India's Petrochemical Consumption to Grow 6-7% Annually, Capacity Expansion Aims to Cut Imports
India's petrochemical consumption is projected to grow 6-7% annually, driven by economic expansion. To reduce import dependence, domestic public and private sector companies are aggressively expanding capacity, with polypropylene capacity expected to nearly double by FY30, potentially eliminating imports. However, the sector faces challenges from global oversupply, weak product spreads, and the need for cost competitiveness. Operating profitability saw a slight improvement recently due to lower input costs, but long-term success hinges on favorable global conditions and government support.
A recent report by CareEdge Ratings indicates that India's domestic petrochemical consumption is set to maintain a robust 6-7% annual growth rate in the medium term. This growth is bolstered by the country's economic expansion and consistent demand from various downstream industries. Recognizing the strong consumption growth, reducing reliance on imports has become a critical strategic goal for the Indian petrochemical sector. Consequently, both public and private enterprises have announced significant plans for capacity expansion across major petrochemical segments.Specifically, polypropylene (PP) capacity is forecast to increase 1.8 times between FY25 and FY30, outstripping the projected 1.4 times demand growth over the same period. This expansion is anticipated to substantially decrease India's import dependence, with the potential to largely eliminate polypropylene imports by FY30.Despite these positive developments, the report cautions that cost competitiveness will remain a crucial factor for domestic players. The sector faces near-term challenges from global oversupply, particularly due to significant capacity additions in China, which have led to weak product spreads and pressure on operating profitability for Indian manufacturers over the past three years. Domestic firms have also contended with intense competition from cheaper Chinese imports.Operating profitability showed a marginal improvement in H1FY26, primarily due to reduced input costs stemming from a decline in crude oil prices. Historically, limited domestic capacity additions necessitated high import dependence for major petrochemicals like polymers (PP, HDPE, LDPE, LLDPE, PVC), aromatics, and elastomers. Moving forward, achieving optimal operating profitability will depend on enhancing cost competitiveness, favorable global demand-supply dynamics, and need-based government support amidst ongoing global capacity expansions.
