The growth story of the Indian chemical industry is akin to Madame Marie Curie’s laboratory experiments. Of it, she once said, “At times, I would be encouraged by a little unhoped-for success; at some others, I would be in the deepest despair because of accidents and failures.”
While Indian chemical industry has scaled globally like in petrochemicals and pharmaceuticals, we have also had disasters like the Bhopal gas leak that killed at least 3787 and injured 558,125 others. This industry has suffered untold damages even as it has silently contributed to the Indian economy. It has advanced the growth of sectors like farming, food, health, mobility and housing.
Mark it; the future of the chemical industry rests on some critical factors. These include: investments in research and development; creating an eco-system that fosters innovation and protects IPR; focusing on multidisciplinary approaches among chemistry, physics and biology; going green and being sustainable and focusing on food, energy and water.
FEW SIGNIFICANT ISSUES OF TODAY
India is a global leader in sectors such as downstream refining, petrochemicals, fertilizers, basic commodity chemicals, specialty chemicals and pharmaceuticals. The industry accounts for 2.11 per cent of the GDP and is the third largest in Asia, after China and Japan, contributing to 12.17 per cent of the exports. In 2017, India added $224 billion to the world’s market and the industry is slated to grow to $400 billion by 2025 and $800 billion by 2030. The drivers to achieve a growth rate of more than 15 per cent are focused scaling, sustainability, innovation and R&D. There are success stories along the Dahej-Vapi-Ankaleshwar belt, Jamnagar belt, in Cuddalore-Chennai area, Hyderabad-Visakhapatnam, Mangaluru, Cochin, Haldia, Panipat, Mathura, etc. The highest potential lies with specialty chemicals sector, like agrochemicals, dyes and colorants, fragrance, and flavours, which is expected to grow at a CAGR of 10 per cent. Value-added industries will also help scale.
VERTICAL INTEGRATION IS IMPERATIVE
Although severely disadvantaged by lack of basic feedstock, especially petroleum derivatives, India has tremendous intellectual capital, which we can use to our advantage. We have built world-class refineries and petrochemical complexes, but sadly they lack the framework for integration. We needn’t look any further than Jurong in Singapore to learn what to do. Jurong Island’s chemical industry contributes 40 per cent of Singapore’s manufacturing industry output. Its success stems from efficient integration and cost-effectiveness. Inside Jurong Island, companies using shared facilities and infrastructure can buy and sell feedstock and products ‘over the fence.’ By leveraging the broad base of manufacturers, corporations can reduce capital investments and operating costs by outsourcing utilities and services like steam, hydrogen, cooling water, effluent treatment, industrial gases, storage, port and terminal facilities and emergency services to specialised third parties. By doing so, everybody benefits from economies of scale.
The recent policy initiative of Petroleum, Chemicals and Petro-chemical Investment Region (PCPIR) works on this principle; but, regarding vertical integration and world scale services, it does not take the idea to its logical conclusion.
INNOVATION AND R&D
Innovation must focus on providing better consumer connect and offering viable solutions to real-life problems. Indian market is a different ball game in areas of nutrition, water and energy. However, no Indian firm is large enough when compared to global MNCs. Hence it may be a good idea for the industry to partner with the government and set up a national innovation fund to solve drinking water problems, deterioration in air quality, providing better battery technology and the like. We can look at a PPP framework, where companies fund 51 per cent, and the GoI forks out 49 per cent.
Stand-alone labs are no longer yielding results. There is no merit in not integrating NCL, CMCSRI and other labs into one structure. We must incorporate CSIR labs into universities. For programmes beyond undergraduate studies, the University Grants Commission should give them greater autonomy.
Indian firms should also deepen their investments in R&D and go beyond process innovation to product innovation. For serving global customers, specialty chemicals need world-class R&D facilities capable of designing its own products. This desire brings to the fore the need to elevate Indian standards and regulations on par with those in EU and USA.
Our measure of success in R&D is going beyond patents and instead measuring how many scientists have become millionaires. If R&D is not a lucrative profession, it will not attract the best talent. Enter Intellectual property. An administrative framework with benefit sharing models would drive the best of scientists to research. Finally, the Indian legal and other dispute resolution mechanisms need to be time bound.
We have the unique opportunity to leapfrog technologies. However, to grab that chance, India must stop adopting outdated product portfolios. Many molecules, banned in the international markets, are still used in India, thereby disallowing the newer products to take root and grow competitively. The government must proactively step in and ban older generation products.
Indian industry needs to embrace product and process sustainability. The framework of Responsible Care should be made mandatory. An independent regulator needs to oversee the implementation of Responsible Care across the chemical sector.
Third-party operators must be made compulsory in all chemical zones to ensure sustainable operations. World-class CETP operators who will provide up-stream units, which do not violate norms, must be encouraged. An independent regulator for environmental sustainability will also reduce the level of corruption and harassment that is innate in the system. Indian industry needs to adopt latest green technologies for manufacturing chemicals. The industry must submit to the government its roadmap to help achieve the Paris commitments made by the Government of India.
INDUSTRY OF THE MORROW
It is my firm belief that India will globally, play a leading role in specialty chemicals and the industry is poised to grow more than double its size. There is a need for the industry to work closely with the various players and work in partnership with the government to achieve its full potential. Focus on specialty and value-added products, integrated manufacturing zones, a more significant pooling of resources, leapfrogging technologies and, finally, innovation and sustainability will drive this industry of tomorrow to greater heights.