quality

chemical sector in India, the Govt. envisages the setting up of a Chemical

Standard Development Organisation (CSDO), under the aegis of the DCPC,

with strong participation of the industry, R&D centres, and academia to drive

consensus regarding national requirements, including safety norms. It will

facilitate access for the Indian Industry to the International Standards

Development Organizations and act as an advisory body for incorporation of

Indian requirement/IPRs/standards in the international standards.

The Chemical Standard Development Organization (CSDO) will be primarily

responsible for the following:

Ensuring compliance with chemical standards, including safety norms, by

evolving & implementing a comprehensive Certification and Inspection

frame-work;

Performing functions relating to the Disaster Management in the chemical

sector.

Setting up an “Institute of Chemical Safety” and conducting training

courses in this area;

Further, there is also a need to re-evaluate and re-formulate existing

environmental standards, regulations and policies, having bearing on the

chemical sector by CSDO. For maintaining a level playing field,

Standards/Norms, adopted in India, should be comparable to those applicable

in other developing countries. Wherever required, help could be taken from

international technical bodies for establishment of pollution norms and

standards. Along the lines of REACH, Indian Industry and CSDO/DCPC are to

jointly develop an effective set of regulations, including safety norms, covering

the entire lifecycle of chemicals.

____________________________

27 Draft National Chemical Policy (Draft NCP-2012) Government of India Ministry of Chemicals & Fertilizers Department of Chemicals & Petrochemicals Op.cit. pg.23.

95

2.8 CHEMICAL DISASTER MANAGEMENT

To strive towards the creation of a Disaster Resistant & Resilient India by

building the capacity at all levels for disaster prevention and preparedness in

the management of industrial disasters, DCPC, in collaboration with National

Disaster Management Authority (NDMA), State Disaster Management

Authorities (SDMAs) and other concerned Govt. Departments, Ministries,

industries, associations, etc., will work on evolving industrial segment-specific

Guidelines, in line with the internationally accepted guidelines/norms/standards

etc., with special focus on the Indian conditions/requirements. It may be

mentioned that NDMA has issued National Disaster Management Guidelines

for Chemical Sector (Industrial) which are of generic nature, and hence

segment-wise such guidelines may be framed by the DCPC. For

implementation of the guidelines, Standard Operating Procedures (SOPs) will

be framed and followed to ensure effective and early mitigation during

disasters and emergencies.

Further, it will be made mandatory for the chemical industries, in a phased,

time- bound manner, to comply with these guidelines and SOPs. The personnel

of this sector will be required to be trained with the disaster management

provisions through training, mock drills, etc.

An appropriate conformance and certification frame-work will be evolved to

ensure compliance with these laid down guidelines and SOPs so as to achieve

the end objectives of them, i.e. a Disaster Resistant & Resilient India.

Human resource development

Human resources are considered more vital than physical resources. India has

around 170 institutes, including IITs, NITs and Universities, which have

Chemical Engineering Departments, offering programmes in this discipline.

These institutes produce approximately 11,000 chemical engineers every year.

However, according to IIChE (Indian Institute of Chemical Engineers), there is

96

still a shortage of qualified faculty to provide chemical education in India. It is

required to take some urgent steps to strengthen technical education in the

country and to establish newer institutes with good facilities.

Towards this end, the following steps would be taken to put in place an HRD

eco-system:

Assess the manpower requirement at different skill and expertise levels by

partnering with “National Skill Development Council” and industry to

identify the relevant needs of the sector and prepare a roadmap,

Create an enabling framework in partnership with Ministry of Human

Resource Development (MHRD) to periodically upgrade academic

curriculum of courses, which are aligned with the technological

advancements in the sector for meeting the human resource requirement,

Coordinate efforts to meet the demand for human resources in different

parts of the chemical- eco-system,

To form a high level Apex body (supported by advisory groups comprising

representatives from industry, academia, PSUs, etc.) to oversee and to act as

guiding and enabling source for all aspects relating to skill development in

chemical field.

For promoting quality training and capacity building for bridging the talent gap

for development of the sector, the strategy would be as follows:

To promote and augment training institutes in urban and rural areas to cater to

the skill and training needs of the sector. Govt. would set up ITIs, vocational

training institutes, etc. to develop skill base in chemical field & would

encourage PPP model for their setting up, with focus on chemicals, in the

chemical clusters in Gujarat and Maharashtra.

Training institutes under the DCPC its other organizations will be

developed as national level schools of excellence.

97

Collaboration between Government and industries is to be promoted to

upgrade the current chemical departments in universities to the status of

the state-of-the-art departments (in terms of infrastructure, faculty

qualifications, industry interaction, and administration), and to set up

specialized universities, which will, inter-alia, run courses such as B.Sc. /

B. Tech in specialized chemicals fields like dyes & pigments technology,

etc.

To attract talented students to this area, special incentives such as

scholarships, stipends, etc., along with good career prospects may be

considered;

To encourage collaboration with premier educational institutes like IITs

and chemical institutes of excellence for bridging the gap between

research/ academics and field problems.

To disperse the created chemical expertise to the related fields. Further,

such expertise will also be made available to other countries.

2.9 CHEMICAL INDUSTRY IMAGE28

Chemicals find applications in all walks of our life. They increase aesthetic

appeal by way of providing colored dyes and paints, increase our longevity by

providing health care pharmaceuticals, provide protection, safety & comfort

through building & construction chemicals, and provide food security to the

mankind by fertilizers and pesticides.

Although, the chemical industry - through various inventions - has brought

about improvements in our lifestyle, it continues to be saddled with a negative

image. One of the reasons is that Safety; Health & Environment (SHE)

standards are not adopted strictly by the manufacturers of the Chemical Sector.

The Government will encourage undertaking programs/schemes for improving

the image of the industry.

