PIB January Week 4: Chemicals & Petrochemicals, Policy Initiatives, Infrastructure, Renewable Energy and Others

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Chemicals & Petrochemicals

  • The Chemicals industry in India is an important contributor to the Indian economy sustaining a variety of downstream industries such as textiles and pharmaceuticals.
  • The Indian chemicals industry with a market size of USD 145 billion is theseventh largest producer of chemicals worldwide and the third largest producer in Asia after China and Japan.
  • The industry consists of various segments such as chemicals, petrochemicals, agro-chemicals, specialty chemicals, colourant chemicals, bio-pharma, bio-agri, and bio-industrial products.
  • India is the third largest producer of agro chemicals globally.
  • India produces around 16% of the world’s dyestuff and dye intermediates, particularly reactive acid and direct dyes.

Policy Initiatives & Investments


FDI Policy


100% FDI is permitted through automatic route except for a few hazardous chemicals.


  • manufacture ofPhthalic Anhydride (29024100) has been reduced to2% from 4%.
  • Excise duty on Epoxy resin, Vinyl ester adhesives,hardener for adhesives resin, hardeners, polyester infusion resin for rotor blades for Wind Operated Electricity Generators has been reduced to 6% from 12%.


Plastic Parks:

  • A scheme to set up need-based plastic parks with the requisite state-of-art infrastructure and common facilities was approved by the Government in March 2015.
  • Financial assistance of up to 50% of the project cost, subject to maximum of INR 40 crore per project is being provided by the Government.
  • The remaining project cost is funded by the State Government or State Industrial Development Corporation or similar agencies of State Government.

Gems and Jewellery Sector

  • The Gems and Jewellery sector in India is one of the largest in the world and contributes to about 29% of the global consumption.
  • In FY 2014-15, the sector constituted 13.30% of the country’s total merchandise exports.
  • India is the largest diamond processing center in the world and accounts for 95% of world’s processed diamonds.
  • The market in India is expected to grow at a compound annual growth rate of 16% over the period 2014-19 according to an industry report.
  • The Industry currently employs around 4.5 million skilled and semi-skilled workers across India and is expected to provide employment opportunities to more than 8.23 million persons by 2022.

Policy Initiatives & Investments

FDI Policy

100% Foreign Direct Investment (FDI) through automatic route is allowed in the sector.


  • The net exports of Gems and Jewellery during FY 2015-16 was USD 39.28 billion.
  • The export of cut and polished diamonds stood at USD 21 billion in FY 2015-16 as against USD 17 billion in FY 2012-13.

Gold Monetization Scheme

  • The Gold Monetization Scheme (GMS) in the form of Gold Deposit Scheme (DPS) and Gold Metal Loan (GML), launched in November 2015, allows individuals, trusts and mutual funds to deposit gold with banks in return for interest.
  • This is helping reduce dependence on gold imports and alleviate pressure on trade balance.
  • The designated banks accept gold deposits under the Short Term (1-3 Years) Bank Deposit as well as Medium (5-7 years) and long (12-15 years) Term Government Deposit Schemes.
  • The Government also launched the Sovereign Gold Bond Scheme, under which gold bonds denominated in grams of gold are issued to individuals by the Reserve Bank of India (RBI) in consultation with Ministry of Finance.

Infrastructure Development

Special Notified Zone

  • With a view to develop India into an international diamond training hub, a Special Notified Zone (SNZ) was opened at Bharat Diamond Bourse in Mumbai on December 20, 2015.
  • The creation of SNZs has ensured the regular availability of direct supply of rough diamond in the country itself and within easy access, not only save time and effort of travel by diamond manufacturers, who move to different centres to procure rough diamonds, but has also minimized middlemen commissions and eventually costs.

Skill development


  • Under the PradhanMantriKaushalVikasYojana (PMKVY), which was launched in July 2015, 70,205 people have enrolled for training out of which 51,569 have been certified.


  • Under Recognition of Prior Learning (RPL), a sub-component of PMKVY, 22,640 artisans have been certified across the country.


