BHAVYA-Rasayan (2026): Developing Dedicated Chemical Parks To Strengthen India’s Chemical Manufacturing Sector

Policy Update

Tanisha Hooda

Background

The Bharat Audyogik Vikas Yojana Rasayan (BHAVYA–Rasayan Scheme) was announced in the Union Budget 2026–27 and approved by the Union Cabinet for establishing three dedicated Chemical Parks in India. Of the total financial outlay of ₹3,030 crore, ₹3,000 crore will be allocated for establishing common infrastructure and basic utilities, while ₹30 crore will be earmarked for administrative expenditure. The scheme will be implemented over a period of five years, from FY 2026–27 to FY 2030–31. It focuses on strengthening India’s chemical manufacturing ecosystem by creating dedicated industrial clusters with improved infrastructure and shared utilities.

The scheme has been introduced to address the infrastructure and competitiveness challenges faced by India’s chemical industry. By providing shared facilities and utilities within dedicated Chemical Parks, BHAVYA–Rasayan aims to reduce logistics costs, improve resource utilisation and create a more supportive environment for domestic manufacturing and investment. It also seeks to improve India’s integration with global value chains and enhance the export competitiveness of the chemical sector.

The scheme is expected to benefit chemical manufacturers, downstream and ancillary industries, investors and the wider industrial ecosystem through improved infrastructure and a more supportive business environment. The Central Government will provide a grant of up to ₹1,000 crore per park, subject to a minimum contribution of ₹500 crore from the concerned State Government, with the parks being developed by State Governments through a challenge-based selection process. By supporting chemical manufacturing and related industries, the scheme is expected to contribute to employment generation, sustainable industrial development and expansion of domestic manufacturing capacity.

Functioning

1. Cluster-Based and Plug-and-Play Model: The BHAVYA–Rasayan Scheme will support States in establishing three dedicated Chemical Parks through a challenge-based selection process. These parks will follow a cluster-based, plug-and-play model where chemical and related industries can operate within an organised industrial cluster and access shared facilities and utilities. By providing ready-to-use facilities, the scheme is expected to facilitate faster establishment of industrial units and reduce the time and resources required for setting up new facilities. However, this benefit will depend on the timely availability, quality, and maintenance of shared infrastructure.

2. Integrated and Sustainable Industrial Ecosystem: The scheme aims to create an integrated ecosystem covering upstream, downstream and ancillary industries across the chemical value chain, enabling stronger industrial linkages and more efficient coordination among related industries. By bringing interconnected activities within a common industrial ecosystem, the Chemical Parks can facilitate better coordination between firms, promote efficient use of inputs and resources. In practice, these benefits will depend on attracting sufficient firms across complementary segments of the chemical value chain.

3. Environmental Risks and Implementation Challenges: While common infrastructure can improve environmental management, its effectiveness will depend on proper operation, maintenance, and regulatory oversight. Inadequately managed CETPs and TSDFs could result in untreated effluents, hazardous waste leakage, and contamination of soil and groundwater. Similarly, water-intensive chemical operations may increase pressure on local water resources, while leaks from interconnected pipelines or improper handling of solvents could pose additional environmental and safety risks. The successful implementation of these facilities therefore requires adequate financing, technical capacity, regular environmental monitoring, and effective coordination between park authorities, industries, and regulatory agencies. Since these facilities will serve multiple industries, weak monitoring or maintenance could create risks across the wider park.

4. Challenge-Based Selection and State-Led Development: Under the challenge-based selection process, States will submit proposals for establishing the Chemical Parks. Each selected park must have a minimum contiguous area of 8 sq. km. of encumbrance-free land. This approach allows States to take the lead in identifying suitable locations and developing the parks according to their industrial potential. However, identifying suitable land with adequate connectivity and utilities may remain an important implementation challenge for States.

5. Attracting Investment and Expanding Domestic Production: The Chemical Parks are expected to attract new investment and encourage existing firms to expand their operations by creating a more organised industrial environment. The availability of common infrastructure can lower some entry barriers for new manufacturing units and support the expansion of production capacity. However, infrastructure alone may not guarantee investment unless firms find the parks commercially viable and operationally attractive.

Performance

Since the BHAVYA–Rasayan Scheme was approved on 24 July 2026, sufficient data on its actual outcomes and impact are not yet available. Therefore, the present assessment focuses on recent trends in India’s chemical manufacturing sector and the scheme’s key design and implementation parameters. These indicators provide a pre-scheme baseline against which the future performance and impact of BHAVYA–Rasayan can be evaluated. Installed capacity, production, and foreign trade are particularly relevant because they correspond to the scheme’s broader objectives of expanding domestic chemical manufacturing capacity, strengthening production, reducing import dependence, and improving the global competitiveness of India’s chemical industry.

