Title: “The credibility of a supplier as a reliable brand is a huge differentiator in today’s competitive world”

…states Roop Salotra, president and CEO – Chemicals Business and Packaging Films Business, SRF Ltd. A graduate in mechanical engineering from the National Institute of Technology, Salotra joined SRF in 1989 as the sales and marketing head for automotive ancillaries.

He is credited with taking proactive steps to promote sustainable development and mitigate climate change. Under his leadership, SRF’s Chemicals Business has earned several national and international recognitions including the Responsible Care Logo in 2006, Greentech Platinum Award for Environment in 2006, Greentech Platinum Award for Safety in 2006 and the ‘Commendation Certificate’ in the independent category for commitment to sustainable development under the ‘CII-ITC Sustainability Award’ for 2008.

In this exclusive e-interview with Nishan Chandran and Vivek Sethi, Salotra sheds light on the current challenges and future opportunities in chemical industry in India, and also on the role of SRF in helping make the world a better place to live in. Excerpts…

Current scenario of the global chemical industry…

Chemical industry is seen as a menace by the common man because only the negative aspects like hazardous chemicals, unsafe storage and resultant leakages, which are usually exceptions, are highlighted. There are a number of responsible manufacturers who are not considered newsworthy, and hence, they are not in the limelight. There is a need to increase awareness among people that chemicals are essential for the survival of human race.

Chemicals in some form or the other are required in every aspect of our life – be it agriculture, medicine, food or housing. The need for chemicals cannot be ignored, and therefore, somebody has to take responsibility for manufacturing and supplying them to society. However, this must be done in a responsible manner.

Competitive advantages like low labour, capital costs and access to raw materials are driving chemical and specialty chemical industries towards India, China, and other such emerging economies. Larger petrochemical complexes are moving towards the Middle East. There is a trend to relocate the global chemical industry to lower cost locations, and this trend will only accelerate.

Trends in the flurochemicals industry…

One of the most chemically active intermediates, hydrogen fluoride (HF), is commonly used in the manufacture of fluorochemicals. HF is produced from fluorspar (CaF2), a raw mineral globally concentrated in China, with deposits also available in Mexico, South Africa and Kenya. The fluorochemicals industry is concentrated in and around these areas, and this concentration will only increase.

Handling products as hazardous as HF requires a high level of expertise and knowledge, which is difficult to find, thereby raising the effective entry barriers and limiting the total number of players. China and India lead the developing world in the fluorochemicals segment and are the likely beneficiaries of the movement of the chemical industry from the developed countries to the emerging economies.

Demand drivers for fluorochemical industry…

A major application of fluorochemicals is in the refrigerants used in room & car air conditioners, refrigerators, deep freezers, and the likes. With increasing per capita incomes driving affordability in the tropical South-East Asian region, the demand for luxury products in cars and homes is expected to grow exponentially. Considering only the growing population and rising standards of living of the middle-class, it is logical to believe that India will emerge as one of the largest refrigerant gas markets in the world. With a number of large suppliers available globally, the real challenge lies in building and nurturing customer relationships. The credibility of a supplier as a reliable brand is a huge differentiator in today’s competitive world.

Recent technological changes and their impact…

There has been an increasing shift towards the usage of hydrofluorocarbon (HFC)-based technologies for refrigeration purposes. Due to the increasing availability of capital and the latest technologies in the developing nations, cutting-edge products are becoming available here soon after they enter the more developed economies.

Despite the hazards associated with the manufacturing process, there is a growing shift towards increasing usage of fluorine-based molecules for specialty chemicals. Fluorine-based molecules have found diverse applications ranging from fluoride toothpastes to agrochemicals and pharmaceutical ingredients. As there are not even 15 countries worldwide that have developed strengths in fluorine chemistry, this space offers huge opportunities. And with all the efforts that SRF is committing into its R&D and operational excellence, we shall be well-placed to take advantage of the situation.

SRF’s R&D investments…

Continuous innovation is the key to survive and grow in any chemical industry set up. At SRF, R&D remains a critical function for sustaining its competitive advantage. Building on our core competence of knowledge in halogen chemistry and operational excellence in handling HF, we have intensified our efforts to develop new molecules for applications in pharmaceuticals and agrochemicals.

Our R&D department has developed technology for the latest generation refrigerant HFC-134a&HFC-32 and has also obtained a US patent for HFC-32. A production facility has been set up for HFC 134a-based on in-house technology, with quality matching international standards. We are also working on more such substitutes and blends. These alternatives will enable our chemical business to move forward and start delivering products that will fill the vacuum created by the phase out of CFCs, and eventually HCFCs, under the Montreal Protocol.

