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April 12, 2012

India Proposes Draft National Chemical Policy

The ACTA Group

On March 29, 2012, India’s Department of Chemicals and Petrochemicals (DCPC), located within the Ministry of Chemicals and Fertilizers, announced the availability of a draft National Chemical Policy, 2012. The draft Policy is intended to facilitate the growth and development of the chemical sector in India. DCPC states that the policy “accords high importance” to research and development (R&D), technology up-gradation, safety and sustainability, pollution and environmental aspects, effluent/waste disposal and treatment, and green chemicals. DCPC requests comments from all concerned Ministries, government departments, industry associations and industries, and citizens. Comments are due April 30, 2012. The draft Policy is available online. Below is additional information regarding a number of proposals included within the draft Policy.

Need for Consolidation of Acts and Rules

The draft National Chemical Policy states that, at present, there are a number of laws in India governing the chemicals industry, and these laws fall under the purview of different Ministries, as listed below:

Ministry of Environment and ForestsEnvironment Protection Act, 1986
Ministry of LabourFactories Act, 1948
Ministry of Road Transport and HighwaysThe Motor Vehicles Act, 1988
Ministry of Commerce and IndustryThe Explosives Act, 1884
Ministry of Home AffairsThe Disaster Management Act, 2005
DCPCThe Chemical Weapons Convention Act, 2000
Ministry of Rural DevelopmentLand Acquisition Act, 1894

DCPC notes that in 2008, the European Union’s (EU) Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) legislation replaced around 40 different environment-related legislations. Other countries, including Australia, Canada, Japan, and China, are adopting similar policies to retain their position in the global market, and “India may also have to pursue similar measures.” DCPC states that, apart from multiplicity of regulations, there are no specific Indian laws pertaining to:

  • Registration of substances;
  • Preparation of a national inventory;
  • Restrictions on hazardous substances;
  • Banning of certain substances;
  • Detailed classification and labeling criteria; and
  • Transport classification.

Though some of these issues have been briefly considered under certain legislations, according to DCPC, “they are yet to be addressed adequately in a comprehensive scientific and coherent manner.”

To adopt a holistic approach towards chemical legislations, DCPC would establish a National Chemical Center, similar to the European Chemicals Agency (ECHA), which would be a centralized, nodal body, responsible for working on legislation, as well as for monitoring implementation. Consolidating the multiple legislations governing chemicals into one “coherent and comprehensive piece of legislation” would simplify its implementation and monitoring. This would also facilitate the creation of a chemicals inventory similar to the European chemical Substances Information System (ESIS). DCPC concludes that there “is a need to create REACH like legislation in India for safe use of chemicals for protection of human health & environment.”

Taxes/Duties and Energy Cost Issues

According to DCPC, while customs duty has been reduced during the last decade, other taxes, such as the central excise and value added tax, continue to be relatively higher compared to many Asian countries. A significant issue is the inverted duty structure: typically, basic raw materials, building blocks, feedstocks, and fuels should be at the lowest rate of duty, followed by slightly higher duty for primary chemicals, still higher for secondary chemicals, and, finally, still higher for final products/chemicals. This would allow an opportunity for value addition and also provide adequate competitive protection. DCPC suggests that government could initiate duty structure rationalization to correct the situation. Fiscal incentives, duties, and taxes rationalization could also be used to stimulate and support the growth and productivity of renewable resources, e.g., bio-mass feedstocks and ethanol, to support green chemistry.

Specialty Chemicals As a Focus Area

Specialty chemicals, known for their end-use applications or performance-enhancing properties, need to be declared as a focus area according to DCPC. Specialty chemicals include construction chemicals, paint driers, food additives, antioxidants, retarders, and water treatment chemicals. DCPC states that, since infrastructure projects are being developed “on a massive scale, the demand of these chemicals will grow by leaps and bounds.”

Several initiatives are needed to ensure the successful growth of the specialty chemicals sector. Special focus needs to be provided to the specialty chemicals companies to set up capacities in Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) by demarcating special zones to aggregate feedstock demand. The anchor tenant would be encouraged to set up an ethylene oxide (EO) plant with stringent manufacturing standards to meet the feedstock demand. DCPC estimates that the additional EO requirement by the specialty chemical industry by 2020 will be around 260,000 tonnes per annum, which could “comfortably support 1 to 2 EO plants within the PCPIRs.”

