Assorted regulations and the lack of any let-up in compliance burden are crippling the growth of India’s $220 billion chemical industry. Each unit in the employment-intensive sector requires to meet as many as 635 compliance requirements every month, and this is particularly stifling for the MSMEs, industry sources and analysts feel.
Rishi Agrawal, co-founder and CEO, TeamLease RegTech said, “Even understanding the compliance needs is difficult for most MSMEs. Lack of training and skilled manpower makes it more challenging for the units to comply.”
Worse, the authorities need to revise the regulatory and compliance norms frequently. “For instance, as many as 200 compliance changes were made in the last week itself, 700 in the last one month and around 1,963 in the current quarter,” Agrawal noted. “It may be relatively easy for big players to track all the necessities (regulatory compliances) because they have their own in-house teams to handle them. But for MSMEs, it really is a big challenge”, he added.
Jaimin Vasa, chairman, Gujarat Chemical Association said, “Ideally, there should be industry-specific generalised licensing, instead of different ones for regulations under the Factories Act and for health, explosives, hazardous materials, food etc.”
Compliance needs vary across states too, which makes it more difficult for the companies operating in different states.
Vasa further said, “The government should help the units to comply with the requirements by making the application process simple and clearances faster.”
According to Agrawal rent-seeking is one of the major problems when it comes to registrations and licenses required for establishing manufacturing units. “So, in order to tackle this, we need to create a controlled environment and private entrepreneurship. The rapid pace of digitalisation can help.”
The Indian chemical industry is the sixth largest industry in the world and third largest in Asia. It accounts for around 11% of the exports from the country and is projected to reach $1 trillion by 2040. It rose from the 142nd rank in 2014 to 63rd in 2019, according to the World Bank’s Ease of Doing Business Report 2021.
