Operation Management Final Tp | Chemical Industry | Quality Assurance







The most precious moments are those when we get an opportunity to remember and thank everyone who has in some way or the other motivated and facilitated us to achieve our goals. First of all I thank to GOD ALMIGHTY ALLAH for giving me power to pen down the term paper in its present shape. I thank the entire teaching staff especially MR. SANJAY JINDAL Lect. LSM for sharing his valuable knowledge with me & for providing her able guidance and support. I also thank to my classmate who every time helped me out and encouraged me for carrying out the task. I fall short of words to thank my family, who stood beside me while completion of my task.



OVERVIEW Chemical industry is one of the oldest industries that has contributed significantly to the industrial and economic growth of India. It is estimated that the size of the Indian chemical industry is around US$ 30 billion. Volume of production by chemical industry positions India as third largest producer in Asia (next to China and Japan) and twelfth largest in the world. The industry, comprising both small scale and large units (including MNCs), produces several thousands of products and bi-products, ranging from plastics and petrochemicals to cosmetics and toiletries. A significant share (around one-third) of production by chemical industry is consumed by itself. The chemical industry accounts for about 13% share in the manufacturing output and around 5% in total exports of the country. The chemical industry contributes around 20% of national revenue by way of various taxes and levies. The chemical industry produced around 8 million metric tonnes each of basic chemicals and basic petrochemicals, and around 10 million metric tonnes of petrochemical intermediaries in 2005-06. Gujarat is the major contributor to the basic chemical as well as petrochemical production with 54% and 59% share in all India production, respectively. Other major states producing basic chemicals include Maharashtra (9%), Tamil Nadu and Uttar Pradesh (6% each). Other major states producing petrochemicals include Maharashtra (18%), West Bengal (12%), Uttar Pradesh (4%), and Tamil Nadu (3%). India’s export of basic chemicals amounted to over US$ 7 billion in 2005-06. India exported US$ 4.85 billion worth of organic chemicals, US$ 775 million worth of inorganic chemicals, US$ 847 million worth of tanning and colouring materials, and US$ 649 million worth of pesticides, in the year 2005-06. In addition, India exported petrochemicals valued nearly US$ 4 billion. India is also an importer of basic chemicals and the import value amounted to over US$ 8 billion in 2005-06. The composition of India’s chemical imports includes organic chemicals (63%), inorganic chemicals (28%), dyes (6%) and pesticides (3%). China, USA and Saudi Arabia are the leading source countries for India’s chemical imports. In addition, India imported petrochemicals valued over US$ 2 billion. The Indian chemical industry has been receiving significant


investment intentions, including foreign direct investment (FDI). Since August 1991, and till November 2006, chemical industry has received investment proposals worth Rs.274486 crores, a share of 11.3% in total investment proposals received during this period. FDI, which is very essential for modern manufacturing of chemicals, has also been flowing into the chemical sector significantly. During the period August 1991 to October 2006, FDI inflows into the chemicals sector amounted to US$ 2.2 billion, a share of around 6% in total FDI inflows into the country.

The chemical industry in India has the potential to grow to around USD 100 billion by 2010 according to KPM s analysis based on a survey of the industry. This would imply an annual growth rate of 15.5 per cent.. At USD 100 billion, the industry s contribution to India s GDP will grow from the current 6.7 per cent to 12.1 per cent and its share of the global industry will increase from 1.9 per cent to 3.9 per cent. In order to fulfill this, the industry needs to focus on new sources of growth like the Speciality and Knowledge


segments. At the Base case, if the current growth rates are maintained, the industry is expected to grow to USD 60 billion by 2010. In that case, the industry s contribution to India s GDP would increase to 7.1 per cent and its share of the global industry would increase to 2.3 per cent. The industry Base case scenario. This study seeks to discuss the would need to seek new directions in order to achieve the incremental USD 40 billion over the drivers and imperatives for the industry s growth.

