India will consider PLI scheme for chemicals and petrochemicals: FM

The Indian government will consider introducing a production-linked incentive (PLI) scheme for chemicals and petrochemicals to encourage domestic manufacturing of these products, finance minister Nirmala Sitharaman said.

“We are in favour of having India becoming a manufacturing hub and, of course, we’ll consider the PLI also for chemicals and petrochemicals,” Sitharaman said at the summit on Global Chemicals and Petrochemicals Manufacturing Hubs in India organised by the Department of Chemicals & Petrochemicals with the Federation of Indian Chambers of Commerce and Industry on July 27.

The minister said the chemicals and petrochemicals sector invariably raises a red flag on issues such as sustainability, carbon emissions, general pollution and groundwater contamination and it is important that the sector takes note of these concerns.

“We should remember that India has set its sights on becoming energy independent by 2047 and achieving net zero [carbon emissions] by 2070,” she said.

Sitharaman said net zero emissions cannot be achieved unless each and every sector – including chemicals and petrochemicals – contributes to the effort. She said India is very focussed on green growth and reducing carbon intensity.

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With India expected to add 500 GW of non-fossil electricity generation capacity, she urged the industry not to rely on fossil fuels for their ventures.

The government has so far announced 14 PLI schemes – aimed at encouraging local manufacturing and cutting imports – for sectors including telecommunications, electronics, white goods, textiles and pharmaceuticals.

India’s combined exports of chemical and petrochemicals rose 2 percent to $9 billion in FY23 (till September 2022), the minister said. Imports in this sector increased to $13.33 billion.

The finance minister said that the importance of the chemicals and petrochemicals sector can be gauged from the fact that it manufactures 80,000 products that directly impact many sectors including construction, packaging, textiles and agriculture.

Sitharaman acknowledged that the inverted duty structure on some products in the sector may be hurting some manufacturers. However, she said correcting an inversion on an item in one line may have a collateral effect on another line. An inverted duty structure is when tax on input products is higher than that on the final product.

“While inversion of duty is a great concern for the industry and correction is definitely necessary, do look at it in a holistic fashion and I will welcome suggestions,” she told the gathering.

Referring to specialty chemicals, the minister said it represents 22 percent of India’s overall chemicals and petrochemicals market and is valued at $32 billion.

She said the world is looking at an alternative destination for manufacturing in this sector and India stands a good chance. However, the Indian industry must focus on adopting sustainable processes and standards, without which it may be difficult to form joint ventures with global giants in this sector.

She urged the industry to look at sustainability and shift to technologies that help in achieving sustainability. It’s important for the sector to have elements of recycling and reuse high on their agenda, apart from aspects such as efficient waste management, efficient waste generation, and reducing consumption of resources that generate high emissions.