XLRI Delhi NCR, BM Batch 2022-24
MGE (Managerial Economics) Project
Selected Sector: Indian Chemical Industry
Section E - Group number 2
Group members of Section E - Group number 2:
Name Roll No
Adarsh Goyal BD22004
Aman Chawla BD22010
Mayank Jindal BD22024
Saket Lohia BD22041
Sanal Almeida BD22043
Siddhant Maheshwari BD22049
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Table of Contents
Sr No Topics Page number
1 Indian chemical industry overview 3
2 Current market scenario and sector dynamics 4
3 Key trends and developments in the Indian chemical industry 5
4 Impact of the Chemical industry on the country’s economy 6
5 Issues, challenges & opportunities 7
6 Investments 9
7 Growth drivers, government initiatives and future outlook 10
8 Analysis of companies in the industry 12
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1. Indian chemical industry overview
Indian chemical industry refers to manufacturing chemicals and chemical products in India. The Indian
chemical industry is primarily driven by the Indian domestic market and demand but exports worldwide.
Ranked 3rd in Asia and 6th in the world, the Indian Chemical Industry has been one of the fastest growing
industries in the world, after the US, China, Germany, Japan, and South Korea.
The chemical sector in India is very diverse, with over 80,000 traded items. Some categories include bulk,
speciality, agrochemicals, petrochemicals, polymers, and fertilizers. India benefits from economies of
scale due to its proximity to the Middle East, the world's largest supplier of petrochemical feedstocks.
India is a major global supplier of dyestuffs, accounting for approximately 16% of the world's dyes and
intermediates production.
This industry produces a wide variety of products that affect nearly every aspect of our lives. The chemical
industry makes a significant contribution to the prosperity of the country. For example, it contributes
more than 1% to European countries' Gross National Product (GNP), 6% or more of the total GNP
produced by all manufacturing industries.
People in this industry are rewarded the highest among all the manufacturing sectors because they
contain a large proportion of highly qualified people.
Major chemicals and petrochemicals production volume India FY 2015-2021
Globally, India stands at the 4th position in the production of agrochemicals after the US, Japan, and China.
Emerging as a key player, the Indian colourant industry holds ~15% market share globally.
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2. Current market scenario and sector dynamics
The Indian Chemical Industry is responsible for contributing around $300 Billion to the GDP and will be a
huge factor in making India a $5 trillion economy. Growing at a CAGR of 9.3%, the chemical industry is
expecting an investment of ₹8 lakh crore by 2025. Since this is a vast sector, it will play an essential role
in growing the Indian economy.
Chemical Industry is one of the industries which not only survived the pandemic but has also flourished.
In the global scenario, China has a share of ~25%, which is far ahead compared to India, which is at ~4%.
In terms of export, China stands at ~18%, whereas India's contribution is merely 6-7%.
PETROCHEMICALS
AGRO-CHEMICALS
Expected a domestic demand growth of 8%
Projected to grow at 8-10 % CAGR till 2025 over next decade. Projected to grow more
than 40% over next 5-7 years.
INDUSTRY TRENDS
FERTILIZERS SPECIALITY CHEMICALS
Expected growth of 13% CAGR reaching Accounts for more than 50% of total chemical
around $138 billion by 2023 exports from India
Market Size of Indian Chemical Sector in $ billion
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The Indian speciality chemical industry has become the hottest investment choice of manufacturers. By
gradually shifting focus beyond traditional cost and creating advancements in technological proficiency,
manufacturing, distribution network, and operational efficiencies show increased customer confidence.
3. Key trends and developments in the Indian chemical industry
● Change in consumer preferences: Consumers are becoming more and more interested in goods and
services that are socially and ecologically conscious. Additionally, they are wanting gentler, safer, and
goods with pure components as they are becoming more concerned of health and cleanliness.
● Increasing per capita consumption: Consumption of chemical goods per person is predicted to double
by 2025 from its current level, which is roughly one-tenth of the global average.
