India’s Chemical Sector Goes Global
t he huge opportunities for the chemical industry in India were the main theme of the first annual joint Chemical Week/ Indian Chemical Council (ICC; Mumbai) conference held recently in Mumbai, which attracted some 250 participants and was pre-ceeded by a CEO roundtable.
“Potential investors are changing their views on India,” said Deepak C. Mehta, managing director at Deepak Nitrite (Pune) and former president and vision committee chairman of ICC. “Whereas before investors’ choice was always China or India, it is now more like China and India,” Mehta says.
Some companies are switching their atten - tion from China to India, executives say. “China has been under pressure to clean up its environment ahead of this year’s Olympics,” says Ravi Kapoor, chairman of ICC Gujarat and managing director at Heubach Colour India (Vadodara).
“India has become a preferred choice for sourcing dyes,” Kapoor says. “India is a global hub for pharma manufacturing,” Jai Hiremath, vice chairman and managing director at Hikal (Mumbai) says. China has had problems with quality control in the recent past, he adds.
India’s $1-trillion economy is the fourth largest and among the fastest growing worldwide. Its population is more than 1 billion, and its industry is growing 10%/year, says S. Mitra, general manager/petrochemicals at IndianOil (New Delhi).
The middle class accounts for one-third of the total population. “By 2025, India will have 24 million rich people, equivalent to the present population of Australia, and 400 million urban middle class, more than the present population of the U.S.,” says Kamal P. Nanavaty, president/crackers and polymers at Reliance Industries.
The Indian chemical industry has sales of $50 billion/year, excluding refining and fertilizers, says D.P. Misra, director general of ICC. With refining and fertilizers, its sales are $150 billion/year, he says.
In 2006-07, the chemical industry grew 8.9%, says Kumaresh C. Misra, joint secretary at the Ministry of Chemicals and Fertilizers (New Delhi). Per capita consumption, however, is still only one-tenth of the world average. The
pharmaceutical industry is one of the largest in the developing world with an average growth rate of more than 10%/year, he says. It ranks fourth in volume and 14th in value among drug-manufacturing countries and contributes 22% by value to the global generic drugs market, he adds.
The large and youthful Indian population is creating big demand for most products, Mehta says. “By 2015, demand for paints in India will outstrip that in the U.S.,” he says. Demand for polymers, currently only 4 kg per capita compared with a world average of
Big lineup: Speakers addressed major issues affecting chemicals in India.
24 kg per capita, is expected to triple by 2012, creating huge opportunities for petchem manufacturers.
India’s ethylene and polymer deficits could reach more than 5 million m.t./year and more than 4 million m.t./year, respectively, by 2011-12, equivalent to five world-scale steam crackers and 10 polymer plants, according to Indian government estimates. Several, mainly domestic, producers have embarked on petchem expansions including: Reliance, the country’s largest player; IndianOil; Gail India (New Delhi); Oil and Natural Gas Corp. (ONGC; New Delhi); Hindustan Petroleum Corp. (HPCL; Mumbai); Guru Gobind Singh Refinery (GGSR; Bhatinda); and Kakinada Refineries (Kakinada).
Most of India’s deficit will be covered by imports from the Mideast, where huge new petchem capacity will start coming onstream by year-end, executives say. The Mideast is ideally situated to supply India, they say. Russia could also become a source for petchems and petchem feedstocks, but supplying India is viewed as impractical by Russian executives. “Except for fertilizers, not much else is mov-
ing from Russia to India; logistically it is too far away,” says Dmitry Konov, chairman and CEO of Sibur (Moscow).
Overseas companies are also eager to establish their own production in India. Sabic is looking for investment opportunities there, chairman Mohamed H. Al Mady says. Total is mulling a refinery and petchem investment with HPCL at Visakhapatnam, and Mitsubishi Chemical is raising purified terephthalic acid capacity at Haldia, to 1. 3 million m.t./year by building an 800,000- m.t./year unit. Solvay Advanced Polymers (Alpharetta; GA) completed a 500-m.t./year polyether ether ketone (PEEK) plant recently at Panoli. It is Solvay’s first commercial-scale PEEK unit and is designed for a doubling of capacity. Lanxess is building an ion exchange resins plant at Jhagadia, and Arkema is contemplating an acrylic acid joint venture with the Essar Group (Mumbai) at Vadinar.
Several issues need to be resolved before many more overseas investors put steel in the ground, speakers said. The severe power shortages that currently plague India must be remedied, and the challenge of retaining qualified manpower needs to be addressed, says Dipankar Dutta Gupta, president of ICC and managing director of East India Pharmaceutical Works (Kolkata). The Indian government is focused on improving the country’s infrastructure which, together with its notorious bureaucracy, has long been a deterrent for potential investors, sources say.
About $515 billion will be spent on infrastructure projects in the next five years, including $166 billion to fix power shortages, Nanavaty says. “About 30% of the overall total will be provided by the private sector,” he says.
Chemical producers have resorted to building their own power plants. “Our industrial processes are quite unforgiving if there is a power interruption,” says George A. Corbin, president and CEO of Solvay Advanced Polymers, which has built a power generating unit to support its plant at Panoli.
Retaining personnel, following the acquisition of Gharda Polymers from Gharda Chemicals in 2005, was an additional difficulty that Solvay had to address. “We faced an immediate challenge to stabilize the turnover
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