____________________________

28 Draft National Chemical Policy (Draft NCP-2012) Government of India Ministry of Chemicals & Fertilizers Department of Chemicals & Petrochemicals Op.cit. pg.27.

98

Specific image building activities, such as leading sustained media campaigns,

organizing workshops, trade fairs, etc. could be undertaken in collaboration

with industry associations such as FICCI, ICC, etc.

It is expected that the chemical sector industries and their

association/federations, would also award scholarships to the promising

candidates to further attract and retain talent.

PROMOTIONAL ISSUES

National Awards for Technology Innovation

A scheme of national awards for technology innovation in various fields, such

as dyes, pesticides, chlor alkalis, etc., is to be formulated. Under this scheme,

the Government would institutionalize awards for outstanding contributions

made in technology innovations. The selection for awards would be made by a

Committee of eminent persons.

Industrial Trade Fairs and Exhibitions

The Government would actively facilitate and support the marketing and

organization of major exhibitions and events in order to provide a platform to

the Indian Chemical Manufactures to show case their strengths.

Market Development

The Government would explore new avenues of export of chemical from India

to Latin American, African and Middle East countries through our embassies

and missions abroad.

99

2.1 Indian Chemical Industry Scenario

Chemical Industry rise one of the oldest industries in India, which contributes

significantly towards industrial and economic growth of the nation. It is highly

science based and provides valuable chemicals for various end products such as

textiles, paper, paints and varnishes, leather etc., which are required in almost

all walks of life. The Indian Chemical Industry forms the backbone of the

industrial and agricultural development of India and provides building blocks

for downstream industries.

The Indian Chemical Market Segment wise is as under: -

TABLE NO: 2.2

INDIAN CHEMICAL SEGMENT AND MARKET VALUES

Segment Market Value (billion US$)

Basic Chemicals 20

Specialty Chemicals 9

High End / Knowledge Segment 6

Total 35

Chemical Industry is an important constituent of the Indian economy. Its size is

estimated at around US$ 35 billion approx., which is equivalent to about 3% of

India's GDP. The total investment in Indian Chemical Sector is approx. US$ 60

billion and total employment generated is about 1 million. The Indian Chemical

sector accounts for 13-14% of total exports and 8-9% of total imports of the

country. In terms of volume, it is 12th largest in the world and 3rd largest in

Asia. Currently, per capita consumption of products of chemical industry in

India is about 1/10th of the world average. Over the last decade, the Indian

Chemical industry has evolved from being a basic chemical producer to

becoming an innovative industry. With investments in R&D, the industry is

registering significant growth in the knowledge sector comprising of specialty

chemicals, fine Chemicals and pharmaceuticals

100

The Indian Chemicals Industry comprises both small and large-scale units. The

fiscal concessions granted to small sector in mid-eighties led to establishment

of large number of units in the Small Scale Industries (SSI) sector.

Currently, the Indian Chemical industry is in the midst of a major restructuring

and consolidation phase. With the shift in emphasis on product innovation,

branch building and environmental friendliness, this industry is increasingly

moving towards greater customer orientation. Even though India enjoys an

abundant supply of basic raw materials, it will have to build upon technical

services and marketing capabilities to face global competition and increase its

share of exports.

As the Indian economy was a protected economy till the early nineties, very

little large-scale R&D was undertaken by the Chemical industry to create

intellectual property. The Industry would, therefore, have to make large

investments in R&D to successfully counter competition from the international

chemicals industry.

101

Statistics

Group-wise Capacity & Production of Major Chemicals

Group-wise Export & Import of Chemicals

TABLE NO: 2.3

GROUP-WISE CAPACITY & PRODUCTION OF MAJOR CHEMICALS 29

(Fig. in MT) Main Groups Installed

Capacity

Production (Figures in MT)

2009-10 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

1 2 3 4 5 6 7 8 9 10 11 12

I: ALKALI 7489600 4342305 4792345 5070374 5271675 5474614 5268987 5268987 5427233 5601913 5981204

II: NORGANIC 715915 374132 403827 440608 508157 543965 602309 602309 512513 517511 572052

III: ORGANIC 1940457 1166575 1352653 1473855 1505895 1545262 1545442 1545442 1254171 1281169 1339589

IV: PESTICIDES 146471 81803 69565 85118 93966 82240 84701 84701 85218 82185 81934

V DYES 54551 24789 26196 25940 28498 29541 32552 32552 37636 51080 47036

TOTAL MAJOR CHEMICALS (I+II+III+IV+V)

10346994 5989604 6644586 7095895 7408191 7675622 7533991 7533991 7316771 7533858 8021815

____________________________

29 http://chemicals.gov.in/chem1.htm

102

TABLE NO: 2.4

GROUP-WISE EXPORT & IMPORT OF CHEMICALS 30

(Figures in Rs. Crore)

Group

ITC - HS Commodity Level Code

TRADE

2001-02

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

INORGANIC CHEMICALS *

2 DIGIT- 28 Export 1259 1946 1949 2871 2431 3629 3317 5166 4540

Import 5730 5579 5916 8130 10446 11473 11393 - 16270

ORGANIC CHEMICALS

2 DIGIT -29

Export 7624 10190 12975 16269 21504 25950 28870 34058 35241

Import 8795 10695 14363 18785 22776 27330 32642 - 44505

DYEING, TANNING AND COLOURING MATTER

2 DIGIT -32 Export 2436 2943 3112 3111 3750 4562 5327 5900 4328

Import 1138 1344 1617 1878 2245 2720 3031 - 4328 PESTICIDES

4 DIGIT -3808

Export

1356

1487

1746

2096

2791

2877

5969

8615

8611

Import

362

287

501

712

754

806

7357 -

11579

Grand Total

Export

12675

16566

19782

24347

30476

37018

43483

53739

54948

Import

16025

17905

22397

29505

36221

42329

54423

0

76682

____________________________

30 http://chemicals.gov.in/chem1.htm

103

2.11 AN OVERVIEW OF THE INDIAN CHEMICAL INDUSTRY

The chemical industry, which includes basic chemicals and its products,

petrochemicals, fertilizers, paints & varnishes, gases, soaps, perfumes &

toiletries and pharmaceuticals is one of the most diversified of all industrial

sectors covering thousands of commercial products. It plays an important role

in the overall development of the Indian economy. It contributes about 3% in

the GDP of the country.

