Chemicals Industry


 

OVERVIEW

The chemical industry plays vital role in the growth of Indian economy, accounting for nearly 2.1 percent of the Gross Domestic Products (GDP). It is one of the most diversified of all industrial sectors covering an array of more than 70,000 commercial products. The industry is the mainstay of industrial and agricultural development of the country and provides building blocks for several downstream industries like chemicals and other related products, petrochemicals, fertilizers, paints, varnishes, gases, soaps, perfumes, toiletry and pharmaceuticals.

The production of major chemicals in India have increased from 8380 thousand tonnes during 2007-08 to nearly 9632 thousand tonnes in 2014-15 increasing at a CAGR of 2.01% during this period.

Export

Exports of chemicals from India
  Inorganic Chemical (HS:28) Organic Chemical (HS:29) Tanning and Dye Extracts (HS:32) Insecticides and Fungicides (HS:3808) Overall Chemical Exports
2010-11 1,846.90 9,020.20 1696.2 1,139.80 13,703.10
2011-12 1,798.70 11,693.40 1947.9 1,427.90 16,867.90
2012-13 1,318.60 12,107.30 2089.8 1,740.10 17,255.80
2013-14 1,364.10> 12,017.20 2547.6 1,922.30 17,851.20
2014-15 1,429.90 11,948.90 2818.6 1,949.90 18,147.30
2015-16 1,206.40 11,508.60 2455.8 1,961.90 17,132.70
Source: DGCIS
Export destinations of Inorganic Chemicals from India
Country Export Value( US$ Mn) Share (%)
China 177.7 14.7
UAE 174.3 14.5
USA 66.5 5.5
Egypt 50.6 4.2
Iran 49.6 4.1
Japan 45.5 3.8
Korea 36.1 3.0
Indonesia 35.7 3.0
Bangladesh 31.4 2.6
Sri Lanka 31.2 2.6
Total 1206.1 100.0
Source: DGCIS

Export destinations of Organic Chemicals from India
Country Export Value( US$ Mn) Share (%)
USA 1,413.3 12.3
China 844.9 7.3
Germany 565.1 4.9
Indonesia 406.7 3.5
Saudi Arabia 394.7 3.4
Netherland 386.1 3.4
Japan 374.5 3.3
Spain 350.7 3.0
Belgium 350.2 3.0
Brazil 317.8 2.8
Total 11,507.7 100.0

Export destinations of Tanning & Dye Extracts from India
Country Export Value( US$ Mn) Share (%)
USA 214.6 8.7
Germany 168.1 6.8
Bangladesh 155.3 6.3
Turkey 148.1 6.0
Italy 99.6 4.1
China 93.2 3.8
Thailand 89.8 3.7
Indonesia 89.7 3.7
Brazil 88.3 3.6
Netherlands 74.7 3.0
Total 2455.8 100.0

Export destinations of Insecticides & Pesticides from India
Country Export Value( US$ Mn) Share (%)
USA 334.2 17.0
Brazil 256.5 13.1
France 88.2 4.5
Japan 74.6 3.8
Australia 66.8 3.4
Belgium 65.6 3.3
China 59.7 3.0
Netherland 59.4 3.0
Germany 54.3 2.8
Vietnam 49.9 2.5
Total 1961.9 100.0

Foreign Direct Investments

100 per cent Foreign Direct Investment (FDI) is allowed under the automatic route in the chemicals sector, subject to all the applicable regulations and laws. The last 20 items which were exclusively reserved for MSME sector have been de-reserved on 10th April 2015, thus opening up these for greater investment, better technologies and to enhance competition in Indian and global markets. FDI in the chemicals segment was approximately US$ 11.9 billion during April 2000 to March 2016 period, accounting for 4.1 per cent of total FDI Inflows in the country.

