Achieving a $2 trillion strong chemical sector by 2047 is an ambitious goal that requires concerted efforts from all stakeholders. While the challenges are significant, they are not insurmountable. With strategic planning, robust policy frameworks, and a focus on inclusive and sustainable growth, industry can turn this vision into reality.  

In this context, the top experts from chemical industry segments discussed, ‘Achieving US $2 Trillion by 2047: Mission Impossible?’ at the 4th edition of NextGen Chemical and Petrochemical Summit 2024 organized by the Indian Chemical News in Mumbai on July 11-12, 2024.   

The session was moderated by Viswanathan Rajendran, Partner, Kearney who while setting the tone of the discussion shared an overview on the current scenario. 

Calling hydrogen as savior of the future and CO2 as the new oil that can be leveraged to produce numerous chemical products, Padma Shri Prof. G. D. Yadav, Emeritus Professor of Eminence, Institute of Chemical Technology (ICT) Mumbai cited water, air and biomass as the potential feedstock. Prof Yadav underscored the need for special incentives for industry to promote sustainable solutions.

“In 2047 when India will be 100 years old, it wants to be a US $3 trillion economy. We should do a reality check whether it is possible and address a few challenges. When we talk about net zero, we should not call it net zero goal but net negative goal as the carbon should not be used for burning as a fuel but making chemicals and materials. At the same time, we are committed to achieving this so-called net zero goal by 2070. India emits 2.622 billion tonnes of C02 as compared to 35.6 billion tonnes globally. If we want to reduce this carbon intensity and also keep on making materials, we need to ensure that each carbon molecule goes into the final product. Since our feed-stock is going to be carbon, CO2 will be the new oil and we can convert it into many products such as methanol, green hydrogen and ammonia. Our feed-stock will be air, water and biomass. Hydrogen will play a key role and the government must give incentives for the hydrogen economy. We need bio based and biodegradable polymers and also de-polymerization of existing polymers through various processes to get monomer hydrocarbons back into economy,” said Prof. Yadav.

“India can achieve the $3 trillion target with right policy and following strict norms by industry. We have to encourage our own industry to compete with China. We must use renewable feed stocks and systems engineering with recycling of energy and retro-synthesis. Minimum number of stages and continuous processes to reduce any hazards. To realize our goal, the manufacturing sector must grow at 25% and the services sector must grow by 70%,” added Prof. Yadav.

Providing a reality check on the current scenario, S. Ganesan, Vice President – Policy Affairs, UPL Limited said: “It takes anywhere between 1-3 years for Environmental Assessment  (EIA) to get completed in India whereas outside India it just takes only 3 months. Secondly, the chemical manufacturing units in the notified industrial areas should by default be moved to B2 category from current A category. It means that the Environment Assessment Report which is cumbersome must be done away with. If we are following the norms and manufacturing in a particular industrial area, there should be no reason for us to go through it. The D3 discharge policy has been in practice since 2004 in Gujarat but so far the government of India has not come up with a separate D3 discharge as there are normal surface water discharge norms that are unacceptable and unscientific.”

“Chemical companies are not allowed to change the product mix even if the total emission load doesn’t change. It takes six months to one year to get the permission from the Pollution Control Board and by the time the product is out, its market is gone. Rule number 9 of Hazardous Substance Management Act of 2016 doesn’t allow captive consumption or sale of by-products and it requires joint visit by state and central officials, generally 2-3 years for the approval. Therefore, the so-called circular economy is a non-starter as you are not allowed to use the by-product. The national chemical policy that wants to enable a strong indigenous chemical manufacturing industry was finalized in 2014 but is yet to be implemented. At present importing chemicals is easier than manufacturing in India. Therefore, the policy should focus on import substitution and export promotion. It will help us create local employment opportunities and fetch us more revenue. India is the only major economy in the world where the share of agriculture is more than manufacturing. In fact the share has come down further from 17% to 13%. Strong link between chemicals and merchandise export, we should focus on increasing manufacturing of chemicals domestically. The growth of imports at 8% is alarming and there seems to be no change. Even if we achieve US $ 3 trillion, the share of the chemical industry is not expected to grow much. Compared to China we are still not competitive enough and need corrective measures, “added Ganesan.

Pankaj Mehta, President, Aarti Industries listed a few top priorities for the industry and policymakers. "To get to US $ 2 trillion by 2027, we need to use the magic of compounding. If we grow at 8-9%, we will usually reach there. That is not much of a stretch I think.  But to reach 3 trillion, you have to get 12% CAGR which would be a little bit of a stretch but we have illustrations how China has achieved it. Chemical industry has triple growth drivers. Import substitution is readily identifiable and what products need to be produced is very clear. Now with global supply chains looking at substitution of China and even if the 10% of China business is diverted to India, the Indian production and exports will witness an increase. The purchasing power is increasing and that will boost the domestic demand. In terms of infrastructure, the story is very good and the construction chemicals."

