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Opportunities and Challenges for the Indian Chemical Industry

By: Admin In: Business Last Updated: 2017-05-25

chemical industry in india

A look around us, and we will understand how inextricably we are linked with the Indian chemical industry. Whether it is the drugs, cleaning agents, synthetic garments or thermoplastic furniture, everything around us is a direct or indirect product of the chemical industry. This industry produces more than 70,000 commercial chemical products annually, which has helped it gain the sixth spot in the list of largest chemical producers in the world and the 3rd spot in list of Asia. Although there are many opportunities for the chemical industry in India that are helping it to grow and expand internationally, at the same time, there are many challenges in its way that are hindering this growth. Let’s read about the opportunities and challenges that the Indian chemical industry is facing today.

Challenges Faced by The Indian Chemical Industry

  • Lack of Raw Material

The raw materials or feedstock used in the organic, as well as the inorganic chemical industry, are not easily available in the market. Chief feedstock like naphtha and natural gas are available at a very high price in India as compared to other countries like Middle East, China, and other South East Asian countries. This lack of feedstock makes India uncompetitive in the global chemical market.

  • Ease in Cheap Import

One of the biggest challenges faced by the Indian chemical industry is the ease in the availability of cheaper chemicals via import. The tariff and other entry barriers on the import of various chemicals have been waivered off by the Indian government. This has led to an increase in the import of different chemicals available in the global market at a much cheaper rate.

  • Outlying Location and Inadequate Infrastructural Facilities

The major Indian chemical industry has been set up along the west coast in Gujarat, while the highest demand of chemicals is in southern and eastern India. This gives rise to logistical transportation costs, thus increasing the overall cost of chemicals. In addition to that, there are several infrastructural problems faced by the industry. The ports do not have adequate facilities, the pipeline connectivity is quite poor, the power supply is insufficient and even the railway depots are a mess; making it difficult for the chemical industries to procure raw material from the various chemical and chemical products suppliers in India.

  • Complex Regulatory Issues and High Taxes

The heavy duty tax imposed on various raw materials surpasses the tax imposed on the finished products. This discourages the Indian chemical industry from manufacturing more chemicals because of the high price of raw materials and encourages the import of the same chemicals because of negligible taxes on import of finished products. Plus, the regulatory process is very complex with a number of certificates and licenses that are required for the setting up a chemical industry in India.

Opportunities for The Indian Chemical Industry

  • Increased Demand for Value-Added Products

The demand for biodegradable polymers, performance plastics, and other value-added chemical products is expected to increase in the coming time because of the various environmental concerns. This would be a good opportunity for the chemical companies in India to start attending to the increasing needs of value-added chemical products. With a little more effort in R&D, value-added products can become great chemical business opportunities for the Indian companies.

  • Expand Export in Emerging Markets

Another golden opportunity for the Indian chemical industry is offered by the strongly emerging countries of Africa, Middle East, and Asia-Pacific. These countries are developing at a faster pace as compared to the developed countries of North America and Europe, thus giving more opportunities for export to the big as well as small chemical businesses in India. Presently the chemical export share of India in the global market is just 2%; the increasing growth in these emerging markets would open new export opportunities for India.

  • Coal Gasification

India is gifted with coal in abundance. Coal gasification comes as the perfect opportunity for the Indian chemical industry to increase its petrochemical and chemical production by leveraging in gasification technology. The demand for petrochemicals has increased and the use of coal gasification for producing more and more chemicals and petrochemicals would be a great opportunity to fulfill this increasing demand which was earlier being fulfilled by increased import.

  • Reverse SEZs in Global Market

Setting up chemical plants in reverse SEZs aka Special Economic Zones in countries like Myanmar, Iran, and Mozambique would give new opportunities to India that has always been looking for affordable raw materials for its chemical industry. Chemical plants set-up in these economic zones would allow cheap and easy duty-free import of raw materials for further use.

The Indian chemical industry has received a much-needed boost in the past 4-5 years. The Government is taking strict measures to cut out the challenges faced by the industry and coming up with new projects and plants to leverage all the opportunities to the maximum. In fact, the new ‘Make In India’ initiative would also play a pivotal role in boosting the growth of the Indian chemical industry.

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