NITI Aayog backs port hubs and fund for chemicals to curb imports

In a bid to curb India’s high import dependence in the chemicals sector, NITI Aayog on Thursday suggested the creation of eight major port-based clusters, a support fund for chemicals, and various subsidies to increase India’s share in global value chains (GVCs).

 

While India is a major exporter of chemicals, it is also heavily reliant on imports, resulting in a $31 billion trade deficit in the sector in 2023, according to the Centre’s official policy think tank. It also flagged that India’s current share in chemical GVCs stands at 3.5 per cent.

 

Around 34 per cent of India’s chemical imports come from China, leading to a $29 billion trade deficit. The Aayog said targeted reforms encompassing a comprehensive range of fiscal and non-fiscal interventions would enable India to build a $1 trillion chemicals sector and achieve a 12 per cent GVC share by 2040. It expects India to achieve zero trade deficit in chemicals by 2030.

 

“India is ideally placed right now, given where the world is — both economically and geopolitically. India is in a sweet spot. We are right at the heart,” said Aayog Chief Executive Officer and former commerce secretary B V R Subrahmanyam at the launch of the report. 

 

“A GVC chemical fund could be established to provide financial support for infrastructure development and other key initiatives within the chemical hub. This fund can ensure that necessary investments are made to address critical infrastructure needs and can offer financial backing for projects that support the long-term sustainability of the parks. State governments will assist in land procurement and handle dispute resolution at the local level,” the Aayog said in its report Chemical Industry: Powering India’s Participation in GVCs.

 

Among other interventions — such as subsidies for operating expenditure, a committee for fast-tracked environmental clearances, and skilling and research and development (R&D) support — the Aayog also recommended major upgrades in port infrastructure and eight new chemical clusters, given most chemical industries and supply chains are port-based.

 

“This initiative could help overcome the insufficiencies of storage capacity, handling capacity, mechanisation and last-mile connectivity that the industry grapples with at present. Developing existing port infrastructure in a targeted manner, with state-of-the-art storage and material handling facilities for critical substances (such as ammonia, ethylene, propylene and natural gas), could enhance the industry’s supply chain efficiency,” it said.

 

It also suggested setting up a chemical committee for ports to advise on and address infrastructural gaps in chemical trading at ports. Meanwhile, Department of Chemicals and Petrochemicals Secretary Nivedita Shukla Verma said deliberations are underway at the expenditure finance committee for a policy on R&D for the sector.

 

The timing of these interventions is particularly critical, the Aayog said, adding that global supply chains are undergoing seismic shifts due to geopolitical tensions, trade realignments, and the push for sustainability. 

 

“As multinational corporations seek alternative manufacturing hubs beyond China, India has a unique opportunity to emerge as a preferred destination — provided it acts swiftly and decisively. The realignment of global trade presents India with a once-in-a-generation chance to establish itself as a key node in the global chemicals network,” the Aayog observed.

 

According to the Aayog’s case study on China, geopolitical tensions persist, and many countries have imposed trade restrictions — such as the US decision to escalate import tariffs by up to 25 per cent in 2018, Germany’s declaration of “derisking” from China by diversifying supply chains, and the European Union’s (EU’s) Green Deal.

 

The Aayog also recommended collaborations on skilling for advanced manufacturing, as the sector faces a 30 per cent shortfall in skilled professionals, particularly in emerging areas such as green chemistry, nanotechnology, and process safety.

 

Aayog Vice Chairperson Suman Bery pointed out that the initiatives must be viewed in the context of global developments like the EU’s Carbon Border Adjustment Mechanism, which aims to discourage polluting commodities and supply chains.