The document discusses the chemical MSME sector in India. It provides information on laws and regulations governing the chemical industry, key industry bodies and forums, and the landscape of micro, small and medium enterprises in India. Specifically, it estimates the IT expenditure of the chemical MSME sector in India. In 2015-2016, the estimated IT expenditure of chemical MSMEs was INR 74.72 billion, with around INR 30 billion spent on IT services. The average IT expenditure per chemical MSME unit was estimated to be around INR 1.65 lakh.

1. 1 / 16
Research Project on
“CHEMICAL MSME SECTOR IN INDIA”
SANKET PATIL
Forensic - CCS

2. 2 / 16
CONTENTS
Laws and Regulations ..3
Industry Bodies and Forums ..8
Indian Market Landscape in terms of Micro, Small and Medium Enterprises ..11
I.T. Expenditure Estimation ..12

3. 3 / 16
i. Laws and regulations
Prime drivers for Chemical rules in India are –
1. Bhopal Gas Disaster, 1984
2. Environment (Protection) Act, 1986
3. Multilateral Environment Agreements (MEAs)
4. Responsible Care; OHAS 18001
OBJECTIVES:-
1. Prevention of major accidents
2. Limiting the consequences on man and environment
3. Safety, control measures and co-ordination amongst industries
Rules under Environment (Protection) Act, 1986 –
 Manufacture, Storage and Import of Hazardous Chemical Rules, 1989, 2000
 Chemical Accidents (Emergency Planning, Preparedness and Response) Amendment Rules,
1996
 Public Liabilities Insurance Act, 1991, 1992
Health and Safety Laws and Regulations –
 Factories Act, 1948, 1987
 Explosives Act, 1889 – Gas cylinder rules, 1981
 Petroleum Act, 1934, Rules, 1976
 Motor Vehicle Act, 1988
Multilateral Environmental Agreements for Chemical Safety and Management –
(Major conventions governing government activities in India)
 Chemical Weapons Convention, 1993
 Stockholm Convention on Persistent Organic Pollutants, 2001
 Rotterdam Convention on Prior Informed Consent, 1999
SECTORIAL VIEW

4. 4 / 16
Chemical Rules in India – Background
Industrial Activities covered in regulations –
 Production, storage, use and import of specified hazardous chemicals
 Chemical and petrochemical substances having hazardous (flammable, explosive, corrosive,
toxic) properties
 Storages of hazardous chemicals not associated with processes
Manufacture, Storage and Import of Hazardous Chemical Rules
Chemical storage in plant premises –
Low Level – 684 Chemicals
Medium Level – 179 Chemicals & Threshold Quantity
High Level – 17 Chemicals & Threshold Quantity
Storage of chemicals away from the main process – 30 chemicals & Threshold Quantity
Manufacture, Storage and Import of Hazardous Chemical Rules
- Requirement in case of low level chemicals
 Identify hazards associated with industrial activity and take adequate steps for
prevention and control
 Provide relevant information to persons liable to be affected by a major accident
 Develop information in the form of data sheets
- Requirement in the case of medium and high level chemicals and storages away from plant
 Conduct a mock drill of emergency plan every six months and submit a report
 Maintain records of imports of hazardous chemicals and to provide information to the
concerned authority
 Ensure the transportation of hazardous chemicals as per the provision of the Motor
Vehicles Act, 1988
- In case of import of hazardous chemicals the importer needs to ensure that –
 The concerned authority has been informed 30 days before such imports
 Maintain records of the hazardous chemicals in the prescribes format, and that
 The inland transportation of chemicals has taken place as per the Motor Vehicle Act,
1988