1. Installed Capacity of Selected Major Chemicals: India’s chemical manufacturing sector has witnessed a gradual expansion in its installed production capacity in recent years. According to the Department of Chemicals and Petrochemicals (DCPC), the installed capacity of selected major chemicals increased from 16,538 thousand MT in FY2022–23 to 17,021 thousand MT in FY2023–24 and further to 17,649 thousand MT in FY2024–25, representing an overall increase of approximately 6.72% over the two-year period. Installed capacity is an important baseline indicator because it captures the sector’s existing production potential and provides a reference point for assessing whether the development of dedicated Chemical Parks contributes to additional manufacturing capacity over time.

Among the major chemical groups, alkali chemicals accounted for the largest share of installed capacity, increasing from 11,100 thousand MT in FY2022–23 to 11,943 thousand MT in FY2024–25, an increase of 7.59%. Pesticides and dyes and pigments recorded relatively higher growth in installed capacity, at 12.60% and 13.51%, respectively. In comparison, installed capacity of organic chemicals increased by 2.27%, while inorganic chemicals increased by 4.76% during the same period.

Figure 1: Installed Capacity of Selected Major Chemicals, FY2017–18 to FY2024–25

Source: Author’s calculations based on Department of Chemicals and Petrochemicals, Section-1_Chemical_Sector_(Table_1-to_5).xlsx , Table 4.

Figure 1 shows that the installed capacity of selected major chemicals increased from 13,927 thousand MT in FY2017–18 to 17,649 thousand MT in FY2024–25, representing an overall increase of 26.72%. This sustained increase indicates a gradual expansion of India’s chemical manufacturing capacity and suggests growing potential to meet rising domestic demand. However, the increase in installed capacity also highlights the need for efficient utilisation of existing capacity and adequate infrastructure to support further industrial expansion.

2. Production of Selected Major Chemicals: While installed capacity indicates the potential production base of the chemical sector, actual production provides a clearer indication of the sector’s output performance. As per the Department of Chemicals and Petrochemicals, total production of selected major chemicals increased from 13,039 thousand MT in FY2022–23 to 13,983 thousand MT in FY2024–25, an increase of approximately 7.24%. Production had declined slightly to 12,979 thousand MT in FY2023–24 before recovering in FY2024–25.

Among the major groups, alkali chemicals recorded the highest production, increasing from 9,493 thousand MT in FY2022–23 to 9,938 thousand MT in FY2024–25. Production of organic chemicals also increased from 1,912 thousand MT to 2,189 thousand MT during the same period. Inorganic chemicals rose from 1,058 thousand MT to 1,197 thousand MT, while production of pesticides increased moderately from 258 thousand MT to 287 thousand MT. Production of dyes and pigments increased from 318 thousand MT to 372 thousand MT.

Figure 2: Production of Selected Major Chemicals, FY2017–18 to FY2024–25 (000 MT)

Source: Author’s calculations based on Department of Chemicals and Petrochemicals, Section-1_Chemical_Sector_(Table_1-to_5).xlsx ,Table 1.

Figure 2 shows an overall increase in the production of selected major chemicals over the period, despite some fluctuations during the intervening years. Production therefore provides a useful baseline for assessing whether the Chemical Parks contribute to higher utilisation of manufacturing capacity and increased domestic chemical output over time.

3. Foreign Trade Performance of Chemicals and Petrochemical Products: While installed capacity and production indicate the expansion of India’s domestic chemical manufacturing base, foreign trade performance provides an indication of the sector’s external competitiveness. According to the Department of Chemicals and Petrochemicals, exports of chemicals and petrochemical products increased from ₹2,19,281 crore in FY2017–18 to ₹3,92,770 crore in FY2024–25, representing an increase of approximately 79.1%. During the same period, imports increased from ₹3,17,856 crore to ₹6,31,898 crore, registering a higher increase of approximately 98.8%.

The higher growth in imports relative to exports indicates continued import dependence in the sector, although the trade data alone do not establish the specific factors contributing to this pattern. This trend provides a useful pre-scheme benchmark for assessing whether BHAVYA–Rasayan contributes to greater domestic production and potential import substitution in the future. However, any future changes in import dependence or export performance would need to be assessed alongside other factors, including domestic demand, production capacity, input availability, technology, and international market conditions.

