| Ecological
and economic profile of the caustic-chlorine industry There are
broadly two categories of industries. Explained simply, one makes the final product the
way we see them on the shelves and one supplies the raw material or intermediate product
to make the final products. The manufacturing industry depends on the intermediary
industry. The manufacturing industry is at the forefront, normally facing the brunt for
any environmental pollution while the intermediary industry remains obscure from the
public gaze.
That is exactly why the third rating of the Green Rating Project
(GRP) is significant. This time, GRP focuses on the caustic-chlorine industry of India
— a key contributor to the country’s economy as well as pollution. What makes it
worse is the fact that the caustic-chlorine industry has no control over the end use of
the products it manufactures.
Prior to rating the caustic and chlorine sector, GRP had rated the
pulp and paper sector where pollution peaked during production while for the automobile
sector, pollution was maximum during the stage of product usage. The rating of the
caustic-chlorine sector is unique because the issues of concern here relate to:
 The output at the end of the production process –
chlorine and caustic soda – that are used extensively by industries to make products
like pesticides and organo-chlorine that are highly detrimental to the environment.
The utilisation, storage and transportation
of the products. For example, storage of large amount of chlorine is similar to a time
bomb, which if explodes, will kill all living organism within its sphere of influence.
Deadly mercury pollution and contamination
arising due to emissions of mercury into air, water and land. The fact that an industrial
disaster that occurred 50 years ago continues to haunt the sector and has laid the basis
for a totally new environmental framework indicates the potential environmental danger
associated with the sector. We are referring to the infamous Minamata tragedy where
mercury was dumped into the sea by a Japanese chemical company leading to its toxic
contamination (see box: Liquid death).
Another issue that has considerably impacted the environmental
trends of the Indian caustic-chlorine industry has been the influence of the global market
on the Indian market. A situation has been created for the Indian industry, where on one
hand, it has to deal with chlorine, that is neither storage nor disposal friendly and on
the other hand, it has to face a glut of caustic soda in the market, because of dumping of
caustic soda by China and the countries of the Gulf region.
| Liquid death
Death this time travelled through the waters and found its way into homes
of innocent fishing folk in a seaside town of Japan, killing children in wombs and
affecting a number of people. Statistics cannot put an estimate to the suffering that
spanned three decades.
The Chisso Corporation, one of the main employers of
Minamata, was making petro-chemicals and plastics. From 1932 to 1968, Chisso Corporation
dumped an estimated 27 tonnes of mercury compounds into Minamata Bay. The destruction of
large scale fishing areas following the dumping simply saw the exchange of money to buy
people off. The logic of the company was to pay people in exchange for polluting.
It was not till mid 1950s that people began to notice
a strange phenomenon in animals and humans. People began to experience numbness in their
limbs and lips. Their speech slurred and their vision constricted. Some people had serious
brain damage. Birds started to drop dead from the skies.
The valiant effort of a doctor from Chisso
Corporation itself, Dr Hosokawa, brought the reasons for the disease to light. He faced
resistance to his theory that linked the disease with the dumping of mercury compounds
from the company into the sea. Chisso Corporation initially succeeded in buying the
silence of people but soon the incident came into national and international limelight.
Though the victims testified at the United Nations Environmental Conference in Sweden, the
UN did not intervene. Till a decade ago, the Japanese courts were still resolving suitable
compensation for the victims. It was Minamata which ultimately forced the Japanese
government to ban mercury in all processes and products. It also heralded a new technology
for the caustic-chlorine industry - the membrane cell technology which gave it a new life. |
2.1 Industrial relevance of the
caustic-chlorine industry
The chemical industry in India is possibly the best example to study the process of
industrialisation. The basic inorganic and organic chemicals produced in the chemical
industry provide the building blocks for several downstream industries.
Caustic soda and chlorine - one of the most important inorganic
chemicals - are used by almost all industries for one thing or the other. The importance
of the sector can be gauged by the fact that caustic-chlorine industry is among the twenty
largest chemical industries in the world. Products made from caustic soda and chlorine are
used everyday by people and they have become an integral part of our lifestyle (see table
2.1).
