High import dependence coupled with strong consumption of major petrochemicals has resulted in domestic companies expanding their capacity across key petrochemical product segments, especially in polyvinyl chloride (PVC) and polypropylene (PP), said CareEdge Ratings in a report on Monday. While the PP capacity is expected to increase by 1.8 times between FY25 and FY30, the PVC capacity is expected to jump higher at 2.5 times relative to existing capacity.
Despite the substantial surge in domestic capacity over the next four years, the agency said that the profitability of Indian manufacturers would still be dependent on cost competitiveness, the global demand-supply scenario, and need-based support from the government. Also, prices and spreads in the domestic petrochemical sector are expected to remain weak in the near term due to global oversupply.
Report on the consumption of petrochemicals
“Consumption of major petrochemicals has grown steadily over the past few years. Though it slowed somewhat in FY25 and broadly tracked domestic economic growth. Consumption growth is expected to remain at around 5% in FY26, similar to FY25. In the PVC segment, India is highly reliant on imports with about three-fourths of requirement met through imports. For PP and polyethylene, import dependency stands at about a fifth of the total consumption,” the report said.
The ratings agency said that the government’s decision to rescind several Bureau of Indian Standards (BIS) Quality Control Orders (QCOs) for various petrochemical products will result in an influx of imports over the medium term, and the ability of domestic players to manage competition effectively will be key.
Crude oil prices
However, benign crude oil prices could provide some respite to the domestic manufacturers. CareEdge said that the average imports of 6 million tonnes during FY19-FY22 period increased substantially to about 9 million tonnes during FY23 and FY24. This elevated period of high imports, primarily from China, adversely affected the domestic industry’s capacity utilisation due to competitive pressures.
But due to the imposition of the QCO from January 2024, the aggregate imports declined in FY25. Further, the weak global demand also affected the profitability of domestic manufacturers for three years till FY25. Though their operating profitability have improved marginally in the first half of FY26 primarily due to lower input costs driven by lower crude oil prices.
“India’s petrochemical consumption growth is expected to remain robust at 6-7% per annum in the medium term driven by economic expansion and downstream product demand. Against this backdrop, reducing reliance on imports is viewed as a key strategic aim,” said Rabin Bihani, associate director at CareEdge Ratings.