The chemical and petrochemical sector in India presently constitutes 14% of

the domestic industrial act According to the United Nations Industrial

Development Organisation (UNIDO), in terms of value added at constant 2000

prices, the Indian chemical Industry was the 6th largest in the world and 3rd

largest in Asia in the year 2008. As per the latest available information from

industry associations, the size of the Indian Chemical Industry in the year 2010

was US$ 108.4 Billion.

Chemical Sector- Production Trends

Chemical Industry is one of the oldest industries in India, which contributes

significantly towards industrial and economic growth of the nation. The Indian

Chemical Industry is the 6th largest in the world and 3rd largest in Asia. It

provides valuable chemicals for various end products such as textiles, paper,

paints and varnishes, leather etc., which are required in almost all walks of life.

The Indian Chemical Industry forms the backbone of the industrial and

agricultural development of India and provides building blocks for downstream

industries

The Indian Chemical Industry comprises both small and large-scale units. The

fiscal concessions granted to the small-scale sector in mid-eighties led to

establishment of a large number of units in the Small Scale Industries (SSI)

sector. Currently, the Indian Chemical industry is in the midst of a phase of

major restructuring and consolidation. With the shift in emphasis on product

innovation, brand building and environmental friendliness, this industry is

104

increasingly moving towards greater customer orientation. Even though India

enjoys an abundant supply of basic raw materials, it will have to build upon

technical services and marketing capabilities to face global competition and

Increase its share of exports.

As the Indian economy was a protected economy till the early nineties, very

limited large-scale R&D was undertaken by the Chemical industry to create

intellectual property. The product patent regime came into force w.e.f. January

2005. Accordingly, the units have to be more innovative with state of the art

R&D Establishments. This will help in development of newer molecules. With

a number of scientific institutions, the country's strength lies in its large pool of

highly trained scientific manpower.

India also produces a large number of fine and specialty chemicals, which have

very specific uses and find wide usage as food additives, pigments, polymer

additives, anti-oxidants in the rubber industry, etc. In the Chemical Sector, 100

percent FDI is permissible. Manufacture of most chemical products inter-alia

covering organic/ inorganic, dyestuffs and pesticides is relicensed. The

entrepreneurs need to submit only IEM with the Department of Industrial

Policy and Promotion, provided no location angle is applicable. Only the

following items are covered in the compulsory licensing list

Because of their hazardous nature:

Hydrocyanic acid &its derivatives

Phosgene &its derivatives

Isocynates &di-isocynates of hydrocarbons

The Dyestuff sector is one of the important segments of the chemical industry

in India, having forward and backward linkages with a variety of sectors like

textiles, leather, paper, plastics, printing inks and foodstuffs. The textile

industry accounts for the largest consumption of dyestuffs at nearly 70 percent.

From being importers and distributors in the 1950s, it has now emerged as a

105

very strong industry and a major foreign exchange earner. India has emerged as

a global supplier of dyestuffs and dye intermediates, particularly for reactive,

acid, vat and direct dyes. India accounts for approximately 7 percent of the

world production. Apart from chemical fertilizers, pesticides played an

important role in the "Green Revolution" during the 1960s and 1970s.

Indian exports of agrochemicals have shown an impressive growth over the last

five years. The key export destination markets are USA, U.K., France,

Netherlands, Belgium, Spain, South Africa, Bangladesh, Malaysia and

Singapore. India is one of the most dynamic generic pesticide manufacturers in

the world with more than 60 technical grade pesticides being manufactured

indigenously by 125 producers consisting of large and medium scale

enterprises (including about 10 multinational companies) and more than 500

pesticide formulators spread over the country.

DCPC set up a Task Force on Chemicals under the chairmanship of Shri Arun

Maira, Member Planning Commission vide Resolution dated 25.8.2010 to

study various facets of the chemical industry, examine major policy issues and

make recommendations for enhancing investment, global competitiveness and

accelerated and sustainable development of the chemical sector as a major

building block of the Indian economy.

The members of the Task Force were drawn from various Ministries /

Departments and from industry associations. The Task Force held two

meetings on 18.10.2010 and 8.2.2011. In the meantime, the Planning

Commission constituted a Working Group on Chemicals and Petrochemicals to

prepare the strategy and road map for the growth of the chemical sector during

the 12th Five Year Plan.

The actual production of major chemicals during the years 2005-06 to 2010-11

and up to September for the year 2011-12 is exhibited in Table-2.5

106

TABLE NO: 2.5

PRODUCTION OF SELECTED MAJOR CHEMICALS

(Figures in ‘000MT) SECTOR PRODUCTION GROWTH

(%) 2005-

06 2006-

07 2007-

08 2008-

09 2009-

10 2020-

11 2011-

12 (up to Sept. 11)

2010-11/ 009-10

Carg. 10-11/

05-06

Alkali Chemicals

5475 5269 5443 5442 5602 5981 2970 6.77 1.78

Inorganic Chemicals

544 602 609 512 518 572 310 10.42 1.01

Organic Chemicals

1545 1545 1552 1254 1280 1342 672 4.84 2.78

Pesticides (Tech.)

