Last updated : June 25, 2024 9:15 pm
India Glycols is unique in the world to produce ethylene, ethylene oxide and several derivatives like glycols, green solvents, and specialty chemicals
What are key trends impacting the Green Chemicals Space? How do you see Sustainability shape the Chemicals, Performance Chemicals and Pharmaceuticals Sector?
The term ‘Green’ has a varied interpretation as used in various contexts by different stakeholders and companies over the years. The evolving parameters and clearer definition will continue to drive awareness, consumer choices, innovation, regulation, and policy as well as business strategy.
There are various aspects of a product being green and the understanding as well as expectations from various stakeholders are also evolving. One important aspect which has been conventionally considered “green” is something that is manufactured from bio-based or renewable. Another aspect is how much toxic load is generated by the product and the resulting environmental impact that it creates. Given the increased focus and awareness on greenhouse gas emissions and the resultant climate change impact, carbon footprint has become another important aspect. It encompasses the complete emissions from cradle-to-grave including Scope 1, 2 and 3. Then, there are other aspects of sustainability such as land use and impact on land, food, and water.
Whilst it would be ideal to meet all possible criteria, in reality, various products and processes will score differently on different criteria and the evaluation itself is complex. Therefore, for example, on one hand something may have a lower carbon footprint it may not have such a good score when some of the other dimensions are considered and vice versa. We will see the evolution of systems and standards for a rigorous evaluation of ‘Green’. I believe with the world being increasingly interconnected, huge data generation and processing and rapid evolution of digital technologies including AI and Quantum computing, we would be able to better assess, quantify and define.
Today sustainability is no longer merely something good-to-do that only responsible companies focus much on. It is increasingly becoming a key strategic consideration for all. The sustainability challenge is indeed extremely serious and requires immediate attention at all levels. It is accordingly reflected in growing awareness and expectations from various stakeholders. The pressure of public opinion and stricter regulations are happening faster than expected in India. In some cases, the new standards are even tighter than other parts of the world.
You may observe that an Industry that has a perception having an adverse environmental impact does not receive as much focus and policy support. It is, therefore, important the chemical industry works towards correcting that perception. I believe the chemical industry has a crucial role to play in helping the world address sustainability issues. This is not only in terms of addressing its own challenges but also by providing new products, processes and solutions to the world. That presents a huge opportunity for innovation and building great businesses which create knowledge based and offer sustainable models for India as well as the world.
India has some great advantages that include diverse feedstock, huge market, affordable talent, lower project cost etc. Changing geo-political dynamics, thrust on Make in India, India’s push for green energy, green hydrogen, carbon capture technologies and a thriving startup ecosystem bode well.
We will witness disruptive changes due the sustainability requirements as well as due to new technologies including digital. Ones who respond well will have great opportunities. Others will have an extremely high pressure to either transform or get acquired or else be out of business.
Challenges for Bio-Based Chemicals
The green chemical space has its own challenges. From our perspective, Ethanol is an important feedstock for chemicals but there is growing demand for blending. Since it got coupled with crude, it is no longer a cheaper feedstock. We have to compete with chemicals which are based on crude, but the cost of sourcing green material has increased due to a variety of reasons. That has posed a significant challenge.
Meanwhile, sourcing of Ethanol is important. India’s Ethanol Blending Programme has some potential repercussions too. Currently sugarcane, molasses and rice are the major feedstocks. These crops are water thirsty and there is an overlap with the food chain. We are talking about corn and biomass as alternatives. Biomass will be an important feedstock but again it will compete with the energy sector and excessive use of biomass will pose another challenge because we will be taking out organic matter and nutrients from the soil. Moreover, some of the technologies / supply chains e.g. cellulosic and captured carbon are either new or yet to be established in terms of commercial viability.
What is the big opportunity in Bio-based Specialties? Where does India Glycols fit into this ecosystem?
