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Indias Chemical Industry A PLI-Powered Transformation Across Sectors

Prashant Singh

12 Jul 2024

The Indian chemical industry is undergoing a transformative phase, propelled by the government's Production-Linked Incentive (PLI) schemes. These schemes, while not exclusively designed for chemicals, significantly benefit various sub-sectors within the industry, fostering domestic production, attracting investments, and stimulating innovation.

Challenges and Opportunities: Navigating the Landscape

While the PLI schemes present a plethora of opportunities, the Indian chemical industry also faces challenges such as high input costs, regulatory complexities, and infrastructure bottlenecks. However, the industry's inherent growth potential, driven by factors such as increasing domestic demand, government initiatives, and a growing focus on sustainability, far outweighs the challenges.

The government's push for self-reliance in critical chemicals, coupled with the global emphasis on green chemistry, opens up significant opportunities for the industry. By embracing sustainable practices, investing in research and development, and leveraging the PLI schemes, businesses in the Indian chemical industry can unlock their full potential and contribute to the nation's economic growth.

PLI Schemes Fuelling the Pharma & Healthcare Chemical Landscape

Bulk Drugs and Drug Intermediaries: This scheme incentivizes the production of critical bulk drugs (active pharmaceutical ingredients) and their intermediaries, vital components of pharmaceutical formulations. By promoting domestic manufacturing, this scheme aims to reduce import dependence and ensure a stable supply of essential medicines.
Medical Devices: This scheme encourages domestic manufacturing of medical devices, many of which rely on specialized chemicals and materials such as polymers, resins, and reagents. By supporting this sector, the scheme indirectly benefits chemical companies supplying inputs to medical device manufacturers.
Pharmaceuticals: This scheme focuses on incentivizing the production of pharmaceutical formulations, including those requiring specific chemical ingredients like excipients, solvents, and preservatives. Chemical companies specializing in these ingredients find ample opportunities to expand their operations and contribute to the growth of the pharmaceutical industry.

Other Key Chemical Sectors Benefiting from PLI Schemes

Agrochemicals: The agrochemical sector, crucial for India's agricultural productivity, is poised for substantial growth with the anticipated introduction of a dedicated PLI scheme. This scheme aims to incentivize the production of crop protection chemicals, fertilizers, and other agricultural inputs, reducing import dependence and ensuring a stable supply for farmers. According, to a report by IMARC Group projects India’s agrochemical market to reach US$ 11.9 Billion by 2032, exhibiting a growth rate (CAGR) of 4.50% during 2024-2032.
Specialty Chemicals: Specialty chemicals, known for their unique properties and applications in diverse industries, are a high-growth segment within the Indian chemical landscape. While a dedicated PLI scheme for specialty chemicals is in the pipeline, the existing scheme for Bulk Drugs and Drug Intermediaries indirectly benefits this sector. The proposed scheme is expected to focus on high-value specialty chemicals with export potential, further propelling growth in this segment. The market value of the specialty chemical industry in India was around 36 billion U.S. dollars in 2021. With a compound annual growth rate of 11 percent, it was estimated to reach a value of 61 billion U.S. dollars by 2026.
Man-Made Fibers (MMF): The PLI scheme for Man-Made Fibers (MMF) and technical textiles indirectly benefits the chemical industry as the production of synthetic fibers and technical textiles requires various chemical inputs. This scheme aims to boost domestic manufacturing of MMF and reduce reliance on imports. The industry expects India's exports of manmade fiber (MMF) textiles to increase 75% to $11.4 billion in 2030 from around $6.5 billion in 2021-22.

Companies Leveraging PLI Schemes: A Deeper Dive

The Production-Linked Incentive (PLI) schemes have garnered significant interest from major players in the Indian chemical industry, spurring investments and expansion across various sectors. Let's delve deeper into how companies are strategically leveraging these schemes to enhance their capabilities and contribute to India's growth story:

Pharmaceuticals and Healthcare:

Sun Pharmaceutical Industries: Sun Pharma has been actively participating in the PLI scheme for pharmaceuticals, aiming to bolster its manufacturing capacity for complex generics and high-value formulations to cater to both domestic and international markets. This commitment aligns with the government's initiative to boost domestic pharmaceutical production and reduce reliance on imports.
Cipla: Cipla has also embraced the PLI scheme, with a focus on expanding its production of bulk drugs and drug intermediates. This strategic move is expected to strengthen Cipla's supply chain and enhance its competitiveness in the global pharmaceutical market.
Dr. Reddy's Laboratories: Dr. Reddy's has similarly joined the PLI bandwagon, aiming to enhance its manufacturing capabilities for both active pharmaceutical ingredients (APIs) and formulations. This expansion is in line with the company's broader strategy to increase its presence in the global generics market and ensure a steady supply of affordable medicines.

Specialty Chemicals:

SRF Limited: SRF Limited has made significant investments in fluorochemicals production under the PLI scheme for Bulk Drugs and Drug Intermediaries. The company aims to capitalize on the growing demand for fluoropolymers in various industries.
Deepak Nitrite: Deepak Nitrite has publicly expressed its interest in expanding phenol and acetone production under the PLI scheme. These chemicals are crucial building blocks for numerous downstream products, including pharmaceuticals, agrochemicals, and plastics.

The Indian chemical industry is at a transformative juncture, with PLI schemes acting as catalysts for growth across various sub-sectors. By navigating the challenges and embracing the opportunities, businesses in these sectors can thrive in the dynamic Indian market and contribute to the nation's manufacturing prowess. The PLI schemes are not only bolstering the growth of the chemical industry but also fostering a more resilient and self-reliant ecosystem, ensuring a brighter future for the sector in India.

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