82 85 83 85 82 82 37 0.00 0

Dyes & Dyestuffs

30 33 44 32 42 47 22 11.90 9.39

Total Major Chemicals

7676 7534 7731 7325 7524 8024 4011 6.65 0.89

Source: Office of the Economic Adviser, Min. of Commerce & Industry CARG: Compound Annual rate of growth Product- wise and Group wise details of installed capacity and production are

At chart no; 2.2

CHART NO: 2.2

THE TREND IN PRODUCTION OF MAJOR CHEMICALS HAS BEEN

DEPICTED IN FOLLOWING CHART.

7676 7534 7731 7325 7524 8024

4011

0100020003000400050006000700080009000

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 (Upto Sep.

11)Years

107

Index of Industrial Production

The Index of Industrial Production (IIP) with base 2004-05 for the month of

August, 2011 released by the Central Statistical Organization show that the

General Index stands at 162.4 which is at 4.1% higher as compared in the level

in the month of August. 2010. The cumulative growth for the period April-

August, 2011-12 stands at 5.6% over the previous year in respect of general

IIP.

TABLE NO: 2.6

MONTH-WISE INDEX OF INDUSTRIAL PRODUCTION

(2004-05=100) during 2010-11 and 2011-12)

Year/Month/Period IIP(Overall) Manufacturing Basic Chemicals & Chemicals Products included in Manufacturing

April 10-11 157.8 166.6 114.2 May,10 156.5 164.2 120.7 June,10 156.6 165.5 124.7 July,10 161.3 172.1 127.7 August,10 156.1 165.2 124.5 September,10 160.3 172.1 125.0 Octomber,10 166.6 176.4 121.7 November,10 158.0 166.8 121.3 December,10 175.6 187.3 124.8 January,11 175.9 186.5 125.8 Februqary,11 168.0 179.4 120.6 March,11 193.1 206.2 126.3 April,11 166.2 176.1 123.5 May,11 166.2 174.5 126.1 June,11 170.4 182.6 123.4 July,11 167.5 177.5 125.3 August,11 162.4 172.5 126.7

Source: Office of the Economic Adviser, Min. of Commerce & Industry

The behavior of IIP of Chemicals and Chemical products vis-à-vis overall IIP

and IIP in respect of manufacturing during 2005-06 -2010-11 has been depicted

in Chart-2.3

108

CHART NO: 2.3

INDEX OF INDUSTRIAL PRODUCTION

(Base: 2004-05=100)

Whole Sale Price Index

The Indices released by the Office of the Economic Adviser, show that the

inflation in Wholesale Price Index of Chemicals & Chemical Products during

the month of March 2011 was at 129.3 % as against 149.5 % in All

Commodities, 135.6%inManufacturing and 179%in Food Articles.

109

TABLE NO: 2.7

MONTHLY INFLATION OF SELECTED COMMODITIES DURING 2009-10 (Based on Wholesale Price Index) (%)

Months All Commodities

Food Articles

Manufact. Products

Chemicals & che. products

Basic Heavy Inorganic Che.

Basic Heavy Organic Che.

Soda Ash

Dyes & Dyestuff

April,10 138.6 168.8 127.9 122.6 124.9 122.7 128.2 113.8 May,10 139.1 172.1 127.9 122.6 125.2 123.5 130.8 114.4 June,10 139.8 175.4 127.8 122.4 125.8 122.9 130.9 114.3 July,10 141.0 178.2 128.1 122.1 125.3 121.6 125.7 113.9 August,10 141.1 176.7 128.3 122.6 125.0 122.1 124.2 114.4 September,10

142.0 179.9 128.7 122.8 124.9 121.5 123.9 115.1

Octomber,10 142.9 180.9 129.2 123.0 125.8 122.5 125.5 117.9 November,10

143.8 181.4 129.8 123.3 125.5 123.2 125.3 116.2

December,10

146.0 189.4 130.9 124.2 126.8 124.8 130.1 116.1

January,11 148.0 192.4 132.6 125.9 127.4 126.9 134.5 117.7 Months All

Commodities

Food Articles

Manufact. Products

Chemicals & che. products

Basic Heavy Inorganic Che.

Basic Heavy Organic Che.

Soda Ash

Dyes & Dyestuff

Februqary,11

148.1 181.3 134.0 127.7 128.3 129.3 136.4 117.2

March,11 149.5 179.0 135.6 129.3 130.2 131.7 138.4 119.0 April,11 152.1 186.8 136.6 131.0 132.8 133.9 142.5 118.5 May,11 152.4 186.3 137.4 131.8 135.2 135.5 145.5 119.1 June,11 153.1 188.8 137.9 132.2 137.2 135.0 144.9 119.7 July,11 154.2 192.8 138.0 132.7 138.6 134.9 149.2 120.7 August,11 154.9 193.7 138.8 133.0 138.2 136.1 148.0 120.4 September,11

158.8 196.5 138.6 133.5 137.0 134.9 149.1 120.1

Source: Office of the Economic Adviser, Min. of Commerce & Industry

Table-2.7 and Chart -2.3 below show the WPI of chemicals & chemical

products vis-a-vis all commodities and manufactured products during the years

2005-06 to 2011-12.-

110

TABLE NO: 2.8

WHOLESALE PRICE INDEX OF CHEMICALS & CHEMICAL

PRODUCTS VIA-A-VIS OTHER COMMODITIES 31

Particulars 2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

All Commodities 104.47 111.35 116.63 126.02 130.81 143.32 Food Articies 105.38 111.52 123.57 134.8 155.39 179.63 Manufacturing Products 102.42 108.22 113.39 120.38 123.05 130.07 Chemicals & Chemical Products 103.79 108.94 112.83 118.07 117.76 124.04

