Chemical Parks Scheme to Boost India’s Chemical Manufacturing

6 Feb 2026

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.

What are Chemical Parks?

  • Definition: Chemical parks are planned industrial clusters explicitly designed for chemical and petrochemical manufacturing, where multiple units operate together.
  • Core Feature: They provide world-class shared infrastructure, common utilities, logistics support, and coordinated regulatory facilitation within a single location.
  • Infrastructure: Chemical parks typically include common environmental and safety infrastructure, such as
    • Central Effluent Treatment Plants (CETPs)
    • Hazardous waste management facilities
    • Common utilities for safe handling and storage of chemicals

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.

Chemical Parks Scheme

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

Existing Cluster-Based Schemes

  • Plastic Parks Scheme: Launched in 2013–14 to consolidate the plastic processing industry, with central grants up to 50% of project cost (capped at ₹40 crore per park).
    • Ten Plastic Parks have been approved across States including Assam, Odisha, Tamil Nadu, and Uttar Pradesh.
  • Bulk Drug Parks Scheme: Launched in 2020 with an outlay of ₹3,000 crore to establish three Bulk Drug Parks in Gujarat, Himachal Pradesh, and Andhra Pradesh.
    • Focuses on common infrastructure such as Central Effluent Treatment Plant(s) (CETP), solvent recovery systems, power and water utilities, and advanced testing facilities.
  • PCPIRs: Petroleum, Chemicals and Petrochemical Investment Regions are large, integrated investment regions located in Visakhapatnam (Andhra Pradesh), Dahej (Gujarat), and Paradeep (Odisha).

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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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Comprehensive coverage with a concise format
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Designed as per recent trends of Prelims questions
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