Chemical Parks Scheme to Boost India’s Chemical Manufacturing

The Union Budget 2026–27 has proposed the establishment of three dedicated Chemical Parks through a challenge-based selection mechanism.

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Chemical Sector in India

• Global Position: India ranks as the sixth-largest chemical producer globally and third in Asia.
• Economic Contribution: The chemical sector contributes about 7% to national GDP and 8.1% of manufacturing Gross Value Added (FY24) (ES 2025–26).
• Production Trends: Production of major chemicals and petrochemicals increased from 45,638 thousand metric tonnes in FY16 to 58,617 thousand metric tonnes in FY25, registering a CAGR of 2.8%.
• Sectoral Strength: India manufactures over 80,000 chemical products, spanning bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers, and fertilisers, with specialty chemicals emerging as a sustained area of strength.
• Current Market Size: India’s chemical industry was valued at approximately ₹21.5 lakh crore (US$ 250 billion) in 2024.
• Strategic Advantage: India’s position as the 4th largest agrochemical producer and a global hub for dyestuffs strengthens its prospects as a high-value chemical manufacturing centre.
• Investment Growth: FDI inflows into the chemicals sector (excluding fertilisers) exceeded ₹1.42 lakh crore by FY25, with total industry investments estimated at ₹8 lakh crore by 2025.

Key Announcements in Union Budget 2026–27

• Chemical Parks Scheme: A new scheme has been introduced to assist States in setting up three Chemical Parks through a challenge-based selection mechanism
• Budgetary Support: An allocation of ₹600 crore in BE FY 2026–27, marking the first instance of dedicated budgetary support for chemical park infrastructure.
• Objective: To strengthen domestic chemical manufacturing, enhance supply-chain integration, and reduce import dependence

Rationale for Chemical Parks

• Cluster-Based Development: Builds on India’s experience with Plastic Parks, Bulk Drug Parks, and Petroleum, Chemicals, and Petrochemical Investment Regions (PCPIRs), which have demonstrated the benefits of shared infrastructure and coordinated planning.
• Value Chain Coverage: Envisaged to cover bulk chemicals, specialty chemicals, and downstream segments, offering a more integrated approach across the chemical value chain
• Cost & Efficiency Gains: Shared logistics, utilities, and testing facilities are expected to lower capital costs and improve operational efficiency.
• Export Competitiveness: Integrated ecosystems will strengthen India’s position in global chemical value chains, especially in specialty chemicals

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Policy Support and Institutional Framework for Chemical Sector

• Infrastructure Expansion: Major investments such as Paradip port-based chemical infrastructure and large oil and chemical projects are strengthening industrial capacity and job creation.
• Policy and Incentive Support: Initiatives like the National Chemical Policy, Green Chemistry Programme, PLI schemes, and CIPET development support innovation, skills, and sustainability.
• NITI Aayog Proposals: NITI Aayog recommends world-class chemical hubs, port-based clusters, faster environmental clearances, targeted FTAs, and enhanced R&D funding.
• Green Hydrogen Mission: The National Green Hydrogen Mission supports chemical sector decarbonisation with a target of 5 MMT annual capacity by 2030, saving fossil fuel imports and reducing emissions.
• Foreign Direct Investment Liberalisation: The chemicals sector permits 100% FDI under the automatic route, except for hazardous chemicals.
• Quality Control and Import Regulation: The government has mandated BIS-like certification for imported chemicals to prevent the dumping of cheap, substandard, and unsafe chemical products into the domestic market.

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