Budget

Post-Budget 2024 Analysis Implications for India s Chemical Industry

Team Chemical Market

23 Jul 2024

India's chemical industry, a significant player on the global stage, has received substantial policy updates in the Union Budget 2024. This analysis examines the key policy changes and their anticipated impacts on various segments within the chemical sector.

1. Green Technology Focus

Policy Change: Increased emphasis on green technologies and sustainability.

Impact:

Specialty Chemicals: The focus on green energy and storage solutions will likely boost demand for specialty chemicals involved in battery production and energy storage systems. Companies specializing in these areas may see growth opportunities.
Fluorospar Reduction: The reduction in customs duty on Fluorospar from 5% to 2.5% will lower production costs for fluorochemicals used in pharmaceuticals, energy solutions, and agrochemicals, enhancing competitiveness and profitability.

2. Financial Support and Investment

Policy Change: Significant financial allocations and incentives.

Impact:

Bulk Drug Parks: The allocation of ₹1,629 crore for Bulk Drug Parks under Production Linked Incentive (PLI) schemes aims to boost pharmaceutical manufacturing, indirectly benefiting the chemical sector through increased demand for raw materials.
Department Funding: The ₹192.21 crore allocated to the Department of Chemicals and Petrochemicals is expected to support sectoral advancements and regulatory improvements.
PCPIR Investment: The Petroleum, Chemicals, and Petrochemicals Investment Region (PCPIR) in Paradip, attracting ₹73,518 crore in investments, highlights the potential for regional growth and job creation, enhancing the local chemical industry’s ecosystem.

3. Infrastructure and Manufacturing

Policy Change: Enhanced capital investment and infrastructure development.

Impact:

Construction Chemicals: The 11% increase in capital investment outlay to ₹11.1 lakh crore, with additional focus on infrastructure, is likely to drive demand for construction chemicals. This includes materials for industrial parks and residential developments.
Industrial Parks: The establishment of 12 new industrial parks under the National Industrial Corridor Development Programme will create investment-ready environments for chemical manufacturers.
Housing Projects: The development of three crore additional houses, supported by a ₹10 lakh crore investment, will stimulate demand for construction-related chemicals.

4. Research and Development

Policy Change: Introduction of the Anusandhan National Research Fund.

Impact:

Innovation Boost: The ₹1 lakh crore allocated to R&D will support innovation in chemical processes and product development. This funding will facilitate advancements in chemical technology and process optimization, potentially leading to more efficient production methods and new product lines.

5. Employment and Skilling

Policy Change: New schemes for employment-linked incentives and internships.

Impact:

Workforce Expansion: Employment incentives, including wage subsidies and EPFO contributions, will help chemical companies manage labor costs and expand their workforce. The comprehensive internship scheme will provide training opportunities, addressing skill shortages in the sector.

6. Taxation and Regulatory Changes

Policy Change: Adjustments in indirect taxes affecting chemicals.

Impact:

Increased Costs: The increase in BCD rates for Ammonium Nitrate and PVC Flex films will raise production costs for these chemicals. Similarly, the higher BCD rate for laboratory chemicals could impact pricing structures.
Reduced Costs: Conversely, the reduction in BCD for critical minerals and specific components used in manufacturing will lower costs for certain chemical products, potentially enhancing competitiveness in these areas.

The Budget 2024 introduces several significant policy changes for the chemical industry. The green technology focus, financial incentives, and infrastructure investments are set to drive growth, innovation, and competitiveness in the sector. However, increased taxation on some chemicals may impact production costs. Overall, these developments will reshape the chemical industry's landscape, fostering opportunities for growth and advancement while presenting new challenges to navigate.

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