CHART NO: 2.4

WHOLESALE PRICE INDEX OF CHEMICALS & CHEMICAL

PRODUCTS VIA-A-VIS OTHER COMMODITIES

____________________________

31 http://chemicals.nic.in/Annual%20Report%202011-2012.pdf

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

Chemicals & Chemical Products 103.79 108.94 112.83 118.07 117.76 124.04

Manufacturing Products 102.42 108.22 113.39 120.38 123.05 130.07

Food Articies 105.38 111.52 123.57 134.8 155.39 179.63

All Commodities 104.47 111.35 116.63 126.02 130.81 143.32

0

100

200

300

400

500

600

700

Axi

s Ti

tle

111

TABLE NO: 2.9

PRODUCT-WISE INSTALLED CAPACITY & PRODUCTION OF

MAJOR CHEMICALS

112

113

114

2.12 Targets and Policy initiatives for XIIth five-year Plan.

The following growth targets have been set for the various segments of the

chemical industry in India. Policy initiatives required in various industry

related aspects are as follows:

CHART NO: 2.5

XIITH FIVE YEAR PLAN GROWTH TARGETS FOR CHEMICAL

INDUSTRY SEGMENTS.

A. SUSTAINABILITY

One of the key issues facing the chemical industry is “Sustainability”. From

being an economic and an environmental issue, it has also acquired strong

socio-political overtones, which already have deep impact on the industry, and

this impact will only deepen in coming years.

The main issues the industry will have to grapple with and address actively, for

the next 2 decades are:

Water

Environmental impact

8%

8%

12%

12%

12%

12%

13%

Alcohol based chemicals

ChlorAlkali

Overall Chemical Industry

Coloranats

Pesticides

Basic Organic Chemicals

Specialty Chemicals

XIIth Five Year Plan growth targets for chemical Industry segments(%)

115

Raw materials

Safety over lifecycle and

Energy use

Unless the industry, government and technical & research institutes address all

these proactively and collaboratively, the industry will not grow. A summary of

the key problems and some potential solutions is given below-

1. Water

This is already a scarce resource in all parts of India. Intense competition with

human needs makes this a very sensitive social factor, and there is no question

that industry will be a third priority in any allocation, after community and

farming needs. Supply of water for Indian chemical industry still has not been a

subject of sustained or planned effort.

2. Environment

The levels of pollution of ground water and air pollution have reached alarming

proportions in most of the chemical industry clusters. While there are sterling

examples of many Indian chemical companies which are in the forefront of

environmental, water and safety performance, the non-compliant attitude of

many companies and ineffective enforcement efforts in some clusters, have led

to large scale damage to environment.

To address these inter-related issues, it is recommended that:

At least 20 reputable and active educational/ research institutes be

identified and supported by GOI, to set up initiatives with industry, to

develop green processes, that are less water intensive, environmentally

compliant, and safe; and to train specialists, process developers and

managers.

These institutes, like the IITs, CSIR labs, and university departments, can

each focus on sectors and areas of key interest, tasked to develop within 5

years into centers of excellence and consultancy; and industry experts may

be asked to join these institutes as advisors/ research panel members.

116

These institutes and others must be encouraged and assisted to partner with

specialist labs and educational/ research institutes of repute in Europe,

Japan, US, where there is a long history of successful work in these areas.

Credible Environmental Audit and Certification, viz Responsible Care

Certification (Sales: over 250 cr) and ISO 14000 Compliance. 250 cr),

should be made mandatory and reportable, for all chemical companies.

Reputable auditors must be empanelled.

Government of India agencies (Ministry of Environment and Forest,

Central Pollution Control Board, Department of Chemicals and

Petrochemicals) must work with state governments to ensure more

rigorous and transparent enforcement of pollution and environment related

regulations in chemical units.

There has to be a system of positive incentives for compliant industries.

The star rating system used by commerce ministry to encourage exports

has worked wonders over the last 20 years. The best way could be to use

the internationally recognized measures of excellence for chemical

company performance in environment, safety, health, community

perception: viz “Responsible Care Certification”; and encourage

companies with such certification through star rating and fast track

clearance for expansions, product diversification etc.

These key non-fiscal incentives will encourage the growth of compliant

companies and will act as a catalyst to motivate non-compliant companies

towards better environmental compliance.

3. Raw Materials

India is seriously deficient in hydrocarbon resources. At the same time India

has a huge wealth of renewable agricultural and agro-waste resources.

Key recommendations are as under:

Industry needs to develop and upgrade technologies and processes to produce

chemicals starting from agro-wastes and non-edible agricultural products such

as ethanol, glycerin, cellulosic materials, non edible oils, etc. to surfactants,

117

polymers, specialty and fine chemicals, through fermentation, genetic

engineering and bio-tech based processes and intermediates. A great amount

of work has already been done worldwide in this direction.

To put in place a national policy and action plan to develop the necessary

plantation industry on waste land along with consuming industry segments

with a focus on low resource agriculture. Identify and inventories all agro-

wastes and their utility as raw materials and bring in the processes for

necessary commercial utilization.

Set up at least 4 regional ‘Centers of Excellence’ who will partner with

international technology organizations and institutes and develop and upgrade

processes for the above processes and products. Treat renewable resources/

agro-waste based chemical industry as an industry of strategic national

importance.

4. Energy

The Indian chemical industry is a major consumer of energy. There are

numerous fragmented capacity plants existing in the country, many of these

are energy inefficient. A few dozen companies of scale have, however,

become examples of high energy efficiency over the years, through process

intensification, energy efficiency improvement, energy capture and recycle.

These measures need to be strongly encouraged, while at the same time

helping the broad spectrum of aspiring companies to emulate and improve.

Recommendations:

Create a database benchmarking energy standards of companies sector-wise.

Publish these benchmarks for companies to work towards achieving, including

the methodology and technologies that have been employed in each of these

products/ industries for energy efficiency. Provide soft loans and tax credits

for such investments (eg waste heat recovery systems, energy audits etc.)