In India, caustic soda is the principal product of the industry
and chlorine is treated as a by product of the industry, though the global
caustic-chlorine industry is driven by chlorine. For an Indian caustic-chlorine industry
to be financially viable, caustic soda has to realise more than 65 per cent of the cost,
as chlorine prices are low. But, in the past few years, chlorine has started getting
importance as a principal intermediate material in the manufacture of PVC.
In India, caustic soda is primarily used in the manufacture of
pulp and paper, detergents, viscose, aluminium, petroleum refining, metal cleaning etc.
Paper and pulp sector followed by humanmade viscose fibres and alumina accounts for the
major chunk of caustic consumption (see graph 2.1).
Global consumption pattern of caustic soda differs from
that of India. Globally chemicals account for 40 per cent of the total consumption
followed by paper and pulp with 18
per cent, alumina with 8 per cent, soap and detergents with 7 per
cent and humanmade fibres with 7 per cent. The rest 20 per cent is distributed among other
uses (see graph 2.2).
In the US, the largest user of caustic soda is the organic
chemical industry (30 per cent), and the inorganic chemical industry (20 per cent). The
pulp and paper industry uses about 20 per cent of the US caustic soda production for
pulping wood chips, and other process. In Europe, the chemical industry is the major
consumer of caustic soda followed by the paper industry. Other users are aluminium
industry.
Similar to caustic soda consumption pattern, pulp and paper sector
is one of the major consumer of chlorine in India. However, it is in HCl production that
maximum amount of chlorine is consumed in India (see graph: 2.3). In recent times, the use
of chlorine in PVC manufacturing has also increased and currently about 11 per cent of the
chlorine is consumed by PVC sector. In recent years India has also started to export
substantial quantity of chlorine based products.
Table
2.1 CHLORINE & CAUSTIC SODA — INDISPENSABLE LIFE-LINE OF THE INDUSTRY
|
| SPHERE OF USE/INDUSTRY |
PRODUCTS OR APPLICATIONS OF USE |
| Production of metals and
resource materials |
Alumina, propylene oxide,
polycarbonate resin, epoxies, synthetic fibres, soaps, detergents, rayon and cellophone |
| Pulp and paper industry |
Caustic soda is used for
pulping wood chips. Chlorine and its compounds are used to bleach wood pulp in the paper production process |
| Petroleum and natural gas
extraction industry |
Caustic soda is used as a
drilling fluid |
| Manufacture of organic
chemicals |
Chlorine is used for making
ethylene dichloride, glycerine, glycols, chlorinated solvents and chlorinated
methanes |
| Plastic industry |
Used for making plastics,
most notably polyvinyl chloride (PVC), which is being used extensively in building and
construction, packaging, and many other items |
| Pesticides |
96 per cent of all
pesticides are produced using chlorine |
| Industrial solvents |
A variety of chlorinated
compounds are used as industrial solvents, including the main ingredient used in dry
cleaning. |
| Water treatment |
Chlorine is used in 98 per
cent of the water treatment plants in the world |
| Pharmaceuticals |
85 per cent of all
pharmaceuticals use chlorine at some point in the production process |
| Other relevant applications |
Domestic bleaches,
flame-retardaXts, food additives, refrigerants, insulation, computeX chip manufacturing
and hospital disinfeXtants among others |
Globally, the majority of chlorine production is used in the
manufacturing of organic chemicals including vinyl chloride monomer, ethylene dichloride,
glycerine, glycols, chlorinated solvents, and chlorinated methanes. Vinyl chloride, which
is used in the production of polyvinyl chloride (PVC) and many other organic chemicals,
accounts for one-third of the total chlorine production (see graph 2.4). The other major
consumers are pulp and paper industry, other inorganic chemicals, disinfection treatment
of water and the production of hypochlorites. Globally, more than two-thirds of all
chlorine is consumed in the same manufacturing plant in the production of other chemical
intermediates, though in India two-thirds of all chlorine is sold.
Graph 2.1 INDIAN
DEMAND PATTERN OF CAUSTIC SODA (in percentage) |
Graph 2.2 GLOBAL
CONSUMPTION PATTERN OF CAUSTIC SODA (in percentage) |
 |
| Source: CMIE Report,
2000-2001. |
Source: Indianfoline,
reports, Chlor-alkali industry. |
Globally, the caustic-chlorine industry is driven by the
demand-supply of chlorine and not caustic soda. Across the world, demand for chlorine is
higher than that of caustic soda, which is considered a by-product.