● Digitalization and Industry 4.0: Through enhanced horizontal and vertical integration, a new definition
of operations management, innovation, and new digital business models, digitalization delivers
competitive advantages. As well as the supply chains, demand forecasting, and pricing strategies of
chemical industries are all becoming digitalized.
● M&A and investment-related activity is rising: The main forces behind robust M&A and investment
activities include downstream value-added prospects, the sustained strength of specialty chemicals,
and portfolio realignment. Leading chemical businesses and international oil and gas conglomerates
are searching for downstream prospects in India and other fast-growing nations. With Saudi Aramco,
Total, and BASF expressing interest in the Indian chemical industry, the trend has already started.
● Innovation and sustainability: The value chain of the chemical industry is moving toward an overall
management philosophy that emphasizes adding value by balancing the pandemic's economic, social,
and environmental effects. By continuously enhancing their products, technologies, and processes and
collaborating closely with their clients and suppliers throughout their value chains, chemical businesses
are implementing sustainability and green chemistry programmes. Between 2009 and 2019, India's
chemical industry's R&D spending grew at a CAGR of 7.91%.
● Production capacity of the Chemical sector: Chemical production in India increased to 903,002 MT in
December 2021 from 861,950 MT in November 2021.
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● Chemical sector import and export:
○ The exports of organic & inorganic chemicals increased 33.75% YoY and reached to US$ 26.48
billion from April 2021 to February 2022.
○ The Imports of organic and inorganic chemicals increased 55.18 % YoY and reached to US$ 27.50
billion from April 2021 to February 2022.
○ India occupies a prominent place in the global trade of chemicals, ranking ninth in exports and
sixth in imports (excluding pharmaceuticals)
● Agrochemical trends in India:
○ India is the world's fourth-largest producer of agrochemicals, behind China, Japan, and the
United States.
○ India is the fourth-largest exporter of pesticides and disinfectants and the thirteenth-largest
exporter of agrochemicals overall. Due to low-cost manufacturing, the availability of technically
skilled labour, seasonal domestic demand, overcapacity, competitive pricing, and a significant
presence in the production of generic pesticides, the nation's exports have expanded.
○ Agrochemicals are expanding in India as a result of increased demand in the agriculture sector.
● Chemical players focusing on sustainable development: Indian chemical companies concentrate their
efforts on challenges like water, environmental effect, raw materials, safety over lifecycle, and energy
use while investing in creative solutions.
4. Impact of the chemical industry on the country’s economy
“Chemical industry will play a crucial role in India’s economic recovery post COVID-19”, says Janardhanan
Ramanujalu, Vice President & Regional Head, SABIC
Mansukh Mandaviya, Union Minister of Health & Family Welfare and Chemicals & Fertilizers, Govt of India
said on 25th Feb 2022 that “The Indian chemicals and petrochemicals industry will play a key role in
achieving the US$ 5 trillion target under the Atamanirbhar Bharat vision”. The basic material for over
80,000 industries is provided by the chemicals and petrochemicals sector, he added. The Indian chemicals
market was worth US$ 178 billion in 2019 and is projected to grow by 9.3% annually to US$ 304 billion by
2025. By 2025, the demand for chemicals is anticipated to increase by 9% annually. By 2025, it is
anticipated that India's chemical sector would contribute US$ 300 billion to the country's GDP.
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5. Issues, challenges & opportunities:
Issues and Challenges:
• Feedstock Demand-Supply Gap: For most of the chemical companies in India, feedstock
procurement at a cheap cost is a challenge due to limited availability in the domestic market. As a
result, most of the procurement is done through imports, which adds to the cost and makes the
domestic market relatively less competitive. For example, for organic & inorganic chemical industries,
feedstock: naphtha & natural gas are critical inputs, however, these raw material costs are higher in
India as compared to China, the Middle East, etc.
