By: Rahul Koul
Last updated : November 29, 2021 11:06 am
A reality check on investment for the sector throws up challenges such as infrastructure, sustainability, business environment, and favorable policies
"It is not the raw material availability that decides the investments but the market place which shapes these decisions. From being the 7th largest manufacturer, we are now at the 5th position globally, signaling a shift towards India’s favor. In those terms, India has witnessed a significant upgrade as a destination for chemicals and petrochemicals," says Deepak C. Mehta, Chairman and Managing Director, Deepak Nitrite Limited speaking at ‘Strategic Global Partnerships: Crucial for Driving Investments and Enhancing Trade’ session at the second edition of "India: Global Chemicals & Petrochemicals Manufacturing Hub” 2021 Summit.
"To grow further, it has to attract global investments. The challenge, however, is that our entrepreneurs are looking for best technologies whereas the multi-nationals who have innovated them won’t sell it but like to partner on their own terms. The raw material availability is another challenge and that too can be addressed through partnerships. The state governments have to evolve their policies as per feedback from the industry. Agility is the most important word and India has been pushing hard to make all the players available for each other and be interdependent and cost effective,” says Mehta.
“The evolution of the overall industry has to be taken into consideration. Most of the top companies have to link their returns on investments to achieving climate neutral goals. From salaries and incentives of board members linked to such goals, there are bonds that are signed by the companies. Recently at LANXESS, we have placed 600 million Euros in the market and if we don’t fulfill these goals we will acquire 0.25 percent annual interest on the investments. With respect to large chemical companies of the world, all the investors are looking at sustainability. The electro-mobility and renewable power are the factors that will drive investments in the longer run. In specialty chemicals, I don’t think we have the large critical mass to set up the big plants, just for servicing domestic industry. We will require export markets and most of us do. The seismic shift that has happened in freight rates, which is about a 700 percent hike, is disrupting the market. We need to be competitive enough to attract the investors,” says Neelanjan Banerjee, Vice Chairman & Managing Director, LANXESS India.
“Rapid urbanization in India will lead to increased demand and that is being captured by all sections of the industry, be it small, medium or large. We are trying to bring in specialty and technology oriented products that can not only help in the growth of the industry domestically but also aid in competing globally. We have brought solutions for the packaging industry, replacing multi-layer packaging through the food packaging options. We have worked pretty hard with the industry to come up with better quality masks and vaccine caps where we used specialty raw materials. Broadly we are trying to bring MSMEs to the global front but developing new technology based products. As we grow, we also need to have fair competition policies. India has taken many measures and it is a work in progress. We have basic fundamentals in our favor but we need to address the regulatory, transport and infrastructural challenges,” says Rakesh Mehta, Director, Board of ExxonMobil-India Chemical Business.
“A lot of products are still not available in India, mostly owing to absence of technology. One example is Styrene which is consumed heavily in India but is still being imported due to lack of production. There are opportunities for partnerships as the value for product placement in the market here is huge. All these tie ups have to happen on a win-win basis. The solutions are possible but the efforts have to be put in by the industry. We have a US $30 billion complex in Jamnagar with US $1.4 million worth barrels refined per day. The additional demand for non-essential products will be fulfilled by chemicals," says Amit Chaturvedi, Head-SCM Petchem, Reliance Industries Limited.
"For that we need to boost the infrastructure and multi-modal transport. The recent GattiShakti program where the sea, road and rail routes will be used to optimize the freight rates is a positive development. The new logistic advancements will benefit the chemical industry which is an essential building block of the economy,” added Chaturvedi.
“There are a lot of deals in Southeast Asia and India which have failed in the past. The insecurities in the minds of technology providers has been an issue. They always grapple with the fact whether their partner is the right one or not. Another challenge is the niche technologies that have been used in various locations but given up due to lack of quality and quantity of feedstock. Investors are also wary of the very specific issues such as the business environment in few locations of their interest. It has in the past deprived their partners of the infrastructural advancements when they back off on investments. Investors are cagey about the chemical business happening in cash payments. Many investors are waiting for the payment systems to evolve. There are different value chains that need attention within the chemical and petrochemical business. Many investors are looking at contract manufacturing in India and the government has to play a role of catalyst to make it happen,” says Deepak Mahurkar, Partner and Leader - Oil and Gas Industry Sector, PwC India.