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About Chemicals


Chemicals are an indispensable and integral part of modern life, touching almost all spheres of human activity. The chemical industry is a very important constituent of the growing Indian economy and it is the mainstay of industrial and agricultural development of the country, providing several building blocks and raw materials for a number of industries, including textile, paper, paint, soap and detergent, pharmaceutical, agrochemical etc. The per capita consumption of chemicals is about one tenth of the world average indicating that potential demand is yet to be realized. Natural Gas, Benzene, Toluene, Xylene, Naphthalene (BTXN), Ethylene, Propylene, Phosphorus, Common Salt, Sulphur etc. are the main raw materials for the manufacture of the chemicals.

2. Chemical Sector at a Glance:

  • The chemical sector is a very important constituent of the growing Indian economy.
  • Provides several building blocks and raw materials for a number of industries, including textiles, paper, paints, soap and detergents, pharmaceuticals, agrochemicals etc.
  • The Global Chemical Market (including Fertilizers and Pharmaceuticals) size was estimated at $5.0 Trillion in 2017. Indian chemical industry currently accounts for about 3% of the World Chemical Market..
  • Indian Chemical Industry (including Fertilizers and Pharmaceuticals) size stands at $ 163 Billion in 2017-18. Its rank is 6th position in the world and 4th in the Asia.
  • India ranks 17th in the World Exports of Chemicals (excluding pharmaceutical products) and ranks 7th in the World Imports of Chemicals (excluding pharmaceutical products).
  • The share of Export of Chemicals & Petrochemicals is 10.3% in the total national export in 2016-17.
  • The share of Import of chemicals & petrochemicals is 10.2% in the total national imports in 2016-17.

With Asia’s growing contribution to the global chemical industry, India emerges as one of the focus destinations for chemical companies worldwide. The Indian chemical industry accounts for ~3% of the global chemical industry. With the concerted initiatives of industry & government, the Indian chemical industry could grow at double digit rate. However, the industry could aspire to grow much more and its growth potential is limited only by its aspirations. This has a potential for further upside in the future considering India’s increasing competitiveness in manufacturing. The department is taking initiatives to facilitate investments require to achieve higher growth rate.

World class infrastructure including developed land, common effluent treatment facilities along with solid waste disposal and incineration facilities are very important to attract investment in the chemical sector in India. The various segments of the chemical industry (such as organic chemicals, specialty chemicals, chlor-alkali, pesticides, colorants and alcohol based chemicals) have their own unique set of challenges. The industry can grow only if these individual segments overcome their challenges and move swiftly along the growth path. The Department is taking all necessary measures to resolve the challenges and facilitate accelerated growth of the sector with top most priority.

3. Growth Drivers for the Chemical Sector:

  • A large population, huge domestic market dependence on agriculture and strong export demand are the key growth drivers for the industry.
  • A global shift towards Asia as the World’s chemicals manufacturing hub..
  • Per capita consumption of chemicals in India is lower as compared to western countries, so immense scope for new investments.
  • Rise in GDP and purchasing power generates huge growth potential for the domestic market.
  • A focus on new segments such as specialty and knowledge chemicals.
  • Skilled science professionals.
  • World-class engineering and strong R&D capabilities.

Some of the major markets for chemicals are North America, Western Europe, Japan and emerging economies in Asia and Latin America. The US consumes approximately one fifth of the global chemical consumption whereas Europe is the largest consumer with approx. half the consumption. The US is the largest consumer of commodity chemicals whereas Asia pacific is the largest consumer of agrochemicals and fertilizers.

4. Research & Development (R&D)

The Chemical sector is highly heterogeneous encompassing many segments like organic, in-organics, dyestuffs, pesticides, paints, soaps and petrochemicals etc. Research and Development is critical and of paramount importance for the growth and development of this sector. Continued R&D efforts in the part of the industry helps to improve their quality standards, obtain higher yields resulting in reduction in cost of production and to earn competitive edge in the International Market. Indian Chemical Industry spends about 2-3% of their total turnover on R&D, as against 9-10% by the multi-national companies in overseas countries. The industry would, therefore, have to make large investments in R&D to successfully counter competition from the international chemicals industry. lndia has a number of scientific institutions and the country’s strength lies in its large pool of highly trained scientific manpower.

