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DEPARTMENT OF MANAGEMENT (LSM)
TERM PAPER
OF
OPERATION MANAGEMENT
ON
MANUFACTURING OPERATIONS IN CHEMICAL
INDUSTRIES
SUBMITTED TO: SUBMITTED BY:
MR. SANJAY JINDAL SHUJA QAMMER
REG NO: 10904442
ROLL NO: 03
SECTION: S1906
MBA (IT) 3rd Sem
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ACKNOWLEDGEMENT
The most precious moments are those when we get an opportunity to
remember and thank everyone who has in some way or the other
motivated and facilitated us to achieve our goals.
First of all I thank to GOD ALMIGHTY ALLAH for giving me power to
pen down the term paper in its present shape. I thank the entire
teaching staff especially MR. SANJAY JINDAL Lect. LSM for sharing
his valuable knowledge with me & for providing her able guidance
and support. I also thank to my classmate who every time helped me
out and encouraged me for carrying out the task.
I fall short of words to thank my family, who stood beside me while
completion of my task.
SHUJA QAMMER
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OVERVIEW
Chemical industry is one of the oldest industries that has contributed significantly to the
industrial and economic growth of India. It is estimated that the size of the Indian chemical
industry is around US$ 30 billion. Volume of production by chemical industry positions India as
third largest producer in Asia (next to China and Japan) and twelfth largest in the world. The
industry, comprising both small scale and large units (including MNCs), produces several
thousands of products and bi-products, ranging from plastics and petrochemicals to cosmetics
and toiletries. A significant share (around one-third) of production by chemical industry is
consumed by itself.
The chemical industry accounts for about 13% share in the manufacturing output and around 5%
in total exports of the country. The chemical industry contributes around 20% of national revenue
by way of various taxes and levies. The chemical industry produced around 8 million metric
tonnes each of basic chemicals and basic petrochemicals, and around 10 million metric tonnes of
petrochemical intermediaries in 2005-06.
Gujarat is the major contributor to the basic chemical as well as petrochemical production with
54% and 59% share in all India production, respectively. Other major states producing basic
chemicals include Maharashtra (9%), Tamil Nadu and Uttar Pradesh (6% each). Other major
states producing petrochemicals include Maharashtra (18%), West Bengal (12%), Uttar Pradesh
(4%), and Tamil Nadu (3%).
Indias export of basic chemicals amounted to over US$ 7 billion in 2005-06. India exported US$
4.85 billion worth of organic chemicals, US$ 775 million worth of inorganic chemicals, US$ 847
million worth of tanning and colouring materials, and US$ 649 million worth of pesticides, in the
year 2005-06. In addition, India exported petrochemicals valued nearly US$ 4 billion. India is
also an importer of basic chemicals and the import value amounted to over US$ 8 billion in
2005-06. The composition of Indias chemical imports includes organic chemicals (63%),
inorganic chemicals (28%), dyes (6%) and pesticides (3%). China, USA and Saudi Arabia are the
leading source countries for Indias chemical imports. In addition, India imported petrochemicals
valued over US$ 2 billion. The Indian chemical industry has been receiving significant
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investment intentions, including foreign direct investment (FDI). Since August 1991, and till
November 2006, chemical industry has received investment proposals worth Rs.274486 crores, a
share of 11.3% in total investment proposals received during this period. FDI, which is very
essential for modern manufacturing of chemicals, has also been flowing into the chemical sector
significantly. During the period August 1991 to October 2006, FDI inflows into the chemicals
sector amounted to US$ 2.2 billion, a share of around 6% in total FDI inflows into the country.
The chemical industry in India has the potential to grow to around USD 100
billion by 2010 according to KPM s analysis based on a survey of the
industry. This would imply an annual growth rate of 15.5 per cent.. At USD
100 billion, the industry s contribution to India s GDP will grow from the
current 6.7 per cent to 12.1 per cent and its share of the global industry will
increase from 1.9 per cent to 3.9 per cent. In order to fulfill this, the industry
needs to focus on new sources of growth like the Speciality and Knowledge
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segments. At the Base case, if the current growth rates are maintained, the
industry is expected to grow to USD 60 billion by 2010. In that case, the
industry s contribution to India s GDP would increase to 7.1 per cent and its
share of the global industry would increase to 2.3 per cent. The industry
would need to seek new directions in order to achieve the incremental USD
40 billion over the Base case scenario. This study seeks to discuss the
drivers and imperatives for the industry s growth.
GLOBAL SCENARIO
The size of the global chemical industry is estimated at approximately USD 2.4 trillion in 2007.
