Chemical units in Gujarat are increasingly focusing on research and development (R&D) and technological upgradation of their existing facilities. According to industry players, units are spending a larger share of their turnover on R&D and upgradation, compared to earlier years.
The state’s chemical industry, which mainly comprises small and medium enterprises (SMEs), is reeling under high costs amid dull market conditions. This has prompted units to spend more on R&D activity that will make production more economical and cost-effective.
“Spending on upgradation and R&D is on the rise, as the need of the hour is to improve productivity and not scale up production. Costs are rising, and it is difficult to pass the burden on to consumers, since the demand side is already weak. R&D will help in reducing costs and address the challenge of pollution concerns as well,” said Jaimin Vasa of Vasa Pharmachem, who is president of the Gujarat Chemical Association (GCA).
Most SMEs in the chemicals sector, which are engaged in the production of dyes, dyestuff and pigments, earlier spent negligible amounts on R&D. However, with rising competition from China and increasing costs, this has changed. According to an industry estimate, large chemical players spend five to 10 per cent of their annual turnover.
“Funding availability is a concern, as of now. Bank finance is costly at around 12-14 per cent, while finance through equity participation is complex for SMEs. SMEs need financial restructuring to be able to go in for automation and become competitive against China,” said Bipinbhai Patel, director, Jay Chemical Industries Ltd.
It may be noted that the Planning Commission is not likely to allocate any funds for the chemicals industry under the 12th Five Year Plan (2012-17). It is believed that in its present state, where most units are unorganised and use obsolete technology, financial support from the Central government may not help much. Therefore, the Planning Commission believes that the chemical industry should start investing in technology upgradation.
According to industry estimates, with Asia’s share in the global chemical industry increasing from 31 per cent to 45 per cent, India has emerged as one of the focus destinations for chemical companies worldwide.
“There is a border dispute between Japan and China. This can create an advantageous possibility for the Indian chemicals industry,” said Patel. With current annual revenues of $108 billion (about Rs 5,72,000 crore), the Indian chemical industry accounts for three per cent of the global chemical industry’s revenues. Gujarat contributes 70-75 per cent to the country’s dyes and chemicals output.
