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PLI for petrochemicals may be announced in the budget

NEW DELHI : The government is working on a production-related incentive scheme (PLI) worth 10,000 crore for the chemical and petrochemical industries, two people familiar with the matter said, as the country aims to triple its capacity to produce these key ingredients by 2040.

The Union budget is likely to announce the scheme, under which selected companies can receive a 10-20% incentive on their additional sales.

The chemicals division, which proposed the scheme, has identified 50 specialty chemicals that will continue to be used by key industries. The chemical and petrochemical industry provides building blocks for various industries, including textiles, paper, paints, varnishes, soaps, detergents and pharmaceuticals.

“The scheme is at an advanced stage and is expected to be announced in next year’s budget,” said one of the two individuals mentioned above, adding that it has been in the works for about two years. Union Minister for Chemicals and Fertilizers Mansukh Mandaviya and Foreign Minister Bhagwanth Khuba have previously indicated that the government is planning a PLI scheme for the chemical sector.

Questions to the Ministry of Finance, the Department of Chemistry and the Department for the Promotion of Industry and Internal Trade remained unanswered until going to press.

Under the plan, the government intends to initially encourage high import value intermediate chemicals.

The Center had adopted a policy in 2007 to create Special Investment Regions for Petroleum, Chemicals and Petrochemicals (PCPIRs); however, the initiative failed to attract significant investment. The government is also now revising the PCPIR policy guidelines.

“The Department of Chemicals and Petrochemicals intends to release PLI and re-draft the PCPIR guidelines as India strives to become a global chemical and petrochemical manufacturing hub, and we have asked the industry to share their views, so that the same can be further refined. Minister Khuba said in September.

According to the government, the chemical and petrochemical sectors would play a key role in helping India become a $5 trillion economy. India has been a major manufacturer of chemicals and petrochemicals over the years.

According to a PwC report published in November 2021, India ranks sixth globally and fourth in Asia in global chemical sales. More than 80,000 types of chemicals and petrochemicals are manufactured in the country and the industry employs more than two million people.

“India is known for exporting specialty chemicals and specific agrochemicals, dyes and pigments. It is the fourth largest producer of agrochemicals in the world, exporting about 50% of production. India is also the second largest producer and exporter of dyes,” the company said.

The chemical and petrochemical industries accounted for about 9% of India’s manufacturing gross value added (VAT) and 1.3% of the national gross value added (VAT) in FY20. The demand for petrochemicals in India has experienced strong growth over the past two decades and the growth momentum is expected to continue for the next two decades. Demand growth is expected to come from all segments: base polymers, fiber intermediates, elastomers and specialty petrochemicals.

According to the government, demand for the top 52 chemical products was 26 million tonnes per annum (mtpa) in 2020 and is expected to reach 87 mtpa by 2040. The additional demand of 60 mtpa would require an investment of approx 18 trillion. According to data from the chemical department around There is 6 trillion in investments in the pipeline.

Despite growth in domestic production, with demand continuing to rise, net imports of chemicals and petrochemicals increased from 1,148 crore in 2004-2005 up to 1.08 trillion in 2018-19 and are likely to reach 3 trillion in 2024-2025, prompting the government to look for opportunities to boost domestic production.

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