The size of the global chemical industry is estimated at approximately USD 2.4 trillion in 2007. The industry is currently under-performing due to the recession . Some of the emerging trends of the global chemical industry that can be leveraged for growth are: • increasing globalisation as growth in mature markets drives leading players to explore new developing markets; • • • • • • • consolidation to leverage economies of scale in the Basic and Knowledge segments; increasing focus on core businesses, resulting in diversified chemical and multi-product companies divesting businesses or exiting non-core product lines; cost optimisation assuming critical importance in the face of slow growth coupled with a pressure on prices due to competition; increasing investments in R&D (especially in the Speciality and Knowledge segments) to gain competitive advantage.


The major products included in this sector are: • • • Alkali- Soda Ash, Caustic soda, Liquid Chlorine, etc Inorganic- Aluminum Fluoride, Calcium Carbide, Carbon Black, Red Phosphorous, etc. Organic- Acetic acid, Methanol, Formaldehyde, Citric Acid, Chloro Methane, Ethyl Acetate, etc. • Pesticides-Pesticides/Insecticides registered under section 9(3) of the Insecticide Act 1968. • Dyes & Dye stuffs- Azo Dyes, Acid Direct Dyes, Basic Dyes, Ingrain Dyes, Oil Soluble Dyes, Sulphur Dyes, Food Colours and Other Dyes. •


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Chemical Industry is an important constituent of the Indian economy having approx. US $ 28 billion turnover which is approx. 7% of India’s GDP.

In terms of volume, it is 12th largest in the world, and 3rd largest in Asia Within India, it constitutes about 15% of manufacturing capacity and20% of the Excise revenue to the Government of India.Chemical industry has weightage of about 13% in the index of industrial production.

The global chemical industry is valued at about US $ 2.4 trillion. Of which, India’s chemical sector accounts for just 2%

India’s present share in Global Trade is 0.6% i.e. USD 45 Billion & it has been expected to increase the same to 1% i.e. USD 80 Billion by 2011.

Chemical & Pharmaceutical Industry is the most important Foreign Exchange earner with major value additions through out the value chain. The value is added using Knowledge, energy and Capital.

The Indian Chemical sector accounts for 13-14% of total exports and 8-9% of total imports of the country.


STRENGTHS • • • • • • • • Diversified Manufacturing Base Vibrant downstream industries in different segments Competitive core industries Capability to produce world-class end products Strong presence in the export market in sub-segments Large domestic market Major raw material component sources within the country Good R&D base

WEAKNESSES • • Infrastructure Cost Advantages


4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Percentage of Net Sales

Cost Disadvantages - India vs. Other Developing Countries

Scale of

India China Thailand Indonesia



Local Taxes

Import Duties

Name of the Country

production • •

Technology Multiplicity of taxes Labor Laws

OPPORTUNITIES • • • • • • • • Challenge to compete globally by concentrating on weaknesses Markets in the developed countries A large number of products going off patent. Advantages in certain categories can be used for boosting exports. Close to middle-east- cheaper and abundant source for petrochemicals feedstock. Stringent environmental laws in the western countries Climatic conditions in India Competencies to utilize renewable resources


Competency to emerge as a global player in the area of Specialty chemicals.

THREATS • • • • • • Imports of chemicals, intermediates and end products Tariff levels for chemicals Greater competition due to Chinese products Bilateral/multilateral trade agreements The labor laws, power supply and infrastructure facilities

• • • • • United Phosphorous Ltd, Mumbai P.I Industries, Jaipur Excel India, Mumbai Colour Chem. Ltd., Mumbai Sudarshan Chemical Industries, Pune


• • • • • • • •

Colourtex, Ahmedabad Jubilant Organosys Ltd., New Delhi Herdilia-Schentady Ltd. Mumbai National Organics Chemicals Ltd., Mumbai Gujarat Heavy Chemicals Ltd., Ahmedabad. India Glycols Ltd., New Delhi Gujarat Alkalies and Chemicals Ltd., Baroda ICI Calcutta

• • • • • • • • Indian Petrochemical Corporation Limited (IPCL) Gas Authority of India Limited (GAIL) Haldia Petrochemicals Limited Tata Chemicals Asian Paints Ciba Rallis Hindustan Organic Chemicals (HOCL)

• • • UAE United States United kingdom




The Indian chemical industry is divided into 3 segments which are : 1.Basic Chemicals 2.Speciality and fine chemicals 3.Knowledge chemicals
Segments Characteristics Constituent Industries



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High Volume Limited product differentiation

• • • •

Petrochemicals Fertilizers Organic Chemicals Other Industrial Chemicals Adhesive sealants Catalysts Industrial gases Plastic additives Agrochemicals Pharmaceuticals Biotechnology


• • •

Typically small production units High product differentiation Low capital investments

• • • •





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biological substances. • High investments in R&D and marketing.



