India’s chemical industry, valued at $220 billion, is a significant source of employment and export revenue. However, it is currently hampered by a heavy regulatory compliance burden, particularly affecting micro, small, and medium enterprises (MSMEs).
Industry experts highlight that each unit must adhere to an estimated 635 monthly compliance requirements across various areas, including factory operations, health, explosives, hazardous materials, and food safety regulations.
Navigating this intricate regulatory landscape is highly challenging for most MSMEs due to inadequate training and a shortage of skilled manpower. “Understanding compliance requirements is tough for most MSMEs. The lack of training and skilled personnel exacerbates the issue,” commented Rishi Agrawal, CEO, TeamLease RegTech.
The situation is further complicated by the frequent updates to regulatory norms. Authorities made 200 compliance changes in the past week, 700 in the previous month, and approximately 1,963 in the current quarter, Agrawal mentioned.
“While larger companies can manage these requirements with dedicated in-house teams, MSMEs struggle significantly to remain compliant. It’s relatively easy for big players, but for MSMEs, it is a significant challenge,” Agrawal said.
Industry leaders are advocating for reforms to simplify the compliance process. Jaimin Vasa, chairman of the Gujarat Chemical Association, recommended industry-specific generalized licensing instead of separate licenses for various regulations under the Factories Act, and for health, explosives, hazardous materials, food, etc.
Additionally, compliance variations across states add another layer of complexity for businesses operating in multiple locations. Vasa urged the government to assist units in complying by simplifying the application process and expediting clearances.
Agrawal also pointed out that rent-seeking behaviour related to licenses and registrations poses a major obstacle, which could be mitigated through digitalization and a more controlled environment that fosters private entrepreneurship.
The Indian chemical industry, contributing eleven percent to national exports, is expected to grow to $1 trillion by 2040. As reported by knnindia.co.in, despite its impressive rise from 142nd to 63rd in the World Bank’s ease of doing business index between 2014 and 2019, a regulatory overhaul might be essential to fully unlock the sector’s potential.
