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2
CHEMICALS November 2010
Contents
Advantage India
Market overview
Industry infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
3
India’s per capita plastic
consumption is projected to
double from 6 kg in 2009 to 12
kg in 2011; rise in consumption
will boost the demand for
chemicals such as phenol, ethyl
acetate and titanium oxide.
• Indian automobile sector is projected to
grow at a compound annual growth rate
(CAGR) of of 19 per cent between
2005–06 and 2011–12.
• The growth in this sector will drive
demand for soda ash in India which is
projected to grow at an annual rate of 5
per cent between 2010–11 and 2011–
12.
FDI of 100 per cent is permitted
under the automatic route; the
manufacture of most chemical
products is de-licensed.
• The Government of India (GoI) plans to invest US$ 33 billion in three
approved Petroleum, Chemicals and Petrochemicals Investment
Regions (PCPIRs); it also plans to establish port-based chemical parks
in special economic zones (SEZs).
• India is considered as a favourable trade location due to a vast
coastline which provides strategic freight advantage, proximity to the
Middle East (oil suppliers) and future demand centre (South-east Asia).
Advantage
India
• India has a diversified
manufacturing base with a capacity
to produce quality chemicals for
world consumers.
• Export of dyes from India is
progressively rising and is expected
to increase from US$ 1.5 billion in
2005–06 to US$ 2.6 billion in 2020.
Growing presence in export market
Strengthening infrastructure
Growing automobile sectorFavourable government policies
Rising plastic consumption
Advantage India
Chemicals November 2010ADVANTAGE INDIA
Sources: ―Eleventh Five Year Plan 2007-12‖, Planning Commission of India website, 2008,
http://planningcommission.gov.in/plans/planrel/fiveyr/11th/11_v3/11th_vol3.pdf, ―Plastic consumption to double by 2011,‖ Business Standard website,
http://www.business-standard.com/india/news/plastic-consumption-to-double-by-2011/345971/, accessed 20 November 2010.
4
CHEMICALS November 2010
Contents
Advantage India
Market overview
Industry infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
5
The Indian chemicals industry is
the twelfth-largest industry in the
world and the third largest in Asia
in terms of volume.
The industry contributes 3 per
cent to the national GDP.
The Indian chemicals industry is
currently valued at around US$ 35
billion.
The industry accounted for 9.3 per
cent of total exports in 2008–09.
Industry exports grew at a CAGR
of 18 per cent between 2003–04
and 2008–09.
Sources: Department of Chemicals & Petrochemicals annual report 2009-10; ―SIA newsletter, April 2010‖, Department of Industrial Policy &
Promotion website, Ministry of Commerce & Industry, http://siadipp.nic.in/publicat/newslttr/apr2010/index.htm, accessed 20 September 2010
The Indian chemicals industry has evolved from being a basic producer of chemicals to an innovative
industry.