The world production of caustic soda is estimated to be around 45
million tonnes per year. The global production of chlorine is in tune of 40 million
tonnes. The global installed capacity of caustic soda in 2001 was about 54.4 million
tonnes while for chlorine, it was about 48 million tonnes.
It is estimated that 65 per cent of the world’s
caustic-chlorine industry is concentrated in three regions; North America, Western Europe
and Japan. Out of this, the share of US is about 30 per cent, the EU accounts for about 25
per cent and Japan’s share is about 10 per cent.
The US is the largest consumer and is also a net importer of
caustic soda, whereas China and Saudi Arabia are the net exporters. The forecast for the
global demand for both chlorine and caustic predicts an increase, although this would
mainly be in Latin America and Asia. Between 1997-2002, the global capacity of the
caustic-chlorine industry is likely to increase by around 6.6 million tonnes per year of
chlorine, largely driven by strong growth projections of PVC in developing countries.
Globally, the economic impact of chlorine is very large. It
affects nearly every industry in one way or the other. For instance, PVC is used in
automobile interiors, construction and nearly every business uses chlorine-bleached paper.
According one estimate, globally the chlorine industry accounts for nearly $71 billion in
sales. The chlorine sector provides a $2.9 billion trade surplus for US and affects an
estimated 40 per cent of the total gross domestic product in US.
| Graph: 2.4 GLOBAL
CONSUMPTION OF CHLORINE (in percentage) |
Graph: 2.3 CHLORINE DEMAND IN INDIA
– VARIOUS SEGMENTS |
 |
| Source: Indiainfoline, sector
reports, Chlor-alkali industry. |
Source: CMIE Report, 2000-2001. |
The US is self sufficient in caustic production. Europe is
approximately in balance in chlorine and has traditionally been the world’s second
largest exporter of caustic soda; currently it is a net importer. Australia and South-East
Asia are the main importing areas. New capacity in the Middle East and South-East Asia may
upset these traditional trade patterns. While globally, the chlorine growth may average
2-3 per cent per year over the next 10 years, it is forecast to be less than 1 per cent
per year in Europe and 3-4 per cent per year in India.
2.2 The Indian caustic-chlorine sector - the economic
challenge
In the last few years, the Indian caustic soda companies have not done well financially.
Over capacity and cheaper imports have resulted in a glut of caustic soda in the domestic
market. This can be seen from the fall in capacity utilisation over the years (see table
2.2). Things have improved since 2001 due to the revival of the paper industry. As is the
case with most commodity-based industries, this industry too is cyclical in nature. In
recent times the domestic industry is also facing a over capacity problem. Five
large-scale caustic soda units have come up since 1997 with companies like Reliance
entering this sector. Gujarat Alkalies & Chemicals Ltd (GACL) is the biggest producer
of the sector.
2.2.1 Influence of global politics on Indian industry
The favourable economics of production in the US and Gulf (cheap electricity, salt and
ethylene) make it possible for the US to export ethylene dichloride (EDC), which is the
basic raw material for making PVC, and the Gulf countries to export caustic soda at
attractive prices. The US is the largest exporter of EDC followed by Europe. The main
importing areas are Australia (alkali for the alumina industry) and South-East Asia (EDC
and caustic).