The industry is currently under-performing due to the recession . Some of the emerging trends
of the global chemical industry that can be leveraged for growth are:
increasing globalisation as growth in mature markets drives leading players to explore
new developing markets;
consolidation to leverage economies of scale in the Basic and Knowledge segments;
increasing focus on core businesses, resulting in diversified chemical and
multi-product companies divesting businesses or exiting non-core product lines;
cost optimisation assuming critical importance in the face of slow growth coupled
with a pressure on prices due to competition;
increasing investments in R&D (especially in the Speciality and Knowledge segments)
to gain competitive advantage.
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MAJOR CHEMICAL PRODUCTS
The major products included in this sector are:
Alkali- Soda Ash, Caustic soda, Liquid Chlorine, etc
Inorganic- Aluminum Fluoride, Calcium Carbide, Carbon Black, Red Phosphorous, etc.
Organic- Acetic acid, Methanol, Formaldehyde, Citric Acid, Chloro Methane, Ethyl
Acetate, etc.
Pesticides-Pesticides/Insecticides registered under section 9(3) of the Insecticide Act
1968.
Dyes & Dye stuffs- Azo Dyes, Acid Direct Dyes, Basic Dyes, Ingrain Dyes, Oil Soluble
Dyes, Sulphur Dyes, Food Colours and Other Dyes.
CHEMICAL INDUSTRY IN INDIA
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Chemical Industry is an important constituent of the Indian economy having approx. US
$ 28 billion turnover which is approx. 7% of Indias GDP.
In terms of volume, it is 12th largest in the world, and 3rd largest in Asia
Within India, it constitutes about 15% of manufacturing capacity and20% of the Excise
revenue to the Government of India.Chemical industry has weightage of about 13% in the
index of industrial production.
The global chemical industry is valued at about US $ 2.4 trillion. Of which,
Indias chemical sector accounts for just 2%
Indias present share in Global Trade is 0.6% i.e. USD 45 Billion & it has been expected
to increase the same to 1% i.e. USD 80 Billion by 2011.
Chemical & Pharmaceutical Industry is the most important Foreign Exchange earner with
major value additions through out the value chain. The value is added using Knowledge,
energy and Capital.
The Indian Chemical sector accounts for 13-14% of total exports and 8-9% of total
imports of the country.
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SWOT ANALYSIS OF THE INDIAN CHEMICAL INDUSTRY
STRENGTHS
Diversified Manufacturing Base
Vibrant downstream industries in different segments
Competitive core industries
Capability to produce world-class end products
Strong presence in the export market in sub-segments
Large domestic market
Major raw material component sources within the country
Good R&D base
WEAKNESSES
Infrastructure
Cost Advantages
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Scale of
production
Technology
Multiplicity of taxes
Labor Laws
OPPORTUNITIES
Challenge to compete globally by concentrating on weaknesses
Markets in the developed countries
A large number of products going off patent.
Advantages in certain categories can be used for boosting exports.
Close to middle-east- cheaper and abundant source for petrochemicals feedstock.
Stringent environmental laws in the western countries
Climatic conditions in India
Competencies to utilize renewable resources
Cost Disadvantages - India vs. Other Developing Count
0
0.5
1
1.5
2
2.5
33.5
4
4.5
Power Interest Local Taxes Import Duties
Name of the Countr
Percentage
ofNetSal
es
India
Chin
Thail
Indon
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Competency to emerge as a global player in the area of Specialty chemicals.
THREATS
Imports of chemicals, intermediates and end products
Tariff levels for chemicals
Greater competition due to
Chinese products
Bilateral/multilateral trade agreements
The labor laws, power supply and infrastructure facilities
MAJOR PRODUCTION CENTERS
United Phosphorous Ltd, Mumbai
P.I Industries, Jaipur
Excel India, Mumbai
Colour Chem. Ltd., Mumbai
Sudarshan Chemical Industries, Pune
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Colourtex, Ahmedabad
Jubilant Organosys Ltd., New Delhi
Herdilia-Schentady Ltd. Mumbai
National Organics Chemicals Ltd., Mumbai
Gujarat Heavy Chemicals Ltd., Ahmedabad.
