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"India Will Continue To Grow As a Consumer-Driven Economy"
Sudhir Shenoy, Chief Executive Officer, Dow Chemical International Private Limited (Dow India) India consumes only a tenth of chemicals, when compared with world average. For a country with 1.25 billion people, the sector was valued only at $144 billion in FY14, which shows that the market is yet to build the critical mass, even in sectors that are not feedstock dependent says Sudhir Shenoy, Chief Executive Officer, Dow Chemical International Private Limited (Dow India), as he discusses about potential Dow – DuPont merger and its impact on Indian BU, Changing Indian Specialty, Agrochemical & Textile Chemicals market scenario, Impacts of GST Bill & GOI’s Make In India Initiative in an exclusive interview with Chemical Engineering World.

As per the recent reports, Dow Chemical Co is considering a potential merger with DuPont Co. which will create a multibillion- dollar entity in India. What kind of synergies will it create in sectors such as agriculture and infrastructure & research capabilities?

How will it impact Dow's specialty chemicals business in India?

Over the last decade the chemical industry globally has been experiencing tectonic shifts in the form of complex challenges and opportunities. The impending Dow – DuPont merger is a major accelerator in Dow’s ongoing transformation. The synergies generated by this merger will have the potential to unlock significant value in a highly competitive marketplace. Overall, the transaction is expected to deliver approximately $3 billion in cost synergies with an upside of approximately $1 billion expected from growth synergies. The merger would entail setting up of three independent publicly traded companies in Agriculture, Material Sciences, and Specialty Products respectively.

These companies will have powerful innovation capabilities, enhanced global scale and product portfolios, focused capital allocation, and a distinct competitive position. Their growth prospects are outlined as follows:

Agriculture: will have the most comprehensive and diverse portfolio with exceptional growth opportunities in the near, mid and long-term. The complementary offerings of Dow-DuPont will provide growers across geographies with a broad portfolio of solutions to enhance farmer productivity and prosperity

Material Sciences: The complementary capabilities will create a low-cost, innovation-driven leader that can provide solutions in packaging, transportation, and infrastructure, among others. The newly developed entity will be pure-play industrial leader and will merge Dow's material science portfolio (except electronic materials) with DuPont's strengths in performance materials.

Specialty Products: This division will focus on unique businesses that are innovation and technology intensive, and share similar investment characteristics. These businesses will bring together DuPont's divisions of nutrition & health, industrial biosciences, safety & protection and electronics & communications, with Dow's electronic materials business.

Post the merger, Dow India, in its refreshed form, will continue to focus on material sciences. With added strengths from DuPont and Dow Corning, not only will we have an enlarged footprint but also an expansive product and solution portfolio. I am looking forward to eventful years ahead of us.

As per reports, India is the seventh largest player in the chemical business in the world. It is forecasted that India would become the fourth largest chemical consumer in the world by 2025. In your view how fast is the Indian market evolving compared to global market?
How competitive are Indian chemical manufacturers compared to their foreign counterparts?

What are the opportunities for domestic manufacturer in evolving Indian market as well in matured international markets? How important is sustainability in this equation?

What are the challenges for domestic manufacturer in evolving Indian market as well in matured international markets? What are the risks and how will those be minimized?

In the coming years, India will continue to grow as a consumer-driven economy. With it strengthening its position as the manufacturing capital for valued goods, the GDP is expected to grow at 7.5 to 8 per cent over the next three years. To support this growth trajectory, the current government has launched some critical missions to enhance manufacturing, sanitation, and liveability.

Given that the chemical industry by nature is the toolbox enabling sustainable products and processes, it can play a major role in making India a global manufacturing hub. The chemical industry typically grows at one and half to two times the GDP, and is projected to grow at 12-15 per cent p.a.

How demonetization will impact India's and chemical segment’s growth prospects is yet to be seen. With a surgical strike on black money, in the short term, the move may soften the growth prospects across industries. However, in the long term, it will only lead to higher transparency and trust in doing business in India.

