India should establish world-class chemical hubs: Niti Aayog report

New Delhi, Jul 3 (PTI) India should establish world-class chemical hubs and develop eight high-potential port-infrastructure clusters to become a global chemical manufacturing powerhouse, a NITI Aayog report said on Thursday.

In a report titled 'Chemical Industry: Powering India's Participation in Global Value Chains', NITI Aayog said India is aiming USD 1 trillion chemical output by 2040.

According to the report, India is set to increase its Global Value Chains (GVC) share from 3.5 per cent in 2023 to 5-6 per cent by 2040, creating 7 lakh additional jobs by 2030.

India's 3.5 per cent share in global chemical value chains and its chemical trade deficit at USD 31 billion in 2023 underscore its high dependence on imported feedstock and speciality chemicals.

"However, targeted reforms encompassing a comprehensive range of fiscal and non-fiscal interventions will enable India to have a USD 1 trillion chemical sector and achieve 12 per cent GVC share by 2040, thus becoming a global chemical powerhouse," the report said.

Outlining several strategic fiscal and non-fiscal interventions aimed at enhancing India's global competitiveness in the chemical sector, the report said, "There is a need of establishment of empowered committee at the Central level along with creation of a chemical fund under the empowered committee with a budgetary outlay for shared infrastructure development, VGF, etc." It suggested that the administrative body at the chemical hub level should handle the overall management of the hub.

While pitching for composition of a Chemical Committee for ports to advise on and address infrastructural gaps in chemical trading at ports, it said, "There is a need for development of 8 high-potential port clusters".

The report recommended that the government should incentivise incremental production of chemicals based on import bill, export potential, single source country dependence, end-market criticality etc.

The report also made a case for fast-track environmental clearance with transparency and accountability.

"Simplify and fast-track EC clearance process through setting up an audit committee under DPIIT (Department for Promotion of Industry and Internal Trade) to monitor timelines and compliance and publish periodic reports and give more autonomy to EAC," it said.

Moving forward, the report suggested that India could negotiate Free Trade Agreements (FTAs) that incorporate specific provisions for the chemicals industry.

This can include incorporating industry-focused protections such as tariff quotas or selective duty exemptions on critical raw materials and petrochemical feedstocks, it added.

India's chemical sector faces several structural challenges that constrain its global competitiveness.

A key issue is the country's heavy reliance on imported feedstock, which contributed to a USD 31 billion trade deficit in 2023, stemming from limited domestic backwards integration.

Infrastructure gaps, outdated industrial clusters, and high logistics costs have created a cost disadvantage compared to global peers.

Compounding this, the report said India's low investment in R&D, with only 0.7 per cent of investment against the global average of 2.3 per cent, hampers indigenous innovation in high-value chemicals.

Regulatory delays, especially in environmental clearances, further stifle industrial agility, it said.

Additionally, the report said the sector is hampered by a 30 per cent shortfall in skilled professionals, particularly in emerging areas such as green chemistry, nanotechnology, and process safety.

"By addressing the existing challenges and leveraging the proposed interventions, India can enhance its competitiveness, attract investments, and build a robust chemical sector capable of leading the global value chain," it said. PTI BKS BKS SHW SHW