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By:

Akhilesh Sinha

25 June 2025 at 2:53:54 pm

Nadda's strategic meet signals urgency for chemical sector

New Delhi: As war simmers across the volatile landscape of West Asia, whether in the form of a direct confrontation between Israel, United States and Iran, or through Iran's hybrid warfare involving groups like Hezbollah and the Houthis, the tremors are no longer confined to the region's borders. They are coursing through the arteries of the global economy. India's chemicals and petrochemicals sector, heavily dependent on this region for critical raw materials, finds itself among the earliest...

Nadda's strategic meet signals urgency for chemical sector

New Delhi: As war simmers across the volatile landscape of West Asia, whether in the form of a direct confrontation between Israel, United States and Iran, or through Iran's hybrid warfare involving groups like Hezbollah and the Houthis, the tremors are no longer confined to the region's borders. They are coursing through the arteries of the global economy. India's chemicals and petrochemicals sector, heavily dependent on this region for critical raw materials, finds itself among the earliest and hardest hit by this geopolitical turbulence. It is in this backdrop that the recent meeting convened by Union Minister for Chemicals and Fertilisers J. P. Nadda at Kartavya Bhavan must be seen not as a routine consultation, but as a signal of strategic urgency. India's ambition to scale this sector from its current valuation of $220 billion to $1 trillion by 2040, and further to $1.5 trillion by 2047, will remain aspirational unless the country confronts its structural vulnerabilities with clarity and resolve. India today ranks as the world's sixth-largest producer of chemicals and the third-largest in Asia. The sector contributes 6-7 percent to GDP and underpins a wide spectrum of industries, from agriculture and pharmaceuticals to automobiles, construction, and electronics. It would be no exaggeration to call it the backbone of modern industrial India. Yet, embedded within this strength is a paradox. India's share in the global chemical value chain (GVC) stands at a modest 3.5 percent. A trade deficit of $31 billion in 2023 underscores a deeper issue: while India produces at scale, it remains marginal in high-value segments. This imbalance becomes starkly visible when disruptions in West Asia choke the supply of key feedstocks, shaking the very foundations of domestic industry. Supply Disruption The current crisis has laid this fragility bare. Disruptions in the supply of LNG, LPG, and sulfur have led to production cuts of 30-50 percent in several segments. With nearly 65 percent of sulfur imports sourced from the Middle East, the ripple effects have extended beyond chemicals to fertilisers, plastics, textiles, and other downstream industries. Strategic chokepoints such as the Strait of Hormuz have witnessed disruptions, pushing shipping costs up by 20-30 percent and adding further strain to cost structures. This is precisely where Nadda's emphasis on supply chain diversification and resilience appears prescient. In today's world, self-reliance cannot mean isolation; it must translate into strategic flexibility. While India imports crude oil from as many as 41 countries, several critical inputs for the chemical industry remain concentrated in a handful of sources, arguably the sector's most significant vulnerability. Opportunity Ahead A recent report by NITI Aayog outlines a pathway to convert this vulnerability into opportunity. It envisions raising India's GVC share to 5-6 percent by 2030 and to 12 percent by 2040. If achieved, the sector could not only reach the $1 trillion mark but also generate over 700,000 jobs. However, this transformation will demand more than policy intent, it will require sustained investment and disciplined execution. The most pressing challenge lies in research and innovation. India currently spends just 0.7 percent of industry revenue on R&D, compared to a global average of 2.3 percent. This gap explains why the country remains largely confined to basic chemicals, even as the world moves toward specialty and high-value products. Bridging this divide is essential if India is to climb the value chain. Equally constraining is the fragmented nature of the industry. Dominated by MSMEs with limited access to capital and technology, the sector struggles to compete globally. Cluster-based development models offer a pragmatic way forward, such as PCPIRs and the proposed chemical parks.

Hydraulic Pressure

India’s pause on the Indus Water Treaty marks a calculated shift from confrontation to coercive control.

Following the Pahalgam terror strike, India has suspended the Indus Water Treaty (IWT), citing ongoing security concerns. The treaty, which has endured decades of geopolitical challenges, now faces uncertainty as India uses its position as an upstream nation to regulate the region’s vital water flow.