India consumes only a tenth of chemicals, when compared with world average. For a country with 1.25 bn people, the sector was valued only at $144 bn in FY14, which shows that the market is yet to build the critical mass, even in sectors that are not feedstock dependent. On the other hand, the chemical industry in India is very fragmented and without economies of scale, it would be difficult for smaller players to remain competitive.

Like other emerging economies, India continues to face challenges in the form of lack of energy, infrastructure, and resource management. While we need to address these challenges, we also need to focus on investing in R&D, IPR and establishing operational standards for self-governance.

On the positive side, the industry is taking proactive steps in embedding sustainability in part of its DNA. This is evident by increasing sophistication and adoption of global standards in sourcing, manufacturing and continuous innovation in product offerings. Focused centres of research excellence driven towards reducing the environmental impact have also been set up.

Overall, I see the sector increasingly moving from a commodity player to a value based solutions provider. This upward integration will help both big as well as smaller players by creating more avenues to foster higher collaboration across the value chain.

As per recent reports, Indian Textile Chemicals market in India will be worth US $2.5 billion by 2021. According to you, what are the key growth drivers that have & will accelerate the projected growth?

What role has Industrialization, surging consumption of textiles in engineered products and rapidly rising awareness about the benefits of using textile chemicals played in the development of Indian Textile Chemicals Market?

On the macroeconomic front, India is one of the fastest growing consumer economies in the world, with a perceptible rise in disposable income. With the sector opening up for 100% FDI in textiles and retail, more international players and technological knowhow are expected to make inroads into the country.

The competitive advantage India has over many countries is a steady flow of skilled workforce in the sector. Textiles is the second largest employer after agriculture, and increase in both labour and capital availability, has enabled India to be the 2nd largest cotton and polyester producer in the world.

Increasing number of leading players is establishing their presence in India. Alongside promoting healthy competition, it has also developed a more organized ecosystem that supports this growth. Today, India has a wellestablished distribution trajectory that feeds into constant demand generation in form of exports. Rapid development of the sector has further led to increase in stewardship practices such as safe and environmental friendly practices and adherence to the EHS norms.

With push under 'Make in India', textiles are expected to grow at an annualised rate of 13% per annum over a 10-year period. The growth could be two-fold:
  • Deepen niche in traditional avenues such as apparel, garments, handicrafts
  • Diversify into newer high value add products such as air bags and wearable technologies (both electronic and medical)
Both these paths have immense export potential and can further strengthen India’s position as a textile ‘solution’ provider on the global map. To support this, the government has announced a slew of measures such as reduction in custom and excise duty, setting up of Technology Upgradation Fund Scheme (TUFS), and Integrated Textile Parks. These, among other measures will make textiles more According to Tata Strategic Management Group report on “Next generation Indian agriculture: Role of crop protection solutions’, Indian agrochemicals market is expected to reach $6.3 billion by FY20. In your opinion, what would be the key growth drivers, opportunities, challenges and strategies to reach these numbers.

The Indian Agriculture sector has been facing critical challenges, thus causing an imbalance in the country's food chain. How Agrochemicals can play a significant role in overcoming this imbalance?

The Indian Crop protection industry is growing at a healthy growth rate of above 8% p.a. and nearly half of Indian crop protection industry output is exported. Having a strong cost advantage; India will continue to be a major supplier to the quality conscious global markets for generic products, provided we enhance investments in R&D and regulatory expertise.

The demand for crop protection products is driven largely by food needs of an eversurging population, which in turn highlights the need for productivity enhancement. In the backdrop of declining resources and climate change, intensive agriculture practices that involve sustainable and safe modern technologies (modern irrigation, efficient germplasm & other crop protection solutions) have become important. It is equally critical to arrest losses caused by pest damage during and after harvest.