DCPC initiatives for promotion of Chemical Sector:

DCPC acts as facilitator for the development and promotion of chemical sector through the following measures:

  • Recommending rationalization of Custom Duty viz minimum Custom Duty on basic feedstocks, slightly higher Custom Duty on penultimate intermediates, higher custom duty on finished products.
  • Recommending removal of anomalies of inverted duty structure to encourage domestic value addition.
  • Recommending imposition of Safe Guard Duty and Anti-Dumping Duty compatible with WTO norms, to provide protection against undesirable cheaper imports.
  • After stakeholder consultation, firming up views of the Department on various bilateral/multi lateral Free Trade Agreements.
  • Rendering comments to DGFT in matters relating to trade in restricted items.
  • Facilitating the industry in compliance of their obligations in terms of international conventions.
  • Undertake activities to showcase the strengths of Indian chemical industry through organizing international conferences, seminars, holding chemical exhibitions etc for promotion of green chemistry/ processes, chemical safety, exchange of ideas and technology etc. for growth in the chemical sector.
  • 5. The Dyestuff Industry

    The Dyestuff sector is one of the important segments of the chemicals industry in lndia, having forward and backward linkages with a variety of sectors like textiles, leather, paper, plastics, printing inks and foodstuffs. The textile industry accounts for the largest consumption of dyestuffs. From being importers and distributors in the 1950’s, it has now emerged as a very strong industry and a major foreign exchange earner. lndia has emerged as a global supplier of dyestuffs and dye intermediates, particularly for reactive, acid, vat ,organic pigments, direct dyes and various dye intermediates. In dyestuff industry, Indian industry ranks second in Asia. It accounts for 16% of the world market.

    6. Pesticides Industry

    Chemicals, fertilizers and pesticides played an important role in the "Green Revolution, during the 1960s and 1970s'. lndian exports of agrochemicals have shown an impressive growth over the last five years. The key export destination markets are USA, U.K., France, Netherlands, Belgium, Spain, South Africa, Bangladesh, Malaysia and Singapore.

    India is one of the most dynamic generic pesticide manufacturers in the world with more than 45 technical grade pesticides being manufactured in the country. 32 firms covered in the large and medium scale sector, including multinationals are engaged in the manufacture of technical pesticides. There are many pesticide formulators spread over the country and India is the 4th largest producer of agrochemicals after USA, Japan and China. This industry is net export earning & contributes significant to the foreign exchange basket of the country.

    7. Fine & Speciality Chemicals

    lndia also produces a large number of fine and specialty chemicals, which have very specific uses and are essential for increasing industrial production. These find wide usage as food additives and pigments, polymer additives, anti-oxidants in the rubber industry, etc.

    8. De-licensed and deregulated industry

    ln Chemical sector, 100% FDI is permissible under the automatic route through RBI. Manufacture of most chemical products inter-alia covering organic / inorganic' dyestuffs & Pesticides is de-licensed. The entrepreneurs need to submit only Industries Entrepreneur Memorandum (IEM) with the Department of industrial Policy & Promotion provided location of the project falls outside standard urban area limits of metropolitan cities and municipal cities. Only the following items are covered in the compulsory licensing list because of their hazardous nature as required by international conventions.

    • Hydrocyanic acid & its derivatives
    • Phosgene & its derivatives
    • lsocynates & di-isocynates of hydrocarbons

    9. Foreign Technology Agreements

    Foreign Technology Agreements in India caters to the growth of the technology in the Indian industries. The foreign technology is transferred from foreign sources such as research and development agencies, foreign parent companies, and other manufacturers to the Indian counterparts. The transfer of foreign technology takes places by the means of foreign direct investments and foreign technology collaboration agreements.

    Foreign Technology Agreements in India permits transfer of technology by the means of Government approval or through the automatic route delegated by RBI.

    • The RBI grants automatic approval through their regional offices to Indian industries for foreign technology collaboration.
    • The payments pertaining to the technology transfer should not exceed US$ 2 million.
    • The royalty to be paid is restricted to 5 % in case of domestic sales, 8 % in case of exports and total payment should be 8 % on sales for a period of 10 years
    • The royalty period should not exceed 7 years from the date of starting of the business or 10 years from the date of signing the agreement

    10. Customs Duty

    On most building blocks & feedstock, the duty is 5% (ethylene, propylene, crude, naphtha, benzene, toluene, xylene, ethyl benzene). The Customs Duty on dyestuff segment is 10%. The Customs Duty on pesticides is 7.5%

    11. Good and Services Tax

    On almost all Chemicals, GST rate is 12%.