Maulik Patel is Chairman and Managing Director of Meghmani Finechem Ltd (MFL) since 2017. He is actively leading and managing the finechem division since the beginning of MFL. He has successfully steered the new company in to a dynamic organization by gradually building up a team of technocrats and engineers backed by an efficient administrative staff. He has expertise in expansion and new projects installations. He has done MSc in chemical engineering from University of Southern California, USA and Master of Business Administration from Long Island University, USA.
While the last decade has been a momentous period for the chemicals sector in India, it is only in the previous year, that it is witnessing a global resurgence. With prevailing geopolitical externalities and a China+1 strategy being adopted by various businesses, Chemical companies, especially their clean and innovative practices, are likely to stay in focus. Now is a golden opportunity for the sector to utilise all its might and take the next quantum leap because this time, it is ‘advantage India.’
A favourable path for growth
As per the latest report by the Indian Brand Equity Foundation, the chemical industry is expected to contribute US$ 300 billion to India’s GDP by 2025. Alkali chemicals have the largest share, with ~69% of the total production in the Indian chemical industry. This is followed by polymers, which accounted for ~59% of the total production of basic key petrochemicals in 2019. India’s chemicals industry comprises more than 80,000 commercial products and is expected to grow steadily due to rising demands for specialty chemicals and petrochemicals. India has a strong presence in the exports market in pharmaceuticals, agrochemicals, dyes & pigments and textiles. The new areas where India is steadily entering and strengthening its presence are Epichlorohydrin (ECH) and Chlorinated polyvinyl chloride (CPVC). ECH is primarily used to produce epoxy resins, accounting for more than 80-85% of global ECH consumption and is expected to continue driving the market. CPVC is a thermoplastic which is produced by chlorination of polyvinyl chloride resin. It is more flexible and can withstand high temperatures when compared to standard PVC. So far, these two products are imported in India and simultaneously have high demand in various sectors, it is a step towards Atmanirbhar Bharat.
While domestic and export markets have picked up, what will be a precursor for the sector is the realignment of the global supply chain that is increasingly drifting away from China. This disruption has led many leading global end-user industries to diversify their vendor base, mainly towards Indian players. These changes have favoured Indian manufacturers to expand their capacities and introduce newer products range which is 1st time in India. In addition, Indian Chemical players are now heavily focussing on sustainable development. Water recycling, environmental impact, safety, and energy usage are some of the industry’s issues trying to resolve. To be globally competitive, Indian chemical companies are mainly investing in innovative and sustainable solutions.
Under the aegis of Make in India, the Government of India supports the industry through several policy measures. Through Union Budget 2020-21, the Government has allocated funds to develop Research capabilities and provide capital subsidy. The Government has taken vital decisions such as reducing customs duty on several imported products and Production Linked Initiative to spur domestic manufacturing of fast-moving chemicals. As per media reports, a 2034 vision for the chemicals and petrochemicals sector has been set up by the Government to explore further opportunities to improve domestic production, reduce imports and attract investments in the industry. Moreover, lower per capita consumption and ease of doing business are encouraged by the Indian Government to create an ecosystem for the Indian chemical industry.
Identifying the green shoots
The chemical industry is primarily a B2B industry, and hence the pattern of growth tends to align with the development of its end-user sector. Given the surge in demand for many end products, India has the potential to emerge as the fourth largest chemical producer in the world. However, it needs to maintain this momentum and not let it fizzle. Also, due to increase in consumption and growth in infrastructure India has reached to a level where the demand will continue to be high and hence it is the right time to set up plants that will give benefit of economies of scale. Companies need to aggressively invest in the right product mix to be competitive and profitable. They also need to explore possible Merger, JV opportunities with international businesses to gain access to cutting-edge technology, resources and new geographies. In addition, companies need to deploy sustainable measures to attract global investments and collaborations.
Industry experts believe that demand for the chemical sector will remain favourable, with volume uptick led by rising domestic consumption and higher exports. As per the latest media reports, the sector collectively has delivered a resilient performance in FY21 and is set to grow to $40 billion by FY25. With this trajectory and conducive business environment, India has the golden chance to dominate the global market of chemicals.