• Volatility in Raw Material prices: For industries like the petrochemical industry, where >50% of
capacities are dependent on naphtha as feed, which is a derived product from crude oil. Now, crude
oil prices witness significant volatility in prices throughout the year, hence resulting in the volatility
of petrochemical prices as well.
• Cheaper Imports: The availability of cheaper imports from countries like China is also a major
challenge. This intensifies the already-existing high competition in the domestic market, leading to
reduced profit margins.
• Infrastructural & Logistical Challenges: Poor infrastructural facilities and inadequate facilities at
ports & railway depots, poor pipeline connectivity, etc., are some key challenges that impact the
chemical industries in India in supply chain management. On account of proximity to raw materials
and ports, a major chunk of Indian chemical industries are set up on the West coast, however, the
majority of the demand comes from end-use industries located in the south and east, leading to
distribution challenges and high transportation costs.
• Lack of Quality Catalysts: For value addition to feedstocks and better processing, quality catalysts
are required, which are lacking in India. The shortage of autonomous research centres is one of the
major causes behind the issue.
• Inverted Duty Structure: Due to the current duty structure raw materials are taxed higher than
finished products, discouraging value addition in the domestic market. For example, some chemicals
used in pharma draw an import duty of 12%, while finished goods are almost duty-free on account
of Free Trade Agreements.
• Focus on R&D: Because of the high costs involved, the chemical industry in India invests low on R&D
activities. This leads to the continued circulation of generic products and low innovation in the
product market.
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• Lack of Education: In agrochemicals, lack of knowledge and awareness among farmers impacts
proper usage, dosage quantity, and application frequency.
• Rise in counterfeit products: Counterfeit pesticides account for up to 40% of pesticide sales in India.
Apart from crop loss, and damage to soil fertility, this also leads to revenue loss to farmers,
manufacturers and the Government.
Opportunities:
• Portfolio Enhancement: Companies in the manufacture of commodity products have a scope of
improvement of their product portfolio by the addition of speciality chemicals such as additives. With
a focus on sustainability, companies should invest in adding more value-added products to their
portfolio. With the scope of local customisation, companies can also make their finished products
more cost competitive in the markets: both domestic & international.
• Untapped market access: With high competition in the domestic market, Indian companies can
explore international markets for organic & inorganic opportunities in countries like Saudi Arabia,
Qatar etc. either through Greenfield or Brownfield projects
• Increase domestic penetration: Indian market is a highly fragmented end-user market. Companies
need to adopt specific strategies in order to efficiently serve it. It is imperative for companies to
increase their vendor base and enter into partnerships with cost-effective local firms to efficiently
tap the fragmented market in India
• Export Opportunities: Although the chemical industry employs 2 million people in India, exports
serve barely 2.5% contribution to global chemical sales. This shows the huge opportunity for the
chemical industry in India to tap into the export segment. Again, strong growth emerging in countries
like Asia-Pacific, Africa, Middle East can also be leveraged for growth in the export market.
• Low per capita consumption: Per hectare consumption of pesticides in India is among the lowest in
the world (<1kg/ha) whereas the same consumption in developed countries is 5-7kg/ha, especially in
China where consumption is 13kg/ha. This presents a huge potential for the agrochemical industry
to grow in volume.
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6. Investments
The Indian government has authorised 100% FDI in the chemicals industry. Between April 2000 and June
2015, the Chemical Industry (other than fertiliser) attracted Foreign Direct Investment (FDI) totalling
USD 10,588 million or Rs 50,908.61 crore. FDI into the sector totalled USD 101 million in June 2015, a 20-
fold increase from USD 4.89 million in June 2014.
The government is targeting a rise from 16% to at least 25% of manufacturing GDP by 2025. To secure
the expansion of the Indian chemical industry, manufacturing investments in the sector are very
necessary. A proposal to create a separate USD 100 million fund for chemical innovation by setting aside
10% of the overall inclusive national innovation fund established by the National Innovation Council is
being made to support commercialization efforts for inventions promoting equitable growth.
