CHAPTER- 2

GROWTH AND PROSPECTS OF CHEMICAL

INDUSTRY IN GUJARAT

74

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 countrys
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
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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 ecosystem 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 Indias 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

76

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

77

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.

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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.

79

CHART NO: 2.1

PRODUCTION OF MAJOR ORGANIC CHEMICALS (Mn Tons)
Production of major organic chemicals (Mn Tons)
1.55

2006-07

1.55

2007-08

1.25

1.28

2008-09

2009-10

1.38

2010-11

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.
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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.

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 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.

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(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.

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(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 fluegas desulphurization and mitigating the impact of acid rain on inland water
bodies.
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 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 Indias 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. Perkins 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
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soon started use of synthetic dyes and depended on imported organic dyestuffs
till 40s. The start up of Arlabs Ltd. (the 1st dyestuffs company) in 1940,
followed by other dyestuffs companies in 50s and 60s 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.
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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. Indias 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 Indias 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.

87

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 Indias human capital. India has the worlds
largest population in the 0-24 years 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.

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2.6 PRESENT STATUS OF THE CHEMICAL INDUSTRY

26

With Asias 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.

89

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

90

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
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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
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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:-

93

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.

94

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
95

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.

96

 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.

97

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.

98

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

High End / Knowledge Segment

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
99

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.

100

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

Production

(Figures in MT)

Capacity
2009-10

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

10

11

12

1
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

101

TABLE NO: 2.4

GROUP-WISE EXPORT & IMPORT OF CHEMICALS 30
(Figures in Rs. Crore)
Group

INORGANIC
CHEMICALS *

ITC - HS
Commodity
Level Code

TRADE

2 DIGIT- 28

Export

PESTICIDES

2871

2431

3629

3317

5166

4540

5730

5579

5916

8130

10446

11473

11393

16270

7624

10190

12975

16269

21504

25950

28870

34058

35241

8795

10695

14363

18785

22776

27330

32642

44505

Export

2436

2943

3112

3111

3750

4562

5327

5900

4328

Import

1138

1344

1617

1878

2245

2720

3031

4328

Export

1356

1487

1746

2096

2791

2877

5969

8615

8611

Import

362

287

501

712

754

806

7357

11579

Export

12675

16566

19782

24347

30476

37018

43483

53739

54948

Import

16025

17905

22397

29505

36221

42329

54423

76682

2 DIGIT -29

Grand Total

4 DIGIT -3808

____________________________
30

2009-10

1949

Import

2 DIGIT -32

2008-09

1946

Import

DYEING, TANNING AND

COLOURING MATTER

2007-08

1259

Export
ORGANIC CHEMICALS

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

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

102

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
103

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
104

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
105

TABLE NO: 2.5

PRODUCTION OF SELECTED MAJOR CHEMICALS
(Figures in 000MT)
SECTOR

PRODUCTION
200506

200607

200708

200809

200910

GROWTH
(%)
202011

201112
(up to
Sept.
11)

2010-11/
009-10

Alkali
5475 5269 5443 5442 5602 5981 2970
6.77
Chemicals
Inorganic
544
602
609
512
518 572
310
10.42
Chemicals
Organic
1545 1545 1552 1254 1280 1342 672
4.84
Chemicals
Pesticides
82
85
83
85
82
82
37
0.00
(Tech.)
Dyes &
30
33
44
32
42
47
22
11.90
Dyestuffs
Total
7676 7534 7731 7325 7524 8024 4011
6.65
Major
Chemicals
Source: Office of the Economic Adviser, Min. of Commerce & Industry

Carg.
1011/
05-06

1.78
1.01
2.78
0
9.39
0.89

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.
9000
8000
7000
6000
5000
4000
3000
2000
1000
0

7676

7534

7731

7325

7524

8024

4011

2005-06

2006-07

2007-08

2008-09

Years

106

2009-10

2010-11

2011-12
(Upto Sep.
11)

 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 AprilAugust, 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)

April 10-11
May,10
June,10
July,10
August,10
September,10
Octomber,10
November,10
December,10
January,11
Februqary,11
March,11
April,11
May,11
June,11
July,11
August,11

157.8
156.5
156.6
161.3
156.1
160.3
166.6
158.0
175.6
175.9
168.0
193.1
166.2
166.2
170.4
167.5
162.4

Manufacturing Basic Chemicals &

Chemicals
Products
included in
Manufacturing
166.6
114.2
164.2
120.7
165.5
124.7
172.1
127.7
165.2
124.5
172.1
125.0
176.4
121.7
166.8
121.3
187.3
124.8
186.5
125.8
179.4
120.6
206.2
126.3
176.1
123.5
174.5
126.1
182.6
123.4
177.5
125.3
172.5
126.7

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

The behavior of IIP of Chemicals and Chemical products vis--vis overall IIP
and IIP in respect of manufacturing during 2005-06 -2010-11 has been depicted
in Chart-2.3

107

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.
108

TABLE NO: 2.7

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

All
Com
modi
ties

Food
Artic
les

Manu
fact.
Produ
cts

Basic
Heavy
Inorgani
c
Che.