To counter the adverse perception around the crop protection industry, regulatory bodies, government, industry, and academia need to join hands. Product stewardship, judicious use of solutions, and freedom from spurious pesticides should be stringently driven. The industry and its key players need to proactively engage and communicate better with stakeholders to build trust and promote goodwill.

Please talk about innovation and R&D portfolio of Dow India and what roles will its operations in India play in the global R&D strategy? Please share insights into plan on expanding R&D centres in direction of same?
The government has consistently emphasized use of science and technology to advance precision, productivity and sustainability. The impetus on developing infrastructure to support industrialization and making Indian cities smart and digitally enabled are important indicators of the 'change within'.

Dow India's aggressive investment in R&D programs and capacity building, along with collaborating with academia, think tanks and industry are directed towards establishing India as a priority market. Our India R&D vision is to continue to grow and establish a fully integrated global centre of excellence, including technical service, application development and research capabilities that accelerate delivery of a market aligned technology portfolio. Major developments are unfolding in this space, and we will share details in due course of time.

Your thoughts on Goods & Service Tax Bill?
Once implemented, GST will affect all aspects of business in India, from decisions on investment location and product pricing to logistics and supply chain optimization. It will be a crucial reform that facilitates India’s development trajectory. As a ripple effect, it is also likely to have an impact on India's international trade by promoting ease of doing business.

GST implementation will go a long way in addressing India's perception of a challenging investment environment, laden with a complicated tax system since a myriad of existing central, state and interstate levies had previously increased tax burdens. The rollout will act as a major boost to India's appeal to attract investments from multinationals and will add momentum to growth of the Indian economy.

For a long time, Indian manufacturers have complained about the inverted duty structure, which has been an impediment in improving industry competitiveness. With the passage of GST bill, we are expected to move towards a one nation one tax regime, which will further bring down costs in the manufacturing sector - thus making it more competitive in the global arena.

Please share your thoughts on GOI’s Make in India initiative?
While ‘Make in India’ for consumption in India is a huge opportunity to take India to the next level in manufacturing, it needs to provide enough impetus for ‘Make in India’ to export. We need to make manufacturing more cost-effective; more importantly we need to make it compliant to global standards, whether in quality, resource utilization, safety or minimizing environment impact.

To enable 'Make in India', we need efficient, sustainable technology and innovative product applications that can build scale and ramp up production faster, yet in a sustainable, resource efficient way. Right now, regulatory hindrances are a challenge in technology transfer to India - we need stronger on-ground enablers like infrastructure and water, cleaner and faster permissions as well as globally comparable IP protection and other law enforcement.

Over the previous year, there have been significant announcements of investment by various countries in automotive, pharma, public health and infrastructure sectors. This directly translates into growing opportunities for Dow materials and technology. If 'Make in India' and other similar initiatives address some of the aforementioned issues, newer technologies and product applications will come to India much sooner. Other factors to consider in making India a manufacturing hub are feedstock availability, cost positioning and access to strong logistics.

What are the future plans of the company in India?
Having been in India for many years, we are positive about the growth prospects in the region. Our focus is on customer connect and local innovation has helped us cross the significant milestone of US $ 1 billion revenue in 2014 and 2015 and we are looking to double our growth in the coming years. We have evolved into being a partner to our customers; by creating and providing solutions that reflect deep understanding of our customer's business.

Our most pertinent growth enablers will be Sadara and our Application Development and Technology Centre (ADTC).

Sadara Chemical Complex, a $20 Billion project is our joint venture with Saudi Aramco and will house 26 different plants. India will benefit not only from feedstock integration, but also from consistent supply of products, in-market commercial-supply capabilities and resources. In addition to this, establishment of the Application Development and Technology Center (ADTC) will help provide application development support to other regions, making India the hub of our innovative solutions.

So far our mainstay industries have been infrastructure, transportation, consumerism, energy, health, plastics and water. Alongside these developments, a focused push towards home and personal care, pharma and food solutions, and microbial control will help us generate more value. Synergizing strengths in our post-merger era will set us on a definitive growth path.