By: Rahul Koul
Last updated : February 03, 2022 12:35 pm
Enhanced budgetary allocations for ramping up of infrastructure and green energy provides enough revenue as well as employment opportunities for the chemical industry
Budget 2022 can be considered to be directional instead of being transactional, says Rupark Saraswat, CEO, India Glycols Limited who feels that the chemical industry could have been given more attention.
Saraswat explains his point of view: “Since the announcements in the budget are fundamental to the transition to green energy and what a circular economy brings, I am really not disappointed. It is also heartening to see the rise of 35% on Capex for infrastructure such as laying of railway lines, ports, Special Economic Zones. Government is clearly focused on Make in India and for the world. It opens up tremendous opportunities for the chemical industry to deliver sustainable molecules and technologies. Government is serious about green power and India could soon become one of the largest producers of green hydrogen. The sustainable business models will work and it is not the companies that win but the ecosystem.”
Saraswat spoke at the E-conference on ‘Demystifying Union Budget 2022-23 for Chemicals & Petrochemicals Sector’ on February 2, 2022 by the Indian Chemical News. Pravin Prashant, Editor, Indian Chemical News moderated the discussion.
“70% of toxic waste comes from the electronic industry but chemicals get blamed instead. We need to change the mindset and focus on R&D in a major way. There is a need to revamp PCPIR policy. It amazes me that India, despite its capacity to create hundreds of Jurong Islands, still lags behind. We have huge feedstock, ready markets and R&D manpower but all of this is underutilized. We as an industry haven't collectively worked to create a win-win ecosystem. Chemicals need to occupy a bugger chuck in government policy. It is a building block for all other industries. We should not allow it as a missed opportunity,” added Saraswat.
8%-8.5% growth rate is quite significant for us to look forward to. It will drive good demand for chemicals and petrochemicals that augurs well for us, says Shohab Rais, COO-Indian Chemical Business, Tata Chemicals Limited.
Rais elaborates: “This budget lays down the roadmap for a longer period and is more than just an annual budget. Government is promoting technology enabled development, energy transition, infrastructure development, in addition to increasing domestic consumption and supporting the capacity additions. In line with the larger global commitment that India has made for tackling climate change, the government has pushed for grid connected energy storage and manufacturing of solar power panels and batteries domestically through additional allocation of Rs. 19,500 crore PLI scheme. They have also announced green bonds to mobilize resources for the infrastructure. Solar panels will generate the demand for many chemicals like silicon adhesives, solvent coatings, coating films in the panel assembly itself. It will also generate demand for Soda Ash in solar glass manufacturing. So apart from energy transition, it also provides opportunities for many chemicals and other industries.”
“Budget also supports domestic value addition. It has announced reduction of custom duties on certain chemicals like methanol, acetic acids and feedstock for petroleum refining etc. At the same time, it has also announced raising custom duties for Sodium Cyanide for which India has enough domestic manufacturing capacity. It is trying to balance out the manufacturing industries and bring down the cost of a few critical products,” adds Rais.
“The industry has seen Rs. 8 lakh crore investment coming in 6 years. There has been no changes in direct or indirect taxes. It assures us that policies are here to stay and investments can be long term. Various expenditures augurs well for chemical and polymer industries. Rs. 40,000 crore allocation for plastic, polymer oriented spending will increase demand for these sectors. In the last 7 years, the finance minister has emphasized ease of doing business. Compliance has made our life easier and we look forward to the new system for environmental clearances. The revamp of SEZ Act will help," says Om Hisaria, Senior VP, Reliance Industries Limited.
“The limit for use of biomass in traditional power plants has been increased. Things will be moving on the ground very soon. As mentioned in NITI Aayog paper, use of green hydrogen in refining, steel plants and fertilizers will be soon made mandatory. This will push green energy. For mobility it will take time yet swapping of batteries for EVs is already on roll in certain geographies. The focus on this should help and implementation will decide the future course,” adds Hisaria.
"It is a fairly well balanced and growth oriented budget. We have to outgrow the inflation and this budget is in that direction. Market timing is perfect despite lack of enough attention to the chemical industry. Capex of 7.5 lakh crore that translates into 35% increase will generate a lot of private investment and employment. Yet the implementation remains the key for the desired impact," says Pankaj Mehta, Joint President-Corporate Relations & Strategy, Aarti Industries Limited.
