Govt to consider PLI scheme for chemicals and petrochemicals industry: FM Nirmala Sitharaman

Energy efficiency and renewable energy commitments of India are also very important, she said.

The central government is considering providing financial support under the production-linked incentive (PLI) scheme to boost domestic manufacturing in chemicals and petrochemicals sectors, Union Finance Minister Nirmala Sitharaman said on Thursday.

“We are in favour of having India becoming a manufacturing hub, and therefore, of course, we will consider PLI also for chemicals and petrochemicals,” Sitharaman said at an industry event.

The PLI scheme was launched in April 2020 in order to provide support to manufacturing in some selected sectors. So far the benefits of this scheme have been extended to 14 sectors with an incentive outlay of Rs 1.97 lakh crore ($26 billion). Telecommunications, electronics, white goods, textiles and pharmaceuticals are among the key sectors that have been extended the benefits under the PLI scheme.

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Addressing the third ‘Global Chemicals & Petrochemicals Manufacturing Hubs in India’ summit, the finance minister stressed the need to correct the trade imbalance in chemicals and petrochemicals sector by boosting domestic production.

The value of combined exports of chemicals and petrochemicals products from India stood at around $9 billion in 2022-23 while the value of imports of these products during the same year stood at $13.33 billion, resulting in a trade deficit of over $4 billion.

“Many of these imports are items which can be produced in the country itself,” the finance minister said emphasising on the need to boost domestic production of chemicals, particularly speciality chemicals that include active pharmaceutical ingredients (APIs), dyes and pigments.

Speciality chemicals account for nearly 22 per cent of India’s chemicals and petrochemicals industry. However, it contributes more than half of India’s total exports of chemicals and petrochemicals.

“I understand the need for more robust support for specialised chemicals. The emergence of this market is driven by the country's strong process engineering capabilities, low-cost manufacturing capabilities and abundant manpower,” she added.

According to the finance minister, major challenges facing the chemicals and petrochemicals industry in India include pollution control regulations, rising labour costs, carbon emission reduction and sustainability.

Underlining India’s target of achieving energy independence by 2047 and cutting greenhouse gas emissions to zero by 2070, Sitharaman said, “Net zero can’t be achieved unless each industry and sector contributes to it.”

Union Minister of State for Chemicals & Petrochemicals Bhagwanth Khuba said the size of the sector is estimated to grow to $300 billion by 2025 and to $1 trillion by 2040 from the current around $190 billion.

Khuba said the central government is working with state governments to set up chemical parks in different parts of the country that will help boost manufacturing in the sector.