The growth of the chemical industry is inextricably tied to that of the overall economy, but there are several industry specific initiatives that should form the agenda for any new government that comes into rule in Delhi over the next fortnight or so. Growth in the industry has stalled - for a number of reasons, not all of which are beyond the control of policy makers, and it is important to address these issues to revitalise the industry, spur new investments and aid the modernisation of small and ailing units.
Agenda 1: Finding a home for the industry
The chemical industry is currently concentrated in the western parts of the country, especially in Maharashtra and Gujarat. Reliable statistics are hard to come by, but it will not be incorrect to peg the share of these two states at more than 75% of national chemical output. In some sectors - e.g. dyes & pigments - this could be even higher, while for others - like pharmaceuticals - they could be slightly lower.
Both states have now reached their limits in terms of land & other infrastructure available for the industry. Large parts of the Gujarat, for example, have now been declared off-limits for new projects and expansions, as per directives of the Ministry of Environment and Forests, as they fall in ecologically damaged zones. The new industrial estates in Dahej and Jhagadia are attracting investors, but the time has come to think beyond to accommodate the likely growth in chemical demand over the next decade.
What could be some alternate sites? Clearly, coastal India is the best bet; clusters should be encouraged around hubs such as Mangalore, Visakhapatnam, Ennore, Paradeep and Haldia. Most are intended to house PCPIRs - dedicated zones for chemical manufacture - but are yet to take off due a multiplicity of reasons including lack of a clear vision, lukewarm interest from anchor promoters (mainly public sector oil refiners) and even less so from international majors. Any new government must seize the moment and try and sell the concept to big names in the industry globally.
Clusters identified for chemicals manufacturing should be granted overarching environmental clearance. Units falling into the master-plan should have no need to seek individual approvals from central authorities, as long as they satisfy local regulatory norms.
Agenda 2: Aid modernisation of existing industrial estates & units therein
A visit to even the largest of existing industrial estates will make evident the pathetic state of infrastructure. Be it the poorly maintained roads, lack of power, or proper functioning of common effluent treatment plants - there is a lot to be done to get existing clusters into shape. Much of the improvements can come from better management, including by involvement of industry representatives, and little or no policy changes are required. In a sense this is low hanging fruit, but the returns will be disproportionately large.