India’s chemicals industry is de-licensed, except for a few hazardous chemicals. In the Indian chemical industry, alkali chemicals have the largest share with ~73.1% of the total production from April to September 2022 (FY23). The chemical industry is expected to contribute US$ 383 billion to India’s GDP by 2030. India is the 6th largest producer of chemicals in the world and 3rd in Asia, contributing 7% to India’s GDP. India's chemical sector is currently estimated to be worth US$220 billion in 2022 and is anticipated to grow to US$ 300 billion by 2025 and US$ 1 trillion by 2040.
India holds a strong position in exports and imports of chemicals at a global level and ranks 14th in exports and 8th in imports at the global level (excluding pharmaceuticals). The chemicals industry in India covers more than 80,000 commercial products with an overall market size standing at US$ 232.6 billion in 2021-22. The industry is expected to grow at 9.3% to reach US$ 304 billion by 2025 on the back of rising demands in the end-user segments for specialty chemicals and petrochemicals. The specialty chemicals sector is expected to reach US$ 40 billion by 2025.
Indian manufacturers have recorded a CAGR of 11% in revenue between FY15 and FY21, increasing India’s share in the global specialty chemicals market to 4% from 3%, according to the Crisil report. A revival in domestic demand and robust exports will spur a 50% YoY increase in the capex of specialty chemicals manufacturers in FY22 to Rs. 6,000-6,200 crore (US$ 815-842 million). Revenue growth is likely to be 19-20% YoY in FY22, up from 9-10% in FY21, driven by a recovery in domestic demand and higher realisations owing to rising crude oil prices and better exports. In April-March (2022-23), India's dye exports totalled US$ 23.78 billion. According to a CRISIL report, the specialty chemicals market in India would grow faster than China, increasing its market share to 6% by 2026 from 3-4% in fiscal 2021. A shift in the global supply chain brought on by the China+1 strategy and a resurgence in domestic end-user demand will fuel significant revenue growth of 18–20% in 2022 and 14–15% in 2023.
Chemical production reached 874.30 million metric tonnes (MMT) in February 2023, while petrochemical production reached 1,773.74 MMT. In February 2023, production levels of various chemicals were as follows: Soda Ash: 250.87 MMT, Caustic Soda: 269.17 MMT, Liquid Chlorine: 201.48 MMT, Formaldehyde: 19.13 MT and Pesticides and Insecticides: 17.01 MMT.
Insecticides share 53% of the total domestic agrochemicals market, followed by Herbicides. Agrochemicals are the key revenue component of India, which exports 50% of its total production. Petrochemicals consumption stood at 22 million tonnes in 2019-20, out of which 16.5 million tonnes were polymer products. As per Chemexcil (Chemicals Export Promotion Council), India’s agrochemicals export was estimated to be at US$ 5.37 billion from April 2022-March 2023 (Provisional).
In December 2020, India witnessed unrealized growth potential in agrochemicals and is focusing on developing new products and judiciously using pesticides.
Despite decreasing demand for polymers due to COVID-19 pandemic, India is likely to witness growth to ~32 million tonnes from 2020 to 2030.
India is a global supplier of dye, accounting for ~16% of the global production of dyestuffs and dye intermediaries. India has a strong presence in the global market exporting to more than 90 countries in the subsegment of dyes, pharmaceuticals, and agrochemicals. From April 2022 to March 2023, India's dye exports totalled US$ 23.78 billion. The country exports dyes to Germany, the UK, the US, Switzerland, Spain, Turkey, Singapore, and Japan. The Indian dyes and pigments market is projected to reach US$ 63.0 billion by 2022.
The domestic chemicals sector's small and medium enterprises are expected to showcase 18-23% revenue growth in FY22, owing to an improvement in domestic demand and higher realisation due to high prices of chemicals. Domestic demand is expected to rise from US$ 170 billion-US$ 180 billion in 2021 to US$ 850 billion-US$ 1,000 billion by 2040.
Supply disruption in China has caused the global end-user industries to diversify their vendor base mainly towards Indian players. Closure of plants in the EU and China due to increasing environmental concerns have favoured Indian manufacturers to invest further in specialty chemicals. From April 2022 to July 2022, exports of organic & inorganic chemicals increased 22.1% YoY to reach 963 MMT.
In the chemical sector, industrial licensing and 100% FDI, under the automatic route, are allowed with exception to few hazardous chemicals. FDI inflows in the chemicals sector (other than fertilisers) reached US$ 20.96 billion between April 2000- December 2022.
Indian companies are witnessing interest from strategic investors led by Japan, Korea and Thailand, as they seek to diversify supply chains from China
From April 2022 – March 2023, exports of organic (US$ 9.64 billion) & inorganic (US$ 2.17 billion) chemicals were estimated at US$ 17.19 billion.
