Budget 2025: Chemical players hope for PLI schemes, tweaks in custom duties to tackle competition

The chemical sector is going through a period of downturn.

With the chemical sector navigating through a rough patch, industry players are pinning hopes on the upcoming Budget to deliver much-needed policy support. Key expectations include the introduction of a Production-Linked Incentive (PLI) scheme to bolster domestic manufacturing and revisions in customs duties on chemical imports, particularly from China, to curb competition and strengthen local production.

Key products like polyethylene terephthalate (PET) and polyvinyl chloride (PVC) are at the centre of these requests, as the industry looks to enhance competitiveness and protect local production.

China remains the world's largest exporter of key products, prompting industry experts to raise concerns about the growing risk of cheap imports flooding the domestic market and undermining local manufacturers.

Despite India's substantial ramp-up in domestic capacity for PET bottle-grade chips, the influx of low-cost imports, particularly from China, has undermined the competitiveness of Indian manufacturers.

As it is, the chemical industry has been hurting from a double whammy of weak demand and overcapacity due to the influx of low-cost Chinese inventory in the global markets over the past couple of years.

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Analysts at Axis Securities expect the government’s further focus on harnessing India's manufacturing capabilities to lead to a Production Linked Incentive (PLI) benefit scheme for the chemical sector.

Alternatively, other tax incentives may be introduced in chemical manufacturing hubs like Gujarat, benefiting multiple Indian chemical manufacturers, the brokerage believes. These initiatives align with broader economic tailwinds, including India’s demographic advantages, the country's capabilities in terms of quality and reliability, and the ongoing shift in manufacturing activities towards Euro+1 and China+1 strategies.

Alongside these, the industry experts also urge the government to announce PLI incentives for battery manufacturers and supporting industries, including those involved in the production of battery chemicals. According to industry stakeholders, this move will help boost the entire electric vehicle ecosystems, leading to a faster adoption.

These measures, if rolled out, can positively impact players like Ami Organics, SRF, Navin Fluorine, Deepak Nitrite and Gujarat Fluorochemicals.

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