In its final report for the 12th Plan (2012-17), the Planning Commission hasn't allocated any funds for the chemicals industry. The draft report had a provision of Rs 575 crore.
According to officials privy to the development, the commission feels the chemical industry should start investing on technological upgrade. In its current unorganised state, which uses obsolete technology, fund allocation wouldn't help much, according to the commission. Officials said the final report was yet to be approved by the National Development Council.
The Ministry of Chemicals and Fertlisers feels under these circumstances, it would have no option but to impose the chemical cess proposed in the draft National Chemical Policy. The policy had proposed to impose a chemical upgrade and innovation cess of 0.5 per cent ad valorem on chemical industries. This was aimed at collecting funds for establishing a technology upgrade and innovation fund. An official said the proposal was in line with the cess imposed by the Ministry of New and Renewable Energy to set up a clean energy fund. The Department of Telecommunications also imposes five per cent cess on an operator's gross revenue.
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However, the chemicals industry is opposing the idea, saying the industry's profitability has already been hit by low exports and a glut at home.
Of the Rs 575 crore stated in the commission's draft report, it was proposed Rs 500 crore would be used to establish a technology upgrade fund, and this would have an annual outlay of Rs 100 crore. While Rs 50 crore would be used to establish a chemicals inventory, Rs 25 crore would go towards the Chemical Promotion and Development Scheme.
The proposal also envisages an autonomous $100-million chemical innovation fund by securing 10 per cent of the total inclusive national innovation fund set up by the National Innovation Council.
The Planning Commission also recommended feedstock availability for the sector. For this, the draft report said every petroleum, chemicals and petrochemicals investment region (PCPIR) should have a cracker. The export of surplus naphtha from the country should be disincentivised, while investment in the naphtha segment must be incentivised, the report added.
“The government must ensure the supply of ethylene oxide (EO) and mandate stringent manufacturing standards for it. The anchor petrochemical tenant in the PCPIR should put up an EO plant to cater to the aggregated demand (25-50 per cent of a typical EO plant capacity). The additional EO requirement by the specialty chemical industry would be about 2,60,000 TPA by 2020, which could comfortably support one to two EO plants and/or multiple EO derivatives plants within the PCPIRs,” the report said.
