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