Ranking sixth in sales in the world, the chemical sector in India caters to 7% of the country’s GDP and the employment of five million people. It has been a very reliable sector through the pandemic to fight poverty and unemployment in the economy. The chemical sector has been given certain incentives to gain a competitive advantage in the global market in the Union Budget 2022. For instance, the concessional corporate tax rates would be given to start-ups in this sector to boost manufacturing and fulfill domestic and international demands. Additions have been made in the PLI for solar power. The ministry has also claimed support for the extension of renewable energy sources in all the areas.
Impact of the Union Budget’s Proposals on the Chemical Sector
The government’s continued focus on PM Gatishakti, infrastructure projects will bring a positive impact for the construction chemicals. The PM Gatishakti plan also focuses on speedier development in the roads and railways networks which solves the issues of logistics faced by the chemical sector. INR 195 billion has been set aside for the solar PLI, for the manufacturing of polysilicon and photovoltaic modules which will lead to higher sales in chemicals such as silicon which is used in manufacturing solar panels. The government has adopted policies to formulate the promotion of electric vehicles in the country which will result in a positive impact on the sales and revenue of lithium-ion used in the manufacturing of E-vehicles. Contracts have been laid to promote optic fiber nets in the rural areas under the PPP model that will have a positive impact on the chemicals used in the manufacturing of optical fiber.
Custom Duty Reduction on Certain Chemicals
In the union budget 2022, customs duty has been reduced on certain critical chemicals such as methanol, acetic acid, and heavy feedstocks of petroleum refining and increased on sodium cyanide. Such adjustments in the customs duties have been made to bring a balance in the domestic value addition in the chemical sector among different types of chemicals.
Chemicals and Agriculture
The finance minister has proposed the promotion of natural, chemical-free farming throughout the country. The finance minister has also proposed the increased use of Kisan drones for crop assessment, digitization of the land records, and spraying insecticides and nutrients.
Incentives to the Newbies
A concessional tax regime of 15% tax has been introduced by the government for the start-ups in the chemical industry, to help them get a competitive edge in the business environment. The last date for commencement of manufacturing has also been extended by 1 year (from march 2023 to march 2024) under section 115 BAB.
Government’s Focus on Development in Different Areas Through Chemical Industry
The ministry has mentioned that stronger support will be provided for the R&D on technologies such as AI, geospatial systems and drones, semiconductors and its ecosystem, space economy, genomics and pharmaceuticals, green energy, etc. This will not only boost the demand for chemicals required in the manufacturing of these things but also bring in massive employment opportunities. The government is also looking for opportunities to scale up battery services in the country, for which it is eager to invest in innovative business models. The government is also looking for reducing the carbon footprint in the economy and for that abolition of five to seven thermal power plants has already been proposed to it. Projects for coal gasification and conversion of coal into chemicals that are required by the industries have also been proposed to evolve technical and financial viability.
Outlook for the Chemicals Industry in FY 22-23
The union budget of 2022 sets the scope for development in various sectors, both in rural and urban regions. Growth is expected in areas such as solar power, other renewable energy sources, E-vehicles, infrastructure, agriculture, etc. This is expected to unlock the demand for chemicals required in all such industries. The tax regimes are expected to encourage innovations, bring in new manufacturing units and promote the ‘make in India’ and ‘Atmanirbhar Bharat’ policy initiatives in the nation.
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