Basic
Heavy
Organic
Che.

Soda
Ash

Dyes
&
Dyest
uff

127.9
127.9
127.8
128.1
128.3
128.7

Chem
icals
&
che.
produ
cts
122.6
122.6
122.4
122.1
122.6
122.8

April,10
May,10
June,10
July,10
August,10
September,1
0
Octomber,10
November,1
0
December,1
0
January,11
Months

138.6
139.1
139.8
141.0
141.1
142.0

168.8
172.1
175.4
178.2
176.7
179.9

124.9
125.2
125.8
125.3
125.0
124.9

122.7
123.5
122.9
121.6
122.1
121.5

128.2
130.8
130.9
125.7
124.2
123.9

113.8
114.4
114.3
113.9
114.4
115.1

142.9
143.8

180.9
181.4

129.2
129.8

123.0
123.3

125.8
125.5

122.5
123.2

125.5
125.3

117.9
116.2

146.0

189.4

130.9

124.2

126.8

124.8

130.1

116.1

148.0
All
Com
modi
ties

192.4
Food
Artic
les

132.6
Manu
fact.
Produ
cts

127.4
Basic
Heavy
Inorgani
c
Che.

126.9
Basic
Heavy
Organic
Che.

134.5
Soda
Ash

117.7
Dyes
&
Dyest
uff

148.1

181.3

134.0

125.9
Chem
icals
&
che.
produ
cts
127.7

Februqary,1
1
March,11
April,11
May,11
June,11
July,11
August,11
September,1
1

128.3

129.3

136.4

117.2

149.5
152.1
152.4
153.1
154.2
154.9
158.8

179.0
186.8
186.3
188.8
192.8
193.7
196.5

135.6
136.6
137.4
137.9
138.0
138.8
138.6

129.3
131.0
131.8
132.2
132.7
133.0
133.5

130.2
132.8
135.2
137.2
138.6
138.2
137.0

131.7
133.9
135.5
135.0
134.9
136.1
134.9

138.4
142.5
145.5
144.9
149.2
148.0
149.1

119.0
118.5
119.1
119.7
120.7
120.4
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.-

109

TABLE NO: 2.8

WHOLESALE PRICE INDEX OF CHEMICALS & CHEMICAL
PRODUCTS VIA-A-VIS OTHER COMMODITIES 31
Particulars

200506
104.47
105.38

All Commodities
Food Articies
Manufacturing
Products
102.42
Chemicals &
Chemical Products 103.79

200607
111.35
111.52

200708
116.63
123.57

200809
126.02
134.8

200910
130.81
155.39

201011
143.32
179.63

108.22 113.39 120.38 123.05 130.07

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

700
600
Axis Title

500
400
300
200
100
0

200506

200607

200708

200809

200910

201011

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

Chemicals & Chemical

Products

____________________________
31

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

110

TABLE NO: 2.9

PRODUCT-WISE INSTALLED CAPACITY & PRODUCTION OF
MAJOR CHEMICALS

111

112

113

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

Specialty Chemicals

13%

Basic Organic Chemicals

12%

Pesticides

12%

Coloranats

12%

Overall Chemical Industry

12%

ChlorAlkali

8%

Alcohol based chemicals

8%

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
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 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 below1. 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.
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 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,
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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 agrowastes 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
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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 Indias 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.
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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

Innovation & Inclusiveness

Organisation

Funding

Infrastructure

Collaboration

Establish the
Chemical sector
council for
innovation

Set up a USD
100 million
Chemical
Innovation Fund

Develop 3 Regional
Clusters and 2
Innovation Centers
in universities

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

Launch an OUTREACH program

Strengthen IP protection through creation of fast-track courts

____________________________
32

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

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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

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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.

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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 sectors 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, IITs 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
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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--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.

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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

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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

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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 Gujarats 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.

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 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
127

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 states
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)

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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 states
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 governments first investors 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
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worth another Rs6.5 trillion, according to data provided by the government.

Under its new investment policy, the government plans to give thrust to agribusinesses, 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.

130