Figure 3: Exports and Imports of Chemicals and Petrochemical Products, FY2017–18 to FY2024–25 (₹ crore)

Source: Author’s calculations based on Department of Chemicals and Petrochemicals, Chemical and Petrochemical Statistics at a Glance 2025, Section-3-Foreign-Trade-(Table-11-to-32).xlsx

Figure 3 shows that both exports and imports of chemicals and petrochemical products followed an overall upward trend over the period, although fluctuations were observed in FY2019–20, FY2020–21 and FY2023–24. Imports remained consistently higher than exports throughout the period and recorded a higher CAGR of 10.3%, compared with 8.7% for exports. This indicates that import growth has outpaced export growth, highlighting the sector’s continued trade deficit. The trend provides a useful pre-scheme benchmark for assessing whether BHAVYA–Rasayan contributes to import substitution and stronger export competitiveness in the future.

4. Global Scale and Competitiveness of India’s Chemical Industry: India’s chemical sector has demonstrated strong performance over the past two decades, but its next challenge is achieving greater global scale. According to Boston Consulting Group (BCG), India’s chemical market is expected to approach US$300 billion by 2030, creating significant opportunities for further growth. The report highlights the need for Indian chemical companies to move beyond familiar value chains, build global partnerships and strengthen capabilities to achieve sustained global competitiveness. These priorities highlight the importance of developing an ecosystem that can support greater scale, innovation and global integration of India’s chemical industry.

5. Technology and R&D Investment for Long-Term Growth: India’s chemical industry can strengthen its long-term competitiveness through greater investment in emerging technologies and focused research and development. Areas such as advanced materials, sustainable production methods, biotechnology and digital technologies can support new product development, improve production processes and help firms adapt to technological changes. Such investments can strengthen innovation and create new opportunities for long-term growth and global competitiveness.

Impact

1. Strengthening Domestic Chemical Manufacturing: BHAVYA-Rasayan seeks to strengthen India’s domestic chemical manufacturing capacity through the establishment of three greenfield Chemical Parks. By providing common infrastructure and shared facilities, the scheme could reduce the infrastructure burden on individual firms and facilitate the establishment and expansion of manufacturing units. Over time, these interventions could support an increase in domestic production capacity and contribute to strengthening the country’s chemical manufacturing base.

2. Reducing Reliance on Imports: A major expected impact of the scheme is reducing India’s reliance on imported chemicals and chemical intermediates. Greater domestic manufacturing can allow Indian industries to source a larger share of their chemical requirements within the country, reducing exposure to international price fluctuations and supply disruptions. In this way, BHAVYA-Rasayan can support import substitution and contribute to greater resilience in India’s chemical supply chain.

3. Attracting Investment: The ₹3,030-crore government allocation is expected to catalyse additional private investment in the chemical sector. By providing shared infrastructure within dedicated chemical parks, the scheme can make these locations more attractive to domestic and foreign investors and reduce some initial infrastructure-related costs. The development of these parks may therefore create industrial clusters where manufacturers, suppliers and supporting businesses operate together, generating wider economic activity.

4. Improving Industrial Competitiveness: The development of integrated chemical parks can improve the competitiveness of Indian chemical producers by providing access to common utilities, infrastructure and supporting facilities. Clustering related industries can also improve linkages between manufacturers and suppliers and potentially reduce logistics and operating costs. This could help Indian firms compete more effectively with imported products and strengthen their position in domestic and global markets.

5. Employment and Wider Industrial Effects: The development of chemical parks is expected to generate direct and indirect employment through manufacturing units, logistics, construction, maintenance and other supporting activities. Since chemicals are important inputs for sectors such as pharmaceuticals, agriculture, textiles and automobiles, stronger domestic chemical production can also create spillover effects across these industries. However, these remain expected medium- to long-term impacts, as the scheme has only recently entered the implementation stage.

Emerging Issues

1. Inadequate Integrated Chemical Ecosystem: A key issue is the lack of integration between upstream and downstream chemical industries. For example, chlorine is generated alongside caustic soda in the chlor-alkali process and has important downstream applications in industries such as PVC, pharmaceuticals, pesticides, pulp and paper, and water treatment. The Central Pollution Control Board (CPCB) notes that chlorine was historically considered an undesirable by-product and highlights the importance of its utilisation and handling within the chlor-alkali industry. This illustrates the importance of developing linkages between chemical producers and downstream users, particularly where safe storage, transportation and utilisation of chlorine are important considerations. Therefore, BHAVYA-Rasayan parks should focus on attracting interconnected industries and developing integrated industrial ecosystems.

2. Infrastructure Development Gaps: The experience of earlier PCPIRs shows that inadequate access to shared infrastructure can affect the performance and viability of chemical clusters. NITI Aayog notes that limited access to shared infrastructure in PCPIRs can increase costs and affect project viability. Chemical industries require reliable utilities, common facilities and waste-management infrastructure for efficient operations. Timely development of such facilities is therefore essential to attract private investment and ensure effective utilisation of BHAVYA-Rasayan parks.

