Union Budget 2021 Highlights: Petroleum and Pharma Sectors get a Thumbs Up

As the finance minister Nirmala Sitharaman rolled out the Union Budget 2021-2022 on Monday, the chemicals and petrochemicals industry counted on the key sectoral gains that the Indian government assures.

Mentioning its key initiatives for the growth of the petroleum and natural gas industry, the government of India announced extension of the Pradhan Mantri Ujjwala Yojana aimed at promoting the consumption of LPG fuel in the Indian households. Extension of the scheme which has already benefitted 8 crore households, will now aim to cover 1 crore more beneficiaries, as mentioned by the finance minister in her Budget speech. Moreover, the government has assured to add 100 more districts to the City Gas Distribution (CGD) Network in the next three years. The CGD scheme will support the expansion of downstream LNG business to wide ranging consumers spread across the domestic, industrial, transport and commercial sectors.

Giving a major boost to the idea of connecting the union territory of Jammu and Kashmir to the Natural Gas grid, the government has also announced its plan to lay a gas pipeline in the difficult terrains of the state. Another major announcement is of setting up an Independent Gas Transport System Operator. As planned, the operator will facilitate and coordinate the booking of common carrier capacity in all-Natural Gas pipelines by any entity on a non-discriminatory, open access basis. The move would undoubtedly benefit the gas marketers across the country.

The Budget 2021-2022 has undoubtedly provided a nearly 200 percent boost to the Indian pharmaceutical sector as the government sets aside INR 124.42 crore for initiatives aimed at the development of the industry. The big push for the pharma sector is being seen as an attempt to discourage the import of raw materials (such as Aniline) from China that are widely used in local drug manufacturing. The move, along with the production-linked incentives (PLI) is aimed to promote domestic manufacturing of Active Pharmaceutical Ingredients (APIs) and other key drug intermediates as the country’s at least 60% of API requirements are sourced from China.

However, with the government’s strong focus on making India a manufacturing hub and boost ease of doing business for setting up new projects, the Indian chemical players are also seeking CAPEX based incentives and revision in the current duty structures to foster fresh investments in capacity additions. The domestic manufacturers of alkali chemicals are seeking government intervention towards raising the import duty over the bulk chemicals (like Cautsic Soda and Soda Ash) while the Pesticides Manufacturers and Formulators Association of India (PMFAI) is seeking a relaxation in GST rates from the existing 18% to a lower percentage over the agriculture inputs to promote the sectoral growth.

As per ChemAnalyst,” The Union Budget came at a time when the Indian economy is steadily recovering from the pandemic-induced slowdown. Analysts predict that the first post-pandemic budget will enable the country’s chemical and petrochemical industry to unlock its tremendous potential. Making wise use of India’s technological capabilities, skilled workforce and a strong chemical industry, it pushes the country’s massive transition from a dependent to a dependable nation in the coming years.”