Chemicals November 2010MARKET OVERVIEW
Overview of the Indian chemicals industry
Market overview
6
Industry segments
Source: Department of Chemicals & Petrochemicals, GoISource: Department of Chemicals & Petrochemicals, GoI
Chemicals November 2010
Basic chemicals
Inorganic chemicals
Petrochemicals
Fertilisers
Other industrial chemicals
Specialty chemicals
Adhesive sealants
Industrial gases
Catalysts
Plastic additives
Knowledge chemicals
Agrochemicals
Pharmaceuticals
Other biochemicals
Segment-wise share of chemical segments (per cent)
MARKET OVERVIEW
57.1425.71
17.14
Basic chemicals
Specialty chemicals
Knowledge chemicals
7
Chemicals and petrochemicals — segmentation
Chemicals November 2010
Major chemicals
• Alkali chemicals
• Inorganic chemicals
• Organic chemicals
• Pesticides
• Dyes and dyestuffs
Major petrochemicals
• Synthetic fibres
• Polymers
• Synthetic rubber
• Synthetic detergent intermediates
• Performance plastics
• Fibre intermediates
• Olefins
• Aromatics
MARKET OVERVIEW
Source: Department of Chemicals & Petrochemicals , GoI
8
14,10314,757 15,143 15,758
16,40615,519
11,689
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 (Apr-Dec)
Major chemicals and petrochemicals — production ('000 MT)
Chemicals and petrochemicals ('000 MT)
Source: Department of Chemicals & Petrochemicals, GoI
State-wise share in production of major chemicals
(2006–07) (per cent)
Source: Department of Chemicals & Petrochemicals, GoI
Chemicals — production
Chemicals November 2010MARKET OVERVIEW
51
8
8
6
4
23Gujarat
Maharashtra
Uttar Pradesh
Tamil Nadu
Punjab
Other states
9
Share of chemicals sector in India’s exports
2009–2010 (per cent)
Source: Department of Commerce, GoI, Annual Report, 2009–2010
341431
507612 657
780
331429
546643
731
989
0
200
400
600
800
1,000
1,200
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Exports Imports
Exports and imports in the chemicals and
petrochemicals sectors (INR billion)
Source: Department of Chemicals & Petrochemicals, GoI
• The chemicals and related products sector contributed 13.8 per cent to national exports in 2009–2010.
• The chemicals and petrochemicals segments grew at a CAGR of 17.97 per cent from 2003–04 till 2008–09.
• The majority of chemicals exported were dyes, dyestuffs and alkali chemicals.
Chemicals — exports and imports
Chemicals November 2010MARKET OVERVIEW
19.8
13.813.8
17.8Engineering goods
Petroleum products
Chemicals and related products
Gems and jewellery
INR
bill
ion
Year
10
Key trends
Industry trends
• The Indian chemicals industry is highly fragmented and is currently going through a major restructuring
and consolidation phase.
• At present, most of the domestic capacity of chemicals caters to a strong domestic market. However, this
with the GoI initiating PCPIRs and SEZs, the export capacity is also expected to increase significantly.
• With investments in R&D growing, the industry is registering significant growth in the knowledge
chemicals sector.
• The industry is focusing on increasing innovations to produce environment-friendly technology and
products.
Investment trends
• Since 1991, the Indian chemicals sector has been consistently ranked third among all sectors in India, in
terms of the amount of investment.
• Between August 1991 and August 2010, investment intentions worth US$ 112.14 billion (INR 5,382.7
billion) have been received in the chemicals sector. This accounts for 7.17 per cent of total investment
intentions in the country.
Source: ―SIA Statistics-September 2010,‖ Department of Industrial Policy & Promotion website,
http://siadipp.nic.in/publicat/stats/sep2010/index.htm, accessed 10 November 2010.
Chemicals November 2010MARKET OVERVIEW
11
High domestic demand potential
• The per capita consumption of chemical products in India is about one-tenth of the world average.
• Consumption grew at a CAGR of 3.9 per cent between 2003–04 and 2008–09.
• Favourable factors such as strong economic growth have ensured that the domestic demand potential for chemicals
is rising.
Key growth drivers
Focus on R&D
India has a strong base for innovation in its network of 200 national laboratories and 1,300 R&D units, which can be
leveraged for the shift towards an innovation-based industry.
Outsourcing
An increasing number of multinational companies (MNCs) are viewing India as a base for manufacturing and supplying
to their global markets.
Consolidation
The Indian chemicals industry is moving towards greater consolidation in order to achieve economies of scale.
