0
Chemicals & Petrochemicals: Advantage India
SECRETARY, DEPARTMENT OF CHEMICALS & PETROCHEMICALS – GOVT. OF INDIA
4TH OCT 2018
PRESENTATION BY P. RAGHAVENDRA RAO
1
Key economic indicators have shown positive growth over past five years
107 111 115 111 115
FY 14 FY 15 FY 16 FY 17 FY18
112 119 125 130135
FY 14 FY 15 FY 16 FY 17 FY 18
4.5 4.1 3.93.5 3.5
FY14 FY15 FY16 FY17 FY18
Consumer Price Index1
Fiscal Deficit (% of GDP)
1.71.3 1.1
0.7 1.9
FY14 FY15 FY16 FY17 FY18
6.4% 7.5% 8.0% 7.1% 6.7%
FY 14 FY15 FY16 FY17 FY18
24 31 40 43 45
FY14 FY15 FY16 FY17 FY18
Index of Industrial Production1GDP Growth Rate (%)
Foreign Direct Investments2 ($ Bn)
Current Account Deficit (% of GDP)
SOURCE: Secondary research, TATA Strategic Research
Notes : 1) Base FY12=100 2) Excluding Reinvested Earnings & other capital
2
India is establishing itself as a global investment destination
SOURCE: Transform India, Government of India
Ranked 3 in World with 7,837 start-ups
after USA and UK
FDI inflows has grown by 6% in past 3
years and it is amounting to ~ USD 45 Bn
in FY’18
Ranked 44 in WB’s
Logistics
Performance Index
Report 2018, Up by
10 places since
2014
In past 7 years
production of total
major chemicals and
petrochemicals has
grown by 6.2%
Ranked 57 in Global
Innovation Index
2018, Up 24 places
since 2015
Ranked 100 in WB’s
Ease of Doing
Business 2017
report, In 2017, India
improved its ranking
by 30 positions Ease of Doing
Business
Start-up
culture
FDIs
InnovationLogistics
Chemical &
Petrochemical
Production
3
Contribution of Indian Chemical & Petrochemical Industry is growing
SOURCE: RBI Handbook of Statistics, Annual Survey of Industries, Tata Strategic analysis, MOSPI
Indian CPC Industry
On a global scale, it accounts for ~3% of the global chemicals industry
Employs ~2 million
people
Contributes 7.2%
of manufacturing
GVA and 1.2% of
National GVA
Vital Component of
daily life. Covers >
80,000 products
Contributes >10%
in India’s exports7.8 % weight on IIP
Contributes 4% to
total FDI Equity
Inflows
4
India is one of the largest chemical markets and ranks 6th in the world by sales value
SOURCE: Industry Reports, Tata Strategic Analysis
Notes : 1) 2016 estimates (Excl. Pharmaceuticals industry)
Global Chemical Sales regional split1Global chemical industry (USD Tn)
15%
16%
12%
39%
4%
Latin America
South Korea
European Union
3%
Rest of
Europe
NAFTA
India
4%China
Japan
Rest of Asia
3%
3%
1%
Rest of the World
3.5
5.0
7.2
20182011 2025
+5.1%
+5.5%
5
Indian chemical industry is poised to grow at a rate of 9.3% till FY25
Indian Chemical Industry: Segment Split (FY18)Indian Chemical Industry: Future Outlook
SOURCE: Tata Strategic Analysis
▪ Demographic Dividends, Low per capita consumption, increasing export demand and enabling government
initiatives are the key growth drivers for the chemicals industry
▪ As per estimates Chemical Industry is expected to grow at 1.3 X GDP
25%
22%
18%
14%
9%
8%
Bulk
Chemicals (41)
Speciality
Chemicals (36)
Agrochemicals (5)
Pharmaceuticals
(APIs) (15)
Petrochemicals (30)
Fertilisers (22)
3%Biotechnology (14)
Notes : 1) Includes basic organic , inorganic and other chemical intermediaries
107
163
304
FY11 FY18 FY25
+6.2%
+9.3%
Values in USD Bn
6Source: Tata Strategic Estimates
Notes : 1) Market size in USD Bn, 2) Market size in No of units, in millions 3) Volatile Organic Content
Shift in customer preferences will push growth in several end-use industries
10-15% p.a growth in key end user industries to drive the market for Indian specialty chemicals
(Expected CAGR FY17-FY25)Shifts in Customer
preferences India Vs World
Key Industries & Growth Rate in India
Milder, safer and natural
ingredients
5
Lower per capita
consumption1Stringent emission norms1
Highly fragmented
customer base2
2 Light weighting for fuel
efficiency
4 Sustainable Packaging
solutions
3 Price sensitive customers
3 Low VOC3 Paints
15
14
12
11
10
10Automobile
Personal care
Packaging
Construction
Paints
Textiles
7
Similarly demand for petrochemicals intermediates offers Make in India Opportunity
Demand-Capacity gap in FY21 (‘000 TPA)
Source: DCPC Data and Tata Strategic Estimates; Exchange Rate I USD = 73 INR
• To meet the growing demand, India will need 5 crackers by 2025, and additional 14 by 2040.