Other collaboration and investments:
• Dorf Ketal Chemicals India Pvt. Ltd., an organisation with its headquarters in Mumbai, India, and
TriBonds Chemical Co., a company with its headquarters in Dammam, the Kingdom of Saudi Arabia,
announced a joint venture (JV) in September 2021 to produce water speciality chemicals for use in
the Middle Eastern petrochemical and refining industry. The JV will address their demands for
managing and processing energy and water regarding refineries, petrochemicals, fuel additives,
plastics, lubricants, oil field chemicals, catalysts, and adsorbents.
• At its Sutrapada factory in Saurashtra, the Gujarat State Fertilizers& Chemicals (GSFC) intends to
invest Rs 1,050 crore over the next two to three years to increase its soda ash and textile capacity
(Gujarat).
• The creation of integrated petroleum, chemical, and petrochemical investment regions has been
mandated by policy (PCPIRs). The 250 square kilometre PCPIR will be an investment location for
producing goods for domestic and international markets.
• Compared to the other three cities where numerous Indian and international firms, including ONGC,
GACL, OPAL, BASF, and LANXESS, have opened facilities, PCPIR in Dahej, Gujarat, drew more
significant investment.
• The PCPIR policy will be revised in December 2020. It has been targeted to attract a combined
investment of Rs. 10 lakh crore (US$ 142 billion) by the year 2025, Rs. 15 lakh crore (US$ 213 billion)
by 2030, and Rs. 20 lakh crore (US$ 284 billion) by 2035 in all the PCPIRs across the country under the
new PCPIR Policy 2020-35. 33.83 lakh individuals are anticipated to gain work due to the four PCPIRs.
By the end of 2020, 3.50 lakh people were working in direct and indirect PCPIR-related activities.
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Location/Region Dahej
Actual Investment Rs. 1,12,873 crore (US$ 14.78 billion)
Total Area 453 Sq. Kms
Actual employment generated 1.84 Lakh
Anchor Tenant ONGC Petro-additional Ltd.
Location/Region Paradeep
Actual Investment Rs. 45,000 crores (US$ 5.89 billion)
Total Area 284.15 Sq. Kms
Actual employment generated 38,000
Anchor Tenant Indian Oil Corporation Ltd.Dahej
Location/Region Vishakhapatnam
Actual Investment Rs. 43,744 crore (US$ 5.73 billion)
Total Area 604 Sq. Kms
Actual employment generated 1.1 lakh
Anchor Tenant Hindustan Petroleum Corporation Ltd.
Location/Region Cuddalore - Nagapattinam
Actual Investment Rs. 8,100 crore (US$ 1.06 billion)
Total Area 257 Sq. Kms
Actual employment generated 13,950
Anchor Tenant Nagarjuna Oil Corporation Ltd.
Petroleum, chemicals and petrochemicals investment region (PCPIR)
7. Growth prospects, government initiatives and future outlook
Three interrelated aspects are what fuel the expansion of the Indian Chemical Industry: The sector is
seeing more investments because of the rising demand driving policy support.
Principle Growth Drivers:
• Emerging Manufacturing Hubs: The Petroleum, Chemicals, and Petrochemical Investment Regions
(PCPIR) policy's designated integrated industrial centres are expected to draw $276.46 billion in
investments by 2035.
• Post-pandemic Effect: Due to the post-COVID-19 rise in demand for disinfectants, the chloro-alkali,
ethanol, personal care, and surfactant industries are anticipated to experience rapid expansion soon.
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• Growth of end-use industries: Packaging, building, the automobile industry, and other sectors will
stimulate demand for chemicals in India.
• Skilled and low-cost manpower: India's chemical industries are made possible by skilled and
inexpensive labour, top-tier engineering, and a robust R&D infrastructure.