Sources: Department of Chemicals & Petrochemicals; Department of Chemicals & Petrochemicals annual report 2009-10
Chemicals November 2010MARKET OVERVIEW
12
Key players — Indian*
Sources: Relevant company websites and annual reports; Prowess
•This list is indicative ; # 2008–09 figures
CompanySales in 2009–2010
US$ million (INR million)Products
Tata Chemicals Limited (TCL) 2,122.0 (101,856)Soda ash, salt, marine chemicals, caustic soda,
cement and bulk chemicals
United Phosphorus Limited (UPL) 1,184.0 (56,832) Agrochemicals
Nirma Ltd 1,071.0 (51,408)Alkyl benzene, alfa olefin sulphonate, sulfuric acid,
soda ash, pure salt
Gujarat Heavy Chemicals Ltd (GHCL) 320.5 (15,384) Soda ash
Gujarat Alkalies and Chemicals Ltd (GACL 292.0 (14,016) Caustic soda
Solaris Chemtech Industries Ltd 52.1 (2,500)# Bromine and bromine chemicals
Chemicals November 2010MARKET OVERVIEW
13
Key players — International*
Sources: Relevant company websites and annual reports
* This list is indicative
CompanySales in 2009
US$ billionProducts
BASF 69.1 Chemicals, plastics, performance and nutrition products
The Dow Chemicals 46.6 Specialty chemicals, agrochemicals and plastics
Bayer 43.4 Agrochemicals, pharmaceuticals, polymers, technology services
E. I. du Pont de Nemours and Company 27.3 Specialty and fine chemicals
INEOS 25.1 PVC films and specialty resins
Evonik Industries 19.3 Specialty chemicals
AkzoNobel 18.9 Coatings, decorative paints and specialty chemicals
Lanxess 7.3 Plastics, rubber, specialty chemicals and intermediates
Wacker Chemie 5.7 Silicone, polymer, specialty and fine chemicals
Chemicals November 2010MARKET OVERVIEW
14
CHEMICALS November 2010
Contents
Advantage India
Market overview
Industry infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
15
Industry infrastructure
Jamnagar,
Thane, Pune , Chiplun
Ahmedabad
Hyderabad
Vadodara
Cochin
Haldia
Bengaluru
NCR
Chennai
Bharuch, Hazira, Vapi
Baddi
DerabassiPanipat
Nagda
Visakhapatnam,
Kakinada
Cuddalore, Puducherry
Mangalore
Industry clusters
Sources: ―SEZ India‖ SEZ India Invest website, http://www.sezindiainvest.com/index.htm, accessed 20 November 2010.
Chemicals November 2010INDUSTRY INFRASTRUCTURE
16
Industry infrastructure — SEZs
Jubilant Chemicals SEZ
LocationVilayat, Bharuch (Gujarat )
(20 km from Dahej)
Area 160 hectares
Developer Jubilant Infrastructure Ltd
Contact
Details
I-A, Sector 16-A,
Industrial Area, Noida – 201301, Uttar
Pradesh, India
Tel: 91 120 2580309
Fax: 91 120 2580310
Website: www.jubl.com
Sources: Department of Commerce 2008–09 annual report, GoI,; ―List of SEZ in India‖ SEZ India Invest website,
http://www.sezindiainvest.com/State_wise.htm , accessed 20 November 2010.
SEZ
Vilayat, Bharuch
Jubilant Chemicals SEZ is the major exclusive chemicals SEZ located in Bharuch, Gujarat, apart from the five major PCPIR regions in India.
Chemicals November 2010INDUSTRY INFRASTRUCTURE
17
• A PCPIR is a specifically delineated investment region with an area of around 250 sq km.
• The region has planned infrastructure to establish manufacturing facilities for domestic and export-led production in petroleum, chemicals and petrochemicals.
• It is designed to house production units, public utilities, logistics infrastructure, environmental-protection mechanisms, residential areas and administrative services.
• PCPIR includes SEZs, industrial parks, free trade and warehousing zones (FTWZs), export-oriented units (EOUs) or growth centres.
• PCPIRs are linked through external physical infrastructure such as rail, road (the National Highways), ports, airports and telecommunications.