DCPC suggests establishing a Specialty Chemicals Forum to frame relevant consumer standards, possibly taking a role similar to the European Chemical Industry Council (CEFIC). The forum would include stakeholders from industry, customers, and government to recommend consumer standards, incentives to drive innovation, and product safety standards. The forum would also be a means of dialogue to hold seminars on the subject, discuss issues affecting both these sectors, and highlight and resolve the primary bottlenecks to growth. The forum would study other countries’ regulations and develop consumer standards, and work towards their introduction and implementation, as well as working with industry sectors from other countries.

Fund for Technology Up-Gradation for Chemicals

DCPC states that, to remain globally competitive and comply with requirements like REACH, the Indian chemical industry must upgrade its technology to meet world standards and show improved performance in global trade. A number of chemical plants are of smaller capacities and operating at uneconomic scales of production with obsolete technologies. The industry, especially the micro, small, and medium enterprise sector (SME), does not have access to capital to upgrade technology on its own. To address these issues, the government would establish a “Technology Up-gradation & Innovation Fund” (TUIF) to address specific technology issues faced by the industry. The fund should also support setting up of common chemicals infrastructure (e.g., effluent treatment plants, chemical waste disposal plants, etc.), which would benefit industries and the environment. To raise funds for the TUIF, DCPC proposes to levy a “Chemical Up-gradation & Innovation Cess” at the rate of 0.5 percent ad-valoerm, which would be collected by the Excise Authorities, and then subsequently transferred to the DCPC.


DCPC suggests introducing incentives for the development of green products and processes (bio-feedstock, bio-degradable products, eco-friendly processes, etc.), including:

  • Putting in place a national policy and action plan to develop the necessary plantation industry, including industrial utility plants such as castor oil, bio-fuels, etc., on waste land;
  • Identifying and inventorizing all agro-wastes (e.g., molasses) and their utility as raw materials and bring in the processes for necessary commercial utilization;
  • Setting up a Center for Green Technologies and regional Centers of Excellence, which would also partner with international technology organizations and institutes, to conduct R & D as well as to develop and upgrade processes and products;
  • Treating renewable resources/agro-waste based chemical industry of strategic national importance; and
  • For efficient and effective disposal of chemical wastes generated by chemical plants, putting in place suitable waste disposal mechanisms through means like incinerator, etc.

Chemical Standard Development Organization (CSDO)

To enable the growth and development of a globally competitive, high quality chemical sector in India, DCPC envisages creating a CSDO, under the aegis of the DCPC, with strong participation of the industry, R&D centers, and academia to drive consensus regarding national requirements, including safety norms. The CSDO would facilitate access for the Indian industry to the International Standards Development Organizations and act as an advisory body for incorporation of Indian requirements/intellectual property rights/standards in the international standards. Compared with the EU, the CSDO would bear the role the National Competent Authorities (CA) take under REACH. The CSDO would be primarily responsible for the following:

  • Ensuring compliance with chemical standards, including safety norms, by evolving and implementing a comprehensive certification and inspection framework;
  • Performing functions relating to the disaster management in the chemical sector;
  • Setting up an Institute of Chemical Safety and conducting training courses in this area; and
  • Re-evaluating and re-formulating existing environmental standards, regulations, and policies having bearing on the chemical sector. To maintain a level playing field, DCPC states that standards adopted in India should be comparable to those applicable in other developing countries. Wherever required, help could be taken from international technical bodies for establishment of pollution norms and standards. Along the lines of REACH, Indian industry and CSDO/DCPC are to develop jointly an effective set of regulations, including safety norms, covering the entire lifecycle of chemicals, which do not put excessive compliance cost burden on the companies.

Creating a National Chemical Center

To promote an integrated and holistic growth and development of the sector in an environmental friendly manner, a National Chemical Center would be formed to:

  • Provide an effective regulatory framework and adequate safeguards to ensure fair competition, and protection of industry as well as consumer interests;
  • Study the trade practices adopted by other countries, especially with respect to the dumping of chemicals by them into India, that cause injury to the domestic industry, and provide reports in this regard for taking remedial measures;
  • Study the international chemical sector scenario, i.e. the trade practices, standards, new innovations, duty structure, and other areas, and recommend suitable measures;
  • Evolve and maintain an inventory of the Indian chemical sector, containing data on production, consumption, imports, exports, and toxicological properties;
  • Survey the chemical sector, and forecast and work on emerging trends, including supply and demand, technologies, opportunities, etc.; and
  • Disseminate awareness and information about hazardous chemicals.

DCPC believes the future of the petroleum, chemicals, and petrochemicals (PCP) sectors holds “spectacular possibilities.” According to DCPC, the PCP sectors “have the potential to script glorious India’s future essentially in the fields of economy and society.”