Chemical manufacturing is the process through which a chemical is synthesized from raw materials or other chemical feed stocks. Product formulation is the process by which chemical products composed of one or more ingredients, are prepared according to the product formula. (1) describes the process for manufacturing the chemicals in the use cluster; and (2) describes the chemical product formulation process, if applicable. In both cases, the descriptions focus on the industrial or laboratory means of synthesis, the necessary starting materials and feed stocks, byproducts and co-products, isolated or non-isolated intermediates, and relevant reaction conditions (e.g., temperature, pressure, catalyst, solvents, and other chemicals). GOALS: • • • Describe the processes for manufacturing chemicals in the use cluster. Describe the process for formulating chemical products used in the use cluster, if applicable. Compile chemical manufacturing and product formulation data to be used by subsequent modules if the impacts of these up-stream processes are being evaluated in a CTSA. PEOPLE SKILLS: The following lists the types of skills or knowledge that are needed to complete this module. • Knowledge of chemical feed stocks, synthetic chemical reaction catalysts, and reaction conditions.
• Understanding of chemical manufacturing processes, including both batch and continuous

processes, as well as chemical equilibrium, kinetics, and heat and mass transfer. Within a business or DfE project team, the people who might supply these skills include a chemist and a chemical or process engineer. Vendors of the chemicals or chemical formulations may also be a good resource.

DEFINITION OF TERMS: Catalyst: A substance that accelerates a chemical reaction but which itself is not consumed in the reaction.


Chemical By-product: An unintended chemical compound that is formed by a chemical reaction. Chemical Intermediate: A chemical substance that is formed during the reaction and then undergoes further reaction to produce a product. Chemical Product: In a CTSA, refers to products in the use cluster composed of one or more chemicals for which product formulation data must be obtained. Chemical Reaction: The process that converts a substance into a different substance. Feedstock: A raw material, pure chemical, or chemical compound that is used to synthesize a chemical. Unit Operation: A process step that achieves a desired function .

The following presents a summary of the approach or methodology for describing the chemical manufacturing processes and product formulation methods of chemicals or chemical products. CHEMICAL MANUFACTURING: Step 1: Obtain chemical information, including CAS RNs, synonyms, melting points, and boiling points from the Chemical Properties module. Step 2: Determine the primary industrial mode of synthesis for each chemical in the use cluster Step 3: Develop a chemical manufacturing process flow diagram for the primary mode of synthesis. The diagram should identify the major unit operations and equipment, as well as all input and output streams. Step 4: Identify any chemical intermediates, catalysts, feed stocks, and chemical products or byproducts involved in the synthesis that have the potential for release.

PRODUCT FORMULATION: Step 5: Obtain chemical product formulation data for any chemical products being evaluated in the CTSA from the Performance Assessment module. When proprietary chemical products are being used, only generic formulations may be available.


Step 6: Determine the primary industrial method of formulation for each chemical product being evaluated. Mixing operations, with or without the addition of heat or pressure, are typical manufacturing processes for product formulations. Step 7: Develop a process flow diagram for the primary industrial method of formulation. The diagram should include the unit operations, material flows, and equipment used in the formulation process. Step 8: Identify any chemical intermediates, catalysts, feed stocks, and chemical products or byproducts involved in the product formulation process that have the potential for release. TRANSFERRING INFORMATION: Step 9: Provide the following information to the modules listed below: •

Energy usage resulting from the chemical manufacturing and product formulation processes (e.g., heat, pressure, etc.) to the Energy Impacts module. Material streams usage resulting from the chemical manufacturing or product formulation processes (e.g., chemical feedstock, catalysts, etc.) to the Resource Conservation module.


Exports and Imports shall be free, except where regulated by FTP or any other law in force.

