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.
A modernisation fund for upgrading the quality of assets, and most importantly, safety and environmental compliance, is clearly required. There is precedence for this; a textile industry upgradation fund, targeted at SMEs, has served that industry well. For the chemical industry, it will improve competitiveness now compromised by lack of scale and operation of aged plants based on outdated technologies. There is little sense in tinkering with tariffs or imposing safeguard/anti-dumping duties to protect domestic units; instead nurture modernisation, consolidation and expansion!
Agenda 3: Distinguish between the good and the bad
The current regulatory regime for granting approvals for expansions and diversifications makes no differentiation between units that are compliant to environmental laws and ones that are not. There has to be system that rewards the compliant and punishes others. Gujarat has made a start by offering extended consent "to operate for units that are ISO-14000 compliant or Responsible Care certified, but there is need to take these initiatives nationwide, especially to the Ministry of Environment & Forests in New Delhi. Delayed approvals even for units that have excellent track records have stymied several business opportunities. Without growth, businesses will suffocate and cease to exist.
Agenda 4: Set standards for quality
The business of speciality chemicals, in particular, will get a tremendous boost if standards for quality, performance and safety are laid out and strictly implemented. Be it for automotives, buildings, electronics, textiles or water, well thought norms, in line with international trends, but taking Indian specifics into account, will play a big role in boosting demand for example for fuel additives, coatings, construction chemicals, flame-retardants, synthetic elastomers etc. While businesses will profit, the benefits to consumers from higher performance products and better safety will be significant.
Agenda 5: Champion the cause of the industry
The chemical industry has become everyone's favourite whipping boy. Admittedly, there are problems within the industry - its safety record is something that it should be ashamed of, and industry needs to introspect as to how this can be bettered. But bashing the industry in every forum is senseless. It frightens the general populace; robs the industry of a societal license to operate; and deters youngsters from taking to the industry for their careers. If not addressed, these will seriously inhibit the industry's prospects for growth.
The government has a role to play in supporting industry-led initiatives to communicate the many benefits the industry brings to diverse sectors of the economy and enable modern living. This is a task too large for the industry or its associations to bear alone!
Agenda 6: Promote 'Made in India' globally
Every effort should be made to promote India as a reliable and safe place to do the business of chemicals, as has been done in the case of pharmaceuticals (in which the chemical industry has had a big role, considering manufacturing of active ingredients is essentially a chemical operation). Support to SMEs for participation in local and international exhibitions and buyer seller meets will go a long way in encouraging exports. Export of chemicals - especially fine & specialty chemicals - should be identified as thrust area and specific markets identified with the support of the local embassies and trade representatives to give a fillip to Indian chemical exports.
Agenda 7: Formulate a national inventory of chemicals
It is a pity that "we still do not fully know the chemicals in commerce in the country. The regulation of chemicals is globally recognised as important, and even developing countries such as China, with a much larger and just as fragmented chemical industry as our own, have made significant strides. A tentative start has been made in India, but needs to be urgently followed through to have a comprehensive picture that will be important for steering the right kind of growth and to meet commitments to international treaties.
This article was originally published in the April, 2014 issue of the Chemical Weekly magazine.