5. 5 / 16
Chemical Accidents (Emergency Planning, Preparedness and Response) Rules
 As an offshoot of Bhopal Gas Disaster
 Formation of Crisis Groups at:
 Central Level
 State Level
 District Level
 Local Level
 Central Crisis Group
 Apex body to deal with major chemical accidents and to provide expert guidance for
handling major chemical accidents
 Continuously monitor the post-accident situation from major accidents, suggest
measures for prevention
 State Crisis Group
 Apex body in the state to deal with major chemical accidents and provide exert
guidance
 Review all district off-site emergency plans in the state and report to the Central
Crisis Group
 District Crisis Group
 Assist in the preparation of the district off-site emergency plan
 Assist the district administration in the management of chemical accidents
 Local Crisis Group
 Prepare local emergency plan for the industrial pocket
 Ensure dovetailing of local emergency plan with district off-site emergency plan
 Train personnel involved in chemical accident management
The Public Liability Insurance Act
 179 chemicals with threshold quantity
 Owner to draw insurance policy more than the paid-up capital but less than INR 50 crore
 Owner to provide relief in case of death or injury or damage to property from an accident on
the principle of no fault
 “Paid-Up Capital” is the market value of all assets and stocks on the date of insurance
 Owner to pay additional amounts as contribution to the Environment Relief Fund
The Owner is required to –
 Provide any information require to ascertain compliance with the provisions of the Act
 Allow entry and inspection to ascertain compliance with the provision of the Act

6. 6 / 16
 Pay the amount of an award as specified by the District Magistrate
Factories Act, 1948
 Major amendments in 1987 after Bhopal Gas Disaster
 Occupational Exposure of chemicals (Limits of over 100 items specified)
Motor Vehicle Act
 Inland Transportation of Dangerous Goods (hazardous chemicals)
 Glass Labels and Safety of Vehicles
Explosives Act
Chemicals stored under pressure conditions –
 Gas Cylinder rules
 License required if quantity stored in cylinders exceeds specified quantities
Petroleum Act
 Storage of Petroleum products and safety precautions
 License to be obtained from chief controller of explosives
Chemical Weapons Convention
Purpose of Convention: Not to undertake whatsoever to –
1. Develop, produce, otherwise acquire, stockpile or retain chemical weapons, or transfer,
directly or indirectly, chemical weapons
2. Use chemical weapons
3. Engage in any military preparations to use chemical weapons, or
4. Assist, encourage or induce in any way, anyone to engage in any activity prohibited by the
convention
Overview of scheduled chemicals and examples of affected industries

7. 7 / 16
Schedule 1 Chemicals: Little or no use in industrial and agriculture activities, but may have
limited use for research, pharma, medical or public health
Schedule 2 Chemicals: May be useful for chemical weapons, can have legitimate uses in:
i) Flame retardant additives and research
ii) Dye and photographic industry
iii) Medical
iv) Metal plating &
v) Epoxy resins
Schedule 3 Chemicals: can have legitimate uses in
i) Resins,
ii) Plastics,
iii) Pharma,
iv) Pesticides,
v) Batteries,
vi) Cyanic acid,
vii) Toiletries
Unscheduled discrete organic chemicals: used in a wide variety of commercial industries and
include acetone, benzoyl peroxide and propylene glycol
Voluntary Initiatives
OHAS (BSI 18001)
 Uptake of System in India: Very Quick
 Over 250 units certified
 70-80 of those certified chemical units
Responsible Care
Many chemical units in India follow the requirements
Sources –
http://r0.unctad.org/trade_env/test1/meetings/brussels2/sess3.a.CII%20Pres%20on%20Che
m%20Safety%20Rules.nyati.pdf

