Indian Chemicals Industry Analysis

India’s chemicals industry is de-licensed, except for few hazardous chemicals. In the Indian chemical industry, alkali chemicals have the largest share with ~69% in the total production; production of polymers accounts for ~59% of the total production of basic key petrochemicals in 2019. The chemical industry is expected to contribute US$ 300 billion to India’s GDP by 2025.

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 global level (excluding pharmaceuticals). The chemicals industry in India covers more than 80,000 commercial products with overall market size standing at US$ 178 billion in 2018-19. 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. In July 2021, production volumes of key chemicals stood at 909,310 MT and petrochemicals at 1,867,351 MT. 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 recovery in domestic demand and higher realisations owing to rising crude oil prices and better exports.

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 was polymer products.

In December 2020, India witnessed unrealised growth potential in agrochemicals and is focussing 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 strong presence in the exports market in the subsegment of dyes, pharmaceuticals and agrochemicals. 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.

The country ranks 14th in export and 8th in import of chemicals worldwide. In September 2021, exports of organic and inorganic chemical exports increased 29.65% YoY to reach US$ 2.37 billion.

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.

In the chemical sector, industrial licensing and 100% FDI, under the automatic route, are allowed with exception to few hazardous chemicals. Total FDI inflow in the chemicals (other than fertilisers) sector reached US$ 18.06 billion between April 2000 and September 2020.

Indian companies are witnessing interest from strategic investors led by Japan, Korea and Thailand, as they seek to diversify supply chains from China

This includes large deals in FY 2020—KKR’s $414 million acquisition of JB Chemicals and Pharmaceuticals Ltd. and Carlyle’s $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.

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 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 2021-22, the government allocated Rs. 233.14 crore (US$ 32.2 million) to the Department of Chemicals and Petrochemicals.

The Government of India is considering launching a production linked incentive (PLI) scheme in the chemical sector to boost domestic manufacturing and exports.