Indian Chemical Industry and BHAVYA Rasayan Scheme

Source: PIB
GS II: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth

Overview

1. News in Brief
2. How it helps

Why in the News?

Union Cabinet has approved Bharat Audyogik Vikas Yojana Rasayan or BHAVYA – Rasayan Scheme.

News in Brief

• Recognising the importance of chemicals and petrochemicals as key inputs for sectors such as agriculture, textiles, pharmaceuticals, nutraceuticals, construction, automobiles and electronics, the government said the BHAVYA Rasayan scheme is expected to attract both domestic and foreign investments, expand manufacturing capacity and generate employment.
• The initiative would strengthen India’s chemical manufacturing ecosystem and promote self-reliance.
• It contributes to the vision of Viksit Bharat 2047 by supporting industrial growth and creating opportunities across downstream sectors of the economy.

Don’t get confused with the BHAVYA Rasayan Scheme and BHAVYA Scheme
BHAVYA Rasayan Scheme is a specific sub-program focused only on the chemical industry, while the general BHAVYA Scheme is a large, nationwide program for all types of manufacturing. 

What is the Chemical Industry?

The chemical industry converts natural resources and raw materials into chemical substances used by households, agriculture and industries.

Its raw materials include:

• Crude oil and natural gas
• Minerals
• Salt
• Coal
• Biomass
• Agricultural feedstock
• Industrial by-products

Chemical products are rarely limited to direct consumer use. Most chemicals function as intermediate inputs for other industries.

Major Segments of the Indian Chemical Industry

India’s chemical industry is highly diversified. It can be divided into the following major segments.

Bulk Chemicals

• Bulk chemicals, also called basic or commodity chemicals, are produced in large quantities and generally have standardised properties.
• Important examples include:
  • Caustic soda
  • Soda ash
  • Sulphuric acid
  • Chlorine
  • Methanol
  • Acetic acid
  • Industrial gases

• They are used as raw materials in manufacturing, textiles, paper, detergents, glass, metals and water treatment.
• Bulk chemical manufacturers generally compete on the basis of production scale, energy cost, raw-material availability and logistics efficiency.

Specialty Chemicals

• Speciality chemicals are manufactured for specific functions and performance requirements.
• Unlike bulk chemicals, their value depends more on technical performance, formulation and intellectual property than on production volume.
• Examples include:
  • Construction chemicals
  • Adhesives and sealants
  • Water-treatment chemicals
  • Electronic chemicals
  • Personal-care ingredients
  • Food additives
  • Textile chemicals
  • Paints and coating additives
  • Industrial catalysts
• Specialty chemicals offer higher value addition and better profit margins.
• India has considerable potential in this segment because of its skilled scientific workforce, process-engineering capability and expanding domestic market.

Agrochemicals

• Agrochemicals include substances used to protect crops and improve agricultural productivity.
• They include:
  • Insecticides
  • Herbicides
  • Fungicides
  • Plant-growth regulators
  • Bio-pesticides

India is one of the world’s leading producers of agrochemicals. The sector has strong export potential because of India’s cost-effective manufacturing capabilities and experience in producing generic molecules.

However, excessive or unsafe use of agrochemicals can cause soil degradation, water contamination, pesticide resistance and health risks.

Petrochemicals

• Petrochemicals are chemicals derived mainly from petroleum and natural gas.
• Major petrochemical building blocks include:
  • Ethylene
  • Propylene
  • Benzene
  • Toluene
  • Xylene
  • Methanol
• These are used to manufacture plastics, synthetic fibres, synthetic rubber, detergents, paints, packaging materials, medical devices and automobile components.
• Petrochemicals form an important link between India’s petroleum-refining sector and downstream manufacturing industries.

Polymers and Plastics

• Polymers include materials such as:
  • Polyethylene
  • Polypropylene
  • Polyvinyl chloride
  • Polystyrene
  • Engineering plastics
• They are widely used in construction, healthcare, agriculture, packaging, transport and consumer products.
• While polymers provide durability and cost advantages, their improper disposal has contributed to plastic pollution and microplastic contamination.

Dyes and Pigments

• Dyes and pigments are used in textiles, paints, printing, plastics, leather and cosmetics.
• India accounts for an estimated 16–18% of global production of dyestuffs and dye intermediates.
• The Indian colourants industry has an estimated global market share of around 15%.
• The sector benefits from India’s strong textile base but also faces serious wastewater and hazardous-effluent management challenges.

