The lab chemicals market in India, despite the government's utter failure to enforce stringent regulations on aspects like health, safety and pollution to bring in standard practices, is expected to grow at a robust rate of 25 per cent per year. The credit for this likely growth is learnt to go to the availability of ample cheap and qualified labour force in the country. At present the market for lab chemicals in India is worth around Rs 350 crore.
Also, factors such as the steady flow of original equipment manufacturer (OEM) business to India, abundant export opportunities and the growing number of new research and development (R&D) set up by international clients are learnt to spur the growth of the budding lab chemicals market in the country at a fascinating rate.
"I assume the market for lab chemicals in India to be around Rs 350 crore. Now, with the increase in OEM business, export opportunities and new R&D set up by international clients, the Indian lab chemicals sector is expected to witness a growth rate of minimum 25 per cent per year," said, Vikas N Shah, director, sales, Loba Chemie Pvt. Ltd.
"Cheap and qualified labour is the main component in the growth of this sector in India. High quality standards followed by a limited group of companies, who cover over 80 per cent of the business, also qualifies to be a growth stimulator," he added referring to the major growth drivers of this emerging industry.
Though there are more than 1000 lab chemical players in India, a major share of this growing industry segment is held by the top ten players, who are mainly responsible for the growth. These ten major players have over the past several years succeeded in attracting foreign companies to come to India for OEM business, apart from successfully tapping the export opportunities for Indian products in the international market.
"There are a group of 10 major players in the Indian market who are mainly responsible for the growth and drawing foreign companies to India for OEM business," said Vikas N Shah without disclosing the names of the major companies due to technical reasons.
"Of late, OEM business in India has pumped new blood into the heart of lab chemicals market in the country. All major multinational companies around the globe have some operation in India as on date. This can be private labelling, custom manufacturing, research or sourcing. This has in turn fuelled the growth of lab chemicals market in India," he added.
Regulatory incompetence
Though the increase in OEM business in India has to an extent helped the lab chemicals market grow in the country, the regulatory incompetence to a large extent acts as an impediment to the (export) growth of this burgeoning market. Though it is a must for the lab chemical players to follow guidelines set by the ISO 9000, 14000 and 18000, only a few players in India - major 10 players - reportedly stick to these manufacturing standards.
"India has the knowledge and skill to provide high purity products and has now understood the standards maintained and required around the globe. But, the country is still very lenient on regulations with health and safety along with pollution. This, in fact, helps the country to offer products at a lower price and hence an (negative) edge over the other international countries, which pay high prices to meet those regulations," noted Vikas N Shah of Loba Chemie.
"The country has over 1000 so called lab chemical manufacturers with over 80 per cent of the group not following any standards for testing, manufacturing or packing of the products. Since, many of the international clients don't trust products and companies from India as they have heard or had some bad experience with the supply from India. It makes it difficult for a buyer to identify the good from the bad till they have worked with them," he added pointing to the gravity of the situation brought about by the regulatory incompetence in the country.
"It is not that India doesn't have regulations in place to curb unethical practices in the lab chemicals arena. But, the government has failed to implement those regulations properly and stringently. All the concerned 'body' of the government, including the pollution control board, is indifferent to the enforcement of regulations. Hence, there are only a couple of players in India, who stick to the standard practices while manufacturing lab chemicals. They are indeed following the directions of the foreign players for whom they produce chemicals," said an industry player on condition of anonymity.
The industry players feel that strict implementation of the regulations would go a long way in helping India emerge as a leading player in the lab chemicals area.
Strengths & weakness
Though the incompetent regulatory system in the country has done its share to impede the growth of India's lab chemicals market, still the country is almost self-sufficient in this area. However, we are learnt to lag in areas of "ultra pure chemicals" and providing standard products from batch-to-batch.
"We are very much self-sufficient in lab chemicals front. It is mainly ruled by the Indian products, contributing to over 80 per cent of the supplies. But we lag in areas of ultra pure chemicals and providing of standard products from batch-to-batch. Over 60 per cent of suppliers from India don't maintain any kind of quality and process check at their end. Ultra pure chemicals require high investment to create the facility, and new and expensive equipment. With sales not guaranteed for Indian made products across the globe, it is a high risk investment for an Indian company," apprised Vikas N Shah of Loba Chemie.
The country is also dependent on imported chemicals to meet some of its requirements. According to Vikas N Shah pharmaceutical companies are the major users of imported chemicals as they have sufficient funds to purchase the same with high reliability of the products. "Imported chemicals are mainly used at the R&D end. Products imported from China such as Amino Acids, Biological Buffers and Rare Earth are of good quality and cheap price. Hence it is better to import them than manufacturing here," he added.
Also, the international market poses a big challenge to the country's lab chemicals market. Many of the products in the international market are much cheaper even after paying high cost for labour and regulations. Products like solvents are mainly produced in Europe and USA and are of much high quality and lower price than the ones produced in India.