"Consumer Awareness Can Drive the Speciality Chemical Industry in India"

Prakash Raman,
Country Manager (India) MD, Solvay Speciality India Pvt Ltd
Chemical Industry in India needs to strengthen and streamline application development programmes. It needs to innovate and develop customised solutions to meet the demand of the end -user market which - as far as speciality chemical manufacturers are concerned – is still small, scattered and in the nascent stage, believe Prakash Raman Country Manager (India) and Managing Director, Solvay Speciality India Pvt Ltd. In an exclusive interaction with Mittravinda Ranjan and Harshal Y Desai, he further highlights the need to have industry -consumer interaction and suggests measures to tap the mega trends.

How can speciality chemical industry in India accelerate the growth?
India has got certain inherent strengths; however, there are some elements which are not very positive including the availability of key feedstock. Rather than focussing on low value commodity chemicals, we should start focussing on the areas where we can add value, especially in downstream business and enhance application development programmes. India has got the technological edge and can perform remarkably well in these segments. Speciality chemicals, speciality polymers and organic chemistry are the areas that must be paid attention to. It’s time industry focussed on some of the megatrends which require chemical industry to develop innovative solutions that are India-specific. Let us consider an example of mobile electronics; the Indian market size is very attractive, but unfortunately no manufacturing activity takes place in the country to cater to this market.

It is a fact that contribution of speciality chemicals is still nascent; however, the contribution has grown significantly in the last few years. I strongly feel that we have got the potential and can grow to a size of about USD 100 billion in future. It is quite possible, but there are couple of issues that need to be addressed. First, we need strong regulatory support, and second, speciality chemical industry needs to spread awareness about the new solutions among the consumers.

The awareness today is very low. For example, the industry has innovative solutions for automotive and construction industry, but not many consumers are aware of these solutions. The consumption of speciality chemicals, compared even to the developing market, is about one-fourth. How many of the users actually know that the use of speciality polymers and other chemicals can help them build a safe and sustainable structure which can help them save lot of money in long term, and how it can help roads to be safer and long-lasting.

So, the value speciality chemicals offer is humongous, but we need a delivery mechanism that can spread the awareness about the advantages and convince the people to invest in new technologies. The scenario is no different for automotive market. We do not have any regulatory requirement for a minimum mileage. How many of the consumers know that the largest selling models of cars in India failed to pass the crash tests? But when these companies export the same models, they use completely different parameters.

Here the point is that the automotive companies should face the incremental cost to save the life of the passengers. The use of speciality material can help car manufactures reduce the wait of the car thus allowing consumer to save on fuels. You must be surprised to know that we don’t use the polymer fuel tanks in India which are more efficient, safer and light in weight. Why it is not happening? Well, it is not happening because the adoption of technology with the Original Equipment Manufacturers (OEM) is not that strong. All these facts need to be communicated to the consumers by the industry.

Isn’t the process of communicating these things to consumers difficult?
Yes, it is and it is indeed a challenging area, but if we have a common body which includes members from the government, industry and the consumer, these issues can be addressed. A regulatory body can push this initiative. We need minimum standards - minimum mileage standards which should be followed religiously. California has already come out with such policies. And for a country like India which is dependent on imports for fuel, these standards are more crucial. Once the consumption goes up, the demand for speciality chemicals can increase multifold, and thus the industry can easily attain the goal of growing to the size of USD 100 billion.

How can the industry make the 'Make in India' initiative successful?
I lead the Chemical Sector innovation committee constituted by Federation of Indian Chambers of Commerce and Industry (FICCI). This committee is making an effort to track the mega trends that are evolving in India. Food, energy, infrastructure, water and health are some of the trends that we have identified. We have also identified the implications and the ideas to address those implications.

Let us first talk about the food industry, where we have already improved the productivity and supply-chain mechanism in recent few years; however, there is still a lot to be addressed. Chemical industry can offer innovative solutions to improve the shelf life of the fruits and vegetables before they reach the consumer. If we can start working on these technologies, we can do a lot of value additions to address this mega trend. We should be working on technologies that are India-specific and bring a commercial value proposition to the manufacturers. We should incentivise the manufactures so that they accelerate the pace of research and come out with affordable solutions.

Water and health are the other two major megatrends. Today, we have huge requirement for fresh water and the key element that is used to desalinate or purify the water is membrane, which is manufactured by the chemical industry, but, unfortunately, there is not a single unit manufacturing membranes in India. There are immense opportunities in health segment as well. We are going to be the diabetic capital of the world very soon. A larger number of people will require blood transfusion and it will require a huge quantity of affordable membranes. This is an area where chemical industry can offer a solution. Innovations in this area will not only benefit consumers, but it will also be a viable business proposition for the manufactures. Blood dialysis today is an expensive process and chemical industry can come out with solutions which are cost effective. These are the areas that we as a part of the committee are working on. You need to manufacture the solution in India as you cannot rely on import for long. So, in order to make the ‘Make in India’ initiative successful in India, you need to incentivise the manufacturers and have policies that support the research and development within the country.

What is the role speciality chemical manufacturers can play?
Well! It is the speciality chemical industry the innovative solutions have to come from. The industry needs to analyse the megatrends, the issues hindering the growth of the niche market, and make sincere efforts to nurture and develop solution within the country. Unfortunately, we are not spending enough money on R & D. We are focussed on short term business opportunities and in addressing low value addition exports business. Speciality chemicals play a crucial role not only in expanding manufacturing capacities but also in creating value addition. The value addition in speciality chemicals is anywhere between 4 to 10 times than that of commodity chemicals which means you produce less and add lot of value.