IWT brokered by the World Bank in 1960, established a framework for water sharing between India and Pakistan. India was granted exclusive rights to the three eastern rivers (Ravi, Beas, and Sutlej) amounting to 33 million acre-feet (MAF) annually, while Pakistan received exclusive usage of the western rivers (Jhelum, Chenab, and Indus) with a total annual flow of 135 MAF.


The treaty bestows India with restricted rights over the western rivers, allowing usage for domestic needs, non-consumptive purposes like hydroelectric generation, and select agricultural activities in Jammu and Kashmir. Though India has developed dam projects along these waterways, their flow and storage remain tightly controlled under treaty regulations.


The annual combined flow of all six rivers is equivalent to 95 times of Mumbai’s total water storage. India is authorized to develop irrigation over 13.4 lakh acres in J&K but currently covers only 6.42 lakh acres. Similarly, while permitted to store 3.6 MAF from the western rivers, India's existing storage capacity remains significantly below this limit.

Immediately stopping such a massive water flow is unfeasible. While infrastructure on the western rivers remains limited, India’s well-developed facilities on the eastern rivers allow for temporary disruptions in Pakistan’s water supply. While the treaty permits India to store western river water only in July and August, suspension allows earlier storage, potentially limiting Pakistan’s supply during peak summer, impacting its sowing season. India could also disrupt water flow by suddenly releasing large volumes, causing unexpected flooding. Pakistan has already accused India of untimely Jhelum River discharge, allegedly triggering emergencies in Muzaffarabad. However, such actions remain constrained by existing infrastructure limitations.


India has adopted desilting as a short-term strategy to enhance water storage capacity. By removing accumulated sediment from river channels and reservoirs, this method increases storage potential and improves water flow management. Since it requires minimal infrastructure, desilting is a quick and effective solution.


Over the next few years, India plans to advance key hydroelectric projects on the Jhelum and Chenab rivers, including Pakul Dul and Ratle on the Chenab, the expansion of Kishanganga project on Kishangaga river (a Jhelum tributary), and fast-tracking Bursar on the Marusudar River (a Chenab tributary). While designed for hydroelectric generation, modifying these projects could increase water storage capacity to 1 MAF, potentially affecting Pakistan’s downstream flow,


India, while effectively using its eastern river share, still lets excess water flow into Pakistan. To curb this, it plans projects like the Shapurkundi Dam, the Ravi-Beas link and the Ujh multipurpose project which are expected to cut Pakistan’s water share by about 10 percent and boost Punjab’s irrigated area. Given Pakistan’s limited 14.4 MAF storage, even full Indian retention of its share could severely impact over 12 million acres of Pakistani farmland, strain power generation, worsen soil fertility, and accelerate groundwater depletion, especially amid increasingly erratic monsoons.


In their current stage and design, all these projects fully comply with the terms of IWT. Additionally, as they are not financed by the World Bank or any international agency, India remains free from external constraints in their execution.


Three key proposed projects on the western rivers remain unimplemented: the Marhu Tunnel, capable of diverting 2.5 MAF from Chenab to Ravi; the Jhelum-Beas Lift Scheme, which can transfer 1.2 MAF annually; and the Chenab-Ravi Link Canal, designed to redirect Chenab’s water to Ravi, significantly expanding irrigation in Punjab and Haryana. If executed, these projects could be completed by 2030-31, drastically impacting Pakistan's agricultural sector which has 30 percent share in its GDP exacerbating its already high inflation rate and food insecurity.


IWT doesn’t allow unilateral withdrawal or termination. However, India’s non-signatory status to the Vienna Convention and Pakistan’s signed but unratified stance creates gray area that India can exploit. While Pakistan may push the issue to the UNSC, India’s strengthened diplomatic ties at the world stage would reduce external pressures. Notably, India has suspended rather than revoked the treaty, allowing it to frame its stance as adhering to treaty principles while signalling potential restoration if Pakistan halts its support for insurgency.


India’s handling of the IWT reflects Sun Tzu’s maxim that wars are best won through strategy, not combat.

(The author is a Chartered Accountant with a leading company.)

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