Indian Chemical Industry
India is the 6th Largest producer of Chemicals in the world and 4th largest in Asia. The country ranks 14th in export of chemicals.
Sales of Chemicals sector in India is worth ~$212 billion (2021). And it is projected to reach $300 billion by 2025 growing at 9.3% CAGR.
Broadly, the industry can be divided into 3 categories:
They are Commodity Chemicals, Specialty Chemicals & Fine Chemicals.
While commodity chemicals are the largest category, specialty chemicals are second largest.
Commodity Chemicals
The commodity chemicals are single pure chemicals, which are comprised of a single chemical unit/molecule. These are manufactured in larger quantities, with annual output exceeding a million tonnes. Because of economies of scale, commodity chemicals are typically less expensive. They have lower margins than other chemicals in general since they are cheaper to produce in large quantities. Commodity chemicals are created in dedicated large reactors by reacting starting materials at specific temperature and pressure settings. They are typically sold on specifications, i.e., on meeting particular criteria. They have numerous applications, implying that a single commodity compound can serve multiple functions. Commodity chemicals include inorganic chemicals, polymers, other petrochemicals, industrial gases, and fertilisers.
Specialty Chemicals
Specialty chemicals can be single pure chemicals or chemical mixtures made by combining two or more substances. These are manufactured in low to moderate quantities. Specialty chemicals are typically more expensive than commodity chemicals. They have better margins than commodity chemicals in general. In batch plants, they are created by blending two or more raw components. They are typically sold on performance, or what they can do for a specific application. They have specific applications, which means that a specialty chemical formulation is useful for a certain application. Specialty chemicals include consumer chemicals (paints, cleaning products), dyes and pigments, agrochemicals, textile chemicals, and so on.
Fine Chemicals
Fine chemicals are pure chemicals with a single chemical unit/molecule. These are produced in small quantities of little more than 1000 tonnes per year. Fine chemicals are expensive due to their high production costs. Because they are manufactured in lower volumes, they have better margins than other compounds. They are created through organic synthesis in multipurpose chemical plants by reacting starting materials at specific temperatures and pressures. Fine chemicals are typically sold on specifications, i.e., on meeting particular criteria. They have fewer applications, meaning a single fine chemical can have a few couple of applications. Fine chemicals include active ingredients, organic intermediates, and organometallics.
| Commodity Chemicals | Specialty Chemicals | Fine Chemicals | |
| Physical Type | Single pure chemicals | Mixture or Single pure chemicals | Single pure chemicals |
| Volume | High volume | Low-moderate volume | Low volume |
| Price | Low price | High price | High price |
| Margins | Low margins | High margins | High margins |
| Price Exposure to Oil/Gas Markets | High | Low | Moderate |
| Plant/Reactor | Produced in dedicated plants (reactors) | Produced in formulation plants (Batch plants) | Produced in multi-purpose plants (reactors) |
| Applications | Many applications | Specific applications | Fewer applications |
| Sold on | Specifications | Performance | Specifications |
| Type | Inorganic Chemicals, Polymers, Other petrochemicals, Industrial gases, Fertilizers | Paints & inks, Dyes & pigments, Agrochemicals, Textile chemicals etc | Active ingredients, Organic intermediates, Organo Metallics |
| Examples | Ex: NaOH, PET | Ex: Paints, Pesticide formulation | Ex: APIs |
| Companies | Reliance O2C, Tata Chemicals | Asian Paints, PI Industries | Vinati Organics, Balaji Amines |
Key Highlights of Indian Chemical Industry
The Chemical industry in India provides several building blocks and raw materials for many industries, including textiles, paper, paints, soap and detergents, pharmaceuticals and agrochemicals.
- India is the world’s fourth largest producer of agrochemicals, producing more than half of all technical grade pesticides.
- India is the world’s largest producer and exporter of castor oil, accounting for almost 85-90% of total worldwide exports in this area.
- India is the world leader in dye production, accounting for 16%-18% of global dyestuff exports. Indian dye is sold in more than 90 countries.
- India is the world leader in dye production, accounting for 16%-18% of global dyestuff exports. Indian dye is sold in more than 90 countries.
- Pesticide and insecticide production has increased by 23.5%.
- Indian scientists have developed a non-toxic organic photocatalyst capable of efficiently capturing CO2 and converting it to methane.
- Major Chemicals and Major Petrochemicals total exports climbed to INR 365.20 billion in 2021-22 (up to June 2022) from INR 346.8 billion. Imports grew to INR 55.26 thousand crores from INR 424.8 billion in the same period last year.
Opportunities in the Indian Chemical Industry
- In recent times, there has been a global shift towards Asia as the world’s chemical manufacturing hub.
- India offers the availability of a large pool of skilled science professionals.
- India has several world-class engineering facilities and strong R&D capabilities.
- The per capita consumption of chemicals is lower in India, compared to western countries, therefore presenting immense scope for setting up export-oriented manufacturing units through new investments.
- To promote investments in the sector, the government is implementing four Petroleum, Chemical and Petrochemical Investment Regions (PCPIR) in the country. PCPIRs will be clustered providing investors with a transparent and investment-friendly policy and facility regime.