8. 8 / 16
ii. Industry body and forums
1. Indian Chemical Council (ICC)
Established in 1938; dedicated to the growth and promotion of all branches of
Chemical Industry in India through a variety of events, trainings, awards and recognitions,
policy advice and other useful activities
(http://indianchemicalcouncil.com/)
2. CropLife India
Voice and advocate of the plant science industry. Protects the interest of member
companies by engaging with decision makers and other stakeholders at the right
platforms. It provides scientific information for future development of government
policies and influence implementation of these. The key goal is to raise awareness of
the contribution that the plant science industry makes to development of sustainable
agriculture and ongoing competitiveness of the Indian agricultural exports.
Develops, manufactures and markets crop protection products used by Indian farmers.
CropLife India has introduced 226 out of 230 pesticides registered in India.
(http://croplifeindia.org/)
3. CPMA India
The apex forum representing the Indian Petrochemical Industry. Established in 1993,
it provides a linkage between the industry, the government and the society. Interacts
with policy authorities and industry associations to develop and maintain harmonious
and conducive business conditions. It operates through different branches namely –
 Polyolefins
 Vinyls
 Styrenics
 Glycols
 Surfactants
http://cpmaindia.com/objectives.php
4. Alkali Manufacturers’ Association India
Represents Indian Chlor-Alkali Industry nationally and globally. Facilitates the
industry’s commitment to technological and economic growth, continuous
improvement in protecting human health & environment, guided by sound science,

9. 9 / 16
technology and risk management principles. Proactively promotes the industry
through practices that are fair, inclusive and sustainable.
http://www.ama-india.org/
5. Department of Chemicals and Petrochemicals
Part of the Ministry of Chemicals and Fertilizers. Entrusted with the responsibility of
policy, planning, development and regulation of chemicals and petrochemical
industries. The business allocated to this department is –
 Insecticides
 Molasses
 Alcohol (Industrial and potable)
 Dye-stuffs and intermediates
 All organic and inorganic chemicals (which are not specifically allotted to
any other ministry/department)
 Planning, development and control of all ministries dealt with by the Dept.
 Bhopal Gas Leak Disaster special laws
 Petro-chemicals
 Industries relating to production of non-cellulosic synthetic fibres
 Synthetic rubber
 Plastics
http://chemicals.nic.in/
6. Indian Specialty Chemical Manufacturers
All India body representing manufacturers of Specialty chemicals established in 1952.
Its members consist of large, medium and small sized units. The membership of the
association is open to manufacturers of chemical for textile, leather, paper, paint,
rubber, fertilizer, engineering, oil and many other industries. Membership now
opened for indenter of multinational companies as associate member.
http://www.iscma.in/
7. Ministry of Petroleum and Natural Gas
http://petroleum.nic.in/
8. Oil Industry Development Board

10. 10 / 16
The Oil Industry (Development) Act, 1974 was enacted following successive and steep
increase in the international prices of crude oil and petroleum products since early
1973, when the need for progressive self-reliance in petroleum/petroleum based
industrial raw materials assumed great importance.
http://oidb.gov.in/
9. Petroleum Conservation Research Association
 Formulates strategies and promotes measures for accelerating conservation of
petroleum products leading to environment protection, energy security and
sustainable development.
 Promotes research, development and deployment efforts aimed at petroleum
conservation and environment protection
 Establishes synergistic institutional linkages at the national and international
levels in the areas of petroleum conservation and environment protection
 Provides training &technical advisory services; functions as a think tank to
the government for proposing policies and strategies on petroleum
conservation, aimed at reducing excessive dependence on oil.
http://pcra.org/
10. Directorate General of Hydrocarbons
Established in 1993 under the administrative control of Ministry of Petroleum and
Natural Gas. Promotes sound management of the oil and natural gas resource having a
balanced regard for environment, safety and technological & economic aspects of the
petroleum activity.
Responsibilities include implementation of New Exploration Licensing Policy (NELP),
matters concerning Production Sharing Contracts for discovered fields and
exploration blocks, promotion of investment in E&P sector and monitoring its
activities.
http://dghindia.org/
11. Petroleum Planning and Analysis Cell
http://ppac.org.in/

11. 11 / 16
iii. Indian market landscape in terms of micro,
small and medium enterprises
Micro, small and medium enterprises contribute nearly 8% of India’s GDP, 45% of the
manufacturing output and 40% of the exports. The share of MSMEs in the GDP is gradually
declining. After analyzing the growth statistics of MSMEs, a reasonable conclusion made in this
regard was that the growth in MSME numbers may be actually happening in the low productivity,
unorganized segments with relatively lesser contribution to the country’s growth parameters.
Hence the gradual decline.
Ref. - http://msme.gov.in/Accelerating%20Manufacturing%20in%20the%20MSME%20Sector.pdf
Presently there are ~ 12.5 million registered MSMEs in India, employing ~ 30 million people.

