Construction Week Online, October 21, 2021
We have to move forward with the mantra of 'Make for world' along with 'Make in India', was the mission given to the nation by PM in his 74th Independence Day speech on 15 August 2020.
In the 14 months since the "Make for the World" announcement, the government has been putting in to play multiple initiatives to encourage the path to this vision. The key element of these initiatives are the 13 Production Linked Incentive (PLI) schemes 1) Key Starting Materials (KSMs)/Drug Intermediates (DIs) and Active Pharmaceutical Ingredients (APIs) 2) Large Scale Electronics Manufacturing 3) Manufacturing of Medical Devices 4) Electronic/Technology Products 5) Pharmaceuticals drugs 6) Telecom & Networking Products 7) Food Products 8) White Goods (ACs & LED) 9) High-Efficiency Solar PV Modules 10) Automobiles & Auto Components 11) Advance Chemistry Cell (ACC) Battery 12) Textile Products MMF segment and technical textiles 13) Specialty Steel. Massive amounts of investments are going to be encouraged in these industries to create globally competitive products.
What is generally unexpressed and is yet of immense importance is the dependence of all these PLI industries on chemical inputs. Multiple bulk chemicals, speciality chemicals, agrochemicals, petrochemicals, and polymers are used either directly in the composition of PLI industries or as a vital component of their manufacturing process and in the case of food products as a growth agent in the form of fertilizers. The International Council of Chemical Associations (ICCA) estimates that the chemical industry directly added $1.1 trillion to global GDP in 2017, while directly employing 15 million people. Over 95 per cent of all manufactured goods rely on some form of an industrial chemical process. Most industry sectors also make use of chemical products, from energy generation and transportation to ICT and construction. According to the Ministry of Chemicals and Fertilizers, the share of Gross Value Added (GVA) of the Chemical industry in the manufacturing sector was about 8.75%2 during 2018-19. The chemical industry also offers alternatives, which serve as substitutes for natural products that would otherwise strain the natural resources.
The market size of the chemicals industry in India is currently worth around USD 178 bn with 80,000 commercial products making us the Sixth largest producer of chemicals in the world. The total production of major chemicals and petrochemicals in 2021-22 (up to May 2021) was 92.8 lakh MT with a 5-year production CAGR of 5.74%. Alkali Chemicals form the biggest chunk of production capacity in India at around 72%. The latest speciality chemicals at $32 bn constitute 18% of the market in India. The agrochemicals market in India is expected to grow at 8% CAGR reaching $4.7 bn by FY25. According to Invest India, there is an opportunity to produce $111 bn worth of chemical products by 2023 for domestic requirements.
According to PwC's researched India Chem 2021 report3 India's chemical industry has a significant potential to reach USD 300 billion by FY25. According to McKinsey4 "Analysis of India's chemical exports and imports, coupled with a review of opportunities emerging from global trends, suggests building self-sufficiency in petrochemicals to plug the shortfall of domestic supply of 52 per cent (by volume).
There is thus a requirement for EPC in all dimensions of the chemical industry in the country as our usage of chemicals derived end-products is set to rise dramatically. EPC is the industry of Industries and there needs to be a significant foundational focus on chemical EPC in addition to the PLI based EPC in the country. 'Make in India, Make for the world' across sectors, and India's increased defence self-sufficiency needs is creating an urgency for corresponding chemicals infrastructure. Manufacturing polyethylene and PVC products too will require raw materials. Enormous appetite thus exists in India to develop the chloro- chemicals industry with a focus on inorganic chemicals like trichloroethylene, poly aluminium chloride and other chlorine-based water treatment chemicals.
Union Minister of Chemicals & Fertilizers had earlier informed that an investment of Rs 8 lakh crore is anticipated in the Indian chemicals and petrochemicals industry by 2025. Currently, Gujarat has a significant share of Indian chemical manufacturing capacity at around 50%, and the South has manufacturing capacity for bulk drugs and pharma. There is thus scope for chemical infrastructure in nearly every other State of India. The States that are actively vying for industrial corridors need to ensure that chemical EPC is given due attention. We have seen how the global chip shortage has hampered the automobile industry and India needs to ensure that an analogous situation does not emerge with respect to chemicals. In the meanwhile, mandatory BIS-like certification for chemicals import has also been started to ensure the high quality of chemicals coming into the country.
The EPC industry too will need to gear up to meet the opportunity presented by the expected demand surge for specialised chemical EPC. We will need to ensure that our R&D capabilities match world standards, and we can patent the required technological processes. Currently, a huge amount of chemical EPC is driven by licenced technological processes from global majors thus creating a huge royalty outflow/cost inflation. As a case in point, we at Nuberg EPC have developed in-house process technologies for various products, which have been successfully applied in large scale industrial plants worldwide.
The Government and EPC industry must work together to also create the large pool of engineers and skilled personnel that will be required to execute the massive undertaking. The Indian market is attractive for Indian EPC-LSTK players like Nuberg EPC where we have already committed investment in high-quality engineering talent and a global R&D facility with ownership of some key technologies. The government is requested to ensure that adequate weightage is provided to Indian EPC-LSTK organisations to capture the Make in India Make for the World opportunity.
© This article was first published in Construction Week Online, October 21, 2021.
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