I would like to speak more broadly on green chemicals of which bio-based specialties are a part of. One of the opportunities has been the fuel blending programme. This created an opportunity to produce Ethanol through various routes. In addition to molasses, the government also made available damaged grain as raw material. Ethanol, CNG and methanol would be interesting green feedstock in future to produce a whole range of hydrocarbons through alternate processes and technologies.
India Glycols is unique in the world to produce ethylene, ethylene oxide and several derivatives like glycols, green solvents, and specialty chemicals that have a better environmental impact profile. This will drive the opportunities for bio-based chemicals. However, carbon capture materials, cellulosic materials will become potential feedstocks for green chemicals in future.
Green materials can be classified into conventional and novel materials. The first one comprises conventional materials but made from greener feedstocks such as making PTA for polyesters using bio-based feedstocks like bio-based MEG. These materials have a lower carbon footprint but still have some of the issues like biodegradability and environmental impact like micro-plastic issues etc.
The next big step will be novel materials which are not only made from greener feedstocks but have other greener attributes like biodegradability and lesser adverse impact on land, water, food chain etc. For example, some work is being done on polylactic based and other novel polymers. However, while polylactic acid-based materials offer better biodegradability, it does not have the same level of heat tolerance and tensile strength. Therefore, continued innovation for improving functional performance as well affordability will be an important driver.
In the times to come, apart from regulations, wider introduction of some forms of carbon tax and/or penalties on one hand as well as wider adoption of carbon trading will be an important driver for adoption of greener materials and processes.
How has India Glycols performed during FY 2023-24 and what are the plans for FY 2024-25?
Due to Covid and other factors, the last 2 to 3 years were quite disruptive for several industries including India Glycols. Sharp increases in feedstock costs, energy costs and freight costs posed a challenge. Imported ethanol prices went up. Imported ethanol price went up from approximately Rs. 35 to Rs. 70 per litre landed at its peak. The price has seen a correction but are nowhere close to the earlier levels which had been stable by and large for many years prior to the period of sharp escalation. Secondly, many countries are looking at their own energy security due to the volatile situation in the Middle East and Russia – Ukraine issue. Thirdly, there are energy transition hiccups in many parts of the world as the energy prices went through the roof particularly in Europe thus affecting the entire energy ecosystem which also impacts the global ethanol prices.
These factors posed a significant challenge in managing our prices and position our products against crude based products which even became cheaper on the other hand. Now, we have taken several actions. We invested in grain-based ethanol capacities. We now have a wider range of options to manage our cost base apart from importing ethanol. In addition, Biofuels presented an additional opportunity for sales as well. The situation however is dynamic, and we are able to choose various options based on best viability.
We have three broad end use areas for our ethanol i.e. Chemicals, Biofuels and Potable Spirits. This has made the business more resilient in terms of back-end feedstocks as well as frontend usage areas.
Our diversification into potable spirits has also helped to derisk the business and improve business performance. Last year i.e. FY 2023 the top line witnessed a slight decline, but it had seen a good improvement in the EBITDA of around 15%. The performance for 9M for FY 2024 has been much better with a revenue growth of ~ 17% and EBITDA growth of ~ 45%. Overall, we expect a good year.
We have been focusing on leveraging our strengths including our sustainability credentials, strong manufacturing footprint, strengths in product, process and application development and a strong relationship with good, reputed partners.
With all these, we are also looking at new value-added chemicals. We have set up a new R&D Centre and expanded our manufacturing for a range of value-added chemicals like Oil Field Chemicals, Carbon Smart Materials, Green Solvents, Speciality Esters, Biopolymers and Amines etc. This is with the aim of improving the quality of the business as well as creating new areas for growth.
What strategy should India adopt to become a global manufacturing hub for bio-based Specialties, Performance Chemicals, and Pharmaceuticals? What role does India Glycols see for itself in making India a global manufacturing hub?