  • Gem &Jewellery Skill Council of India (GJSCI) is working towards development of 310 National Occupational standards (NOSs), which specifies the standard of performance the individual has to meet.

New and Renewable Energy Sector

  • The Government has revised its target ofrenewable energy capacity to 175 GW by end of 2022, making it the largest expansion in theworld and providing plenty of opportunities for investors.
  • The UN Environment Program’s (UNEP) ‘Global Trends in Renewable Energy Investment 2016’ report ranks India among the top ten countries in the world investing in renewable energy.
  • The Government is also committed to Clean Energy and is driving efforts to achieve 40% power installed capacity from non-fossil-fuel-based energy resources and reducing emissions by 33-35% of its GDP by 2030.
  • The New & Renewable Energy sector has witnessed the highest ever-solar power and wind power capacity addition over the last twoyears since April 2014.3575 MW capacity has been added from various renewable energy sources as on October 31, 2016 for FY2016-17.

Policy Initiatives & Investments FDI Policy

100% FDI is allowed under automatic route for projects of renewable power generation and distribution subject to provisions of The Electricity Act, 2003.

Fiscal Incentives

The Government has provided a whole host of financial and fiscal incentives for promoting renewable energy projects.


  • Fiscal incentives such as accelerateddepreciation, concessional custom duty, excise duty exemption, income tax holidays for 10 yearsto promote renewable energy.


  • To promote solar roof tops, INR 5,000 crorehas been approvedfor implementation of GridConnected Rooftops systems over a period of five years up to 2019-20 under National Solar Mission (NSM).
  • This will support installation of 4,200 MW Solar Rooftop systems in the country in the next five years
  • Clean Energy Fund– Clean environmentcess on coal, lignite and peat has been doubled from Rs.200 per tonne to Rs.400 per tonne, to promote use of renewable energy sources (Budget 2016-17).
  • Renewable energy projects included in priority sector lending normsof commercialbanks (RBI, April 2015).
  • Renewable Generation Obligation (RGO) -New coal/lignite based thermal plants after specified date to also establish/procure/purchase renewable capacity (January 2016).
  • Inter-sate transmission charges and losses for Wind and Solar projects have been waived off (January 2016).
  • Provision of rooftop solar and 10% renewable energy is now mandatoryunderMission Statement and Guidelines for development of smart cities (October 31, 2016).


Scheme for Development of Solar Parks and Ultra Mega Solar Power Projects

  • MNRE launched the scheme for development of Solar Parks and Ultra Mega Solar Power Projects on December 12, 2014.
  • 25 Solar Parks with capacity of 500 MW and above (smaller parks of lesser capacity for Himalayan and hilly regions) and Ultra Mega Solar Power Projects targeting over 20,000 MW of solar power installed capacity will be set up within a span of 5 years starting from 2014-15.

Scheme for Development of Solar PV Power Plants on Canal Banks/ Canal Tops

  • “Pilot-cum-Demonstration Project for Development of Grid Connected Solar PV Power Plants on Canal Banks and Canal Tops” was approved on December 5, 2014. A target of 100 MW Grid Connected Solar PV Power Plants on Canal Banks and Canal Tops (50 MW on Canal Tops and 50 MW on Canal Banks) has been set.

 Other Incentives to promote renewable energy projects


  • Various projects of total 356 MW capacityhave been sanctioned and projects of 84 MW capacity have been tenderedfor Indiandefense and para military forces using solar cells and modules manufactured in India.


  • A Joint Indo-US PACE Setter Fund has beenestablished, with a contribution of USD 4 millionfrom each side to enhance clean energy cooperation.


  • India has the fourth largest wind powerinstalled capacityin the world after China,United States and Germany. To further boost this segment, the National Off-Shore WindEnergy Policy 2015was announced to facilitateoffshore wind farms in the territorial waters of India.


  • Government has recently approved amendments in tariff policy in Jan. 2016 which envisages long term trajectory of Renewable Purchase

Obligation (RPO) prescribing purchase of solar energy to promote renewable energy with an aim to reach up to 8%of total electricityconsumption by March, 2022.

