Govt asks chemical industry to introspect low FDI

The government on Tuesday said foreign direct investment (FDI) in India's chemical sector is "meagre" at only 9 per cent of the total inflow in the country in spite of conducive policy and asked the industry players to introspect the reasons for the same.

Addressing a CII organised event, Chemicals and Fertiliser Minister D V Sadananda Gowda asked the industry to suggest if policy interventions are required to boost growth of the sector which has the potential to reach from the current USD 163 billion to USD 304 billion by 2025.

He also assured the industry to address major hurdles being faced like delay in getting green clearances and rollback of tax incentive for research and development (R&D) after taking feedback from experts and stakeholders.

Already, the government has taken necessary measures to resolve the challenges and set up a Development Council and Advisory Forum for the chemical and petrochemical sector.

"In chemical sector, 100 per cent FDI is permissible under the automatic route. The FDI inflow in this sector is only 9 per cent of the total inflow in the country, which is every meagre in spite of conducive industrial policy," Gowda said.

It is gathered that neighbouring countries like Singapore, Vietnam, Thailand, Philippines are attracting the investment.

"The industry needs to introspect the reasons for the same and advise the government about measures or policy interventions to be initiated in this regard," he said.

Stating that the Indian chemical market size accounts for only 3 per cent of the global chemical industry of USD 5 trillion, the minister said adding that Indian chemical industry could grow at double digit with the current initiatives of the industry as well as the government.

The R&D spending needs to be enhanced from the present 2-3 per cent to 5-8 per cent of the revenue in line with overseas companies, he said adding that sustainable development should a prerequisite for long-term development of the sector.

He also appealed that new technologies and techniques are required for achieving 'zero defect' in quality and 'zero effect' on environment so that India can emerge as a major hub in this sector.

On concerns raised by the industry, the minister said, "those issues will be taken care by the government. Issues like roll back of tax incentives, problem in dealing with environment issues are some of the hurdle in the chemicals industry. We will resolve all these issues after getting feedback from the experts."

Tata Chemicals Managing Director and CEO R Mukundan said there should be a level playing field and flexibility for the industry to grow at a faster rate.

"What we are asking for is level playing field. In R&D, we need to invest more. I strongly urge the government to support R&D through incentives," he said.

In terms of green laws, the industry is already working with government think-tank Niti Aayog. "We must focus on those laws which don't allow us to scale and be flexible. We dont have to dilute other things on environment and safety," he added.

He talked about focusing on bringing multidiscipline science together with more investment in areas of biochemistry and nanotechnology besides adopting more intelligent systems.

According to SRF Ltd Managing Director Ashish Bharat Ram, India is the sixth-largest producer of chemicals in the world and currently growing at 8-10 per cent annually.

However, the per capita consumption of chemicals in India is among the lowest in the world and hence there is immense potential for demand generation which can boost the manufacturing of chemicals significantly, he added.