NITI Aayog Pitches Incentives, Port Upgrades to Boost Chemical Exports
NITI Aayog, the government's leading public policy think tank, has proposed several measures to nearly double India's $44 billion in annual chemical exports by 2030, citing the lack of local demand as a key barrier to the industry's faster growth.
A report lists many initiatives, including creating new and existing manufacturing clusters to assist scaling, improving port infrastructure for better storage and transportation, and putting in place a sales-linked incentive scheme to localize production and boost exports of vital chemicals.
According to the report, India had a $31 billion chemical trade imbalance in 2023 and held a 3.5 percent stake in global value chains (GVCs), compared to 23 percent for China.
The government and business want to raise the domestic market's 2023 valuation of $220 billion to $1 trillion by 2040.
The paper claims that the industry is robust and has sustained a six percent annual growth rate over the previous three decades, with the agrochemical and dyes sectors achieving strong export results.
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The research stated that while the industry has not been struggling, it does not appear to have been as successful as the pharmaceutical industry, with which it is closely tied.
One factor in the pharmaceutical industry was India's prowess in chemistry.
India could double its GVC share to 5–6 percent by 2030, according to the research, mostly by switching from bulk chemicals to highly sought-after specialty chemicals.
According to the report, proper policy changes can potentially increase exports from $44 billion in 2023 to 35–40 billion in 2030.
In order to do this, the paper suggests a sales-linked incentive program that is disguised as an operating expenditure (opex) subsidy to increase capacity. The goal of the subsidy is to increase exports and lessen excessive reliance on particular nations for imports of vital chemicals. Products falling within the broad categories of petrochemicals, battery and electronic chemicals, agrochemical intermediates, pharmaceutical intermediates, dyes and pigments, and numerous uses will be eligible for the proposed program.
NITI Aayog Member Arvind Virmani said India can identify potential choke points in the chemicals supply chain like China did in 2018. “They identified choke points from their perspective, we have to look at it from our perspective. We already know that certain chokes have been done on critical minerals, etc. So, identifying these choke points in chemicals is very important to decide where some of the subsidies will have to be directed.”
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Restructuring the current cluster-based Petroleum, Chemicals, and Petrochemicals Investment Regions (PCPIRs), specifically Dahej, Paradeep, and Vizag, was another recommendation made in the report. The PCPIRs for Paradeep and Vizag are still far from finished.
It also suggested creating eight high-potential clusters that cover 14 major and 12 minor ports throughout India, as well as establishing a Chemical Committee to find and fix infrastructure deficiencies in port-based chemical trade.