  • Government is implementing the GreenEnergy Corridor Projectfor Strengthening inter-state and intra-state transmission system along with other control infrastructure to facilitate integration of large scale renewable energy generation.

Ease of Doing Business


  • Renewable energy has been re-classified as‘white category.’ Previously, this sector wasunder ‘green category’ and the re-classification will enable ease of doing business as setting up of solar and wind power plants will be exempt from seeking environmental clearances from Ministry and consent from State Pollution Control Boards.


  • Wind Atlas 2015, a GIS (Geographic InformationSystem) based software tool to help policy planners and developers was launched inSeptember 2015. The tool identifies regionaland local wind energy potential in India and contains average annual values of Wind Speed (m/s), Wind Power Density and Capacity Utilization Factor (CUF) calculated for an average 2 MW turbine at 100 m.

Skill Development

About 98,000 people work in the four major areas of renewable energy i.e. Solar, Wind, Biomass and Small Hydro Power.

Oil and Gas Sector

  • Oil & Gas sector is a key contributor to India’s economy.
  • India is the third largest consumer of crude oil and petroleum products globally accounting for 5 % of world oil consumption in 2015, behind US and China.India’s refiningcapacity is 230 MMTPA (Million Metric TonnesPer Annum). Refining capacity of Indiaexpanded by 15 MMTPA with the commissioning of Paradip Refinery in February 2016.
  • The country has 635 MillionMetric Tonnes (MMT) of proven oil reserves, 54 Trillion Cubic Feet (TCF) of proven natural gas reserves and 96 TCF of estimated shale gas reserves (estimated at the beginning of 2015).
  • With 48% of the country’s sedimentary area yet to be explored, the oil & gas sector provides tremendous opportunities for investment.

Policy Initiatives & Investments


FDI Policy


  • 100% FDI is allowed through automatic routefor exploration activities of oil andnatural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum products’ pipelines, natural gas pipelines, LNG regasification infrastructure, market study, formulation and petroleum refining in private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government or private participation in exploration of oil and the discovered fields of natural oil companies.
  • FDI upto 49% is permitted through automatic route for Petroleum refining by PSUs, without any disinvestment or dilution of domestic equity in the existing PSUs.


Hydrocarbonand Exploration   Licensing


Policy (HELP)

  • Notified on March 30, 2016, it unveiled a series of reforms that will revitalize the upstream sector.
  • Uniform licensing system, which will cover all hydrocarbons, i.e. oil, gas, coal bed methane etc. under a single license andpolicy framework.
  • Revenue Sharing Model: Contracts will be based on biddable revenue sharing and not the current cost recovery model
  • Open Acreage Licensing Policy (OALP), oil and gas acreages will be available round the year instead of cyclic bidding rounds as in New Exploration Licensing Policy (NELP).
  • A bidder may apply to the Government seeking exploration of any block not already covered by exploration and if found suitable Government will call for competitive bidding.
  • Concessional Royalty regime introducedwherebydeep water and ultra-deep water areasshall not have any royalty for the first seven years, and thereafter shall have a concessional royalty of 5% (in deep water areas) and 2% (in ultra-deep water areas). In shallow water areas, the royalty rates has been reduced to 7.5% from 10%.
  • Marketing and pricing freedom allowsexplorers to sell gasproduced fromgeologically difficult, high risk / high cost areas with a ceiling price
  • Development of Pipeline Infrastructure:


Urja Ganga Gas Pipeline Project: InOctober 2016, the Government laid the foundation for the gas pipeline project, at Varanasi.


The 2540 km long Jagdishpur – Haldia&Bokaro – Dhamra Natural Gas Pipeline Project (JHBDPL) under Urja Ganga when completed will supply natural gas to Uttar Pradesh, West Bengal, Bihar, Odisha and Jharkhand and will benefit around 20 lakh families.


— In September 2016, the Government approved viability gap funding / partial capital grant at 40% ( INR 5,176 crore) of the estimated capital cost of INR 12,940 crore to GAIL for development of JHBDPL project.