India Glycols Ltd., New Delhi
Gujarat Alkalies and Chemicals Ltd., Baroda
ICI Calcutta
MAJOR EXPORTERS IN INDIA
Indian Petrochemical Corporation Limited (IPCL)
Gas Authority of India Limited (GAIL)
Haldia Petrochemicals Limited
Tata Chemicals
Asian Paints
Ciba
Rallis
Hindustan Organic Chemicals (HOCL)
MAJOR EXPORT DESTINATIONS
UAE
United States
United kingdom
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China
SEGMENTS OF THE INDIAN CHEMICAL INDUSTRY
The Indian chemical industry is divided into 3 segments which are :
1.Basic Chemicals
2.Speciality and fine chemicals
3.Knowledge chemicals
Segments Characteristics Constituent Industries
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Basic High Volume
Limited product differentiation
Petrochemicals
Fertilizers
Organic Chemicals
Other Industrial Chemicals
Specialty Typically small production units
High product differentiation
Low capital investments
Adhesive sealants
Catalysts
Industrial gases
Plastic additives
Knowledge Differentiated chemical and
biological substances.
High investments in R&D and
marketing.
Agrochemicals
Pharmaceuticals
Biotechnology
CHEMICAL MANUFACTURING PROCESS & PRODUCT
FORMULATION
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Chemical manufacturing is the process through which a chemical is synthesized from raw
materials or other chemical feed stocks. Product formulation is the process by which chemical
products composed of one or more ingredients, are prepared according to the product formula.
(1) describes the process for manufacturing the chemicals in the use cluster; and (2) describes the
chemical product formulation process, if applicable. In both cases, the descriptions focus on the
industrial or laboratory means of synthesis, the necessary starting materials and feed stocks, by-
products and co-products, isolated or non-isolated intermediates, and relevant reaction conditions
(e.g., temperature, pressure, catalyst, solvents, and other chemicals).
GOALS:
Describe the processes for manufacturing chemicals in the use cluster.
Describe the process for formulating chemical products used in the use cluster, if
applicable.
Compile chemical manufacturing and product formulation data to be used by subsequent
modules if the impacts of these up-stream processes are being evaluated in a CTSA.
PEOPLE SKILLS: The following lists the types of skills or knowledge that are needed to
complete this module.
Knowledge of chemical feed stocks, synthetic chemical reaction catalysts, and reaction
conditions.
Understanding of chemical manufacturing processes, including both batch and continuous
processes, as well as chemical equilibrium, kinetics, and heat and mass transfer.
Within a business or DfE project team, the people who might supply these skills include a
chemist and a chemical or process engineer. Vendors of the chemicals or chemical formulations
may also be a good resource.
DEFINITION OF TERMS:
Catalyst: A substance that accelerates a chemical reaction but which itself is not consumed in the
reaction.
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Chemical By-product: An unintended chemical compound that is formed by a chemical
reaction.
Chemical Intermediate: A chemical substance that is formed during the reaction and then
undergoes further reaction to produce a product.
Chemical Product: In a CTSA, refers to products in the use cluster composed of one or more
chemicals for which product formulation data must be obtained.
Chemical Reaction: The process that converts a substance into a different substance.
Feedstock: A raw material, pure chemical, or chemical compound that is used to synthesize a
chemical.
Unit Operation: A process step that achieves a desired function
.
APPROACH/METHODOLOGY:
The following presents a summary of the approach or methodology for describing the chemical
manufacturing processes and product formulation methods of chemicals or chemical products.
CHEMICAL MANUFACTURING:
Step 1: Obtain chemical information, including CAS RNs, synonyms, melting points, and
boiling points from the Chemical Properties module.
Step 2: Determine the primary industrial mode of synthesis for each chemical in the use cluster
Step 3: Develop a chemical manufacturing process flow diagram for the primary mode of
synthesis. The diagram should identify the major unit operations and equipment, as well as all
input and output streams.
Step 4: Identify any chemical intermediates, catalysts, feed stocks, and chemical products or by-
products involved in the synthesis that have the potential for release.
PRODUCT FORMULATION:
Step 5: Obtain chemical product formulation data for any chemical products being evaluated in
the CTSA from the Performance Assessment module. When proprietary chemical products are
being used, only generic formulations may be available.
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Step 6: Determine the primary industrial method of formulation for each chemical product being
evaluated. Mixing operations, with or without the addition of heat or pressure, are typical
manufacturing processes for product formulations.
Step 7: Develop a process flow diagram for the primary industrial method of formulation. The
diagram should include the unit operations, material flows, and equipment used in the
formulation process.
Step 8: Identify any chemical intermediates, catalysts, feed stocks, and chemical products or by-
products involved in the product formulation process that have the potential for release.
TRANSFERRING INFORMATION:
Step 9: Provide the following information to the modules listed below:
Energy usage resulting from the chemical manufacturing and product formulation
processes (e.g., heat, pressure, etc.) to the Energy Impacts module.
