Synergy Article

Binoy Shah

Environmental and Legal Challenges Pertaining to Chemical and Allied

Industries
Chemical and Petrochemical sectors have been increasingly important in the development of our
country. They provide a barrage of raw materials for the industrial sector and share a chunk in
the country’s GDP. Recently though, there have been worrying news for the upcoming chemical
plants and also established ones. An official of the Department of Chemicals and Petrochemicals
was quoted saying that “ The chemicals industry in India is facing issues such as infrastructure,
communication networks, labour laws and environmental standards”. Dwelling further certain
serious issues emerge.

While the chemicals industry was responding to environmental concerns, some companies are
not following the standards. Companies making dyes and other chemicals have been found not
meeting the prescribed environmental standards. The industry should identify policy reforms,
action for institutional building, budgetary support and tax incentives in that order so that a
realistic strategy can be arrived at instead of just focusing on tax sops.

The specialty chemical industry is one of the few bright spots in the beleaguered chemical
industry. Even they are facing certain problems. The availability of key feed stocks (raw
materials) essential to manufacture specialty chemicals is the main challenge. Some feed stocks
that are currently imported if made available in India at a lower cost, can give the industry a
competitive edge. For Example:- Availability of Ethylene Oxide (EO) used by many specialty
chemical companies is a major challenge. Reliance is the only big producer which sells it. But
ethylene oxide cannot be imported. It cannot even be safely transported as it is hazardous and
explosive. Unfortunately new refineries (that produce EO) are coming up in far-flung places.

The other challenge is that because of lack of standards, there is no demand. Specialty chemicals
such as flame retardants and environmentally safe paints are important for a country as they
saves lives. Someone has to take a decision on what standards are appropriate for India and
mandate those standards so that lives can be saved and the chemical industry can grow.

Differential import duties are another area that the Government needs to look into. There are
certain raw materials that have higher import duties than finished products. Energy is an
important cost and energy costs are very high in India. Some industries are in Gujarat and in
Gujarat it is possible to do energy trading. That has helped a lot. If other States too permit energy
trading, it will help further the expansion of industries.

Environmental Regulations have become a major headache and a source of corruption in

upcoming industries. Environmental regulations should be strong and should be enforced
speedily. We cannot tolerate delays because of environmental issues. Environmental regulations
that are quick are good for the country. But they should not hold up projects. It should either be a
‘No’ or a ‘Yes’.
 Synergy Article
Binoy Shah

There are a wide array of problems faced by the petroleum and petrochemical sector of our
country. There’s a wide range of global legal challenges facing the petro-chemical industry
today, some of the major ones are described here. Extraterritoriality is a problem where nations
will seek to impose their laws and jurisdictions outside traditional geographic and jurisdictional
boundaries. There’s increased regulation in almost every aspect of their operations, from deep-
water drilling to oil trading, from what they can and can’t say to their shareholders to how they
pay the executives. There’s the interaction of the laws of states, the obligation to do something in
one nation that is illegal in another. There’s the impact of politically motivated actions on the
rule of law and sanctity of contract, resulting in actions such as expropriations or retrospective
laws and increase the chances of corruption in locality. There’s the increasingly uncertain
business environment caused by the breakdown in trust between governments, corporations and
civil society. There are many global legal challenges facing the petro-chemical industry today,
some soluble and many which look like they won’t be. But what does seem to be accepted today
is that we will need many lawyers to help solve them.