"On the environmental compliance side, there are a few deeply concern areas for the industry. The multiple deep sea discharge rules for the industry don’t make sense when the ocean is full of chloride. We should be able to make chloride brine solutions readily. There are a lot of studies and a lot of hurdles. Our deep sea discharge standards are even stricter than the western norms. Earlier zero discharge was considered as an appropriate means of handling effluents but it also increases your carbon footprint because you need energy to get rid of water. But deep sea discharge doesn’t require that and now with environmental and carbon footprint factors, deep sea discharge lines are critical along with effluent treatment plants. Also, if you have a network of supply chains, it makes the industry more efficient. Things like ethylene, chlorine and polypropylene and such building blocks. If you have a network at PCPIR, that kind of infrastructure has to be looked at.  There are private entities like Payal Industrial Park (PIP”0 that are doing this yet a much larger scale needs to be identified by the government. For making chemicals, we require raw materials, energy and manpower. We need to also work on skill development. For example, since the industry is concentrated in Gujarat, there is a lot of attrition. The infrastructure for education needs to be looked at," added Mehta.

Suresh Kalra, Managing Director – India & President Asia, hubergroup expressed optimism about the regulatory compliance getting better and stronger besides focus on digitalization. However, he is equally skeptical about the slow progress on ease of doing business and sluggish approval process in India.

Kalra explained: “If we would be growing at 8% CAGR in the last 20 years, this is possibly a reasonable target we have. We are sitting at a point of inflection in India because every time we have to compare the Indian chemical industry that is with China. It’s a reasonably sandbagging target. When India was not strong in terms of infrastructure and regulatory framework. Now a lot of progress has been achieved in terms of the regulatory system and there is a reasonable change in terms of setting up of effluent water treatment plants across the chemical industry. In terms of ease of doing business and bureaucracy, we still have challenges that are persisting. In China, there is a single window clearance for setting up chemical plants while India has multiple windows for clearance. Entry is very easy in China but exiting the business is tough. There are muti-national companies who have really not made any money in China but that is not the case with India. I haven’t seen a single company losing any money here. This has been happening since the last 20 years when we were not at an inflection point we are now in. I would, therefore, say that the regulatory framework is getting stronger. As per India's Chemicals (Management And Safety) Rules (ICMSR) guidelines, we have to register all the chemicals that we are manufacturing and using in India on the portal. Most of the data is getting digitized and monitored in real time. So the change is real and will surely achieve the US $3 trillion goal."

Gaurav Vyas, AVP – Strategy (Director’s office), Reliance Industries emphasizes on the need for use of right technologies and course correction. "Each atom should go into the product. There is a list of things we need to do. Firstly, there should be feed-stock prioritization for the country. The feed-stock which is good for producing something must get priority. For example, gas should be diverted to fertilizers, coal for power production, and naptha for petchem and chemicals. It is a crime to produce power by using imported naphtha. There should be a policy that the building block molecules should go into the chemicals. Secondly, achieving carbon negative we should have all the carbon molecules that come from oil and gas feedstock go to polymers rather than use them to produce steam power. Not just about asking for government policy, we as an industry should not have steam crackers and even if we do it should not be based on naptha. We could have electrification of crackers or use of thermal power etc. Alternate to crude and natural gas must be explored as we are not having such enough resources. Reliance has a world’s largest gasification facility in Jamnagar where we are doing petco gasification. Similar approach can be adopted for gasification of coal and biomass but at the same time we have decarbonization targets. When I am saying decarbonizing using gasification, we should also capture CO2 and use it.”

"I am not against recycling but I feel if we are rich in coal we must use it to produce power. We can create sustainable aviation fuels and e-chemicals out of CO2. Another thing is the clustering or creation of PCPIRs and developing infrastructure to have feedstock security. At Reliance, we have ethylene and propylene and we want to make PVC as the country has the deficit but for that we don’t have chlorine. If we have a clustering facility or greater collaboration with chlorine manufacturers, we could use that. Now we have created a joint venture in the Gulf just for PVC. We need government support in terms of incentives and may be a PLI scheme when we set up a refining facility for production of petrochemicals. It will help us to lower our capital investment," added Vyas.

Stressing on the need for collaboration between government and financial institutions to create special economic packages for the chemical industry, Dr Jaimin R. Vasa, President, Gujarat Chemical Association said, "The availability of capital at a cost effective rate is critical for competitiveness at both domestic and global levels. The fact that 95% of the industry is MSME and contribute 29% of India’s GDP. To support them, the government and financial institutions can collaborate to provide low interest rate investments. The capex is very high in the chemical industry and the government can directly subsidize the interest rates on loans for the chemical industry. This reduces the cost of capital for the industry, making investments more attractive and feasible. Secondly, credit guarantee schemes should be introduced. The financial institutions can be encouraged to provide better terms to the industry players, establishing the specialized financial programs tailored for the chemical industry with longer repayments and grace periods."