Petroleum, Chemicals and Petrochemicals Investment Regions
(PCPIR) … (1/2)
Source: Department of Chemicals & Petrochemicals annual report 2009-10
Chemicals November 2010INDUSTRY INFRASTRUCTURE
Vizag and East
Godavari
Vagra- Bharuch
Haldia
Cuddalore & Nagapattinam
18
Petroleum, Chemicals and Petrochemicals Investment Regions
(PCPIR) … (2/2)
Source: ―Presentations‖, Petroleum, Chemicals and Petrochemicals Investment Region Policy website, http://www.indiachem.in/pcpir.htm, accessed
24 November 2010
State Location Details/status Leading players
Gujarat Dahej, Bharuch
• Approved
• Area — 5,000 hectares
• Investment potential of US$
10.42 billion (INR 500.2 billion)
Indian Petrochemicals Corporation
Limited (IPCL), Petronet LNG, Gujarat
Chemical Port Terminal Company
Limited (GCPTL)
Andhra PradeshVisakhapatnam to
Kakinada
• Approved
• Area — 60,358 hectares
• Investment potential of US$ 71
billion (INR 3,408 billion)
Hindustan Petroleum Corporation, LG
Polymers India Pvt Ltd, Nagarjuna
Fertilizers & Chemicals Ltd
West BengalHaldia mainland to
Nayachar Island
• Approved
• Area — 25,000 hectares
IOC Petronas, Tata Chemicals, Haldia
Petrochemicals
Orissa Paradip • Area — 28,414 hectares Tata-Sasol
Chemicals November 2010INDUSTRY INFRASTRUCTURE
19
CHEMICALS November 2010
Contents
Advantage India
Market overview
Industry infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
20
Investments
Announcement
dateAcquirer Target
Deal value (US$
million)
November 2010 Songwon Industrial Co, Ltd High Polymer Labs Limited 20
September 2010 BASF India Ltd BASF Construction Chemicals (India) Pvt Ltd 33
September 2010 Jairam Phosphates-Facilities Khaitan Chem & Fertilizers Ltd -
July 2010Agri and Performance Polymer business of
Jubilant Organosy LtdJubilant Organosys Ltd (Shareholders) -
July 2010 Huntsman Corp Laffans Petrochemicals Limited -
June 2010 Atul Ltd Polygrip Rubber Production Pvt Ltd 2.2
May 2010 Godrej Sara Lee Ltd Godrej Consumer Products Ltd 233.6
March 2010 The Valspar (Singapore) Corporation Pte Ltd DIC Coatings India Ltd 9
Indian deals
*Excluding fertilisers
Sources: Chemicals NewViews, July–September 2010, ―M&A Transactions,‖ ThomsonOne Banker, accessed 24 November 2010
Mergers and acquisitions
• The chemicals sector* attracted cumulative foreign direct investment (FDI) of US$ 362 million in 2009–2010.
• Between August 1991 and September 2009, approvals for more than 900 foreign technology transfers (FTT) have been granted in the chemicals sector, accounting for 11.20 per cent of the total approvals.
Chemicals November 2010INVESTMENTS
21
CHEMICALS November 2010
Contents
Advantage India
Market overview
Industry infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
22
Policy and regulatory framework
Licensing policy
• Licensing requirements have been removed, except for hazardous chemicals and a few special drugs.
• Entrepreneurs are allowed to set up chemicals industries following the Industrial Entrepreneurs’ Memorandum (IEM) route.
• Under the automatic route, 100 per cent FDI is allowed for all chemicals except hazardous ones.
Customs duty
• The peak rate of customs duty on most chemicals is 7.5 per cent.
Source: Department of Chemicals & Petrochemicals annual report
2009-10
Excise duty
• Excise duty of 16 per cent is applied on almost all chemicals.
PCPIR policy
• The PCPIR Policy has been introduced to boost the development of chemicals and petrochemicals investment regions.
