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WE NEED A CRACKER PLANT

The size of the chemical industry in India is around $160bn, accounting for less than 4 per cent of the global chemical industry size of $4.7 trillion. Also, the per-capita consumption in India is hardly a tenth the size of China’s, a fifteenth of the western world and even when compared to Brazil and Mexico is only a fourth. Thus, there is a massive potential for growth.
Lack of a market is not impeding the growth. Indeed, for most chemical products, India is one of the fastest growing markets, with a growth rate of around 8-9 per cent p.a. What constrains the industry growth are the usual issues: inadequate infrastructure (ports, pipelines, power, and road), unfavourable regulations (very low import tariff, and impact of free trade agreements), delay in take-off of the Petroleum, Chemicals and Petrochemical Investment Region (PCPIR) scheme, non-availability of building blocks like ethylene, propylene and the like and the employability of people.

Massive imports of chemicals

A significant deterrent to the growth of the industry is the low tariff structure on imports, further compounded by the concessions offered in free trade and bilateral trade agreements. This is facilitating companies to directly sell to India from their bases outside, and thereby undermining the “Make in India” initiative. Even though 100 per cent FDI is allowed in the chemical sector from the early 1990s, it is telling that there is no significant international investment in this sector in India. This is leading to massive imports of chemicals, thereby affecting the country’s balance of payments.
In Tamil Nadu, the chemical industry has a distinguished history. The state has been a forerunner in establishing chemical plants. One of the country’s oldest caustic soda plants was established in the 1930s at Mettur, as indeed was the country’s first polysilicon plant and one of the oldest PVC plants. Chemical industry clusters have come up in Ranipet, Mettur, Cuddalore and Tuticorin and significant employment been generated within the state. Yet the state accounts for only 6 per cent of the chemical industry in India, lagging Gujarat’s 57 per cent by a far distance. Tamil Nadu should see a far higher share given the natural advantages it has regarding a long coastline of 1160 km, plus three major ports and multiple minor ports.
Moreover, Tamil Nadu has a significant advantage in the availability of quality, skilled manpower with a high number of engineers, diploma holders and ITI graduates being turned out every year. Where Tamil Nadu falls behind is in the area of petrochemicals; this is because of the absence of even a single naphtha/ethane cracker in the state. This has led to the unavailability of basic building blocks like ethylene, propylene, and butadiene.
A critical requisite to growing the chemical industry is thus the setting up of a naphtha cracker, which will lead to the growth of downstream units and have a positive multiplier effect. A step was made in this direction by setting up a PCPIR in the Cuddalore-Nagapattinam belt. This was to have kick-started growth in the chemical sector in the state. Unfortunately, it did not happen due to the absence of a large anchor unit.
A concerted effort to engage the national oil companies to set up a cracker plant in the state would provide the required impetus to the growth of the chemical industry in the state. This, coupled with infrastructural improvements in chemical clusters like common effluent treatment plants, pipeline corridors and desalination plants in the coastal areas, will stimulate a more rapid growth of the chemical industry in Tamil Nadu.

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