Require all chemical manufacturing companies with sales revenue above Rs.

50 corers, to publish audited energy consumption figures in comparison to the

118

benchmarks. The very requirement of evaluation, comparison, and

dissemination will persuade a large number of companies to work towards

energy improvement.

Create at least one centre for energy excellence which will be tasked with

acquiring and sublicensing energy efficiency technologies.

5. SAFETY OVER LIFECYCLE

There has been increasing international and local concern over the impact of

chemicals on human and plant, animals and aquatic life; and on key resources

like water and atmosphere. This green movement is a very positive feature and

has resulted in legislations like REACH in the EU and similar regulations in

Japan and North America. It is important that India emulate these countries,

and design and adopt a sensible and practicable system of controls to regulate

and ensure safety over the entire chemicals life cycle: from manufacture to

distribution to end-use, to recycle, destruction or disposal. There is now

sufficient experience, for example, from REACH in the EU, and from the US

and Canada, for Indian industry and government to jointly develop a workable

and much less “expensive” set of regulations covering the entire lifecycle of

chemicals.

B. STRATEGY FOR STRENGTHENING R&D

Innovation is important for chemical industry fortunes. In the past, product

innovations have helped in developing products with multibillion dollar sales

(e.g., glyphosate, industrial enzymes) and process technology innovations

have helped in reducing operating cost by greater than 20% (e.g., direct

oxidation of propylene).

However India’s performance on innovation has been rather unsatisfactory.

According to World Intellectual Property Organization statistics (2009) India

was granted just 7,539 patents as compared to 67,948 of China and 157,283 of

USA. Recently published global innovation index by INSEAD ranks India at

56th position: much below other developing countries like Malaysia, UAE and

China.

119

Realizing that innovation is the engine for the growth of prosperity and

national competitiveness in the 21st century, the Government had declared

2010 as the ‘Decade of Innovation’. To take this agenda forward, Prime

Minister has approved the setting up of a National Innovation Council (NIC)

to develop a national strategy on innovation with a focus on an Indian model

of inclusive growth. The idea is to create an indigenous model of

development suited to Indian needs and challenges and develop product and

services that are affordable by a low income household, without

compromising quality.

CHART NO: 2.6

INNOVATION & INCLUSIVENESS 32

____________________________ 32 Indian chemical industry – XIIth five year plan Op.cit. pg.77.

Innovation & Inclusiveness

Organisation

Establish the Chemical sector council for innovation

Funding

Set up a USD 100 million Chemical Innovation Fund

Infrastructure

Develop 3 Regional Clusters and 2 Innovation Centers in universities

Collaboration

Sign International Collaboration agreements with 2 countries (Germany, Singapore)

Launch an OUTREACH program

Strengthen IP protection through creation of fast-track courts

1 2 3 4

5

6

120

After studying the experience of other countries (US, UK and China) and

understanding of Indian context, NIC recently crafted out Indian innovation

strategy for the next decade with focus on “inclusive innovation”.

The Chemical ministry should undertake six specific initiatives in line with

National Innovation Strategy to support innovation specific to chemical

industry.

1. Establish Chemical Sector Council For Innovation

NIC has proposed setting up State and Sector innovation councils to

help in formulating the ‘Roadmap for Innovation 2020’ and implement

it in respective States and Sectors.

In line with this, a Chemical sector council should be setup which

should have representatives from the government, chemical companies,

industry associations and reputed research/ educational institutes (e.g.,

NCL, ICT)

Within first six months, the Chemical sector council should develop an

integrated view of R&D/innovation requirements of the chemical

industry by working with all key stakeholders like government,

companies and various industry associations (e.g. ICC, FICCI, CII)

2. Establish an Autonomous Usd 100 Million Chemical Innovation Fund

NIC has proposed establishment of USD 1 billion inclusive innovation

fund for India to encourage commercialization efforts for innovations

generating inclusive growth; it also recommended use of the PPP model

to increase quantum of investment by 10 to 20 times its seed capital.

The chemical sector needs to secure at least 10% of total national

inclusive innovation fund to invest in ventures/ innovations for the

chemical industry.

The chemical sector council should short-list three areas (e.g. food,

energy, water) to deploy these funds where chemical innovations can

121

significantly contribute in developing solutions which promote

inclusiveness.

3. Develop Three Regional Clusters And Two Innovation Centers In

Universities Dedicated To Chemical Industry .

Driving the innovation agenda nationally would require strengthening

regional capacity for innovation and strong industry-academia linkages.

NIC has proposed to identify 20 innovation clusters across the country

and 20 innovation hubs at different universities in India.

Three dedicated clusters for chemical industry should be created in

regions with large share of chemical industries (e.g. Gujarat,

Maharashtra, Tamil Nadu, Andhra Pradesh) and similarly two

universities focused on chemical engineering (e.g. ICT, IIT Mumbai)

should be short listed to develop innovation hubs for chemical industry.

4. Sign International Collaboration Agreements with Germany and

Singapore

NIC is already developing a platform for collaboration and engagement

with other countries to understand their views and strategies for

strengthening the innovation eco-system.

Germany and Singapore, with presence of large scale chemical industry

and world scale research facilities, can be good partners for India to

learn and develop capabilities in chemical product and process

innovation.

Both of these countries have world class examples of large scale

chemical parks (e.g., Ludwigshafen in Germany, Jurong in Singapore)

with integrated infrastructure, knowledge management and R&D

facilities; India can benefit significantly from their experience while

establishing PCPIRs.

These collaborations could be in the form of bilateral exchange forums,

linkages between relevant industry association and research institutes.

122

5. Launch an Outreach Program

NIC has defined outreach as one important pillar of the National

Innovation Strategy. They have also proposed a National Innovation

Portal which will provide all information related to the innovations and

the innovators in a single repository and will also act as an outreach

medium.

