CEOs’ Views on the Chemical Industry – Bimal Goculdas, Managing Director & Chief Executive Officer, The Dharamsi Morarji Chemical Company Ltd.

Bimal Goculdas 
Managing Director & Chief Executive Officer, The Dharamsi Morarji Chemical Company Ltd.

Chemical Industry Digest (CID) Q1: Various reports including government data show declining GDP growth. Economists are also talking of challenging times. In the light of these observations, overall how do find the chemical & allied industries, chemical plant & equipment & engineering segments faring?

How is your industry in particular faring and how do you look to 2020 and the rest of the decade unfolding?

Bimal Goculdas (BG): There is global economic uncertainty. It is not restricted to India as a country, or any particular sector. The chemical industry provides inputs for almost all other industries. Buildings are made of cement, steel, paint, glass, ceramics etc. so when the real estate industry, for example, is in a slow down the input industries will also face the slow down. This includes the chemical and allied industries.

Our company provides intermediates for a wide range of sectors including, polymers, paints, agrochemicals, pharmaceuticals etc. In the last 2 quarters business was much slower than the previous 7 or 8 quarters. According to us, this is a result of the global perception of declining consumption, which leads to manufacturing sector becoming more conservative. Geo-political uncertainty also adds to the confusion. We believe that fundamentally, India as a country, and the chemical industries within India, will have good growth, subject to getting the right support from the government.

CID Q2: Many chemical company spokespersons say that there is a demand recession, while at the same time there are many platform and other chemicals, APIs etc. being increasingly imported, which we can well produce here or increase existing capacities. Why are companies not investing in new projects or increasing capacities at least for those chemicals where we have good demand and are being imported?

BG: The Government of India is taking steps to identify large volume and value imported chemicals and to encourage domestic productions of the same. It is important to realize that any steps that the government takes needs to be within the ambit of the WTC as well as other trade agreements that have been signed in the past.

There are other issues as well which require long term planning and strategic thinking. These include: creation of efficient logistic infrastructure including coastal and inland water transport, creation of truly integrated chemical complexes with pipeline transport and shared infrastructure and utilities.

Also important for expansion and diversification is an environmental policy that permits compliant companies to grow and address changes in markets. It is currently taking too long to get permissions for expansion or change in product mix, by such time the market dynamics may have changed. While some flexibility has been given to certain sectors such as pharmaceuticals and dyes, a general policy decision for the entire chemical industry is needed.

CID Q3: Also our exports of chemicals have come down. What are the reasons for this? Why are we not globally competitive?

BG: Exports of chemicals have come down due to a variety of reasons. It needs to be understood whether global demand has gone down and therefore exports from India have reduced, or whether India’s share of the global market has reduced. It is also possible that since the prices of crude oil and commodities have reduced, exports may have gone down in value but not in volume. So a thorough study needs to be done to understand the correct position.

Regarding competitiveness, for large volume chemicals India will have a rough time competing because of lack of availability of feedstock, poor pipeline and transport infrastructure, high cost of utilities, and smaller scale of operations. However, in the small and medium volume chemicals particularly the specialties, pharmaceuticals, agro chemicals etc. where technology and innovation plays a big role, India is globally competitive. If some of the bottlenecks mentioned above are eliminated or reduced, growth can be exponential.

CID Q4: Despite the fact that the chemical industry is a technology intensive industry, which needs significant R&D inputs and which needs can also make our industry competitive, the industry’s spending and results on the R&D front are none too great to write about except for a few exceptions here and there. Why are chemical companies not enthusiastic on the R&D front?

BG: R&D spending by companies varies widely. Most multinational companies do their research in dedicated labs, very few of which are in India. The scale of individual Indian companies compared to global peers is much smaller which again means that there are fewer resources available to invest in R&D. Even in the pharma sector, where India is a big player, no molecules have been invented in India because the cost and risk is too high for even the large Indian pharma companies. Most of the R&D work done in India is on process development and this is not always well documented for a variety of reasons, including safe guard of intellectual property.

While there are good research institutes all the over the country, the interaction with the industry needs a lot of improvement. We have great minds in India, that is evident from the kind of work Indians are doing in overseas research centres, but enough opportunities are not available to challenge and retain the brightest talent within India.

CID Q5: What solutions and measures can you suggest from industry side as well as on the part of the government to drive the growth of chemical & allied industries in India?

BG: There are several steps that need to be taken from all concerns:

1. The Government should invest heavily in all kinds of infrastructure, even though it does not seem necessary at this point in time.
2. Special focus should be given to have truly integrated chemical complexes with incentives for common utilities and common effluent treatments.
3. Students from government funded institutes, who pursue further studies or careers abroad may be made to sign a bond towards the subsidized cost of education. Also, industry should put an appropriate value for technical talent so that engineers and scientist can get their true worth. Today, India’s brain drain is benefitting the west.
4. Research institutes and universities should be upgraded with the latest laboratories and computing facilities. The Government should focus on having quality institutions rather than large quantities. If we are generating lakhs of unemployable engineers, it is of no use to the industry or the country.
5. Companies which have high environmental standards, including Responsible Care Certification should be given freedom to expand and change their product mix so long as their effluent load is not increased.
6. There should be focus on water resources, no untreated sewage should move into any river. This is responsibility of the government at local and national level. Availability of water for industry should be ensured as well as guiding farmers away from crops that require excessive water.
7. India has a very viable feedstock, it is also renewable – Ethanol from sugarcane. Burning of Ethanol by blending in fuels is a criminal waster and should be banned instead of being encouraged.
   

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