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The procedure for facilitating foreign direct investment has been simplified. Most of the chemical items fall under the RBI automatic approval route for FDI/NRI investment up to 100 per cent.

Expansion of FMS – Focus Market Scheme (FMS) has been expanded by adding 26 new markets, out of which 16 are in Latin America and 10 in Asia-Oceania. Incentive under the scheme has been enhanced from 2.5% to 3%.

Expansion of FPS – Incentive under the scheme has been enhanced from 1.25% to 2%.

Duty free import of specialized inputs /chemicals and flavoring oils is allowed to the extent of 1% of FOB value of preceding financial year’s export.

Free imports of samples by exporters - Number of free samples allowed is increased from 15 to 50 as per para 49 of Highlights of Foreign Trade Policy announced on 27-8-2009. It seems the change will be effective after relevant customs notification is suitably modified.

Customs Duty 1.)The peak rate of Customs Duty on most Chemicals is 7.5% 2.)On basic raw materials like sulphur, rock phosphate, natural borates is 5% 3.)On most building blocks & feedstock the duty is 5% (ethylene, propylene, benzene, toluene, xylene )

Excise Duty-On almost all chemicals the excise duty is 16%. EPCG scheme


Zero duty EPCG scheme - A ‘zero duty’ EOCG scheme has been introduced in FTP 2009-14 for a limited period i.e. upto 31-3-2011.The scheme is available for exporters of engineering and electronic products, basic chemicals and pharmaceuticals, apparels and textiles, plastics, handicrafts, chemicals and allied products and leather and leather products, except those excluded in HBP Vol. 1.

Manufacture under Bond -Under the Manufacture under Bond Scheme, all factories registered to produce their goods for export are exempted from import duty and other taxes on inputs used to manufacture such goods. Against this the manufacturer is allowed to import goods without paying any customs duty. The production is made under the supervision of customs or excise authority.

Duty exemption and remission schemes-The Government has been taking various steps for augmenting the export. Some of the important measures taken by the Government are as follows:-


Extension of the Duty Entitlement Pass Book (DEPB) Scheme up to December 31,2009;

2. Providing pre and post-shipment credit assistance in rupees as well as

in dollars;

3. Reduction in import duties of raw materials; and

4. Reduction in interest rates on export finance; etc



The supply chain structure of chemical industries:

Raw materials



Manufactur e


Distributo r
Dealer Direct Sale




The chemical industry is one of the most regulated activity sectors, where regulation includes specific quality systems such as good laboratory practice (GLP), good clinical practice (GCP) and good manufacture practice (GMP). On the other hand, accreditation to these practices covers technical performance and is not suitable for pharma research and development (R&D) as it is almost impossible to comply with the requirements of the European standard in the pharma environment. The challenge is, therefore, to develop quality systems, compatible with various principles, that not only cover formal quality items, but also ensure good scientific and technical performance.


Quality Assurance (QA): is the activity of providing evidence needed to establish quality in work, and that activities that require good quality are being performed effectively all those planned or systematic actions necessary to provide enough confidence that a product or service will satisfy the given requirements for quality. QA introduces the rules—'fit for purpose' and 'do it right the first time'. It can be achieved by introducing appropriate standard operating procedures (SOPs) in-house. SOPs: An SOP is a set of instructions having the force of a directive, covering those features of operations that lend themselves to a definite or standardized procedure without loss of effectiveness. Every good quality system is based on its SOPs. The International Conference on Harmonization (ICH) defines SOPs as 'detailed, written instructions to achieve uniformity of the performance of a specific function'. SOPs are necessary for chemical products developmentwhether it concerns a pharmaceutical company, a contract research organization, an investigator site, or any other party involved to achieve maximum safety and efficiency of the performed clinical research operations. SOPs provide procedural information about what needs to be completed to fulfill the obligations of the regulations and provide auditors and regulatory authority inspectors a tool to monitor adherence. INSPECTIONS AND AUDITS Before any inspection or audit starts, it is customary for the inspector or the auditor to read the current SOPs for the relevant field. This is to judge the compliance of SOPs, as to how sincerely they are used by the related personnel, following ICH and other applicable regulatory guidelines. During inspection the inspectors generally ascertain that appropriate SOPs are available; edition numbers are correct and all obsolete editions have


been withdrawn from circulation; distribution lists are still correct; SOPs are effective, not leaving parts of the working procedures uncontrolled; whether the SOP conveys a process that is effective in achieving compliance with requirements/standards, whether the process that is described in the SOP is an efficient way of performing the task; can the requirements of the SOP be enforced; and whether the SOP training records for the staff are in place.