Material streams usage resulting from the chemical manufacturing or product formulation
processes (e.g., chemical feedstock, catalysts, etc.) to the Resource Conservation module.
FTP PROVISIONS FOR THE CHEMICAL INDUSTRY
Exports and Imports shall be free, except where regulated by FTP or
any other law in force.
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The procedure for facilitating foreign direct investment has been
simplified. Most of the chemical items fall under the RBI automatic
approval route for FDI/NRI investment up to 100 per cent.
Expansion of FMS Focus Market Scheme (FMS) has been expandedby adding 26 new markets, out of which 16 are in Latin America and 10
in Asia-Oceania. Incentive under the scheme has been enhanced from
2.5% to 3%.
Expansion of FPS Incentive under the scheme has been enhanced
from 1.25% to 2%.
Duty free import of specialized inputs /chemicals and flavoring oils is
allowed to the extent of 1% of FOB value of preceding financial years
export.
Free imports of samples by exporters - Number of free samples
allowed is increased from 15 to 50 as per para 49 of Highlights of
Foreign Trade Policy announced on 27-8-2009. It seems the change will
be effective after relevant customs notification is suitably modified.
Customs Duty
1.)The peak rate of Customs Duty on most Chemicals is 7.5%
2.)On basic raw materials like sulphur, rock phosphate, natural borates
is 5%
3.)On most building blocks & feedstock the duty is 5% (ethylene,
propylene, benzene, toluene, xylene )
Excise Duty-On almost all chemicals the excise duty is 16%.
EPCG scheme
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Zero duty EPCG scheme - A zero duty EOCG scheme has been
introduced in FTP 2009-14 for a limited period i.e. upto 31-3-2011.The
scheme is available for exporters of engineering and electronic
products, basic chemicals and pharmaceuticals, apparels and textiles,
plastics, handicrafts, chemicals and allied products and leather and
leather products, except those excluded in HBP Vol. 1.
Manufacture under Bond -Under the Manufacture under Bond
Scheme, all factories registered to produce their goods for export are
exempted from import duty and other taxes on inputs used to
manufacture such goods. Against this the manufacturer is allowed to
import goods without paying any customs duty. The production is
made under the supervision of customs or excise authority.
Duty exemption and remission schemes-The Government has
been taking various steps for augmenting the export. Some of the
important measures taken by the Government are as follows:-
1. Extension of the Duty Entitlement Pass Book (DEPB) Scheme up to
December 31,2009;
2. Providing pre and post-shipment credit assistance in rupees as well as
in dollars;
3. Reduction in import duties of raw materials; and
4. Reduction in interest rates on export finance; etc
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SUPPLY CHAIN:
The supply chain structure of chemical industries:
Raw
materials
Supplier
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GRAPH: SUPPLY CHAIN STRUCTURE
Manufactur
e
Distributo
Inventory
Dealer Direct Sale
Consumer
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QUALITY CONTROL IN CHEMICAL SECTOR
The chemical industry is one of the most regulated activity sectors, where
regulation includes specific quality systems such as good laboratory practice
(GLP), good clinical practice (GCP) and good manufacture practice (GMP). On
the other hand, accreditation to these practices covers technical
performance and is not suitable for pharma research and development (R&D)
as it is almost impossible to comply with the requirements of the European
standard in the pharma environment. The challenge is, therefore, to develop
quality systems, compatible with various principles, that not only cover
formal quality items, but also ensure good scientific and technical
performance.
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Quality Assurance (QA): is the activity of providing evidence needed to
establish quality in work, and that activities that require good quality are
being performed effectively all those planned or systematic actions
necessary to provide enough confidence that a product or service will satisfy
the given requirements for quality. QA introduces the rules'fit for purpose'
and 'do it right the first time'. It can be achieved by introducing appropriate
standard operating procedures (SOPs) in-house.
SOPs: An SOP is a set of instructions having the force of a directive, covering
those features of operations that lend themselves to a definite or
standardized procedure without loss of effectiveness. Every good quality
system is based on its SOPs.
The International Conference on Harmonization (ICH) defines SOPs as
'detailed, written instructions to achieve uniformity of the performance of a
specific function'. SOPs are necessary for chemical products development-
whether it concerns a pharmaceutical company, a contract research
organization, an investigator site, or any other party involved to achieve
maximum safety and efficiency of the performed clinical research operations.
SOPs provide procedural information about what needs to be completed to
fulfill the obligations of the regulations and provide auditors and regulatory
authority inspectors a tool to monitor adherence.