• Global Investments: Strong anti-dumping legislation, 100% FDI in the chemicals industry, and the
presence of major international businesses like BASF, Dow Chemicals, Bayer, and others are what is
driving the Indian chemical market.
Government Initiatives:
• The government has created a 2034 vision for the chemicals and petrochemicals industry to examine
prospects to increase domestic output, lower imports, and draw in investments. For the agrochemical
industry, the government intends to introduce a production-link incentive scheme with 10–20% output
incentives in order to develop an environment for end-to-end manufacturing through the
development of clusters.
• Except for a few dangerous substances, 100% FDI is permitted in the chemical sector through the
automatic approach.
• Industrial licensing is accepted in most industries with an exception of a few dangerous substances
• The Indian government gives assistance through the "Make in India" program, decreased basic customs
duties on several items, and funding for research and development in the sector.
• To serve as investment hubs for petroleum, chemicals, and petrochemicals as well as related services,
four Petroleum, Chemicals, and Petrochemical Investment Regions (PCPIRs) have been established.
• To increase domestic manufacturing and exports, the Indian government is contemplating
implementing a production-linked incentive (PLI) plan in the chemical industry.
Future Prospects:
One of the most important sectors in every nation's growth and development is the chemical industry.
According to official statistics, the Indian chemical sector has a 2019 market value of USD 178 billion
and is projected to increase to USD 304 billion by 2025 at a compound annual growth rate (CAGR) of
9.3%. By 2025, $8 lakh crore in investments is anticipated. Key chemical production quantities were
909,310 MT in July 2021, and petrochemical production volumes were 909310 MT and 1,867,351 MT,
respectively. The market for petrochemicals is anticipated to increase at a 7.5% compound annual
growth rate (CAGR) from FY 2019 to FY 2023 due to increased disposable income and corresponding
demand, as well as government efforts.
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The market for petrochemicals is anticipated to increase at a compound annual growth rate (CAGR) of
7.5% from FY 2019 to FY 23 with the demand for polymers predicted to increase at an 8% pace due to
increased disposable income and corresponding demand, as well as government efforts. The Indian
agrochemical industry is anticipated to develop at an 8% CAGR and reach USD 4.7 billion by FY-2025.
If certain crucial growth imperatives are met, the Indian chemical sector has the potential to expand
tremendously. Currently, the three most important goals for the Indian chemical business are securing
feedstock, finding the right product mix, and seizing M&A possibilities. Several investing options
include:
• To secure feedstock, chemical businesses in India should either look for other feedstock sources
or invest in building factories in resource-rich countries.
• Utilizing the Naphtha and its derivatives as the accessible feedstock in India, businesses need to
spend in researching the best product mix to be both lucrative and competitive.
• By taking advantage of the growing expansion of western corporations in India, Indian companies
can investigate potential merger, joint venture, or JV prospects for technology, finance, or access
to the worldwide market.
• To reduce their energy costs and address the issue of water availability, chemical industries might
engage in researching strategic energy management and strategic water management.
• Businesses may invest in India's forthcoming PCPIRs to help them overcome infrastructural,
electricity, and water availability issues.
8. Analysis of companies in the industry
TATA Chemicals Limited
With headquarters in Mumbai, India, Tata Chemicals Limited is an international business interested in
chemicals, crop protection, and speciality chemical products. With operations in India, Europe, North
America, and Africa, the firm is one of India’s giant chemical corporations. A part of the Tata Group
conglomerate, Tata Chemicals has established itself as one of the biggest chemical companies in India.
Rallis India is a publicly listed subsidiary of Tata Chemicals.
Regarding manufacturing capacity, Tata Chemicals is India's second-largest producer of soda ash. This was
the second soda ash plant that Kapilram Vakil established. Since 2006, Brunner Mond, a chemical firm
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with facilities in Kenya's Magadi and the United States of America's General Chemicals, has been
controlled by Tata Chemicals. Brunner Mond is situated in the United Kingdom. Tata Chemicals Ltd.
bought 100% of the company on March 27, 2008. Together, these acquisitions have expanded production
capacity to around 5.17 million tonnes of soda ash. For US$290, Tata Chemicals purchased a 25% share in
the Gabonese ammonia-urea fertilizer plant in April 2010.
