By Malini Hariharan
The Indian government is being asked to give a fresh boost to the chemicals industry in the 12th Five Year Plan beginning from 1 April.
A working group for the chemicals industry has detailed key measures that the government must take to ensure growth of 12% during the plan period (2012-2017).
Top of the list are improvement in infrastructure and feedstock availability. The group has recommended that the government encourage 'consortium cracker' projects to be built at Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs) across the country.
The government can also help in securing feedstock from gas and oil rich countries, such as in Middle East and Russia.
Export of surplus naphtha from the country should be disincentivized and made available as feedstock for new petrochemical units.
New technologies such as coal-to-methanol/olefins/acetic acid and coal gasification need to be encouraged and incentives should also be given for use of bio-based raw materials.
The recommendations come after a weak performance by the chemicals industry (except the specialities chemicals sector) during the last five years. Production of basic organic chemicals declined by 6% on due to stiff competition from imports and low availability of feedstock which constrained operating rates at Indian plants.
The working group is quite clear that the industry can grow only if the government follows a clearly defined strategic road map. The alternative is to see Indian demand being served by overseas suppliers.
India has a tough task ahead. Many of the recommendations by the working group are not new but government action so far has been consistently slow.
Foreign investors have already starting building plants elsewhere in Southeast Asia or the Middle East with an eye on servicing the Indian market at least for the next decade. Luring them to India will be difficult unless there is some real action on the ground.