Others
• Plans are underway to set up port-based chemicals parks in SEZs to encourage clustering, provide infrastructure and enable tax concessions.
• Downstream SEZs have been planned to use the output of chemicals parks.
Chemicals November 2010POLICY AND REGULATORY FRAMEWORK
23
CHEMICALS November 2010
Contents
Advantage India
Market overview
Industry infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
24
Opportunities … (1/5)
Chemicals November 2010POLICY AND REGULATORY FRAMEWORK
Water treatment
chemicals
Alkali chemicals
Sources: ‖Working group on Indian chemical industry,‖ Planning Commission website,
http://www.planningcommission.gov.in/aboutus/committee/wrkgrp11/wg11_chemical.pdf, accessed November 19, 2010; ―On-Farm Land and
Water Management,‖ Central Soil Salinity Research Institute website, http://www.cssri.org/onfarm.pdf, accessed 15 November 2010.
• Alkali chemicals constitute the largest segment in the Indian inorganic chemicals sector and presents
high growth potential in domestic market.
• Net imports in the alkali chemicals sector grew at a CAGR of 24.3 per cent between 2003–04 and
2008–09.
• Increasing usage of recycled water and stringent government legislations will create demand for
water treatment chemicals such as chlorine.
• The utilisation of water treatment chemicals such as chlorine in India presents a significant
opportunity for chemical companies to tap their potential market demand in India.
25
Research &
Development
Eco-friendly
technology and
products
Logistics services
Opportunities … (2/5)
Chemicals November 2010POLICY AND REGULATORY FRAMEWORK
Sources: ‖Working group on Indian chemical industry,‖ Planning Commission website,
http://www.planningcommission.gov.in/aboutus/committee/wrkgrp11/wg11_chemical.pdf, accessed November 19, 2010
• The chemical industry in India is witnessing increased focus towards research and development,
which in turn provides opportunities for growth of R&D hubs and industry specific institutes.
• The government is also providing support to industry specific research institutes to promote
research. The Central government has planned to lend US$ 3.12 million (INR 149.8 million) in 2009–
2010 to Central Institute of Plastic Engineering & Technology (CIPET) to promote R&D efforts.
• There is a rising awareness in the industry about developing eco-friendly technology to reduce the
wastes generated and to develop similar products. Investing in R&D to develop such technology/
products is a potential growth area for the chemicals industry.
• Logistics services addressing the specific needs of the chemicals industry can serve as one of the
significant support infrastructure to promote the development of the industry.
• This can be leveraged by setting up logistic parks and transport hubs to support exports to other
parts of the world.
26
Dyestuff
Opportunities … (3/5)
Chemicals November 2010POLICY AND REGULATORY FRAMEWORK
Specialty chemicals
Sources: ‖Working group on Indian chemical industry,‖ Planning Commission website,
http://www.planningcommission.gov.in/aboutus/committee/wrkgrp11/wg11_chemical.pdf, accessed November 19, 2010; ―Specialty Chemicals
Market in India to Reach $40 Billion in Next Three Years,‖ Chemical Week website,
http://www.chemweek.com/markets/specialty_chemicals/flavors_and_fragrances/26018.html#, accessed 20 November 2010
• Textile sector is a major consumer of dyestuffs and accounts for 70 per cent of dyestuff
consumption in India. The GoI's policy to promote export of cotton goods and promote blend of
polyester fibres with cotton/viscose domestically is expected to result in continued high demand for
disperse dyes. The market demand for dye and dye intermediates in India is expected to grow at a
CAGR of 4.7 per cent from 652,000 tonnes in 2004–05 to 900,000 tonnes in 2010–11.
• Stringent environmental laws in the western countries have resulted in discontinuance of production
of certain dyes for textiles and leather, giving an opportunity to Indian chemical companies to
manufacture such products and export to these countries.