Outlook

India is an important player in the global trade of chemicals, plastics and allied products and there is still tremendous scope to increase its share in the global trade. Near term outlook of Indian chemical sector is looking promising as government is keenly taking various measures to help the Industry. The government has initiated probe into dumping of chemical from three countries including China to help domestic industry from cheap imports.


 

SELECT GOVERNMENT INCENTIVES

General Incentives

  • Government reduced Basic customs duty (BCD) on Ulexite Ore (Calcium Sodium Borate) (2528) from 2.5% to 0%.
  • Government reduced Special Additional Duty (SAD) on Naphtha (27101290) from 4% to 2%.
  • Government reduced BCD on Styrene Monomer (29025000) from 2.5% to 2%. Further, SAD on this product has been reduced from 4% to 2%.
  • Government reduced BCD on Ethyleme Dichloride (29031500) from 2.5% to 2%. Further, SAD on this product has been reduced from 4% to 2%.
  • Government reduced BCD on Vinyl Chloride Monomer (29032100) from 2.5% to 2%. Further, SAD on this product has been reduced from 4% to 2%..
  • Government reduced BCD on Isoprene (29012400) from 5% to 2.5%
  • Governmeni reduced BCD on Anthraquinone for Hydrogen Peroxide from 7.5% to 2.5%
  • Government reduced BCD on Butyl Acrylate from 7.5% to 5%.
  • Government reduced BCD on Liquefied Butanes from 5% to 2.5%.

R&D Incentives

Industry/private sponsored research programmes – a weighted tax deduction is given under Section 35 (2AA) of the Income Tax Act. A weighted deduction of 200% is granted to assesses for any sums paid to a national laboratory, university or institute of technology, for specified persons with a specific direction, provided the said sum is used for scientific research within a programme approved by the prescribed authority.

Companies Engaged in Manufacture having an In-house R&D Centre

A weighted tax deduction of 200% under Section 35 (2AB) of the Income Tax Act for both capital and revenue expenditure incurred on scientific research and development. Expenditure on land and buildings are not eligible for deductions.

 

FDI

100% Foreign Direct Investment (FDI) is allowed under the automatic route in the chemicals sector, subject to all the applicable regulations and laws. FDI in the chemicals segment was approximately US$ 11.9 billion during April 2000 to March 2016 period, accounting for 4.1% of total FDI Inflows in the country. The FDI inflow in the chemicals sector during the period April 2015 to March 2016 was approximately US$ 1470 million.

 


 

SELECT EXPORT MARKET REGULATIONS

Europe

REACH (EC 1907/2006) aims to improve the protection of human health and the environment through the better and earlier identification of the intrinsic properties of chemical substances. This is done by the four processes of REACH, namely the registration, evaluation, authorisation and restriction of chemicals. REACH also aims to enhance innovation and competitiveness of the EU chemicals industry.

"No data no market": the REACH Regulation places responsibility on industry to manage the risks from chemicals and to provide safety information on the substances.  Manufacturers and importers are required to gather information on the properties of their chemical substances, which will allow their safe handling, and to register the information in a central database in the European Chemicals Agency (ECHA) in Helsinki. The Agency is the central point in the REACH system: it manages the databases necessary to operate the system, co-ordinates the in-depth evaluation of suspicious chemicals and is building up a public database in which consumers and professionals can find hazard information.

The Regulation also calls for the progressive substitution of the most dangerous chemicals (referred to as "substances of very high concern") when suitable alternatives have been identified.

USA

The Toxic Substances Control Act (TSCA) places requirements on those importing chemicals into, or exporting chemicals out of, the customs territory of the United States.Under TSCA section-13, exporters to USA are required to comply with TSCA regulations, and importers too have to certify the chemical before importing a chemical substance, mixture or article containing a chemical substance or mixture into the U.S. Importers must certify that imported chemical substances either comply with TSCA (positive certification) or are not subject to TSCA (negative certification).


For further details on Regulations applicable in various geographies, refer to this link: http://www.standardsmap.org/identify