Fertilisers

• Fertilisers provide essential plant nutrients such as nitrogen, phosphorus and potassium.
• Major fertilisers include:
  • Urea
  • Diammonium phosphate
  • Complex fertilisers
  • Potash-based fertilisers
• Although fertilisers are administratively handled through a separate department, they remain closely connected to the broader chemical manufacturing ecosystem.
• India has expanded domestic fertiliser production, but it continues to depend on imports for several raw materials and fertiliser products.

How India is Positioned in the Indian Chemical Industry

• The Indian chemical industry covers more than 80,000 commercial products and directly or indirectly employs more than two million people.
• India is:
  • The sixth-largest producer of chemicals in the world
  • The third-largest chemical producer in Asia
  • The third-largest producer of agrochemicals globally
  • A major producer of dyes, dye intermediates and generic agrochemicals
• The industry was estimated to be worth approximately US$250 billion in 2024.
• It is expected to reach around US$300 billion by 2028, while long-term demand for chemicals and petrochemicals may approach US$1 trillion by 2040.
• India’s chemical and allied-product exports reached approximately US$18.65 billion during April 2025–February 2026.
• During the same period, exports of organic chemicals stood at about US$6.89 billion and exports of inorganic chemicals at about US$2.20 billion.

India also imports significant quantities of chemical products and intermediates. Organic chemical imports were about US$13.90 billion, while inorganic chemical imports were around US$6.79 billion during April 2025–February 2026. This indicates that India has strong manufacturing and export capabilities in some chemical segments but continues to depend heavily on imports in several critical value chains.

Geographical Distribution of the Chemical Industry

Chemical manufacturing in India is concentrated in states with ports, refineries, industrial clusters, pipelines and access to raw materials.

Major chemical-producing states include:

• Gujarat
• Maharashtra
• Tamil Nadu
• Andhra Pradesh
• Odisha
• Uttar Pradesh
• Rajasthan
• West Bengal

Challenges Facing the Indian Chemical Industry

• Dependence on Imported Feedstock
  • India imports significant quantities of crude oil, natural gas, chemical intermediates and speciality raw materials.
  • This exposes the industry to Exchange-rate fluctuations, Global price volatility, Shipping disruptions, Trade restrictions, Geopolitical conflicts
  • Import dependence is particularly significant in some organic chemicals, electronic-grade chemicals and advanced intermediates.
• High Logistics Costs
  • Chemicals often require specialised pipelines, tankers, warehouses and safety systems.
  • Poor connectivity between ports, refineries, chemical units and downstream industries raises costs and reduces competitiveness.
• Environmental Pollution
  • Chemical manufacturing can produce Toxic effluents, Hazardous waste, Air pollutants, Contaminated sludge, Volatile organic compounds, Greenhouse-gas emissions
  • Improper disposal may contaminate soil, rivers and groundwater.
  • Industrial accidents can also create long-term health and environmental consequences.
  • Industrial emissions are also an important component of urban air-pollution challenges, including Delhi air pollution.
• Low Research and Development Spending
  • Many Indian companies remain focused on generic manufacturing and process replication.
  • Insufficient investment in research can limit India’s ability to develop New molecules, Advanced materials, Electronic-grade chemicals, Green chemicals, High-performance polymers, and proprietary manufacturing processes
  • Moving up the value chain will require collaboration among industry, universities and public research institutions.
• Energy-Intensive Production
  • Several chemical processes require high temperatures, steam, electricity and continuous operations.
  • Dependence on fossil-fuel-based energy increases Production costs, Carbon emissions, Exposure to energy-price volatility
  • Decarbonising chemical production is difficult because emissions arise both from energy use and chemical reactions.
• Competition from China and the Middle East
  • China benefits from massive production capacity, integrated clusters and economies of scale.
  • Middle Eastern producers benefit from access to relatively low-cost petrochemical feedstock.
  • Indian companies must compete through efficiency, innovation, quality and specialised products rather than relying only on low labour costs.

About Bharat Audyogik Vikas Yojana Rasayan

BHAVYA – Rasayan Scheme for establishing three dedicated Chemical Parks in the country.