The Indian chemical industry generally suffers from a bad perception in

the eyes of the public and needs to improve its image through more

university, college, business interactions. This program will play crucial

role in building the chemical sector’s capability of attracting and

retaining high quality talent in the chemical field.

The OUTREACH program should also have the target of building a

chemical innovation eco-system between several constituents like

innovators, venture capitalists, research institutes, companies and

industry associations.

D. STRATEGY FOR HUMAN RESOURCE DEVELOPMENT AND

EMPLOYMENT GENERATION

The chemical industry has not been able to attract top-class talent which has

created a severe shortage of skilled manpower, seriously impacting its

productivity and growth. To realize the complete potential of the domestic

industry, steps to attract talent, such as offering R&D/ marketing-oriented job

profiles and attractive career paths, should be implemented. Additional

specialized universities, IIT’s in chemical stream and vocational training

institutes could significantly improve the employability of the workforce in the

chemical industry.

India has around 170 institutes, including IITs, NITs and university chemical

engineering departments, offering programmes in chemical engineering. These

institutes produce approximately 11,000 chemical engineers every year.

However, the number of Ph.D is not adequate. In India, the ratio of engineering

123

doctorates to engineering graduates is estimated to be less than 1% while in

developed nations like Germany, USA and UK; it is 7-9%. China had a ratio of

around 0.25% in 1988 which has now improved to 3%. According to Indian

Institute of Chemical Engineers, there is a pressing need for the other top

institutes in the discipline to establish M.Tech/ Ph.D programmes, as there is a

severe shortage of qualified staff members to provide chemical education in

India.

Chemical industry will require additional 4.5 to 5 million skilled workers by

FY17, including 0.25 million professional manpower for the specialty

chemicals industry. Adequate educational infrastructure would be required to

impart vocational training to develop the required manpower. India would

need to take some urgent steps to strengthen technical education in the

country and establish newer institutes with good facilities.

2.13 CHEMICAL INDUSTRY IN GUJARAT

Chemical and Petrochemical Industry is the leading sector in terms of the

projects filed as well as under implementation category as indicated by the

analysis of the investment in chemical and allied sector vis-à-vis total industrial

investment in all sector. The Chemical Industry in Gujarat comprises of

about 500 large and medium scale industrial units, about 16000 of small scale

industrial units and other factory sector units.

Gujarat emerged as leading Indian states in terms of the investments committed

in the chemical and petrochemical sector. It contributes to more than 62% of

national petrochemical and 51% of national chemical sector output. Around

6,000 chemical and petrochemicals products are produced in the state.

Manufacturing of chemicals and chemical products contributes to around one

fifth of the total employment in state.

124

The major reasons which could be attributed to such a spectacular growth of

this sector in the state are a strong base of petrochemical industry, increasing

availability of basic feed stock, relatively low overhead cost, and availability of

necessary infrastructure, trained and technical manpower and high degree of

entrepreneurship. Gujarat Industrial Development Corporation (GIDC) has set

up mega estates, particularly for chemicals at Ankleshwar, Panoli, Vapi,

Vatwa, Jhagadia, Vilayat and Dahej to facilitate further development and

growth.

Moreover, to support Chemical and Petrochemical based industries. Govt. of

Gujarat has come up with Dahej PCPIR, PCPIR is a specifically delineated

investment region planned for the establishment of manufacturing facilities for

domestic and export led production of Petroleum, Chemicals and

Petrochemicals. It is spread over 453 km of brown field area in the coastal belt

of Gulf of Khambhat, in Bharuch District.

The proposed industrial SEZ in the PCPIR includes, petrochemical and

downstream petrochemical industries, synthetic organic chemicals, industrial

gas producing industry, packaging industries, shipbuilding/fabricating unit.

The industry is strongly supported by industrial infrastructure including 28

common effluent treatment plants, 7 Common Hazardous Waste Treatment,

Storage and Disposed Facilities in operation, 14 private TSDP and 8

Government facilities in operation. 4 common incinerators and 34 captive

incinerators in operation. 12 Common bio medical waste management facility,

chemical terminal ports, LNG Ports, industry specific estates and special

economic zones.

The lower per capita consumption of many important items at present and

growing middle class with increasing purchase power constitutes an attractive

market for various products The development of Chemical and Petrochemical

Industry requires creation of basic and allied infrastructure facilities and in

125

view of the availability of the same, the Indian/Gujarat Chemical Industry has

opportunity to grow within as well as outside the country.

The Chemical Industry needs to engage in strategic partnerships with foreign

partners with a view to realise and capitalize the latent potential. The existing

technology needs to be upgraded with the help of foreign partners.

INDUSTRY ASSOCIATION:

Vatva Chemical Industrial Association, Ahmedabad

Ankleshwar Industrial Association

Vapi Chemical Association

Jhagadia Industrial Co-op. Society Ltd

Gujarat Pesticides Formulation Association

CENTRAL GOVERNMENT MINISTRY :

Department of Chemicals and Petrochemicals

Ministry of Petroleum and Natural Gas

EXPORT PROMOTION COUNCIL-(INDIA) :

Chemicals & Allied Products Export Promotion Council

CHEMEXCIL - Chemicals, Pharmaceuticals & Cosmetics Export Promotion

Council

126

2.14 GUJARAT -GLOBAL CHEMICAL SUMMIT-2010 33

As a run-up to the Vibrant Gujarat 2011 Summit, the Government of Gujarat in

association with Gujarat Chemical Association (GCA) organized the Global

Chemical Leaders’ Summit 2010 (GCLS 2010) in Ahmedabad. The first day of

the 2-day summit, organized with the support of the Industrial Extension

Bureau (iNDEXTb), focused on showcasing Gujarat’s perspective on the

global competitiveness agenda in chemicals, petrochemicals, agrochemicals,

and dyestuff and specialty chemicals sectors while green manufacturing

practices were given priority.