We need to transform our organizations towards having a culture of learning and innovation, high standards and excellence. We have come from a past where we would get a loan, licence, put up a factory, have some people and start production by getting technology from MNCs. Today licenses and capital are not the real constraint and it all about investing in great talent, excellence, and innovation. This is crucial to create a knowledge-based organization for driving innovation to meet unique and arising needs for the India as well as the world and deliver sustainable products. This will continue to be an important area for the Indian Speciality Chemicals Industry.
We also need to strategize in a way that can address India's challenges, encash opportunities and leverage India’s advantages in terms of talent, raw material, feedstocks, and capital cost. Another area that needs attention is the availability of feedstock for base materials which are either not produced or not competitively produced. For the pharmaceutical and agrochemical industry, the majority of API (key starting materials) are still being imported from China. This is a concern as well as an opportunity.
There is also a need to build a good manufacturing ecosystem. I have wondered why India has not created parks like Jurong Island, Singapore. If you look at it, India is in a much better position in almost every respect to create several manufacturing set ups like or better than Jurong and make them much more successful. India is better placed in many respects be it access to feedstocks, access to markets, quality of talent, cost of talent, cost of doing projects, availability of land, water and other resources. Yet many consider Jurong as a preferred manufacturing destination due to several factors. These include work culture, standards (EHS and Quality), and better facilitation by the government and better collaborative working by the industry.
Another very important aspect is proactive risk management and the perception around managing the EHS risks. In my view, this is one of the reasons why the Chemical Industry does not get as much policy support as it should probably get.
We must have a sharp focus on process safety and environmental risk management as well as compliances and governance. It is becoming increasingly critical from the view of stakeholders. These include society, regulators, consumers, NGOs, governments, and policy makers as well as investors. Without that we will not attract talent, get necessary policy support, or attract investments which are key for the industry to realize its true potential. It must not be seen as a cost but a very important investment for building great businesses.
In the end, it is not about individual companies as much as it is about creating winning ecosystems. The electronics ecosystem of Japan or the automobile ecosystem of Germany or several others are good examples. Lastly, particularly, in today’s world it is about outstanding collaboration and creating reliable, trustworthy, and lasting partnerships.
Initiatives taken by India Glycols for enhancing process safety across all facilities/processes to make operation intrinsically safe?
Conventionally, safety was thought about as taking some extra care, following some procedures, and providing personal protective equipment etc. That is a very limited way of looking at safety. Process Safety is a very advanced science. It is about adopting leading edge practices, leading edge science, technology, design and most importantly a strong culture throughout the organisation.
Process safety for example is about examining the impact of all layers together and quantifying the risk. It is a very rigorous approach which helps improve in a multiple dimensional way. With emerging technologies like digital and AI, this will advance even faster. Good companies will progress to convert their ability to manage Process Safety and Environmental risks into a distinct competitive advantage. It is also crucial to attract good talent which is at the heart of creating successful chemical companies.
Similarly, we can expect the world to be far less tolerant of companies that continue to not address these risks. The expectations of stakeholders and regulations will continue to become more stringent. Even a few major incidents can have a detrimental impact not only on specific companies but the industry as a whole. I therefore consider investment in safety and environmental risk management not a cost but a long-term strategic imperative.
How are Indian companies driving innovation?
Driving innovation foremost is about creating a strong culture of learning and innovation. That needs time, investment, a strong belief, motivation and commitment. The fruits of this often-longer term but much larger and much longer lasting. You can beat one technology which another company may have acquired but you can’t beat a strong culture of innovation. It is not about doing it all along but building a strong culture of collaboration within and outside the organisation, a culture where people are given space to think, space to try and to learn from mistakes. It is about creating a fertile ground for sprouting of ideas, evaluation of ideas, weeding out and shortlisting of ideas and then executing them and scaling them up with perseverance.
It is also about focusing on identifying problems or needs and creating value for customers, consumers and society. In the times to come sustainability will remain at the heart of innovation and it will drive the most innovation in the industry. We, as a country, are making progress, but we need to keep pushing as there is a lot more that needs to be done and eventually not only about catching up but getting ahead in an ever increasing competition in the world.