In May 2023, Reliance Industries plans to set up 10 GW solar project in Andhra Pradesh.
In March 2023, Chennai awaits more bio-CNG plants to enable switch to clean energy.
In February 2023, the company is setting up a new formaldehyde plant with 300 TPD capacity at the existing manufacturing facility at GIDC, Ankleshwar in Gujarat.
In January 2023, Tata Chemicals Europe signs pact with Essar-backed Vertex for sale of low-carbon hydrogen.
In December 2022, GMM Pfaudler Ltd has entered into an agreement on December 8th, 2022 to acquire Mixel France SAS and its wholly owned subsidiary Mixel Agitator Co. Ltd. For US$ 7.63 million.
In September 2022, Spanish perfume maker Puig acquired a controlling stake in Kama Ayurveda Pvt. Owning 85% of the company.
In May 2022, a global investment firm, PAG acquired Optimus group along with consortium partners CX Partners and Samara Capital.
In April 2022, Dorf Ketal, a manufacturer of research based specialized chemicals has acquired Khyati Chemicals for US$ 36.28 – 48.48 million (Rs. 300-400 crore).
Advent International acquired a majority position in Avra Labs in January 2022, uniting it with two other businesses it had previously acquired, RA Chem Pharma and ZCL Chemicals.
This includes large deals in FY20—KKR’s US$ 414 million acquisition of JB Chemicals and Pharmaceuticals Ltd. and Carlyle’s US$ 210 million acquisition of SeQuent Scientific Ltd.
The Indian Government supports the Industry through research & development and initiatives such as reducing basic customs duty on several imported products and promoting the ‘Make in India’ campaign.
A 2034 vision for the chemicals and petrochemicals sector has been set up by the government to explore opportunities to improve domestic production, reduce imports and attract investments in the sector. The government plans to implement production-link incentive system with 10-20% output incentives for the agrochemical sector; to create an end-to-end manufacturing ecosystem through the growth of clusters.
Lower per capita consumption and ease of doing business are promoted by the Indian government; this reflects good investment opportunities with huge growth potential.
The government has established four petroleum, chemicals and petrochemical investment regions (PCPIRs) as investment regions for petroleum, chemicals and petrochemicals, along with associated services. Plastics Parks have been set up to facilitate technology development and conducive ecosystem to produce specialised plastic products.
The Department of Chemicals & Petrochemicals intend to bring PLI in chemical & petrochemical sector and will redraft the Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) guidelines.
In December 2020, the PCPIR policy is being completely redesigned. Under the new PCPIR Policy 2020-35, a combined investment of Rs. 10 lakh crore (US$ 142 billion) is targeted by 2025, Rs. 15 lakh crore (US$ 213 billion) by 2030 and Rs. 20 lakh crore (US$ 284 billion) by 2035 in all PCPIRs across the country. The four PCPIRs are expected to generate employment for ~33.83 lakh people. ~3.50 lakh persons have been employed in direct and indirect activities related to PCPIRs by the end of 2020.
The government is planning to hold roadshows in eight overseas markets for the proposed investors’ summit planned in January 2022, with focus on the petrochemicals sector, and is eager to attract investors to its newly launched Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) near the upcoming crude oil refinery in Pachpadra village (in Barmer district, Rajasthan).
In November 2021, Indian Oil Corporation (IOCL) announced plans to invest Rs. 3,681 crore (US$ 495.22 million) to set up India’s first mega-scale maleic anhydride unit for manufacturing high-value specialty chemicals at its Panipat Refinery in Haryana.
In September 2021, Dorf Ketal Chemicals India Pvt. Ltd., a company headquartered in Mumbai, India; and TriBonds Chemical Co., based in Dammam, the Kingdom of Saudi Arabia, have announced a joint venture (JV) to manufacture water specialty chemicals for applications in the Middle East refining and petrochemical industry. The JV will focus on meeting the energy and water management and processing needs of refineries, petrochemicals, fuel additives, plastics, lubricants, oil field chemicals, catalysts and adsorbents.
In June 2021, the Rubber Skill Development Council (RSDC) announced that it is expanding its vertical to cover the chemicals and petrochemicals sectors and will be now known by the name Rubber, Chemical, Petrochemical Skill Development Council (RCPSDC). The council will implement skill training programmes in chemicals and petrochemicals verticals for the youth across country.
Under the Union Budget 2022-23 the government allocated Rs. 209 crore (US$ 27.43 million) to the Department of Chemicals and Petrochemicals. PLI schemes have been introduced to promote Bulk Drug Parks, with a budget of Rs. 1,629 crore (US$ 213.81 million).