With regard to MSMEs in the Chemical Sector, the following points are significant in the
Indian context –
 The industry is broadly categorized into two sections – organic (petro & agro-chemicals,
drugs, cosmetics) and inorganic chemicals (alkalis, dyes, dyestuffs)
 A more functional classification can be made by dividing the industry into specialty
chemicals (adhesives, additives, lubricants, antioxidants, biocides, corrosion inhibitors,
dyes) and fine chemicals (used by pharmaceutical and agrochemical industries). Both are
low volume, high margin.
Figure 1 Ref. - https://www.dnb.co.in/Chemical/overview.asp

12. 12 / 16
IT EXPENDITURE
The Scene up to 2009
According to a survey in 2009, IT adoption is largely prevalent among chemical SMEs with
more than 75% of the respondents belonging to this industry adopting IT in their business. However
the share of IT of 58% of the chemical SMEs was less than 1%. The survey also revealed that only 4%
of the respondents are planning to increase their IT budget.
Figure 2 Ref. - https://www.dnb.co.in/SMEMumbai2009/ClusterTrends.asp
A NASSCOM report published around July 2014 predicts that SMEs in India are likely to double
their IT expenditure by 2017-18. This news is in congruence with the estimations published in
SupportBiz.
The NASSCOM report claims that SMEs are expected to double their IT expenditure to over 1
lakh crore by 2017-18.
In 2012-13, Indian SMEs spent an amount of INR 47,200 CR (USD 8.7 billion) on IT
infrastructure and services, and expected to double to USD 18.6 billion by 2017.

13. 13 / 16
PART A
Estimation of IT spending by Indian SMEs in various years
Taking 2012-13 as the base year, (y = 0) and the respective investment as the base
investment (x = 8.7),
Assuming that the growth in investment follows a linear trend YOY,
 x = my + C
y = 0 gives x = 8.7 (billion USD)
 C = 8.7
 In 2017-18 (i.e., y = 5), x = 18.6 (billion USD)
 18.6 = 5m + 8.7
 m = 1.98

Hence the IT investment, x (in billion USD) can be estimated for any FY between 2012-13 (y =
0) and 2017-18 (y = 5)
IT investment in 2015-2016 (y = 3) = USD 14.64 billion = INR 934.62 billion
Assuming that the spend on IT is in direct proportion with production,
The share of Chemical MSMEs in total production is 8%
 The share in IT spending for the year 2015-16 = 0.08 x 14.64 ≈ USD 1.17 billion
= INR 74.72 billion
The study reveals that out of the total expenditure on IT by SMEs –
 45% is spent on Hardware,
 40% on IT services, and
 15% on SaaS *
Hence the expenditure on IT Services = 0.4 x 74.72 billion
≈ INR 30.00 billion
* SaaS (Software as a Service) is a software distribution model in which applications are hosted by a vendor or service
provider and made available to customers over a network, typically the Internet.
x = 1.98y + 8.7