Initiatives in North-East


  • The Hydrocarbon Vision 2030 for North-East India was released on February 9,2016, and focuses on doubling oil & gasproduction by 2030 and leveraging the hydrocarbons sector for social and economic development along with promoting cooperation with neighboring countries such as Bangladesh, Myanmar, Nepal & Bhutan.
  • To incentivizeexploration & production in the North East, a 40% subsidy on gas operation has been extended to private companies operating in the region.


Innovation & Technology


  • INDMAX (lndane Maximization) technology has been developed to maximize light distillates from refinery residue by IOCL R&D.


  • A novel Separation Technology for gas processing called HP HiGAS has been developed by HPCL and a demonstration unit commissioned at Visakh Refinery.


  • HPCL has indigenously developed Engine oilfor Arjun Tank , oil for high mast for defence use, Grease for rock breakerattachment inHeavy earth moving machinery (HEMM).
  • The first ever indigenously built and fabricated Four Ball Test Machine was purchased and installed by HPCL.
  • Every PSU under the Ministry of Petroleum and Natural Gas (MoPNG) has constituted a specialized Indigenization Development Group (INDEG) to promote indigenization andare actively involved in organizing regular vendor meets to promote the idea of ‘Make in India,’ and identification of equipment and products that can be indigenouslymanufactured such as LNG ships.

Other Initiatives

  • In a move that will help reduce losses for public sector petroleum refiners on sale of regulated petroleum products and (LPG and PSD kerosene), diesel prices were fullyderegulated w.e.f. October 19, 2014.
  • Direct Benefit Transfer (DBT) in PDS Kerosene Scheme (DBTK)is beingimplemented on pilot basis in 33 districts of 9 States w.e.f. April 1, 2016.
  • Under PradhanMantriUjjwalaYojana (PMUY) scheme launched on May 1, 2016, 5 crore LPG connections will be provided to BPL families with a support of Rs.1600 per connection in the next 3 years. INR 8000 crore has beenallocatedtowards the implementation of thescheme.
  • PAHAL, the world’s largest Direct Benefit Transfer scheme, launched on January 1,2015, directly transfers LPG subsidy to consumers all over the country.

Provision of clean fuel


  • As per recommendation of the Expert Committee contained in Auto Fuel Vision & Policy – 2025, MOPNG has issued orders for supply of BS-IV auto fuels in the entire country by April 1, 2017 in a phased manner.
  • As part of the 1st phase, supply of BS-IV auto fuels has commenced in the northern part of the country w.e.f. April 1, 2015.
  • Oil marketing companies have also been advised to be ready to switch over directly from BS-IV to BS-VI fuel standards by .April 1, 2020.


  • Ethanol Blended Petrol (EBP) Programme


To Help Reduce Emission, in December,2014, the Government has allowedprocurement of ethanol at a fixed delivered price ranging between Rs.48.50 to Rs.49.50 per litre (including all taxes and transportation cost).


Ethanol produced from other non-food feedstocks besides molasses have been allowed to be procured.


Excise duty has been waived on ethanolsupplies to OMCs for EBP by sugar mills during 2015-16.


Ease of Doing Business Initiatives

Facilitating Supply of Natural Gas to Fertilizer and Power Sector:

  • The Government has approved supply ofpooled Natural Gas at uniform delivered price to all grid connected gas based fertilizer plants for urea production w.e.f March 31, 2015.
  • It has also approved the scheme for utilizationof stranded gas based power generation capacity, which was a joint proposal from MoPNG and Ministry of Power and will help in revival of 16000 MW stranded gas based power plants.
  • Government has allowed the sale of Bio-diesel (B100) by private manufacturers to bulk consumers like Railways, State Transport Corporations and other bulk consumersw.e.f. August 10, 2015. As on September 30, 2016, 2.32 crorelitres of biodiesel (B100) has been procured.
  • Extraction of Coal Bed Methane (CBM): InNovember, 2015, Government permitted Coal India Limited & its subsidiaries to explore coal-bed methane gas from the coal mining lease areas held by them. This will help in augmenting CBM gas production in the country.




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