• The Scheme will have a total financial outlay of Rs.3,030 crore.
• With Rs.3,000 crore towards meeting the cost of establishing the Common Infrastructure Facilities and Basic Utilities inside the park and Rs. 30 crore as administrative expenditure.
• The scheme would run for a period of 5 years from FY 2026-27 to FY 2030-31.
• Centre would provide a grant of up to Rs.1,000 crore per park. This will be subject to a minimum contribution of Rs.500 crore by the concerned State Government.

How does BHAVYA Rasayan help the economy?

• It will promote development of the Chemical industry.
• The development along the whole value chain, including
  • Upstream, downstream and ancillary industries promoting efficient utilisation of resources
  • Leading to lower logistics cost.
• Through shared Common Infrastructure Facilities and Basic Utilities, keeping the needs of the chemicals industry in mind, it will lead to enhanced cost competitiveness and will make the Indian Industry globally competitive.
• It will help the Indian Chemical industry better integrate in Global Value Chains, leading to greater exports and higher import substitution.
• It will promote development of the Indian Chemical Industry sustainably by creating
  • An environment-friendly ecosystem consisting of centralised facilities such as Common Effluent Treatment Plant, Treatment, Storage, and Disposal Facility, and Hazardous Waste Management infrastructure.
  • It will ensure better compliance management with environmental regulations, thereby promoting development of industry in an eco-friendly manner.
• Development of the chemical sector will lead to a cascading effect through enhanced development of downstream sectors of the economy as well,
• Leading to higher employment generation and greater development of the economy, helping achieve the goal of Viksit Bharat @ 2047.

Concerns Related to the Scheme

• Successful implementation will depend on:
• • Transparent selection of locations
  • Availability of water and energy
  • Adequate transport connectivity
  • Scientific environmental-impact assessment
  • Safe disposal of hazardous waste
  • Protection of surrounding communities
  • Disaster-management planning
  • Timely land acquisition
  • Coordination between the Centre and states
  • Prevention of underutilised industrial infrastructure
• Chemical parks should not become pollution-intensive enclaves.
• Environmental safeguards must be incorporated during planning rather than added after industries begin operating

Government Initiatives Supporting the Sector

• Petroleum, Chemicals and Petrochemicals Investment Regions
  • The PCPIR policy promotes large integrated industrial regions for petroleum, chemical and petrochemical industries.
  • Major PCPIR locations include:
    • Dahej in Gujarat
    • Paradip in Odisha
    • Visakhapatnam–Kakinada in Andhra Pradesh
    • Cuddalore–Nagapattinam in Tamil Nadu
  • These regions aim to provide common infrastructure and attract large-scale investment.
• Production-Linked Incentive Schemes
  • Although there is no single comprehensive PLI programme covering the entire chemical industry
  • PLI schemes for pharmaceuticals, bulk drugs, medical devices, textiles, solar modules and batteries indirectly support chemical demand and domestic manufacturing.
• Foreign Direct Investment
  • The chemical sector, except for certain hazardous chemicals, is largely delicensed.
  • Up to 100% foreign direct investment is generally permitted under the automatic route in most chemical-manufacturing activities, subject to applicable sectoral and environmental regulations.
  • FDI inflows into India’s chemical sector, excluding fertilisers, reached approximately ₹1.49 lakh crore between April 2000 and December 2025.

Key Takeaways

UPSC Prelims and Mains Practice Question

Preliminary Examination Practice Question

Consider the following statements regarding the BHAVYA Rasayan Scheme:

1. It provides for the establishment of three dedicated chemical parks in India.
2. The Central Government may provide financial assistance of up to ₹1,000 crore per park.
3. Each park must have a minimum area of approximately 2,000 acres.
4. The parks will be developed exclusively by private-sector companies.

Which of the statements given above are correct?

A. 1 and 2 only
B. 1, 2 and 3 only
C. 2, 3 and 4 only
D. 1, 2, 3 and 4

Answer: B

Mains Practice Question

Discuss the importance of the chemical industry for India’s economic and strategic development. Examine how integrated chemical parks under the BHAVYA Rasayan Scheme can address the sector’s infrastructure and environmental challenges.

Daily Current Affairs: Click Here

Rate this Article and Leave Feedback