Table 2.2 CAUSTIC
SODA PRODUCTION TRENDS IN INDIA |
YEAR |
INSTALLED CAPACITY
(000’MT) |
PRODUCTION
(000’MT) |
DEMAND
(000’MT) |
SUPPLY (000’MT) |
CAPACITY UTILISATION
(in percentage) |
1995-1996 |
1,673.0 |
1,308.7 |
1,346.0 |
1,448.6 |
78 |
1996-1997 |
1,914.0 |
1,320.0 |
1,331.5 |
1,460.1 |
69 |
1997-1998 |
2,028.5 |
1,416.8 |
1,506.5 |
1,561.9 |
70 |
1998-1999 |
2,272.1 |
1,492.2 |
1,558.2 |
1,640.5 |
66 |
1999-2000 |
2,251.4 |
1,514.0 |
1,548.2 |
1,576.8 |
67 |
Source: Alkali
Manufacturers Association of India. |
The market conditions are such that caustic soda is in demand in
India while chlorine is not; while globally the industry requires more chlorine than
caustic soda. Though Indian companies have excess chlorine, they cannot export it simply
because of the major hazards associated with transportation of chlorine. Chlorine also
finds a place in the list of toxic and hazardous substances banned for transnational
transportation under the Basel Convention on hazardous wastes. As a result, India is faced
with a double edged sword – on one hand, it has a growing chlorine stock that it
cannot dispose off and on the other hand, the dumping of caustic soda is forcing the
sector to compete with low international prices. This is unviable for the sector as its
production costs are high.
As mentioned earlier, the Indian caustic-chlorine industry is
highly influenced by the global manufacturing and market conditions. The reasons that make
it difficult for the industry to break the existing shackles and face the onslaught of
foreign dumping are the following:
Sector still dependent on imported technology
Though the sector is moving towards a cleaner technology (i.e. membrane cell technology),
the country is not equipped to provide this technology indigenously. The sector is
dependent on imports for even replacement of cell consumables, which is very expensive.
In addition, there is a high import duty on getting membranes.
Though the import duty for new membrane cell plants was as high as 25 per cent in
1997-1998, it has been brought down to 15 per cent in 1999-2000. However, spares for
repair including replacement of worn out membranes still attracts 30 per cent import duty.
These factors have made the conversion to membrane technology an
unviable option and hence most of the companies who have converted to membrane are not
doing well financially.
Differential
power tariffs
The sector is affected by the difference in energy costs in India and abroad. Energy
consumption is about 70 per cent of the cost of making chlorine and caustic soda in India.
Compared to international power tariff levels of US 2 cents per kilowatt, current tariffs
in India are close to 8-9 cents per kilowatt1. In addition, the power supply is highly
unreliable with frequent fluctuation resulting in lower operational efficiencies and
higher input costs.
Lowering
of custom duty on imports of caustic soda led to glut in Indian market
The industry is against the reduction in customs duty on imports of caustic soda. As of
1996-1997, the lower customs duty opened the floodgates for foreign imports as a result of
which the expanding PVC sector started shipping in chlorine derived EDC from the Arabian
Gulf and Gulf of Mexico, where energy prices were lower. Other countries like France and
Japan were also found dumping caustic soda at a very low price in Indian market resulting
in a glut. This resulted in considerable increase in imports in 1997-1998 and 1998-1999
(see table 2.3).
The sector had made several representations to the government for
levying anti dumping taxes on these countries. As a result, government introduced an
anti-dumping duty on imports for caustic soda. The anti-dumping duty levied on
manufacturers from Japan is US$ 319.4 per tonne of caustic soda while it is US$ 309.4 for
French exporters and US$ 266.9 per tonne of caustic soda for Saudi Arabia.
Table 2.3 CAUSTIC SODA
– SUPPLY & DEMAND IN INDIA (in ’000 MT) |
YEAR |
PRODUCTION |
IMPORTS |
TOTAL DOMESTIC
AVAILABILITY
(Including opening stock) |
EXPORTS |
DOMESTIC CONSUMPTION |
1996-1997 |
1,320.0 |
64.0 |
1,403.2 |
56.9 |
1,331.5 |
1997-1998 |
1,416.8 |
116.0 |
1,547.6 |
17.3 |
1,506.5 |
1998-1999 |
1,492.2 |
94.5 |
1,610.5 |
30.0 |
1,156.0 |
1999-2000 |
1,514.0 |
60.0 |
1,598.5 |
28.3 |
1,548.2 |
Source:
23rd Annual Report of Alkali Manufacturers Association of India, 1999-2000 |
The sector is now pushing for stopping all imports by making it
mandatory for Indian companies like NALCO to use domestic products.