INSPECTIONS AND AUDITS
Before any inspection or audit starts, it is customary for the inspector or the
auditor to read the current SOPs for the relevant field. This is to judge the
compliance of SOPs, as to how sincerely they are used by the related
personnel, following ICH and other applicable regulatory guidelines.
During inspection the inspectors generally ascertain that appropriate SOPs
are available; edition numbers are correct and all obsolete editions have
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been withdrawn from circulation; distribution lists are still correct; SOPs are
effective, not leaving parts of the working procedures uncontrolled; whether
the SOP conveys a process that is effective in achieving compliance with
requirements/standards, whether the process that is described in the SOP is
an efficient way of performing the task; can the requirements of the SOP be
enforced; and whether the SOP training records for the staff are in place.
QA paradigms: One of the most widely used paradigms for QA
management is the PDCA (Plan-Do-Check-Act) approach. In order to have the
PDCA approach, SOPs may be tailored for--pre-clinical, clinical, bio-analysis
and pharmacokinetics, regulatory affairs, pharma-ovigilance/drug safety,
project management, data management, quality assurance including
inspections by competent authorities, external vendor management, crisis
management (including product recall), supply chain management and
change control procedures. In a nutshell, all that can be said is 'write down
what you do, do what is written down'.
ISO STANDARDS FOR CHEMICALS
Inorganic chemicals: ISO 1552:1976 & ISO 3425:1975
Organic chemicals: ISO 1995:1981 & ISO 5280:1979
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Risk Management for Chemical Industries
The chemical industrial sector is highly heterogeneous encompassing many sectors like organic,
inorganic chemicals, dyestuffs, paints, pesticides, specialty chemicals, etc. Some of the
prominent individual chemical industries are caustic soda, soda ash, carbon black, phenol, acetic
acid, methanol and azo dyes. Chemical manufacturing sector in India is well established and has
recorded a steady growth in the overall Indian industrial scenario. The Chemical and allied
industries have been amongst the faster growing segments of the Indian industry. The Indian
chemical industrial sector had a turnover of around Rs.1200 billion in 2001-2002. The chemical
exports also accounts for more than 16.20% of the total Indian exports during 2001-2002.
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The risks associated with the chemical industry are commensurate with their rapid growth and
development. Apart from their utility, chemicals have their own inherent properties and hazards.
Some of them can be flammable, explosive, toxic or corrosive etc. The whole lifecycle of a
chemical should be considered when assessing its dangers and benefits. Though many of
chemical accidents have a limited effect, occasionally there are disasters like the one in Bhopal,
India, in 1984, where lakhs of people were affected and LPG explosion in Vizag refinery where
huge property damage in addition to 60 deaths was experienced. Therefore chemicals have the
potential to affect the nearby environment also.
Design and Pre-modification review : Improper layout like location of plant in
downwind side of tank farm , fire station near process area , process area very close to
public road and wrong material of selection had caused severe damages to the work andoutside environment
Chemical Risk Assessment:Not assessed for new chemicals from the point of view of
compatibility, storage, fire protection, toxicity, hazard index rating, fire and explosion
hazards
Process Safety Management: HAZOP, FTA, F&E Index calculation, reliability
assessment of process equipment, incorporating safety trips and interlocks, scrubbing
system, etc. not done before effecting major process changes, lack of Management ofChange procedure (MOC), etc.
Electrical Safety: Hazardous area classification , protection against static electricity ,
improper maintenance of specialized equipment like flameproof etc were ignored.
Safety Audits: Periodical assessment of safety procedures and practices, performance of
safety systems and gadgets along with follow up measures were not carried out.
Emergency Planning: Lack of comprehensive risk analysis indicating the impact of
consequences and specific written down and practiced emergency procedures along with
suitable facilities had increased the severity of the emergency situations.
Training: Safety induction and periodical refresher training for the regular employees
and contract workmen were not carried out.
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Risk Management & Insurance Planning : Thorough identification and analysis of all
risks and insurance planning were not done so that interruption risks and public liability
risks could also be managed effectively.
REFERENCES
Department of chemicals and petrochemicals, Chem Report 2008
Overview of the chemical industry, KPMG report 2008
Organic chemicals annual review, Crisil Research, December 2008
Datamonitor, Chemicals in India, October 2007
WTO international trade statistics, 2007
Chopra Sunil, Meindl Peter-2006 Supply Chain Management third edition, Dorling
Kindersley(India) Ltd.
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Websites
www.chemindia.org/1934hoc-asf87-ch
http://commerce.nic.in/trade/national_ftpp.asp?id=3&trade=n
http://en.wikipedia.org/wiki/Chemical_industry
explore.oneindia.in/detail/2/chemicals-nic-in.html