• India has emerged as an exporter of dyes, exporting dyes to Germany, U.K., U.S., Switzerland, Spain,
Turkey, Singapore and Japan. The export of dyes is expected to increase from US$ 1.5 billion in
2005–06 to US$ 2.6 billion in 2020.
• A rebound in consumer demand (driven by economic recovery) and significant outsourcing
opportunities are expected to drive growth in the Indian specialty chemicals market.
• The Indian specialty chemicals market is expected to grow from US$ 18 billion in 2006 to US$ 40
billion by 2013.
27
Petrochemicals
Opportunities … (4/5)
Chemicals November 2010POLICY AND REGULATORY FRAMEWORK
Agrochemicals
Sources: ‖India’s Petrochemical Sector Set for Higher Growth,‖ Chem Guide website, http://chemguide.asia/news/top/2010/01/05/indias-
petrochemical.html, accessed 15 November 2010; ‖Working group on Indian chemical industry,‖ Planning Commission website,
http://www.planningcommission.gov.in/aboutus/committee/wrkgrp11/wg11_chemical.pdf, accessed November 19, 2010.
• The long-term outlook for India’s petrochemicals industry is robust.
• The demand for plastics in the country is expected to record double-digit growth by 2015, driven
by population growth and increased industrialisation. In addition, the domestic demand for
polymers will double to11 MT by 2015.
• The robust demand forecast, along with GoI’s plans to develop PCPIRs in India, holds immense
opportunities companies to invest in petrochemicals sector in India.
• The GoI is placing increased emphasis on the growth of agriculture in India. The GoI is taking
initiatives to put the agriculture sector on the growth radar and achieve 4 per cent growth in the
Eleventh Five Year Plan period (2007–2012), up from the 2.5 per cent growth achieved in 2002–
2007.
• The government initiatives, amid rising food demand in India, is likely to give immense growth
opportunities to companies dealing in agrochemical products in the country.
• In addition, growing focus on biofuels is expected to give additional opportunities to agrochemical
companies in India. India plans to include 5 per cent biofuels in transportation by 2012 and 10 per
cent by 2017.
28
Fertilisers
Opportunities … (5/5)
Chemicals November 2010POLICY AND REGULATORY FRAMEWORK
Source: Chemicals NewViews, July–September 2010
• Urea consumption in India is growing and is expected to increase at a CAGR of 3.5 per cent from
26.5 MT in 2009–2010 to 31.4 MT in 2014–15. However, the domestic supply of urea is projected
to support only 24.6 MT in 2014–15, which gives opportunities to fertiliser companies to add
capacities in India and tap growing demand.
• The rise in contract farming trend is also expected to benefit fertiliser companies in India. Under
contract farming, the fertiliser companies produce products at economical labour and land costs in
India to export to high–demand regions of the world.
29
CHEMICALS November 2010
Contents
Advantage India
Market overview
Industry infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
30
Industry associations
Indian Chemical Council
Sir Vithaldas Chambers, 16-Mumbai Samachar Marg, Mumbai – 400023
Phone: 91 22 22047649/ 22846852
Fax: 91 22 22048057
Website: www.icmaindia.com
Alkali Manufacturers Association of India
3rd Floor, Pankaj Chambers, PreetVihar Commercial Complex, Vikas Marg, New Delhi – 110092
Phone: 91 11 22432003, 22410150, 55253401
Fax: 91 11 22468249
Website: www.ama-india.org
Indian Specialty Chemical Manufacturers' Association
1156, Bole Smruti, Suryavanshi Kshatriya Sabhagriha Marg, Off. Veer Savarkar Marg, Dadar (West)
Mumbai – 400 028
Tel: 91 22 2446 5003
Website: www.iscma.in
Chemicals November 2010INDUSTRY ASSOCIATIONS
31
Note
Wherever applicable, numbers in the report have been rounded off to the nearest whole number.
Conversion rate used: US$ 1= INR 48
Chemicals November 2010NOTE
32
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CHEMICALS November 2010