2.2.2 The future of the Indian caustic-chlorine industry
The co-production of chlorine and sodium hydroxide in fixed proportions, 1.128 tonnes of
caustic (as 100 per cent NaOH) per tonne of chlorine produced, has always been a problem
for the caustic-chlorine industry. Both products are used for very different end uses with
differing market dynamics and it is only by rare chance that demand for the two coincides.
Depending on demand for which product is dominant, either can be regarded as a
by-product.The price then varies accordingly. Price fluctuations can be extreme: in the
spot market in cases of oversupply, caustic prices variation can be as low as US$ 20-30
per tonne of caustic soda whereas, in short supply, prices can be US$ 300 and higher per
tonne of caustic soda2.
Overall, with caustic soda being excess in the major producing
countries, the Indian market is likely to be flooded with cheap caustic soda imports
making it difficult for the Indian companies to compete with global players on price. In
addition, the existing excess capacity in the Indian industry further floods the market
with caustic soda. This, coupled with increased cost of production due to increase in
power cost, will affect the performance of existing players adversely in coming future.
Paper and pulp, man-made fibres, soaps and alumina are the major
user sectors of caustic soda. Together they account for more than 80 per cent of the
domestic demand. The paper and pulp sector has been growing at the rate of around 6 per
cent per annum in volume terms. The soap industry is expected to grow at the rate of
around 9-10 per cent per annum. The demand for caustic soda will grow from this industry.
Caustic soda is used in the conversion of bauxite into alumina, though the demand from
this sector is sluggish. The demand from humanmade fibre industry has slowed down as the
sector itself is growing at a pace of 6 per cent per annum. Therefore, the overall demand
of caustic soda is expected to grow at a rate of 6-7 per cent per annum in the future. The
domestic industry can also grow at this rate only if it is able to compete with the cheap
imports. Survival is going to be hard even for the most efficient companies.
According to financial accounting definition, the responsibility
of a company ends at the physical boundary of the company. If one uses this definition,
then the environmental challenges facing the caustic-chlorine industry is rather
manageable. It just has to get rid of the mercury cell technology.
However, if one considers the definition of boundary as per
environmental accounting, wherein the boundary is defined as the environmental impact of
the company’s processes and products right from sourcing of raw material to the final
disposal of the product, the environmental challenges that caustic-chlorine industry
faces, is as big as it can ever get for a industrial sector (see table 2.4). In this case,
the caustic-chlorine industry will have to take responsibility for the environmental
impact of not only the production plant, but also the final products made from the
products it produces (mainly caustic soda and chlorine).
2.3.1 Range of issues involved in the caustic-chlorine
industry
The sheer range of issues related to the caustic-chlorine industry demand that the
environmental impact study of the sector be done in two separate segments. Accordingly,
the division has been done as follows:
Environmental impact
from the production plant of caustic-chlorine industry; and,
Environmental impact of
the products of caustic-chlorine sector once it leaves the plant premises.
Environmental performance of production plant
The vulnerability and dangers of mercury losses during the
production process and leakage of chlorine during process and from storage is a constant
nightmare to both the industry and environmentalists.
Forewarned but not forearmed
If the Minamata disaster is an example of a deliberate and slow
murder, then the oleum gas leak at Shriram is about the callousness of the management
despite being forewarned.
It was a disaster in the waiting at the Shriram Foods &
Fertiliser Industry, situated bang in the middle of populated middle class colonies of
Delhi.
Preliminary reports had expressed concern about the safety
arrangements at the plant. A parliament question had been raised about the possibility of
major leakage of liquid chlorine from the caustic-chlorine unit of Shriram Fertilisers.
In reply, the Minister of Chemical and Fertilisers stated that the
government was fully conscious of the problem of hazards from dangerous and toxic
processes and assured the House that the necessary steps for securing observance of safety
standards would be taken in the interest of the workers and the general public. Pursuant
to this assurance, an expert committee examined the safety and pollution control measures
covering all aspects such as storage, manufacture and handling of chlorine. Headed by
Manmohan Singh, the committee made various recommendations in this report and went to the
extent of saying that the caustic-chlorine plant cannot be allowed to be restarted unless
these recommendations are strictly compiled with by the management.
