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September 22, 2023


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Union budget may roll out ₹10,000 cr PLI for chemicals

3 min read

NEW DELHI : The government is working on a production-linked incentive (PLI) scheme worth 10,000 crore for chemicals and petrochemicals industries, two people aware of the matter said, as the country aims to triple its capacity to manufacture these key ingredients by 2040.

The Union budget is likely to announce the scheme, under which selected companies may get an incentive of 10-20% on their incremental sales.

The department of chemicals, which has proposed the scheme, has identified 50 speciality chemicals that will be further utilized by key industries. The chemical and petrochemical industry provides building blocks for several industries, including textiles, papers, paints, varnishes, soaps, detergents and pharmaceuticals.

“The scheme is in an advanced stage and is expected to be announced in next year’s budget,” one of the two people cited above said, adding it has been in the works for about two years. Union minister for chemicals and fertilizers Mansukh Mandaviya and minister of state Bhagwanth Khuba have indicated earlier that the government has plans for a PLI scheme for the chemicals sector.

Queries to the finance ministry, department of chemicals and the department for the promotion of industry and internal trade remained unanswered till press time.

Under the plan, the government plans to incentivize intermediate chemicals having high import value initially.

The Centre had adopted a policy in 2007 to set up dedicated petroleum, chemicals and petrochemicals investment regions (PCPIRs); however, the initiative could not attract significant investments. The government is now also reworking the PCPIR policy guidelines.

“The department of chemicals and petrochemicals intends to bring PLI and redraft PCPIR guidelines as India aspires to become a global manufacturing hub for chemicals and petrochemicals, and we have asked the industry to share their viewpoints so that the same can be fine-tuned further,” minister Khuba said in September.

According to the government, the chemicals and petrochemicals sectors would play a key role in helping India become a $5 trillion economy. India has been a significant manufacturer of chemicals and petrochemicals over the years.

According to a PwC report published in November 2021, India ranks sixth globally and fourth in Asia in terms of global sales of chemicals. More than 80,000 varieties of chemicals and petrochemicals are manufactured in the country, and the industry employs over two million people.

“India is known for the export of speciality chemicals and specific agrochemicals, dyes and pigments. It is the fourth largest producer of agrochemicals globally and exports about 50% of the production. India is also the second-largest manufacturer and exporter of dyes,” it said.

The chemical and petrochemical industry accounted for around 9% of India’s manufacturing gross value added (GVA) and 1.3% of its national GVA in FY20. India’s petrochemical demand has seen robust growth over the last two decades, and the growth momentum is expected to continue for the next two decades. Demand growth is expected to be across all segments—commodity polymers, fibre intermediates, elastomers and speciality petrochemicals.

According to the government, in 2020, the demand for the top 52 chemical products was at 26 million tonnes per annum (mtpa), and it is expected to reach 87 mtpa by 2040. The additional demand of 60 mtpa would require an investment of about 18 trillion. According to data from the department of chemicals, around 6 trillion worth of investments are in the pipeline.

However, despite the growth in domestic manufacturing, with demand persistently rising, net imports of chemicals and petrochemicals increased from 1,148 crore in 2004-05 to 1.08 trillion in 2018-19 and are likely to reach 3 trillion in 2024-25, prompting the government to seek opportunities to boost domestic production.

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