Chemicals under BIS: A Double-edged Sword?
The Department of Chemicals and Petrochemicals (DCPC) and the Ministry of Chemicals and Fertilizers, Government of India, has been enforcing mandatory standards for chemicals and petrochemicals through the Bureau of Indian Standards (BIS). Minister of State for Chemicals and Fertilizers, Anupriya Patel, stated that this initiative aims to safeguard human, animal, and plant health, ensure environmental safety, and enhance national security.
To date, the DCPC has notified 72 Quality Control Orders (QCOs) for chemicals and petrochemicals. Out of these, 41 have been implemented, while the remaining 31 have been extended. Additionally, the Ministry of Agriculture & Farmers’ Welfare regulates insecticides under the Insecticides Act, 1968, and the Ministry of Environment, Forest and Climate Change oversees hazardous chemicals through the Manufacture, Storage and Import of Hazardous Chemicals Rules, 1989, and the Chemical Accident Emergency Planning, Preparedness, and Response Rules, 1996.
India’s reliance on foreign goods, particularly from China, has been significant due to the lack of diverse domestic standards. However, the implementation of stringent standards has had a notable impact. For example, in the toy industry, QCOs prioritising high quality and local production have led to a 52 per cent decrease in toy imports from 2015 to 2023, according to data from the Department of Consumer Affairs. This illustrates how these standards can reduce dependency on foreign goods by ensuring superior quality in domestic products.
The impact of QCOs is evident in the purified terephthalic acid (PTA) industry. PTA, a crucial raw material for polyester production, has seen a significant reduction in imports from China due to stringent quality standards. India’s reliance on Chinese PTA, which peaked at nearly 1 million metric tons in 2022, has been curtailed, fostering the growth of domestic production capacities. This move aims to stabilise the market, improve quality, and reduce dependency on foreign suppliers.
However, the impact of QCOs on polyester filament yarn has been less favourable. The piecemeal implementation and extensions of QCOs for polyester filament yarn have sparked concerns among manufacturers and the weaving industry. Manufacturers worry about the inconsistent application of these standards, which disrupts supply chains and affects production efficiency. The weaving industry opposes the current QCO implementation, arguing that the standards set by the BIS are unrealistic and hamper their operations.
The textile industry recently welcomed the relaxation of mandatory QCOs for polyester fibre, filament yarn, and spun yarn imported under the Advance Authorization Scheme, export-oriented units, and special economic zone industries. According to Southern India Mills’ Association (SIMA) chairman SK Sundararaman, the QCO issued on April 15, 2021, mandated users to purchase these products only from BIS license holders, affecting textile exporters relying on specialty fibres and yarns from foreign manufacturers whose applications were pending approval.
The government’s relaxation, announced on March 11, 2024, for viscose fibre imports and extended on June 6, 2024, for polyester staple fibre, filament yarn, and spun yarn, has been a relief for the industry. These relaxations allow imports under the Advance Authorization Scheme with pre-import conditions and a reduced export obligation fulfilment period of six months, down from 18 months.
Industry leaders, including Rakesh Mehra of the Confederation of Indian Textile Industry (CITI) and Bhadresh Dodhia of the Manmade and Technical Textiles Export Promotion Council (MATEXIL), have supported these relaxations.
In summary, while the Indian government’s QCOs on chemicals like PTA are designed to improve quality and reduce dependency on imports, their fragmented implementation in the polyester filament yarn shows that fragmented implementation can start to derail things faster than to fix them. The textile industry’s example indicates that a more balanced and coherent approach to enforcing these standards could help mitigate the adverse effects on different segments of the value chain. As the government continues to expand QCOs to more chemicals, it must carefully balance enforcement to ensure these measures become a boon rather than a bane for the industry.
Trade trends over the past five years have fluctuated. Exports of major chemicals increased from 1,698,384 tonnes in FY20 to 2,642,179 tonnes in FY24, peaking at 4,626,765 tonnes in FY23. Exports of major petrochemicals decreased from 8,798,230 tonnes in FY20 to 3,850,778 tonnes in FY24, with a high of 9,334,559 tonnes in FY23. Fertiliser exports fell from 303,604 tonnes in FY20 to 154,682 tonnes in FY22, then increased to 186,148 tonnes in FY23 and 298,762 tonnes in FY24.