India’s business and industry think tank, the Federation of Indian Chambers of Commerce and Industry (FICCI), has urged the government to increase import duties on polypropylene (PP) and polyethylene (PE) to prevent the dumping of these petrochemicals in India and to protect the interests of domestic producers. FICCI has recommended raising the import duties on these raw materials from the current 7.5 percent to 12.5 percent.
In a letter addressed to the Department of Chemicals and Petrochemicals, under the Ministry of Chemicals and Fertilizers, India’s leading trade body expressed concerns that countries like China might exploit India’s low import duties to dump petrochemical products such as PP and PE, thereby harming domestic producers. Increasing import volumes could lead to reduced capacity utilization, ultimately resulting in workforce retrenchment. PP and PE serve as raw materials for various industries, including automobiles, packaging, agriculture, electronics, medical devices, and construction.
Burgeoning ImportsThe downstream industry's substantial capacity expansion has been consistently rising. According to reports, the projected deficit of PP and PE is expected to reach 12 million tonnes per annum, valued at approximately US$ 12 billion at current prices, by 2030. The Indian petrochemical industry is cyclical in nature. However, China has been rapidly scaling up its petrochemical production capacity to capture global markets and significantly increasing exports to deficient countries like India at prices lower than those prevailing in domestic markets.
Currently, India imports a bulk of its PP and PE from the Middle East and the United States due to the availability of cheaper feedstocks in those regions. However, with China’s capacity expansion and competitive marketing strategies, Chinese exporters are expected to capture a significant share of India’s PP and PE markets in the future. Presently, India imports chemicals and petrochemicals worth US$ 101 billion annually. This presents a significant opportunity to curb imports, reduce the import bill in this sector, and alleviate India’s burgeoning current account deficit.
| India’s aggregate petrochemical demand (million tonnes) |
| Financial year (April-March) | Volume | Growth (%) |
| 2024-25* | 61 | 7 |
| 2023-24* | 57 | 7 |
| 2022-23 | 53 | 8 |
| 2021-22 | 49 | 13 |
| 2020-21 | 43 | (-)6 |
| 2019-20 | 47 | 7 |
Source: Chemicals and Petrochemicals Manufacturers’ Association (CPMA); * Projections
InvestmentsIndia’s petrochemical sector is projected to attract investments worth US$ 87 billion over the next decade, accounting for more than 10 percent of global petrochemical growth, Union Petroleum Minister Hardeep Singh Puri said recently. These investments are expected to come from both domestic as well as foreign investors to meet India’s rapidly growing demand, driven by infrastructure development.
Speaking at the ‘Roundtable on Petrochemicals’ during India Chem 2024 in Mumbai, Puri estimated a combined investment of US$ 142 billion (approximately Rs 10 lakh crore by 2025 under the new Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) Policy 2020-35. This target reflects the government’s long-term vision for the chemicals and petrochemicals industry.
Market sizeThe market size of the Indian Chemicals and Petrochemicals sector is expected to grow to approximately US$ 300 billion by 2025, up from its current market size of US$ 220 billion. The demand for chemicals is predicted to nearly triple and the petrochemicals industry in India may reach US$1 trillion by 2040. Addressing industry leaders, Puri highlighted the vast potential of India’s petrochemical sector. With annual consumption between 25 to 30 million tonnes, India stands as Asia's third-largest economy, exhibiting a per capita consumption significantly lower than developed nations. This gap presents ample opportunities for demand growth and investment.
As the sixth-largest chemicals producer globally and third in Asia, India exports chemicals to over 175 countries, accounting for 15 percent of its total exports. Puri emphasized that chemicals and petrochemicals will drive global oil demand growth, with India’s integrated petrochemical capacity linked closely to its expanding refining capabilities. Projections indicate an increase from 257 million metric tonnes per annum (MMTPA) to 310 MMTPA by 2028, enhancing cost competitiveness.
The government, alongside public sector undertakings (PSUs) like Oil and Natural Gas Corporation (ONGC) and Bharat Petroleum Corporation Ltd (BPCL) and private players like Haldia Petrochemicals, is committed to significant investments, with nearly US$ 45 billion in petrochemical projects underway. An additional US$ 100 billion is projected to meet rising demand, aligning with India’s transition to a lower-carbon future. India has witnessed a substantial growth in its petrochemical production capacity, projected to increase from approximately 29.62 million tonnes to 46 million tonnes by 2030.
Government initiativesHighlighting the initiatives rolled out by the government to accelerate growth within the industry, the Minister mentioned key policies including the development of PCPIRs, Plastic Parks, and Textile Parks, alongside facilitating 100% Foreign Direct Investment (FDI) through automatic routes. The growing Indian population and rapidly expanding economy are major drivers of increasing demand for petrochemical products, said the Minister. As more citizens enter the middle class, the demand for a diverse range of products—many of which are derived from petrochemicals—is set to rise significantly. Additionally, he said the government's focus on clean energy is contributing to heightened demand for petrochemical solutions.
The chemical industry plays a crucial role in India's economy, contributing around 6 percent to the gross domestic product (GDP) and generating employment for over 5 million people. India is the second-largest exporter of chemical dyes and agrochemicals globally, accounting for about 3 percent of global chemical sales. However, the country is also a net importer of chemicals and petrochemicals, with a dependency on imports for around 45 percent of petrochemical intermediates. Bridging this gap between domestic demand and supply through local production remains a priority.
Key to infrastructure growthMinister emphasized the pivotal role of the chemical and petrochemical industries in serving as the backbone of numerous sectors, including agriculture, electronics, infrastructure, automobiles, and textiles. With a robust focus on sustainability, the government is committed to reducing reliance on imports and enhancing infrastructure. The specialty chemicals sector, experiencing a 12 percent compound annual growth rate (CAGR), is also reshaping India’s economic landscape. However, a low-carbon strategy is essential for sustainable growth in the petrochemical industry.
To further enhance growth, the Minister encouraged the Indian chemical industry to learn from global chemical hubs such as the Port of Antwerp, Port of Houston, and Jurong Island. By synergizing within clusters to share feedstock, achieve economies of scale, and create common facilities for innovation and skill development, the industry can accelerate its development.
With a strong starting point and supportive government policies, Puri said India has the potential to become the next global chemicals manufacturing hub. He expressed confidence that with collaboration from domestic and international investors, the petrochemical sector will contribute to India’s goal of becoming a US$ 5 trillion economy by 2025 and achieving "Viksit Bharat" status by 2047.
Short-term growthPerceived to move in tandem with the country’s economy, India’s petrochemical demand is likely to grow by 7 percent in the financial year (FY) 2024-25 due to stellar manufacturing and services sectors. The forecasted growth for 2024-25, however, is similar to the expansion projected for the recently ended 2023-24, but substantially lower than the post-pandemic move recorded in the previous two financial years.
An official paper presented recently at the World Petrochemical Conference 2024 in Houston, the United States, estimates India’s petrochemical demand may rise 7 percent to 61 million tonnes in FY2024-25, compared to a similar growth projected in the financial year 2023-24 with demand estimating at 57 million tonnes. In the previous two subsequent years, total petrochemical demand grew by 8 percent to 53 million tonnes, and 13 percent to 49 million tonnes.
This growth is attributed to the forecast of robust economic growth fuelled by the government’s massive infrastructure spending and the resurgence of post-pandemic consumer activities. After contracting in the financial year 2020-21 due to pandemic-related disruptions in factories and trade, India’s petrochemical consumption rebounded and outpaced the growth of the gross domestic product (GDP). This growth projection signifies an increase in the consumption of petrochemical value chains in the future and a healthy growth rate for the industry.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
