Govt says FDI in chemical industry very low; asks industry to introspect

The government on Tuesday said foreign direct investment (FDI) in India's chemical sector is "meagre" at only 9 per cent of the total inflow in the country in spite of conducive policy and asked the industry players to introspect the reasons for the same.

Addressing a CII organised event, Chemicals and Fertiliser Minister D V Sadananda Gowda asked the industry to suggest if policy interventions are required to boost growth of the sector which has the potential to reach from the current USD 163 billion to USD 304 billion by 2025.

He also assured the industry to address major hurdles being faced like delay in getting green clearances and roll back of tax incentive for research and development (R&D) after taking feedback from experts and stakeholders.

Already, the government has taken necessary measures to resolve the challenges and set up a Development Council and Advisory Forum for the chemical and petrochemical sector.

"In chemical sector, 100 per cent FDI is permissible under the automatic route. The FDI inflow in this sector is only 9 per cent of the total inflow in the country, which is every meagre in spite of conducive industrial policy," Gowda said.

It is gathered that neighbouring countries like Singapore, Vietnam, Thailand, Philippines are attracting the investment.

"The industry needs to introspect the reasons for the same and advise the government about measures or policy interventions to be initiated in this regard," he said.

Stating that the Indian chemical market size accounts for only 3 per cent of the global chemical industry of USD 5 trillion, the minister said adding that Indian chemical industry could grow at double digit with the current initiatives of the industry as well as the government.

The R&D spending needs to be enhanced from the present 2-3 per cent to 5-8 per cent of the revenue in line with overseas companies, he said adding that sustainable development should a prerequisite for long-term development of the sector.

He also appealed that new technologies and techniques are required for achieving 'zero defect' in quality and 'zero effect' on environment so that India can emerge as a major hub in this sector.

On concerns raised by the industry, the minister said, "those issues will be taken care by the government. Issues like roll back of tax incentives, problem in dealing with environment issues are some of the hurdle in the chemicals industry. We will resolve all these issues after getting feedback from the experts."