In this conversation with The Policy Edge, Mr. Biswas discusses the structural constraints and trade-offs that shape India’s industrial policy – from inter-ministerial coordination and trade exposure to environmental regulation and fertilizer distortions. He offers a practitioner’s perspective on how sectoral capability is built through steady institutional alignment and long-term strategic choices rather than headline interventions.
Across chemicals, fertilizers, environment, finance, and trade, ministries often pursue competing objectives. From inside the system, how are these contradictions negotiated – and who ultimately arbitrates when economic logic, political considerations, and regulatory goals diverge?
From the outside, government appears as a single entity. In practice, each ministry operates with its own mandate. The Ministry of Environment focuses on sustainability and pollution control. The Ministry of Finance is concerned with fiscal balance. The Ministry of Agriculture responds to farmers’ needs. Industry ministries look at competitiveness and growth. These priorities do not automatically align.
At the working level, differences are addressed through consultation, inter-ministerial discussions, and formal notes. Departments present their positions and try to persuade other stake-holder ministries for a decision. When an issue has wider implications and there in no agreement among various related ministries, it is deliberated through a mechanism for achieving larger national objectives.
Ultimately, the political executive takes the final call. Officials can recommend options and explain the consequences of different options. The decision, however, reflects a broader assessment of competing sectoral interests. That is how contradictions are resolved – through structured negotiation followed by political determination.
In a liberalised economy constrained by WTO commitments and limited tariff flexibility, how can a ministry meaningfully promote a sector like chemicals and petrochemicals? What instruments remain when direct subsidies, protective tariffs, or regulatory controls are politically or legally constrained?
Industrial promotion in this sector is very different from that in social sector policy. In welfare programmes, the government can design schemes and allocate funds directly. In chemicals and petrochemicals, that kind of direct financial support is generally not feasible. We do not have a large subsidy framework to deploy, nor do we exercise extensive regulatory control over the industry.
At the same time, we operate within international trade commitments and fiscal discipline. Tariff changes are limited and often sensitive. Promotion, therefore, cannot mean protection in the traditional sense.
What we can do is address specific bottlenecks – anomalies in duties, constraints in raw material access, and procedural delays. We can facilitate dialogue, organise consultations, and create platforms for industry to align with policy objectives. In other words, promotion becomes enabling rather than financing.
If the cost disadvantage is structural – for example, higher natural gas prices – that cannot always be offset administratively. The role of the ministry is to improve the operating environment within these constraints, not to override them.
Given high input costs, compliance burdens, and sustained import competition, does it make economic sense to scale back such sectors – or do their downstream linkages justify support, even if that raises costs for users across agriculture, pharmaceuticals, and manufacturing?
If we apply classical trade theory strictly, the conclusion may be uncomfortable. In chemicals and petrochemicals, our input costs, especially natural gas, are significantly higher than in many competing countries. Compliance costs are also higher. On that basis, one could argue that we do not have a clear comparative advantage.
But policy cannot look at this sector in isolation. Chemicals are not just another industry. They are upstream to agriculture, electronics, pharmaceuticals, and several manufacturing segments. Weakening the base has consequences across the economy.
At the same time, protection has its limits. Very high tariffs are difficult under global trade commitments and can raise costs for domestic downstream users. Direct subsidies require substantial fiscal space. Neither complete withdrawal nor blanket protection is a practical solution.
The dilemma, therefore, is not whether to protect or withdraw, but how to preserve strategic depth. Even if we are not the lowest-cost producer globally, maintaining domestic capability in such a foundational sector has long-term value. The approach, therefore, has to be calibrated – selective support where necessary, while remaining mindful of global integration.
When domestic environmental standards are perceived as stricter than global benchmarks, and chemical industries face regulatory and reputational constraints, how should policymakers balance sustainability with cost competitiveness?
Environmental protection is a legitimate and necessary objective. Pollution control, climate considerations, and sustainability cannot be compromised. The Ministry of Environment is discharging its mandate, and industry has to respect that framework.
However, the difficulty arises when compliance costs become significantly higher than those faced by global competitors. In some cases, industry perceives that certain domestic standards are stricter than international benchmarks. When input costs are already high, additional regulatory burdens can further erode competitiveness.
The issue is not whether to maintain environmental safeguards, but how to calibrate them. Standards should be rational, evidence-based, and, ideally, aligned with global norms so that domestic producers are not placed at a structural disadvantage. In some instances, we tried to review norms that appeared inconsistent, but such revisions require coordination across ministries and are neither quick nor straightforward.
The objective, therefore, is alignment rather than dilution – ensuring sustainability while maintaining industrial viability. That balance requires continuous dialogue, not abrupt shifts in either direction.
5. When agronomic science flags soil imbalance and economists point to fiscal inefficiency, yet political demand sustains nitrogen-heavy subsidies, what explains the persistence of reform inertia?
In fertilizers, the distortion is well recognised. Nitrogen, particularly urea, is heavily subsidised, while phosphatic and potassic fertilizers receive much lower support. From an agronomic perspective, this creates imbalance in soil nutrients. Agricultural institutions have repeatedly highlighted the need for more balanced application practices.
From an economic standpoint, the subsidy structure also has fiscal implications. But policy operates within a broader social context. Farmers are accustomed to urea because it is available at a very low price. Any change in pricing or subsidy structure directly affects them and therefore becomes politically sensitive.
Departments can analyse the imbalance and recommend rationalisation. However, reform requires changing a pricing structure that has shaped farmer behaviour for many years.
The persistence of inertia is not due to lack of awareness. It reflects the intersection of scientific evidence, fiscal constraints, and electoral realities. Corrective measures therefore tend to be gradual rather than abrupt and need to be brought in a phased manner with farmers’ involvement and regular dialogue for such shifts.
Across chemicals and fertilisers, India remains dependent on imported process technology despite scale and policy support. Is this primarily a failure of incentives, ecosystem design, risk appetite, or long-term industrial strategy?
In reality, we do not have the most advanced indigenous process technology in many segments of chemicals. When more efficient latest technology is available abroad, companies often prefer to import it or continue using the old technology rather than invest heavily in developing their own. It is commercially quicker and less risky.
Technology development, however, requires an ecosystem – sustained R&D investment, collaboration between industry and research institutions, and long-term policy consistency. In the past, there were incentives such as weighted tax deductions for R&D expenditure. Even then, the overall culture of deep industrial research did not become widespread. Once incentives are reduced, the motivation weakens further.
Countries that built technological depth did so over decades – either through original innovation or through systematic reverse engineering followed by incremental improvement. That kind of coordinated approach requires patience and alignment between policy and industry.
Therefore, the issue is not only incentives. It is about long-term vision and willingness to invest in domestic capability. Without that, dependence on imported technology will naturally continue.
