Union Budget 2026–27 Proposes Three New Chemical Parks, ₹600 Crore Allocation and ₹20,000 Crore CCUS Push for Chemicals Sector

The Union Budget 2026–27, tabled in the Lok Sabha by Finance Minister Nirmala Sitharaman, has proposed the establishment of three new dedicated Chemical Parks through a challenge-route, cluster-based plug-and-play model, marking a major policy push for India’s chemical and petrochemical industry. The initiative is supported by a ₹600 crore central allocation for FY 2026–27 and is aimed at boosting domestic production, reducing import dependence, and enhancing global competitiveness.

In her Budget speech, the Finance Minister said that a dedicated scheme would be launched to support state governments in setting up these chemical parks, underscoring the Centre’s commitment to infrastructure-led industrial development.

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Cluster-Based Chemical Parks to Strengthen Domestic Manufacturing

The proposed Chemical Parks will function as integrated industrial clusters, offering shared infrastructure such as utilities, logistics, pipelines, storage facilities, and environmental compliance systems. The plug-and-play model is expected to significantly reduce capital costs, shorten project implementation timelines, and improve ease of doing business for both large manufacturers and MSMEs.

According to budget provisions, the parks will be developed through a challenge-based selection process, encouraging states to compete on parameters such as land availability, infrastructure readiness, and industrial ecosystem strength. Public-private partnerships are expected to play a key role in long-term sustainability.

₹600 Crore Budget Allocation for Three New Chemical Parks

The Union Budget has earmarked ₹600 crore in FY 2026–27 for the development of the three chemical parks. This marks the first focused budgetary allocation specifically for chemical park infrastructure at the national level.

Industry experts view this as a structural shift away from fragmented industrial estates toward ecosystem-based manufacturing hubs, similar to those seen in global chemical production centres.

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Why Chemical Parks Matter for India's Chemical Industry

India’s chemical industry is valued at approximately USD 220–230 billion, making it the sixth-largest chemical producer globally. The sector contributes nearly 7% to India’s GDP and employs more than 2 million people directly, with several million more engaged indirectly.

Despite its scale, India continues to depend heavily on imports for critical intermediates and specialty chemicals, particularly from East Asia. Recent global supply-chain disruptions have highlighted the risks of this dependence.

The chemical parks initiative seeks to address these challenges by:

• Encouraging domestic production of intermediates

• Strengthening backward and forward linkages

• Improving supply-chain resilience

• Enabling world-scale manufacturing

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Carbon Capture, Utilisation and Storage (CCUS): ₹20,000 Crore Green Push

In a major sustainability-focused announcement, the Union Budget has also proposed an outlay of ₹20,000 crore over the next five years to support Carbon Capture, Utilisation and Storage (CCUS) technologies.

The CCUS programme will cover five industrial sectors, including:

• Chemicals

• Power

• Steel

• Cement

• Refineries

The initiative aims to achieve higher technology readiness levels for end-use applications and reduce industrial carbon emissions by capturing carbon dioxide for reuse or safe storage, preventing its release into the atmosphere.

For the chemicals sector, CCUS is expected to play a critical role in enabling cleaner production processes and improving alignment with global ESG and sustainability standards.

Sustainability and Environmental Compliance in Chemical Parks

Environmental compliance remains one of the biggest challenges in chemical manufacturing. The proposed chemical parks are expected to incorporate:

• Centralised Effluent Treatment Plants (CETPs)

• Hazardous waste management systems

• Cleaner production technologies

• Common environmental monitoring frameworks

The integration of CCUS funding further strengthens the environmental architecture of the chemical parks, making them compatible with international sustainability norms.

Likely Beneficiary States

While the government has not yet announced locations, industry analysts expect strong interest from coastal and industrially advanced states such as:

• Gujarat

• Maharashtra

• Tamil Nadu

• Andhra Pradesh

• Odisha

These states already host refineries, ports, petrochemical complexes, and industrial corridors, giving them a natural advantage in hosting large-scale chemical parks with export potential.

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Revival of 200 Legacy Industrial Clusters

In another significant announcement, the Union Budget 2026–27 has proposed a scheme to revive 200 legacy industrial clusters across the country. The objective is to improve cost competitiveness and efficiency through infrastructure and technology upgrades.

This initiative is expected to directly benefit the chemicals and petrochemicals sector, particularly traditional manufacturing hubs facing infrastructure bottlenecks.

The Finance Minister noted that reviving and strengthening traditional industries is essential for accelerating and sustaining economic growth while preserving jobs.

Investor and Industry Impact

From an industry and investor perspective, the combined push for chemical parks and CCUS offers:

• Lower capital expenditure due to shared infrastructure

• Reduced regulatory and compliance risks

• Faster time-to-market for new projects

• Increased attractiveness for foreign direct investment (FDI)

• Improved export competitiveness

For MSMEs and specialty chemical manufacturers, the plug-and-play model lowers entry barriers and supports innovation-driven growth.

How Budget 2026–27 Marks a Policy Shift

Earlier approaches focused on:

• Production-linked incentive (PLI) schemes

• Company-specific subsidies

• Fragmented industrial estates

The 2026–27 Budget signals a move toward:

• Infrastructure-first industrial development

• Cluster-based manufacturing ecosystems

• Long-term competitiveness and sustainability

This shift reflects global best practices in chemical manufacturing and industrial planning.

The proposal to establish three new Chemical Parks, backed by ₹600 crore in budgetary support, alongside a ₹20,000 crore CCUS programme, represents a landmark policy intervention for India’s chemical industry. Combined with the revival of 200 legacy industrial clusters, the measures lay the foundation for a more resilient, competitive, and sustainable manufacturing ecosystem.

If implemented effectively, these initiatives could transform India into a global-scale chemical manufacturing hub, driving investment, innovation, employment, and exports over the coming decade.

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Three New Chemical Parks FAQs

Q. How many chemical parks were announced in Budget 2026–27?

Ans. The Union Budget 2026–27 proposed the establishment of three new dedicated chemical parks, to be developed through a challenge-route, cluster-based plug-and-play model.

Q. What is the budget allocation for chemical parks?

Ans. An allocation of ₹600 crore has been earmarked in FY 2026–27 to support the development of the three chemical parks and related infrastructure.

Q. What industries will benefit from chemical parks?

Ans. The chemical parks will benefit a wide range of industries, including petrochemicals, specialty chemicals, agrochemicals, pharmaceuticals, and downstream chemical manufacturing, as well as MSMEs and export-oriented units operating within the chemicals value chain.