Soon after taking charge, Minister for Chemicals and Fertilisers Ananth Kumar announced that the new government “intends to place the farmer at the centre of the agriculture sector, the village and the country’s economy”. The same view was articulated in the Budget.

The chemicals industry provides pesticides and herbicides that ensure a healthy crop, clothing and footwear for the farmer, paint for his doors and window-frames, and, of course, medicines. It even powers his battery-operated radio and lights his way through the fields. It is probably the only industry that can help India face the challenge of meeting the demands of a rapidly increasing population with finite resources, without causing harm to the environment.

Being a catalyst

This industry has gone through radical changes over the last few years. With increasing challenges of sustainability and resource management in food, agriculture, textiles, automobile, aerospace, cosmetics and manufacturing, etc — the industry is no longer just about supplying bulk chemicals. It provides solutions for business and social development. The industry directly contributes 7 per cent to India’s GDP. However, indirectly, it contributes much more than that.

If we account the contribution of the industry to other manufacturing sectors, it is close to 60 per cent of the GDP — the textiles industry (which contributes four per cent to the GDP), engineering and machinery (8 per cent ), transportation (8.5 per cent), IT (9 per cent), construction (13.5 per cent) and agriculture (15.7 per cent). Categorised on the basis of end use, the modern chemicals business serves the following broad classes of economic activity: manufacture using basic chemicals; manufacture of life sciences products; use of specialty chemicals; and consumer products manufacture. Basic or ‘commodity’ chemicals are used in an ever-expanding range of engineering and manufacturing processes.

Organic chemicals such as propene and benzene are used to make plastics and pharmaceuticals, while inorganic chemical compounds such as chlorine and sodium carbonate are used in plastics, fertilisers, soaps and surfactants, and building materials. Polymers are the largest end-use for chemicals — made from bulk petrochemicals and basic chemicals, polymers serve all categories of plastics and man-made fibres used in packaging, home construction, containers, appliances, computers, shoes, transportation and toys.

Pharmaceuticals use about 15 per cent of all chemicals produced in India, the paints and dyes sector about 5 per cent, polymers about 6 per cent, man-made fibres 16 per cent, soaps and toiletries about 11 per cent, fertilisers as much as 18 per cent and pesticides 3 per cent.

Welcome gestures

Ananth Kumar’s vision of developing PCPIRs (petroleum, chemicals and petrochemicals investment regions) in India and investing in countries supplying feedstock is timely. It could move India beyond its 3 per cent contribution to the world chemicals economy.

The Finance Minister’s decision to reduce import duties on key manufacturing components such as ethane, propane and butane are welcome moves. Setting up of chemical parks, implementation of ‘zero duty’ on the import of chemicals to facilitate easy availability and higher import of cheaper feedstock, tax holidays similar to that extended to boost the power sector and a waiver of Special Additional Duty (SAD) would provide a further boost the chemicals industry.

The writer is the CEO and Chairman of Dow Chemical International Pvt Ltd

(This article was published on July 16, 2014)