Diplomats of 9 international missions from United Kingdom, South Africa,

Ethiopia, Botswana, Kenya, Mozambique, Zambia, Ghana and Peru

participated during the day.

The main agenda of the event, a 2-day international exhibition was organized

which saw participants from the entire spectrum within the sector.

____________________________

33 vibrant Gujarat 12-13 Jan 2011. 5th Global Chemical Summit.

127

INDIA CHEM -GUJARAT 2011

To promote the growth of the chemical sector, IndiaChem - Gujarat 2011, the

second in the series of India Chem Gujarat - an International exhibition &

conference covering Specialty, Fine Chemicals, Agrochemicals and Colorants

was inaugurated by Shri Narendra Modi, Hon'ble Chief Minister of Gujarat at

Mahatma Mandir on 13th of October 2011 at Mahatma Mandir, Gandhinagar,

and Gujarat. The event was jointly organized by the Department of Chemicals

& Petrochemicals, Govt. of India, and Govt. of Gujarat, iNDEXTb and

Federation of Indian Chambers of Commerce and Industry (FICCI). Chemexcil

organized an International Reverse Buyer-Seller meet during the exhibition.

Ms. Neelkamal Darbari, Joint Secretary (Petrochemicals) at the inauguration of the India Chem

Gujarat 2011 in the Presence of Shri. Narendra Modi, Chief Minister, Gujarat.

Government should work in collaboration with industries to upgrade the

current chemical Departments in universities to become state-of-the-art

Departments (in terms of infrastructure, faculty qualifications, industry

interaction, and administration).

IndiaChem-Gujarat 2011 international exhibition was a huge success with

participation of over 150 exhibitors including 15 from abroad. A focused

pavilion covering the dyes sector, with participation of 24 companies was set

up by the Gujarat Dyes Manufacturers Association. The exhibition included

participants from six countries viz: USA, China, Japan, Germany, Belgium and

128

Singapore. The Exhibition received over 6000 Business Visitors, which is an

indication of the interest generated by the event. The event succeeded in

showcasing Gujarat State and India's capability in the chemical sector with

special focus on segments of the chemical industry covered by the event.

A conference with the theme "Leveraging Gujarat State Advantage in the

Global Chemical Industry" was also organized concurrently with the

exhibition. The conference endeavored to highlight the potential of these

segments and was found very useful by the industry

An international Reverse Buyer Seller meet which was organized on the side

lines of the event by CHEMEXCIL (Chemicals Export Promotion Council),

was also a huge success. This event attracted buyers from 23 countries

especially from Africa, Latin America and CIS - all of which are emerging

markets of importance for the Indian Chemical Industry.

Global Chemical Leaders’ Summit 2010: “Global Competitiveness – Gujarat

Perspective”

2.15 GUJARAT TARGETS 15% INDUSTRIAL GROWTH, WITH A

SHADE OF GREEN. 34

Ahmedabad: The Gujarat government is targeting an ambitious 15% industrial

growth for the next five years, but with a touch of green, as it drafts the state’s

industrial policy for 2009-13.

“This makes it imperative for Gujarat to achieve the overall growth target of

11.2% fixed by the Planning Commission, and agricultural growth of 12%,” an

official in the state industry department said. He did not want to be identified as

he is not authorized to speak to media. “In addition to production growth, the

new policy will aim to provide capital and interest subsidy to industries willing

to invest in green technology,” the official said.

____________________________

34 Gujarat targets 15% industrial growth, with a shade of green. (Govt. Gujarat)

129

The thrust on environment-friendly technology is more a clean-up act in a state

with sizeable investments in the chemical sector, said a senior bureaucrat in the

state industry department.

The Ankleshwar-Panoli-Jhagadia belt in Bharuch, a district in southern

Gujarat, is one of the biggest chemical and pharmaceutical hubs in the country,

with more than 2,000 units earning estimated revenues of Rs20, 000 Crore.

Of the 51 special economic zones (SEZs) in the state, seven are in the

pharmaceutical and chemical sectors.

“Recent mishaps like in Ankleshwar and rising demand for cleaner products

has forced the state government to think about attracting green technology,” the

bureaucrat said.

In April, a fire broke at an inflammable toxic waste treatment plant in

Ankleshwar. The plant was holding 100 times its capacity of waste and was not

equipped to handle highly toxic substances.

According to the industry department official, the government plans to provide

special incentives for investors setting up effluent treatment plants and landfills

for industrial waste. The government is also expected to provide more teeth to

the Gujarat Pollution Control Board in its industrial policy for 2009-13.

Industrial production in Gujarat grew at 12.6% between 2003 and 2008 under

the existing industrial policy. The new policy, likely to firmed up in the next

two-three months, will be marketed internationally as a precursor to the state’s

global investors summit — Vibrant Gujarat 2009 — in January, an event that

aims to attract investors from across the globe. The existing policy came into

effect before the Gujarat government’s first investor’s summit in 2003.

Till March, Gujarat attracted investments worth Rs5.62 trillion, including

Rs2.15 trillion for the electricity sector and Rs1.86 trillion for manufacturing.

The state has also entered into memorandums of understanding for investments

130

worth another Rs6.5 trillion, according to data provided by the government.

Under its new investment policy, the government plans to give thrust to agri-

businesses, textiles, gems and jewellery, mineral-based industries and ship

building as well.

The new policy will also aim to create a special land bank for industries.

Gujarat Industrial Development Corp. has already been instructed to acquire

more than 50,000ha for this purpose, according to a government official

familiar with the development.

The government is also expected to provide additional sops in its new policy to

attract industries to economically and industrially backward areas and tribal

regions in the state, he said.