The Gujarat government has signed a memorandum of understanding (MoU) with Deepak Chem Tech Ltd (DCTL) to set up three manufacturing projects at Dahej in Gujarat at a total investment of Rs 5,000 crore. These projects are proposed to be commissioned by 2026-27, which will eventually help India to move a step closer to achieving self-reliance in petrochemical intermediates production.

According to the MoU, the DCTL will set up these plants to manufacture specialty chemicals, phenol/acetone, and bisphenol at Dahej, which has a potential of around 1,500 employment opportunities. Additionally, these projects would boost the supply of petrochemical intermediates, as well as substitute imported raw materials which constitute nearly half of India’s demand. The MoU was signed by the Gujarat Chief Minister Bhupendra Patel in the presence of Industry Minister Balwantsinh Rajput and the Minister of State of Industries Harsh Sanghvi in Gandhinagar.

Speaking on the occasion, Gujarat Chief Minister Bhupendra Patel said, “This collaboration is the state government’s commitment towards the vision of ‘Aatmanirbhar bharat.’ The MoU step supports the mantra of India’s Prime Minister Narendra Modi to make the country self-reliant in the petrochemical intermediate sector.”

Deepak Mehta, Chairman of DCTL’s parent company Deepak Nitrite Limited, appreciated the government’s support and encouragement which was extended during discussions about this project. Mehta further elaborated on the company’s gesture towards humanity in challenging times like the coronavirus (Covid) pandemic outbreak.

Mehta said, “The current market of petrochemicals intermediates is estimated at US$180 billion which will increase to US$650 billion in a few years. Gujarat can develop the capacity to produce 50 percent i.e. US$300 billion worth of petrochemical intermediates.

Established a little over two-and-a-half years ago, DCTL is engaged in the business of manufacturing ammonia, nickel, nitric acid, agricultural chemicals, calcium nitrite, lithium, mercury, and a host of other organic and inorganic chemical products. DCTL enjoys an authorized capital of Rs 500 crore and a paid-up capital of Rs 9.50 crore, according to data compiled by the Ministry of Corporate Affairs.

India’s petrochemical industry
Petrochemical products have become an integral part of modern societies and an inseparable product from human beings. Products like cars, electronic goods of packaging articles, use an abundance of petrochemicals. So, petrochemicals as plastics raw materials have become indispensable in day-to-day lives.

As India progresses towards a US$5 trillion economy by 2024-25 and US$10 trillion Gross Domestic Product (GDP) by 2030 and plans are afoot to achieve that, the share of petrochemical and its derivatives and raw materials sectors shall become even more significant especially due to increasing their use in agriculture, infrastructure, manufacturing, and services.

Although India is self-reliant on basic petrochemical products with its export numbers promising, the petrochemical intermediates or derivatives sectors witness a serious scarcity, with the country depending upon almost 50 percent of its demand on imported products. The import dependence is quite high when compared to the chemical manufacturing sector.

Anticipating the need of the hour, the government called for the present as an opportune time for Indian downstream companies including chemical manufacturers to set up new plants in the petrochemical intermediate field. Experts called for an expansion in the existing capacity and setting up new manufacturing units for increasing the production capacity to meet the current deficit and grow its demand future.

Import reliance for half of annual demand
According to an estimate, the lack of growth for the petrochemical intermediate industry allows Indian companies to become import dependent resulting in a cumulative loss of around US$200 billion due to rising import bills and missed growth opportunities by 2030. On the other hand, the downstream petrochemical industry i.e. specialty chemicals account for over 50 percent of chemical exports in 2022, driven largely by agrochemicals, dyes, and pigments, among others.

The Indian petrochemical intermediates market is driven by the growth of downstream industries including plastics, synthetic fibers, and rubber, as well as the increasing demand for high-performance materials in various end-use applications including automotive, construction, and textiles. The Indian economy is set to become the third largest by 2030, India’s US$190 billion petrochemical industry is set to witness a compounded annual growth rate (CAGR) of 8 percent by then.

Growing at a compounded annual growth rate (CAGR) of 1.2-1.5 percent of the gross domestic product (GDP), India’s chemical and petrochemical demand is set to continue its rapid expansion in the next two decades to achieve the overall market size of US$1 trillion by 2040. The growth potential in the Indian chemical and petrochemical sector is immense. This industry is expected to contribute approximately 10 percent to the incremental growth in global petrochemical demand in the coming years.

India’s per capita consumption of petrochemical derivatives is still low compared to developed countries. However, this sector has made significant progress in recent years, becoming one of the largest producers of petrochemical products in the world. India is estimated to contribute around 10 percent of the global growth in the petrochemical industry. The country’s chemical market size is projected to reach US$300 billion by 2040, up from the current valuation projected at US$178 billion. The chemical industry in India is expected to attract investment worth US$87 billion in the next decade.

Future growth drivers
The Indian government has allowed 100 percent foreign direct investment (FDI) through an automatic route to foster growth across the chemical and petrochemical value chain. It has created Petroleum, Chemicals, and Petrochemicals Investment Region (PCPIR) zones and established over 10 plastic parks. All these initiatives are set to boost growth in the chemical and petrochemical sectors. The forthcoming PCPIR policy, slated for implementation between 2020 and 2035, may attract investments of more than US$ 420 billion (Rs 34 lakh crore) in this sector.

With several growth-enabling policies initiated, India’s petrochemical sector is estimated to witness an investment worth US$30 billion. The government has assured the industry that it will address current challenges and implement flagship initiatives to enhance global competitiveness, improve the quality of products, and provide a business-friendly environment in the chemicals and petrochemicals sectors. Indian petroleum refiners have increased their cumulative refining capacity to 251.2 million metric tonnes per annum (MMTPA) from 215 MMTPA in the financial year 2013-14 to avail opportunities in the forward integration segment.


DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com