14. 14 / 16
PART B
Average IT Expenditure Estimation
The info obtained from –
http://blogs.economictimes.indiatimes.com/thewindbeneaththewings/http-author-blogs-
economictimes-com-thewindbeneaththewings-entry-anchor/ estimates the total number of
MSMEs in India (registered + unregistered) to be 45 million units as of 2011.
The info obtained on vibrantgujarat.com indicates that the number of registered SMEs (y) versus
the year (starting from 2007-08 as x = 1) follows the trend –
y = 268188.91 * x – 170894.53
Using this hypothesis,
The annual growth rate of registered MSMEs = dy/dx = 268188.91
Hence the growth in registered SMEs from 2011-12 to 2015-16 is –
= 268188.91 * 4 = 1072755.64
The ratio of total SMEs to registered SMEs in India is assumed to be fairly constant and
has the value 14.73.
(http://indiamicrofinance.com/micro-small-enterprises-india.html)
Hence the total number of SMEs that has increased since 2011 = 1072755.64 * 14.73 =
15803388.02 = 15.80 million
Total SMEs operating in India in 2015-16 ≈ 45 + 15 = 60 million
 Average IT Spend per SME = 934.62 billion/60 million
=
NOTE: The above value is the minimum value because the value of IT investment is assumed to
be for all the SMEs while it is likely that it may only be applicable to the registered SMEs. In that
case,
 Average IT Spend per SME = 934.62 billion/ (60/14.73) million
=
 The spend on IT Services will be – 0.4 x 2,29,800 ≈ INR 1 lakh
Additionally it must be noted that the above value is a highly approximate as it does not
incorporate the sector-specific utility of IT for SMEs operating in diverse sectors.
INR 15,600
INR 2,29,800

15. 15 / 16
PART C
Sector-wise IT Expenditure Estimation
Referring to fig. 1, and assuming statistical consistency, we can do a segment-wise
break-up for various sectors of the chemical industry to estimate the corresponding IT spends –
Segment % share in the
Chemical Sector
Total IT Spend
(INR billion)
Spend on IT Services
(INR billion)
Alkali 71.5 53.42 21.37
Organic 19.6 14.64 5.86
Inorganic 7.2 5.38 2.15
Pesticides 1.3 0.97 0.39
Dye and Dyestuff 0.4 0.30 0.12
PART D
Estimation Based on The Business Standard Findings in Gujarat
A study published in The Business Standard in 2013 (see Sources) reveals findings of IT
investments of Gujarat based SMEs. It must be noted that over 53% of the total Chemical MSMEs
in India operate from within Gujarat, where Chemical is one of the topmost MSME sectors. Hence,
the estimations for Gujarat-based SMEs in general can be assumed to be fairly applicable to the
chemical sector. Based on this hypothesis, the findings of the study in Business Standard can be
used to estimate the approximate IT expenditure by Chemical SMEs.
The study claims that a typical SME with sales revenues of INR 50 – 100 lakh spends around
INR 1 lakh/year (on IT Software + Hardware combined). While an SME with turnover of INR 5 –
10 CR spends around INR 10 – 12 lakh/year on IT expansion.
Applying the ratio of 40% on IT Services, the corresponding amounts annually spent on IT
Services become INR 40,000 (for revenues 50 – 100 lakh) and INR 4-5 lakh (for revenues 5 –
10 CR) respectively.

16. 16 / 16
Sources –
 http://www.businessnonstop.in/tech/smes-to-double-their-it-expenditure-nasscom-fs-
report.html
 http://www.supportbiz.com/articles/news/indian-smes-smaller-cities-spend-9-billion-it-
2017.html
 https://www.dnb.co.in/SMEMumbai2009/ClusterTrends.asp
 https://www.dnb.co.in/Chemical/overview.asp
 http://www.dnb.co.in/Chemical/
 http://www.vibrantgujarat.com/images/pdf/Micro-Small-and-Medium-Enterprises.pdf
 http://blogs.economictimes.indiatimes.com/thewindbeneaththewings/counting-the-beans-
how-many-msmes-are-in-india-part-i/
 http://blogs.economictimes.indiatimes.com/thewindbeneaththewings/http-author-blogs-
economictimes-com-thewindbeneaththewings-entry-anchor/
 http://www.business-standard.com/article/sme/gujarat-smes-increase-it-spending-by-20-
113052700986_1.html
 http://indiamicrofinance.com/micro-small-enterprises-india.html