• Investment potential only in petrochemicals for these crackers is approximately ~ INR 475,000 Cr (~$ 65 Bn).
8
Several actions have been taken by government to address industry challengesKEY CHALLENGES & ACTIONS TAKEN SO FAR (1/2)
SOURCE: Tata Strategic Analysis
Infrastructure
Availability of feedstock
Regulations & Licences
1
3
2
Challenges Actions taken so far
▪ Roads: 17,055 km of highway projects awarded in FY 18
▪ Rail: Rs 143,000 crore (US$ 19.6 billion) budgeted as Capex for FY18
▪ Port: Establishment of New Central Port Authorities Act, 2016 to provide
more autonomy to the India’s major ports
▪ Industrial licencing has been abolished for most sub-sectors except in
hazardous chemicals
▪ Simplified documentation and other licences to further improve ease of
doing business ranking
▪ Reverse SEZ concept is being encouraged and facilitation to ensure
access to feedstock
9
Government is committed to play facilitator’s role to support industry growth
KEY CHALLENGES & REFORMS MADE SO FAR (2/2)
SOURCE: Tata Strategic Analysis
Complex tax system
Integrated Chemical Parks
Skilled manpower &
Labour law
4
6
5
Challenges Actions taken so far
▪ Simplified indirect tax system by replacing 16 tax categories to one GST
(Goods and Service Tax
▪ Sector-specific Skills Development programme supported through NSDC
schemes
▪ Implementation of e-governance to boost transparency and create
business friendly environment
▪ Petroleum, Chemicals & Petrochemicals Investment Regions (PCPIR)
policy is under revision to make it more effective
10
Key initiatives undertaken by the GOI are expected to have positive businessImpact
SOURCE: Primary interactions, Secondary research, Tata Strategic Analysis
Notes : 1) Exchange Rate: INR 67/USD 2) Upside calculated by considering the estimated increase in the growth rate after the initiatives 3) Growth Rates Till FY25
Swachh Bharat
Smart Cities
Agricultural
Reforms &
Farmer’s Welfare
Make in India
Goods &
Services Tax
Initiative Government Support
Financial target of
INR 30,000 cr. for FY19
(USD 4.48 Bn)
Budget estimation of
INR 57,600cr. in FY19
(USD 8.36 Bn)
Funding of
INR 2.04 lakh cr.
(USD 30.44 Bn)
100% FDI under automatic
route
GST implemented with
effect from 1st July 2017
Surfactants &
Water Treatment
Chemicals
Construction
chemicals
PVC &
Agro-
chemicals
Pharma, Textiles,
Automobiles, etc
Chemicals &
Petrochemicals All
End use Industries
End-use industries benefited Business Impact3
Boost Chemical industry
growth >9%
Surfactants & water treatment
chemicals estimated to grow at
15%
Market for construction
chemicals expected to grow at
15%
Market for PVC expected to
grow at a CAGR of 12% &
agrochemicals by 7.5%
Improving efficiency, logistics
cost reduction & Improving
speed to market
11
Making it easy & more
attractive for you Investor grows
Economy grows, Nation
grows
It is the right time to invest in INDIA
12
Thank You