management is the PDCA (Plan-Do-Check-Act) approach. In order to have the PDCA approach, SOPs may be tailored for--pre-clinical, clinical, bio-analysis and pharmacokinetics, regulatory affairs, pharma-ovigilance/drug safety, project management, data management, quality assurance including inspections by competent authorities, external vendor management, crisis management (including product recall), supply chain management and change control procedures. In a nutshell, all that can be said is 'write down what you do, do what is written down'.

Inorganic chemicals: ISO 1552:1976 & ISO 3425:1975 Organic chemicals: ISO 1995:1981 & ISO 5280:1979


Risk Management for Chemical Industries
The chemical industrial sector is highly heterogeneous encompassing many sectors like organic, inorganic chemicals, dyestuffs, paints, pesticides, specialty chemicals, etc. Some of the prominent individual chemical industries are caustic soda, soda ash, carbon black, phenol, acetic acid, methanol and azo dyes. Chemical manufacturing sector in India is well established and has recorded a steady growth in the overall Indian industrial scenario. The Chemical and allied industries have been amongst the faster growing segments of the Indian industry. The Indian chemical industrial sector had a turnover of around Rs.1200 billion in 2001-2002. The chemical exports also accounts for more than 16.20% of the total Indian exports during 2001-2002.


The risks associated with the chemical industry are commensurate with their rapid growth and development. Apart from their utility, chemicals have their own inherent properties and hazards. Some of them can be flammable, explosive, toxic or corrosive etc. The whole lifecycle of a chemical should be considered when assessing its dangers and benefits. Though many of chemical accidents have a limited effect, occasionally there are disasters like the one in Bhopal, India, in 1984, where lakhs of people were affected and LPG explosion in Vizag refinery where huge property damage in addition to 60 deaths was experienced. Therefore chemicals have the potential to affect the nearby environment also.

Design and Pre-modification review : Improper layout like location of plant in downwind side of tank farm , fire station near process area , process area very close to public road and wrong material of selection had caused severe damages to the work and outside environment

Chemical Risk Assessment: Not assessed for new chemicals from the point of view of compatibility, storage, fire protection, toxicity, hazard index rating, fire and explosion hazards

Process Safety Management: HAZOP, FTA, F&E Index calculation, reliability assessment of process equipment, incorporating safety trips and interlocks, scrubbing system, etc. not done before effecting major process changes, lack of Management of Change procedure (MOC), etc.

Electrical Safety: Hazardous area classification , protection against static electricity , improper maintenance of specialized equipment like flameproof etc were ignored.

Safety Audits: Periodical assessment of safety procedures and practices, performance of safety systems and gadgets along with follow up measures were not carried out.

Emergency Planning: Lack of comprehensive risk analysis indicating the impact of consequences and specific written down and practiced emergency procedures along with suitable facilities had increased the severity of the emergency situations.

Training: Safety induction and periodical refresher training for the regular employees and contract workmen were not carried out.


Risk Management & Insurance Planning: Thorough identification and analysis of all risks and insurance planning were not done so that interruption risks and public liability risks could also be managed effectively.

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Department of chemicals and petrochemicals, Chem Report 2008 Overview of the chemical industry, KPMG report 2008 Organic chemicals annual review, Crisil Research, December 2008 Datamonitor, Chemicals in India, October 2007 WTO international trade statistics, 2007 Chopra Sunil, Meindl Peter-2006 “Supply Chain Management” third edition, Dorling Kindersley(India) Ltd.



www.chemindia.org/1934hoc-asf87-ch http://commerce.nic.in/trade/national_ftpp.asp?id=3&trade=n http://en.wikipedia.org/wiki/Chemical_industry explore.oneindia.in/detail/2/chemicals-nic-in.html

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