We need to focus on building the value chain for domestic market that will be much more sustainable. We should explore options where we can source cheap feedstock from China or other locations and then do the value additions here in India.

Will you please comment on the R & D capabilities of Solvay?
Solvay has sizeable presence in India. We have a team of about 750 professionals in the country. In 2013 Solvay India had approximately 230 million euro revenue, and we have the ambition and road map to more than double it in the next three years, Solvay in India will continue to look for both organic and inorganic growth opportunities. Our growth in India is through strategic mergers and acquisitions, the acquisition of Gharda's polymer unit being the first of them. The Gharda acquisition has been one of the most positive experiences for Solvay as after the acquisition the company could manufacture polymers for top of the pyramid of polymer chemistry. These polymers are used for high-end applications in healthcare, industrial and electric and mobile electronics sector. However, most of the material manufactured is supplied to US and Europe. This is one example that exhibits the capability of engineers and scientists who manufactures this advanced material meeting requirement of overseas market. We have lot of confidence on Indian strength in R & D and technical capabilities, and to leverage that we have established Solvay's global R & D centre in Salvi, Vadodara which currently employs around 50 high quality scientists working on global research programmes. The centre, when it would be fully operational in the coming few years, can host upto 200 scientists.

Many companies have established their R & D and innovation centres in India, which clearly show their faith in Indian talent. But are we innovating for India at these centres?
Even though we continue to pursue on global innovation, there is still immense scope and opportunity for India specific Innovation to cater to the emerging needs of Indian consumers. All the chemical companies need to enhance its reach to Indian masses which is possible mainly through innovation And once we develop products specific for Indian requirement, we can also export them to other countries after due modification. There is a strong perception among the masses that speciality chemical only meet the requirement of the top of the Pyramid , which is not true. We need to change this perception and innovate products that can meet the requirement of middle or the bottom of the pyramid. Currently market attractiveness for speciality chemical manufacturers in India is low because the market is small and fragmented. As I talked about earlier, we need regulatory support to enhance and accelerate the consumption standards which are very low even compared to developing countries.

We have reasonable demand for most of the advanced applications, but still the production is not happening in India. The end-market for Automobile - Luxury Cars/SUVs, Smart Devices, Advance Electronics ie, semiconductors are the three areas which are expected to grow at a CAGR of approximately 15, 15 and 10 percent, respectively, but the end-market domestic production is zero . Pharma and Food Packaging is the only market where domestic production is significantly higher than domestic demand.

Which markets the products are supplied into in majority – domestic or international - from your Salvi unit? How are you increasing your presence in India?
Our growth strategy in India goes hand in hand with our global strategy.. Solvay is continuously looking for opportunities to expand its manufacturing base in India so that it can increase its share for the domestic market. We are committed to have a strong network of distributor in the country and have a larger market development team. Solvay has recently hired a strategic marketing professional to focus specifically on India by identifying key market segment where Solvay can take the lead. Being a major and meaningful player in speciality chemical market in India has always been our goal and hence we are committed to make India as one of our manufacturing hub. We have world class technology in our manufacturing units in India. Our waste water management system at Panoli site is the best among similar systems installed at other manufacturing units of Solvay across the world.

Quicker environment clearances mechanism and easy availability of raw materials is something that will further encourage us to invest more in the country.

What is the kind of infrastructure we need to have in place to give boost to speciality chemical manufacturing in India?
We need to increase capacities to manage liquids - both hazardous and non -hazardous - at ports. We have only one chemical port which is already overcrowded. Better road infrastructure is another element that can improve the supply chain operations. We need to move chemicals in much safer manner. Chemical industry is already perceived to be dangerous and hazardous and we cannot simply afford to mar its reputation further by ignoring proper emergency measures. We are active member of a new initiative 'Nicer Globe' started by Indian Chemical Council (ICC) to monitor truck carrying hazardous chemicals. Under this initiative we train respective staff on how to handle emergency situations and have better emergency preparedness and response.

How can we improve the image of chemical Industry?
It is a time-consuming process and needs to be started at school level. It is very sad that not many students like to pursue career in chemistry. There are lot of opportunities and we will need thousands and lakhs of chemical engineers in future. Modern human life is all about chemistry and this fact needs to be explained to the masses. So, we need more and more outreach programme to educate people. Almost all established chemical companies through their Corporate Social Responsibility (CSR) are already spreading the awareness. But in India the problem is that the chemical industry is not organised. It is still dominated by small and medium scale manufacturers, which usually do not follow the compliances to the tee. If we have proper chemical clusters, the issue of Health, Safety and Environment (HSE) can be addressed successfully to a great extent. A common facility will always help in streamlining the chemical manufacturing process as a whole.

One bad incident puts question mark on entire industry. You will be surprised to know that contemporary polymer plants are much more sophisticated and advanced in terms of technology than several electronic units, but still they are considered as 'dangerous chemical units'.

What are your plans for future?
Specialty polymers, specialty surfactans, healthcare, automotive, food and beverages industry are some of the area where Solvay will keep focusing upon . We intend to become a 500 million USD company over the next 3-5 years which will come through organic as well as inorganic growth and will continue to develop innovative solutions through chemistries.