On December 4, 1985, a major leakage of oleum gas took place as a
result of a tank that burst after the collapse of the structure it was mounted on. This
was followed by another leak after a couple of days from the joints of a pipe. It resulted
in the death of an advocate and affected the health of a large number of people. The issue
here is not the extent of damage but the fact that the company had simply looked the other
way after being warned of potential disaster. This is one instance where we hope that
history will not repeat itself. |
However, two environmental disasters, Minamata in Japan and the
oleum gas leak in Delhi alone (see box: Forewarned but not forearmed) have pushed industry
to clean up its act at the production plant.
Moving towards cleaner technology
With increasing awareness on environmental issues especially with
respect to mercury pollution an era of change is sweeping the caustic-chlorine industry.
The mandatory rule by the Indian Government in 1986 that new
caustic-chlorine plant should only be installed with membrane cell technology has
expedited the eventual shift from mercury cell technology to membrane technology. While in
1960s and 1970s, most of the companies were using mercury or diaphragm cell technology,
today in India, 69 per cent of companies use membrane cell while 31 per cent still use
mercury cells.
Capacity of caustic-chlorine sector increased substantially in
1990s when some big companies were set up using membrane cell technology like Indian
Petrochemicals Corporation Ltd, Reliance Industries, Shriram Alkalis & Chemicals Ltd,
etc. In addition, number of companies earlier using mercury cells changed to membrane
during 1990s such as NRC Ltd – Chemical Division, Punjab Alkalies & Chemicals
Ltd, Grasim Industries Ltd, etc. The membrane technology has advantage over mercury cells
in terms of absence of mercury pollution and energy efficiency. |
Today, the level of environment management that one sees in
the Indian caustic-chlorine industry is nothing less than the global best. The sector has
slowly moved away from the toxic mercury cell process and more than 70 per cent of the
sector uses the best available membrane cell technology at their production plant. (see
box: Moving towards cleaner technology) Compared to Europe and the US, where more
companies are using the polluting mercury cell and diaphragm cell technology respectively,
the effort of the Indian caustic-chlorine sector in moving towards membrane cell
technology is truly commendable. Even at the production plant, the performance of Indian
caustic-chlorine sector is more or less comparable to the global best performance (except
in mercury emission). The energy consumed by Indian caustic-chlorine industry is probably
the least in the world and their consumption efficiency too rivals the global best
performance. In addition, to make sure that their eco-friendliness is recognised, they
have obtained internationally acknowledged certifications for their environment, health
and safety performance. Out of all industrial sectors of India, the percentage of total
companies having ISO 14001 for environment and ISO 18001 for health and safety is probably
the maximum in the Indian caustic-chlorine industry. However, the biggest challenge that
the sector faces is the reduction in mercury pollution. Currently, Indian companies
consume as much as 50 times more mercury than a European mill and this is the difference
that Indian companies have to eliminate.
Environmental
performance of the products
The ultimate use of chlorine is not under the control of the caustic-chlorine industry.
The downstream industry makes environmentally damaging products like plastics, pesticides
and organo-chlorine from chlorine. Serious questions of adverse health and environmental
effects of chlorine and chlorinated compounds have been raised.
Central to the case against chlorine is the contention that
chlorinated substances are, as a group, health and environmental hazards. Many chlorinated
compounds do show up on lists of toxic substances developed by various government
agencies. Chlorinated organic compounds, or ‘organochlorines,’ are toxic,
bioaccumulative and the cause of problems such as cancer, immune suppression, birth
defects, fertility problems and endocrine disruption. Dioxin - a chlorinated substance -
is currently being studied by the United States Environmental Protection Agency as being
the culprit in a variety of health and environmental problems. Other chlorinated
compounds, such as CFCs are ozone depleters and are already being phased out. The good
technical properties of chlorine have actually given it a bad reputation: chlorine has
strong binding properties and is a building block in several chemicals that do not break
down easily, like PCB and CFC.
In the past few years, numerous groups from industry, government
and NGOs have formed to explore the health and environmental issues associated with
chlorine use. Some have issued calls to phase out chlorinated compounds, while others have
called for further study.
The chlorine controversy is only likely to snowball with increase
in scientific research on the issues. Hopefully, the decisions affecting chlorine will be
based on rational science and risk assessment, resulting in a better quality of life. |
