CHAPTER- 2 GROWTH AND PROSPECTS OF CHEMICAL INDUSTRY IN GUJARAT
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2.1 INTRODUCTION INTRODUCTI ON 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 75
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 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
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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. th
The Indian Chemical Industry is currently US$ 50 billion and it is 12 largest rd
producer of chemicals in the t he world and 3 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.
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CHART NO: 2.1 PRODUCTION OF MAJOR ORGANIC CHEMICALS (Mn Tons) Production of major organic chemicals (Mn Tons) 1.55
1.55 1.38 1.25
2006-07
2007-08
2008-09
1.28
2009-10
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. 80
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. 84
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 85
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. 86
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
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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. 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 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.
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2.6 PRESENT STATUS OF THE CHEMICAL INDUSTRY
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.
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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
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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 91
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 92
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:-
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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. 28
2.9 CHEMICAL INDUSTRY IMAGE
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
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 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
1
2
2001-02
3
2002-03
4
2 003-04
2004-05
5
6
7
5070374
5271675
5474614
2006-07
8
I: ALKALI
7489600
4342305
4792345
II: NORGANIC
715915
374132
403827
440608
508157
543965
602309
III: ORGANIC
1940457
1166575
1352653
1473855
1505895
1545262
1545442
IV: PESTICIDES
146471
81803
69565
85118
93966
82240
84701
V DYES
54551
24789
26196
25940
28498
29541
TOTAL MAJOR CHEMICALS (I+II+III+IV+V)
10346994
5989604
6644586
7095895
7408191
7675622
____________________________ 29
2005-06
http://chemicals.gov.in/chem1.htm
101
5268987
2007-08
9 5268987
2008-09
10
2009-10
11
2010-11
12
5427233
5601913
5981204
602309
512513
517511
572052
1545442
1254171
1281169
1339589
84701
85218
82185
81934
32552
32552
37636
51080
47036
7533991
7533991
7316771
7533858
8021815
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
Grand Total
2431
3629
3317
5 166
4540
5730
5579
5916
8130
10446
11473
11393
-
16270
7624
10190
12975
16269
21504
25950
28870
34 058
35241
8795
10695
14363
18785
22776
27330
32642
-
44505
Export
2436
2943
3112
3111
3750
4562
5327
5 900
4328
Import
1138
1344
1617
1878
2245
2720
3031
-
4328
Export
1356
1487
1746
2 096
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
5 4423
0
76682
____________________________ 30
2009-10
2871
2 DIGIT -29
4 DIGIT -3808
2008-09
1949
Import
2 DIGIT -32
2007-08
1946
Import
DYEING, TANNING AND COLOURING MATTER
2004-05 2005-06 2006-07
1259
Export ORGANIC CHEMICALS
2001-02 2002-03 2003-04
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
GROWTH (%)
200910
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-à-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
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
142.9 143.8
Februqary,1 1 March,11 April,11 May,11 June,11 July,11 August,11 September,1 1
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
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
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
192.4 132.6 Food Manu Artic fact. les 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
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 Particulars All Commodities Food Articies Manufacturing Products Chemicals & Chemical Products
200708 116.63 123.57
200809 126.02 134.8
31
200506 104.47 105.38
200607 111.35 111.52
200910 130.81 155.39
201011 143.32 179.63
102.42
108.22 113.39 120.38 123.05 130.07
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
700 600 500 e l t i T s i x A
400 300 200 100 0 200506
200607
200708
200809
200910
201011
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
____________________________ 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 114
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. 115
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, 116
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 117
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. 118
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
1
2
Organisation Establish the Chemical sector council for innovation
3
4
Funding
Infrastructure
Collaboration
Set up a USD
Develop 3 Regional
Sign
100 million
Clusters and 2
International
Innovation Centers
Chemical
in universities
Innovation Fund
Collaboration agreements with 2 countries (Germany, Sin a ore
5
6
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. 119
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 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 122
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.
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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 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. 5 th Global Chemical Summit. 126
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 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)
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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 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 129
