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INDUSTRY & SERVICES

CHEMICALS

The chemical industry, which includes basic chemicals and its products, petrochemicals, fertilizers, paints & varnishes, gases, soaps, perfumes & toiletries and pharmaceuticals is one of the most diversified of all industrial sectors covering thousands of commercial products. It plays an important role in the overall development of the Indian economy. It contributes about 3 per cent in the GDP of the country.

Chemical industry is one of the oldest industries in India. It not only plays a crucial role in meeting the daily needs of the common man, but., which are required in almost all walks of life. Over the last decade, the Indian Chemical industry has evolved from being a basic chemical producer to becoming an innovative industry. With investments in R&D, the industry is registering significant growth in the knowledge sector comprising of specialty chemicals, fine chemicals and pharmaceuticals.Indian chemical industry is expected to grow to US$100 billion by 2015.

Overview of the Chemical Industry

The chemical and petrochemical sector in India presently constitutes 14 per cent of the industrial domestic activity. It should also be noted that investments in this sector are highly capital intensive with long gestation periods. The growth of petrochemicals and chemicals is projected at 12.6 per cent and 8 per cent respectively in the 11th five year plan (2007-2012). According to the United Nations Industrial Development Organization (UNIDO), in terms of value added at constant 2000 prices, the Indian chemical Industry is 6 th in the world and 3rd in Asia .

Production trends

Production of Selected Major Chemicals

Sector
Production (in 000 Metric Tonne)
Growth (%)
  2007-08 2008-09 2009-10 2010-11
up to Sept.
2009-10/ 2008- 09 CARG
2009-10/05-06
Alkali Chemicals

5443

5442

5602

2890

2.9

0.6

Inorganic chemicals

609

512

518

281

-12.6

-1.2

Organic Chemicals

1552

1254

1280

649

-19.2

-4.6

Pesticides (Tech.)

83

85

82

44

-3.5

0.0

Dyes & Dyestuffs

44

32

42

24

31.2

8.8

Total Major Chemicals

7731

7325

7524

3888

2.70

-0.5

 

Production of Selected Major Petrochemicals

Sub-Group
Production (in 000 Metric Tonne)
Annual Growth
 
2007-08
2008-09
2009-10
2010-11
up to Sept.
2009-10/ 2008- 09
CARG
2009-10/05-06

Synthetic Fibers

2524

2343

2601

1362

11.01

8.08

Polymers

5304

5060

4791

2486

-5.32

0.12

Elastomers (S. Rubber)

106

96

106

51

10.42

-0.92

Synthetic Detergent Intermediates

585

552

618

302

11.96

2.68

Performance Plastics

157

141

172

78

21.99

7.88

Total Major Petrochemicals

8676

8192

8288

4279

1.15

2.64

Source:Annual Report 2010-11,Ministry of Chemicals and Fertilizers,Government of India

Dyestuff sector

The Dyestuff sector is one of the important segments of the chemicals industry in India, having forward and backward linkages with a variety of sectors like textiles, leather, paper, plastics, printing inks and foodstuffs. The textile industry accounts for the largest consumption of dyestuffs. From being importers and distributors in the 1950's, it has now emerged as a very strong industry and a major foreign exchange earner. India has emerged as a global supplier of dyestuffs and dye intermediates, particularly for reactives, acid, vat and direct dyes. India accounts for 7 per cent of the world production.

Concessions to Chemical Companies

Some chemical companies had demanded concessions during the recession period. These included reduction in Central Excise Duty from 14 per cent - 8 per cent, roll back of Import duty of 5 per cent on Naptha, levy of crisis duty (10 per cent) on all chemicals, intermediates, dyes, pigments and pesticides, expeditious disposal of anti dumping/Safeguard Measures, fiscal reliefs to SMEs and provision of low cost credit to them.

The Government has taken the following decisions in this regard:

(i) Reduction of Excise Duty from 14 per cent-10 per cent and then from 10 per cent-8 per cent.

(ii) Anti dumping duty/Safeguards were imposed in respect of following:

Soda Ash

Imposition of Safeguard Duty 20 per cent

Caustic Soda

Imposition of Safeguard Duty 15 per cent

Carbon Black

Anti Dumping duty $78-$195 per MT country specific

(iii) DEPB rates were restored to March, 2008 level.

(iv) 150 per cent weighted deductions of expenditure on R&D for recognized R&D units.

(v) Period of credit for exports was increased from 180 days to 270 days.

Foreign Direct Policy in Chemical Sector

In chemical sector, 100 per cent FDI is permissible. Manufacture of most chemical products inter-alia covering organic/inorganic, dyestuffs & Pesticides is delicensed. The entrepreneurs need to submit only IEM with the Department of Industrial Policy and Promotion, provided no locational angle is applicable. Only the following items are covered in the compulsory licensing list because of their hazardous nature.

  • Hydrocyanic acid & its derivatives
  • Phosgene & its derivatives
  • Isocynates & di-isocynates of hydrocarbons

 

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