Chemicals department may be moved under ministry of petroleum

The government may consider hiving off the department of chemicals and petrochemicals from the fertiliser ministry and bring it under the petroleum ministry.

 The government may consider hiving off the department of chemicals and petrochemicals from the fertiliser ministry and bring it under the administrative control of the petroleum ministry for better synergy as India aspires to become a hub for the $4 trillion global chemical industry, two persons aware of the matter said on Sunday.

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While the idea was under discussion for some time since 2016, the petroleum ministry recently told a parliamentary panel that this could be “strategically a better option” that would require “detailed” deliberations, the persons said, requesting anonymity.

Replying to a query raised by the parliamentary standing committee on whether bringing the department of petrochemicals under the ministry of petroleum and natural gas (P&NG) would lead to better synergy in implementation of petrochemical integration projects in refineries, the oil ministry said: “Yes.”

“Therefore, bringing Department of Petrochemicals under the Ministry of P&NG will be strategically a better option as it will bring better synergy in planning and implementation of petrochemical units to meet ever growing import and self-sufficiency in petrochemical,” the committee’s report dated March 23, 2023 said, quoting the ministry of petroleum and natural gas (MoPNG).

Spokespersons in the ministry of petroleum and natural gas, the ministry of chemicals and fertilisers and the cabinet secretariat did not respond to an email query on this matter.

According to an industry report, the global chemicals market was estimated to be around $4 trillion in 2021, where India’s contribution was just $190 billion, with tremendous potential of growth with the right policy push such as a production-linked incentive (PLI) scheme. Petrochemicals are the largest sub-segment of the chemicals market. Commodity polymer and fibre intermediates are the major segments comprising almost 80% of the total petrochemical demand in India.

While the oil ministry underscored the importance of synergy between petroleum and petrochemicals, it, however, told the committee that “this needs a detailed deliberation amongst stakeholders”. In fact, the department of chemicals and petrochemicals was earlier part of the petroleum ministry and it was transferred from the ministry to the chemicals and fertilizers ministry on June 5, 1991.

“Refineries are being integrated with petrochemicals to improve their profitability and sustainability to address energy transition and substitution of conventional transportation fuels by renewable in future. Refineries are major producer of petrochemical feedstock and intermediates viz., propylene, naphtha, aromatics, PTA [purified terepthalic acid] including refinery offgases, which can also be used as feedstock…,” the ministry told the committee.

The panel also said in its report that the petrochemicals industry is one of the fastest growing industries in India with demand increasing at a compound annual growth rate (CAGR) of more than 8% in the last five years.

The committee said the petrochemicals market in India is dominated by basic petrochemicals (about 45%) in which upstream and downstream petroleum companies of the country have a large presence. Recently, ONGC commissioned the largest petrochemical plant of the country in Bharuch, Gujarat. Indian Oil Corporation is also executing several petrochemical projects to increase its present Petrochemical Industry Index of about 5% to 15% by 2030.

The committee observed that India’s petrochemicals sector has expanded since the 1990s and it is on course to becoming a major petrochemicals hub of the world.

“The OMCs [oil marketing companies] of the country have also become large, diversified and integrated. Here, the Committee feel that transfer of Petrochemicals division from the Ministry of Chemicals & Fertilizers to the Ministry of Petroleum & Natural Gas will benefit both the petroleum & petrochemicals sectors through better policy formulation and implementation and also utilizing the synergies between two sectors,” it said.

The committee, therefore, asked the petroleum ministry to examine the expediency of transfer of petrochemical divisions from the ministry of chemicals and fertilisers to the ministry of petroleum and natural gas, the people mentioned above said.