"Chemical industry requires substantial investments in terms of infrastructure, technology and research. The access to the financial packages will help the industry in bringing competitiveness, upgrade their facilities, adopt new technologies and improve efficiency which are very crucial for staying competitive in an increasingly globalized industry. Innovation and sustainability can be facilitated through financial support to drive environmental initiatives, sustainable practices, and comply with stricter regulatory norms. The chemical industry is a significant contributor to job creation and economic growth. Collaborative models between government and financial institutions are critical for fostering growth and broader economic development," added Dr Vasa.

Talking about the increased focus on sustainability in chemical organizations, Ankur Singh, Vice President & Head Strategy, Chemicals Business, DCM Shriram said, "There is a business aspect to sustainability and then there is another dimension critical for our own growth. When we dissect sustainability in terms of exposure to exports, the USA doesn’t need us, the Middle East is doing fine, China is balanced and Europe is our natural market. At any point of time, our export dependency in terms of value added chemicals would be in Europe. In the next two years, the EU emission norms will be gone and Sustainable-Eco-Buildings Assessment Method (SEBAM) will be in practice. Most of the large chemical players will start working on reporting for SEBAM as well. The real impact of sustainability on profit and loss count will come heavy on the Indian market. More than just a buzzword, sustainability has become a licence to operate. Our sustainability practices are at par with Europe and we see a lot of appreciation coming from European counterparts. There is still a lot to do.”

“In terms of manufacturing, there are four elements that matter, raw material, energy, production process and supply chain. Unfortunately we are suffering on all four. We don’t have enough feedstock, greening of feedstock is miles away as there is a cost to it. There are a lot of bulk chemicals that are energy intensive. Couple of companies have started getting a lot of green power but there are two problems. There is not so uniform policy on green power across India which makes western region naturally a hub. It is the imperative of the government to form a hybrid policy where the capex is lower. Second element is the process chemistry. Unfortunately, in our R&D ecosystem, we are not working on the cleaning of our processes, especially the effluent treatment. There is a lot of R&D required in process chemistry. In terms of supply chain, we haven’t evolved our policy. We are the only country where chlorine is moved through roads owing to a policy dating back to the post Bhopal Gas leak tragedy and it hasn’t been reviewed. We can use the trains and pipelines to replace it. The lack of facilities and technology sophistication at par with China is a major concern. Only thing that Europe appreciates is our sustainability commitments but we need to work on that so that we don’t lose this edge. The growth should not come from price but volume as China will play on the volume," added Singh. 

Rajesh Kamat, Vice President and Head, Sales & Marketing, Tata Chemicals spoke about the importance of data analytics to improve the efficiency of chemical manufacturing and supply chain.  "The basic technology for manufacturing chemicals by and large is mature and doesn’t differentiate them from each other.  What makes it competitive is how you leverage it and use it efficiently. That’s where digital comes into picture as there are many use cases where by simply leveraging the data and analytics one is able to extract 10-20% efficiency and cost in a lot of processes. For all this to happen, depends on how good the data is? Today we have organizations that have enormous amounts of data and the question is how we use it. The data needs to be clean and have a single source of truth as we have seen that data in many cases doesn’t match. To solve this we have embarked on data analytics maturity platform TCS- Datom, a proprietary platform developed by TCS, our group. That basically talks about all the basic parameters of data and many layers such as governance, analytics etc."

"Digital can be used across the spectrum of the value chain, we have Industry 4.0 talk going on that applies to the chemical industry as well. The sensors are attached to almost every single machine in the organizations and there is huge historical data. Here big data analytics comes into action. Earlier local optimization used to work in silos but now we have data beyond days, months and years. We have created digital twins to look at the golden batch. We look at all the parameters across the value chain to achieve the best process by making tweaks wherever required. Robotics and use of drones is also coming up in manufacturing, safety and monitoring. We can create a command system remotely and monitor the progress in locations that are dangerous for humans. Mobility and wearable devices is another area and each workman becomes a command centre. We are no longer constrained by location and our set of experts can do their job well. Even in sales, the automation of end to end customer satisfaction, shipments without manual intervention. India is adopting these technologies. Data safety especially in cross border transactions must have a governance model. There are challenges such as finding the right talent and a change in mindset in terms of adoption of new technologies," added Kamat.

The Summit was supported by DCM Shriram Chemicals as principal partner, Somaiya Vidyavihar University as academia partner, Cadmatic as platinum partner and Andhra Pradesh Economic Development Board (APEDB), Govt. of Andhra Pradesh as state partner.

Gold partners for NextGen Chemicals & Petrochemicals were Epsilon Carbon, Forbes Marshall, Gharda Chemicals, Indofil Industries, Ingenero, IPCO, Jaaji Technologies, Moglix, PIP, Port of Antwerp - Bruges, RIECO and Re Sustainability. Associate Partners are: HPCL and Nuberg EPC.

Supporting partners included Aarayaa Advisory Services, Archroma, India Glycols and Tata Steel Special Economic Zone and industry association partners are: ACFI, AMAI, CropLife India, Gujarat Chemical Association and PMFAI.