SRF’s quality initiatives…

SRF manages its business through effective implementation of TQM in an integrated manner, combining principles, methods, systems and tools. TQM is now woven into the fabric of SRF, as this approach is used not only in operations but also in integrating strategic goals with annual directions. This is essentially aimed at bringing about continual improvements in every facet of the organisational activity – be it manufacturing, marketing, designing, engineering, projects, personnel or any other support function.

The company’s TQM activities are built on a three-pronged strategy:

Enhancement of customer satisfaction

Continual improvement in every business activity

Involvement of everyone in the organisation

Building on the solid foundation of breakthrough management, SRF has developed its own unique six-month certification programme on problem solving, titled ‘PSP Blue’ for developing better skills. Building on this success, SRF has further designed and launched a high-level certification programme titled ‘PSP Silver’ to impart advanced skills to people in the areas of new product development, technology and manufacturing.

SRF’s pioneering efforts to invest in clean development mechanism (CDM) technology…

SRF’s chemical business has been at the forefront of the ‘climate change’ movement. It has been instrumental in making India one of the leaders at both the Montreal Protocol as well as the Kyoto Protocol. As a company, it has been one of the first to cutback on ozone depleting gases under the Montreal Protocol as well as greenhouse gases under the Kyoto Protocol.

An active participant in CDM, SRF boasts of some of the most reputed names as its project participants. In fact, it was one of the first companies in India to invest in CDM under the Kyoto Protocol to reduce carbon emissions. Our CDM project has the potential of reducing upto 3.83 million tonne of CO2-equivalent per annum, by destroying the HFC-23 produced as a by-product of HCFC-22 rather than permitting it to escape into the atmosphere. This destruction takes place in a thermal oxidation plant which was the first such facility in India.

Impact of Montreal Protocol on SRF’s business…

SRF’s chemicals business is regulated by the Montreal Protocol, an international treaty designed to protect the ozone layer by phasing out the production of substances believed to be responsible for ozone depletion. India is one of the signatories to this agreement, and SRF wholeheartedly supports this environment-friendly initiative, despite the commercial costs it entails. SRF voluntarily shut down its Halon plant in 1998 when it was discovered that Halon damages the ozone layer. Similarly, CFC production has been cut from 3,289 million tonne (mt) in 2005 to 984 mt in 2007, which amounts to a 70 per cent reduction over a period of two years.

HCFC-22, another refrigerant gas manufactured at our plant, is also restricted under the Montreal Protocol, though it has a distant phase-out date of 2030. Increasing concerns of climate changes, however, are accelerating the phase-out timelines globally, and we find markets and applications shifting towards new-age substitutes well ahead of schedule. Considering the production/consumption in 2009-10 as the baseline, quantities need to be scaled down by 75 per cent by 2010, and 90 per cent by 2015. These represent huge cut-backs and a significant acceleration of the phaseout schedule. Carbon tetrachloride (CTC), a part of our chloromethanes product line, is also controlled by the Montreal Protocol, and is required to be completely phased out by December 2009.

Initiatives taken by SRF to aid sustainable development…

As a part of the CDM project, SRF has embarked on several initiatives to aid sustainable development in the backward region of Alwar, Rajasthan. The Natural Resource Management project involves harnessing under-utilised land and water resources by creating earthen checkdams to harvest rainwater, which is then used for large scale plantations. Rural ladies are empowered and uplifted to form self-help groups (SHG) that engage in microfinance. HIV Aids awareness initiatives work towards limiting spread of this deadly endemic, while in education SRF has adopted a government primary school to improve the quality of education available to the children in this region. Through these initiatives, we have been able to impact the lives of about 2,800 families in 28 arid villages in Rajasthan. Reputed non-governmental organisations like Pradan and Sard have been engaged to spearhead this effort.

SRF’s planned capital expenditure and expansion plans…

As a group, we have eight plants in India and one in Dubai. In 2008, we acquired two companies – one in Thailand and the other in South Africa.

Established in 1973, SRF has today grown into a global entity with operations in four countries. Pursuing its aspiration to achieve global leadership by 2020, SRF has embarked on a long and challenging journey of growth and expansion of all its businesses.

An investment of about Rs 1,000 crore has been made in the last four years, mainly in adding and augmenting state-of-the-art production facilities, with an additional Rs 600 crore worth of projects being in different stages of completion. Investment in R&D for chemical businesses will help SRF acquire capabilities to develop new fluorochemical molecules required by pharmaceutical and agro chemicals majors, and deliver them from a new chemicals complex that is in the pipeline.
Quotes:

As CFC&HCFC have high ozone depleting potential, they have been phased out under the Montreal Protocol. As producers scramble to put in place the technology and production assets to retain their marketshare and customer base, the industry is currently undergoing a discontinuous and accelerated change.