Revenue (FY22) Operating income Net income
₹12,620 crores (US$1.6 ₹1,548.07 crores (US$190 ₹1,257.62 crores (US$160
billion) million) million
• Under basic chemicals, TCL offers soda ash, cement, salt, sodium, crushed refined soda,
bicarbonate, and marine chemicals. Speciality chemical consists of a solution towards
agrochemical through Rallis and other speciality solutions such as HDS and nutritional products.
• Basic chemical forms around 75% of total revenue while the remaining comes from speciality
products
Economic Standpoint
The economic viability of Tata Chemicals, one of the largest private sector companies, impacts the national
economy and the economies of the areas in which it operates.
In addition to directly creating jobs in the operational sectors, the organization also provides indirect
income generation opportunities. Numerous people's livelihoods depend on secondary operations,
including civil and other contract work, transporters, and other goods and services that benefit these
individuals. The company is committed to the general improvement of the neighbourhood, particularly
the impoverished. TCL contributes to the advancement of infrastructure like as roads, offers brick-paved
tracks, builds and repairs schools, provides piped water supplies, electrifies rural areas, builds cow
shelters, etc. directly or through the Tata Chemicals Society for Rural Development (TCSRD).
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Indian Petrochemicals Corporation Limited
Indian Petrochemicals Corporation Limited (IPCL) was a petrochemicals company in India. The company
had surpassed the US $2 billion milestone in revenue for the fiscal year 2005–2006 at the time of its
divestiture to Reliance Industries Limited. As part of its disinvestment initiative, the Government of India
sold 26% of its equity interests in June 2002 to Reliance Petroinvestments Limited (RPIL), a Reliance Group
company. In accordance with SEBI (Takeover Regulations), RPIL obtained an additional 20% of the
company's equity shares through a cash offer, leaving it in control of 46% of the claims. 2007 saw the
merger of IPCL and Reliance Industries Ltd. Following the Securities and Exchange Board of India (Sebi)
guidelines, RPIL acquired an additional 20% of the company's equity shares in an open offer, increasing
its stake to 46% of the equity capital. The necessarily available offer it made to the public at the same
price of Rs 231 per share was included in the acquisition's total cost of Rs 2,641.45 crore.
What does it mean for Reliance?
Reliance viewed IPCL as a natural ally. After the acquisition, RIL established a formidable market share of
50 to 95 in six product groups, including polyvinyl chloride (PVC), ethylene oxide, LLDPE/HDPE,
monoethylene glycol (MEG), polypropylene (PP), and linear alkyl benzene (LAB). Its market share in
polymers (PP, PVC, and LLDPE/HDPE) increased to roughly 75–80%. Its market share increased to almost
50% and 70% in LAB and ethylene oxide, while it reached a dominant 95% in the MEG market.
Based on the product profile, Reliance determined the goods and grades where IPCL excelled. The
distribution network combo was worked out on the marketing front. Additionally, Reliance revised the
dealer commission structure and distribution policy. By taking a closer look at topics like sales tax, the
taxation structure was improved. Another important aim was to rationalize the logistics. At IPCL, Reliance
carried out an effective information technology program that included the installation of SAP and MIS
systems. Reliance thoroughly evaluated IPCL's IT systems and concluded that much more work remained.
The restructuring of IPCL's financial structure was a significant and complex challenge before the new
administration.
Reliance is one of the top ten petrochemical producers in the world and the largest producer in the nation.
The company's ongoing efforts are focused on harnessing the power of chemistry to create products,
services, and consumer experiences for various industries, including apparel, packaging, agriculture,
automotive, housing, industrial, and healthcare.
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