3. Logistics and Connectivity Constraints: Efficient logistics are essential for transporting raw materials and finished products. State Governments and park authorities should therefore ensure strong road, rail and port connectivity along with adequate common logistics facilities to support the efficient functioning of Chemical Parks.

4. Delays in Regulatory Clearances: Delays in regulatory and environmental clearances can increase project costs and discourage investment. Earlier PCPIR experience highlights the importance of efficient approval processes. A time-bound and coordinated clearance mechanism should therefore be established while maintaining necessary environmental safeguards.

5. Weak State-Level Coordination and Slow Rollout: BHAVYA-Rasayan’s success will depend significantly on effective Centre-State coordination. Delays in land, infrastructure, approvals and industry mobilisation may slow down the development of parks. Clear timelines, regular monitoring and dedicated state-level coordination mechanisms can help ensure faster and smoother implementation.

Way Forward

Going forward, the successful implementation of BHAVYA–Rasayan will require timely development of the three Chemical Parks with reliable common infrastructure, efficient logistics and strong environmental management systems. Effective Centre–State coordination and time-bound regulatory clearances will also be important to avoid delays and ensure that the parks become operational as planned.

The scheme should also focus on building integrated chemical ecosystems by encouraging linkages between upstream, downstream and ancillary industries. Greater private-sector participation, investment in technology and R&D, and adoption of sustainable production practices can help improve productivity, innovation and the long-term competitiveness of Indian chemical manufacturers.

Overall, BHAVYA–Rasayan has the potential to strengthen India’s domestic chemical manufacturing base, attract investment, support employment and reduce dependence on imports. By improving infrastructure and industrial linkages, the scheme can enhance India’s participation in global value chains and contribute to a more resilient, competitive and self-reliant chemical industry, supporting the broader vision of a developed India.

For post-implementation evaluation, the performance of BHAVYA–Rasayan can be assessed using measurable indicators such as the number of Chemical Parks made operational, private investment mobilised, number of industrial units established, additional production capacity created, capacity utilisation, employment generated, export growth, changes in chemical imports, utilisation of common infrastructure, and compliance with environmental standards. These indicators can be compared with the pre-scheme baseline to assess the scheme’s performance and longer-term impact.

References

Boston Consulting Group (BCG), 2026, “Building The Next Indian Chemical Giant – The 10 Point Blueprint to Scale,” Boston Consulting Group, 15 January 2026.
https://www.bcg.com/publications/2026/india-building-the-next-indian-chemical-giant

Department of Chemicals and Petrochemicals, 2025, “Chemical and Petrochemical Statistics at a Glance 2025,” Ministry of Chemicals and Fertilizers, Government of India.
https://chemicals.gov.in/statistics-glance

Jaiswal, A. (2026). Govt notifies Rs 3,030-crore scheme for three mega chemical parks. The Times of India. https://timesofindia.indiatimes.com/india/govt-notifies-rs-3030-crore-scheme-for-three-mega-chemical-parks/articleshow/133196700.cms

Khetarpal, S. (2026). Chemical Parks: Getting the Chemistry Right. India Today Magazine, February 16, 2026. https://www.indiatoday.in/magazine/budget/union-budget-2026/story/20260216-4-chemical-parks-getting-the-chemistry-right-2864248-2026-02-06

Prime Minister’s Office, 2026, “Cabinet approves Scheme of Chemical Parks – Bharat Audyogik Vikas Yojana Rasayan (BHAVYA–Rasayan),” Government of India
https://www.pmindia.gov.in/en/news_updates/cabinet-approves-scheme-of-chemical-parks-bharat-audyogik-vikas-yojana-rasayan-bhavya-rasayan/

Press Information Bureau, 2026, “Union Budget 2026–27: Boost to Domestic Chemical Manufacturing,” Government of India, Press Information Bureau
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2222931&reg=48&lang=2

Press Information Bureau, 2026, “Cabinet approves scheme of Chemical Parks ‘Bharat Audyogik Vikas Yojana Rasayan (BHAVYA Rasayan),” Government of India, Press Information Bureau
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2288863&reg=48&lang=1

About the Contributor

Tanisha Hooda is a Research Intern at the Impact and Policy Research Institute (IMPRI) and a B.A. (Hons.) Economics graduate from Manav Rachna International Institute of Research and Studies (MRIIRS), Faridabad. Her research interests include competition policy, digital economy, public policy, and economic development, with a focus on analysing the socio-economic implications of emerging policy frameworks.