"The announcements such as housing for all, manufacturing of railway coaches, defense infrastructure benefit us as these are consumers of chemicals and plastics. Technology enabled development, digital economy, defense infrastructure will help. The Gati Shakti for transport infrastructure will enhance the railways, so will the new 400 trains and 100 railway coach manufacturing centres. We have been representing the concept of reducing the custom duties on feedstock and rather moving it on to intermediates and finished foods. That has been accepted. Hopefully, there will be tax adjustments and we will not have to wait for the next budget. Extension of 15% tax on startups should encourage manufacturing. Budget also signifies stability of policies and revisiting of SEZ framework should also impact PCPIRs that have been hanging for too long. It is disappointing that there is no PLI for our industry that could support 8 lakh crore investment," adds Mehta.
"Rs. 4,400 crore plus investment into river linking projects will irrigate 1 crore hectares of land and generate power and generate employment. It will raise the water levels up and many rural people will get employment. Similarly, the MSP payment to farmers is a great step. The announcement about inclusion of drones for agriculture use will help in bringing down the cost and also ensure safety for farmers. 1.5 lakh post offices will be converted into core banking and it will go a long way to help in inclusion of farmers and rural citizens for online quick transactions," says Deepak Shah, CMD, Sulphur Mills Limited.
"Being a R&D company we have 375 patents, I feel that something could have been done better. The hike in freight rates for cheap products from 100% to 500% increase will be bad for the industry. Budget allocation for agriculture from 1.8 to 1.23 lakh crore for agriculture is less. PLI for agriculture should have been there. It is important that the government authorities and stakeholders remain on the same page as we have seen many calling us a dirty industry. Another area that needs attention is land which is expensive and often the cost of a project is impacted by it. If you currently need the output of 5,000 tonnes, you will plan for 15,000 tonnes. It has to be the economy of scale,” adds Shah.
The budget 2022 instead of looking at short term gains has rather focused on long-term gains, says Kaushal Soparkar, Managing Director, Meghmani Finechem Limited.
“As India’s per capita income is on the rise, this budget is great for filling the gaps to bridge towards missing infrastructure. The focus on house and drinking water will push the investments in the sectors. From startup India to Make India and now make for the world, the government is joining all dots. It will help us to create more jobs. Developing waterways will help us and so will drone usage for agriculture. The lower logistic cost will help the end user and will improve overall efficiency. Simplified logistics will help us to focus on manufacturing. Hope the momentum will sustain in coming budgets. We as industrialists have to ensure the investments and the continuing stable policies will help us to do that," adds Soparkar.
While the budget announcements are welcome, it is critical to watch out monitoring and management of the schemes rolled out by the government, believes Priyamvada Bhumkar, Managing Director, Soujanya Color Private Limited.
“Since it will involve huge financial disbursement, the smooth implementation could have a huge impact on the construction industry, steel, cement industries. Huge financial outlays for housing and water projects will have a huge impact on people and industries and as a society. As a company we are primarily addressing the coloring needs of the coating industry and coloration on ink etc. There is going to be a lot of construction due to schemes and this will drive the demand for coatings. The solar industry too will also require coating. The custom duty has been phased out on many chemicals and exemption will go on 300 chemicals. One thing that is missing is the incentivization of exports. Being an export oriented company, with 30% revenue coming from exports, we would have felt encouraged if the government had given few incentives on chemical exports,” adds Bhumkar.
Chemical industry has a US $300 billion opportunity staring us at it besides the surplus of trade deficit. What we need are the significant incentives to drive the investment for manufacturing, says Amit Gandhi, Managing Director & Partner, Boston Consulting Group.
“The new incentives for JVs with global companies could spur the investments downstream. PLI schemes for intermediates and condo crackers, dedicated chemical research centres, digitally driven faster chemical manufacturing and supply chain stream, digitized chemical repository are the areas that require attention. Among the positives is the extension of tax incentives for startups. The partnerships with global companies in terms of technology has been a demand for a long time and it has been fulfilled. We need to solve the digital and condo crackers in the upcoming budget. Industry also has to take a few steps by itself. For example, can we convince the 3-4 big anchor investors for condo crackers? Industry and government joint consortium will have to drive this as it will be a huge flip for the industry,” concludes Gandhi.