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Bimal Goculdas
MD & CEO
DMCC Specialty Chemicals
In this exclusive interview, we have the privilege of speaking with Bimal Goculdas, MD & CEO, DMCC Specialty Chemicals about the Indian chemical sector’s journey toward achieving net-zero targets. He sheds light on the necessary measures and investments required to reduce Scope I and II emissions, as well as the company’s role in the global markets following their sustainability initiatives. He also addresses the recent drop in revenues and provides insights into current investments and future plans.
India’s commitment to achieving net zero by 2070 provides a considerable timeline, but it will require strong political will to drive the necessary changes within the chemical industry. Mere goodwill won’t be enough to accomplish this goal. Therefore, it becomes imperative to introduce monetary incentives, necessitating robust political determination to implement policies similar to the Carbon Tax imposed by the European Union. A viable approach would involve offering premium prices for low-carbon products, thereby making customers bear the cost while benefiting from lower taxes or facing penalties for purchasing high-carbon supplies. By penalizing companies with high carbon footprints and incentivizing those employing cleaner processes throughout the value chain, manufacturers will be encouraged to invest in sustainable practices.
There are several steps the industry can take internally, starting with transitioning to renewable energy sources like solar and wind power. In addition to procuring clean energy, manufacturers can adopt technical measures to enhance energy efficiency.
For instance, converting batch processes to continuous operations would lead to significant improvements in power consumption and substantial reductions in carbon emissions. The transportation system for chemical goods in India is currently highly inefficient, with trucks spending significant time on the roads to transport raw materials and finished products.
The government is actively promoting the use of efficient trucks, and infrastructure development efforts led by Mr. Gadkari are unprecedented. Leveraging the country’s extensive railway network can play a crucial role in improving transportation efficiency. By reducing reliance on trucks and shifting to railway transport, not only can efficiency be enhanced, but it also proves to be a more cost-effective option. Currently, the facility for loading trucks onto trains and offloading them at the destination is only available for routes between Kolar and Mangalore or Cochin. Despite having a 4000-kilometer coastline, India lacks efficient coastal transportation for chemicals or a comprehensive roll-on-roll-off system for railway wagons. Enhancing multimodal connectivity through road, rail, and waterways can serve as a game changer in improving overall efficiency and sustainability within the chemical industry.
At DMCC Specialty Chemicals, our journey towards carbon neutrality has been a gradual process, undertaken over a period of time. Our goal is to achieve carbon neutrality by the end of this year. Rather than relying on a single big project, we have implemented a combination of small and large initiatives to improve our process and energy efficiencies. While it is challenging to provide an exact figure for the investments made, we have consistently invested in projects to drive sustainability. One of the key steps we have taken is transitioning most of our processes to continuous operations.
This shift has not only improved our energy efficiency but has also allowed us to produce even smaller volume products more efficiently. Additionally, we have made significant use of solar & wind energy as a major part of our energy input. Furthermore, we are currently focused on enhancing our power generation from waste heat. This initiative aims to reduce our reliance on the grid by 90%, leading to a significant reduction in our carbon energy footprint and operational costs. The high costs associated with electricity in the industrial sector make this investment particularly valuable.
By investing in steam pipelines at both our manufacturing units in Dahej and Roha, we have substantially improved steam utilization efficiency, which has not only benefited us but also neighboring units by reducing fuel consumption. Through these measures and investments, we are committed to achieving carbon neutrality and contributing to a more sustainable future.
Following the implementation of these initiatives, DMCC should be regarded as a prominent player in the global markets, particularly as a premium supplier of carbon-neutral or low-carbon goods compared to our competitors. Although we may not currently enjoy a competitive advantage due to the absence of enforceable laws, it is crucial to note that such regulations will inevitably come into effect.
As governments and international bodies increasingly prioritize sustainability and carbon neutrality, DMCC’s proactive approach places us in a favorable position to meet future requirements and market demands. By aligning our operations with environmentally conscious practices and offering carbon-neutral or low-carbon products, we anticipate gaining a competitive edge as regulatory frameworks become more stringent. Our commitment to sustainability and the investments made towards achieving carbon neutrality not only demonstrate our dedication to environmental responsibility but also position DMCC as a trusted partner for customers seeking sustainable solutions. As global markets shift towards a greener and more conscious economy, we are poised to capitalize on the growing demand for environmentally friendly products and services.
While the current market advantage may be limited, we firmly believe that DMCC’s proactive initiatives position us favorably for future developments in global markets. By being a supplier of carbon-neutral and low-carbon goods, we are well-prepared to meet upcoming regulatory requirements and cater to the increasing demand for sustainable products.
After experiencing strong revenue growth in FY 2022, the group faced a decline in revenues in the subsequent year. This drop can be attributed to various factors. Firstly, in July-August 2022, there was a significant decrease in commodity prices, leading to a sharp decline of approximately 65% in terms of previous values. This resulted in a drop in revenue during the July-September quarter. On the market front, the group witnessed a reasonably good first quarter. However, during the second quarter, there was a noticeable deferral of shipments, primarily driven by the prevailing uncertainty in Europe.
The high energy prices in Europe and a general reduction in stock by businesses caused disruptions throughout the supply chain. Consequently, the demand for products decreased, creating panic among producers, which further led to price reductions. The group’s bulk chemicals business, which deals with commodities such as dyes and intermediates for textiles, particularly struggled, impacting the overall offtake. Moreover, in October, a planned maintenance shutdown of a plant took place, which occurs every one and a half years.
This not only increased maintenance costs but also had an adverse effect on revenues. During the October-December quarter, the market conditions remained weak. Customers across various sectors lacked product visibility and therefore refrained from placing orders for raw materials, resulting in reduced volumes for the group. These factors collectively contributed to the decline in revenues after a period of strong growth in FY 2022. The group faced challenges arising from fluctuations in commodity prices, uncertainty in the European market, disruptions in the supply chain, and a decrease in customer demand.
Regarding our projects and internal operations, we are pleased to announce the successful completion of all our planned capital expenditures (Capex). Our brownfield Sulphuric acid plant in Dahej is now operational, and in the latter part of the quarter, we also completed the construction of our specialty chemical plant in Dahej. We are excited to begin the process of ramping up production at this plant over the coming quarters. While there may initially be a higher focus on commodities, we anticipate that over time, the product mix will balance out, with approximately one-third being commodities and two-thirds being specialties. We have made significant value additions to our sulfone products, which are performing reasonably well and have been launched in the market.
However, due to the global slowdown, we have yet to witness the full impact of these additions. Currently, we are producing smaller volumes of three products from our multipurpose plant, but we expect them to contribute positively to our bottom line. Although we are unable to disclose specific product names, we continue to produce sulfonation and chloro-sulfonation based products in our expanding production at the Dahej facility. In the Indian market, the annual demand for Boron spans various industries, including glass, ceramics, pharmaceuticals, fertilizers, steel, brass, precious metals, and refining. Unfortunately, India does not have Boron mineral reserves, necessitating imports of boric acid from the US, Turkey, or South America for the production of Boron specialties. Recently, there have been restrictions imposed on boric acid imports, posing challenges for our operations.
As the availability of the main raw material is limited, we are considering expanding our boric acid production. However, we acknowledge that this expansion may not be globally competitive. This aspect of our business is currently under review, and a decision is yet to be made. Overall, our projects have progressed well, and we have achieved important milestones in expanding our production capabilities. We are optimistic about the potential of our specialty chemical plant, and while challenges exist in certain areas, we continue to explore strategies to overcome them and drive growth in our business. multipurpose plants and are now
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