India’s transformation into a worldwide industrial powerhouse is emphasized in the Atmanirbhar Bharat vision. With robust backward and forward links sustaining a broad range of downstream industries, such as plastics, automotive, textiles, construction, and consumer products, the petrochemical sector is a vital pillar of India’s economic growth.
Over 5 million people are employed in the $220 billion chemicals and petrochemicals industry in India, which also contributes roughly 6% of the country’s GDP. About 12 kg of petrochemicals are consumed per person in India, which is one-third of the global average and suggests substantial room for expansion and investment. More significantly, the products and processes in this changing industry are getting more complex, which calls for investment and legislative action to take advantage of the opportunities for value addition.
Key obstacles
About 45% of petrochemical intermediates are imported into India, which is a net importer of chemicals and petrochemicals. Chemicals and petrochemicals are India’s second-largest import category, with yearly imports of over $88.6 billion.
The six major chemical building blocks—ethylene, propylene, butadiene, benzene, mixed xylenes, and toluene—have a current worldwide overcapacity of 222 MMT, with the majority of this additional capacity coming from China. At the moment, China is the world’s largest supplier of important goods such as polyester fiber, polyvinyl chloride (PVC), pure terephthalate acid (PTA), and polyethylene terephthalate (PET) resins.
The prospect of inexpensive imports streaming into India is posed by this global overcapacity, flat demand growth in many nations, and a shifting geopolitical situation. These inexpensive imports may make Indian producers less competitive, which could result in a decline in market share, underutilization of capacity, and a risk to future investments.
Possible Actions
Tariff Rationalisation: The tariff structure of different petrochemical products has anomalies that require review due to the dynamic shifts in the geopolitical landscape that affect global trade flows. For instance, India has made large expenditures to greatly expand its local production for polyethylene terephthalate (PET) bottle-grade chips.
Similar difficulties arise with polyvinyl chloride (PVC), a vital component of nation-building projects like construction and irrigation that requires a reconsideration of its tariff classification given its significant economic contribution.
Improving manufacturing infrastructure: One of the most important requirements for modernizing the industry is the development of entire ecosystems. To facilitate expansion, the petrochemical sector needs a strong infrastructure for manufacturing, storage, and transportation.
Production-linked incentives (PLI): By promoting investment, innovation, and competitiveness, PLI can significantly contribute to the growth of the petrochemical sector. High-value specialty chemicals, performance chemicals, and necessary intermediates can all be produced with the help of these incentives. PLI schemes can draw investments, improve technological breakthroughs, and raise the sector’s overall productivity by offering financial incentives for reaching predetermined output targets.
Encouraging research and development (R&D): In the petrochemical industry, innovation is essential to attaining self-reliance. India needs to make R&D investments to create sustainable and affordable industrial technology. This entails creating substitute feedstocks, implementing cutting-edge production techniques, and promoting cooperation.
Here, high-performance computing (HPC) and contemporary artificial intelligence (AI) can be extremely important in creating new compounds and materials as well as enhancing manufacturing procedures. This will guarantee environmental sustainability and open up new uses.
The path ahead
A contemporary and ecologically conscious petrochemicals sector is an essential component of the global industrial system and a key engine of economic expansion. As long as it is shielded from unfair competition, India's petrochemical industry, which has a sizable investment pipeline, has the potential to make a major economic contribution. Implementing policies that support domestic manufacturing and draw in more investment is crucial given the changes in geopolitical dynamics and patterns of international commerce. This will guarantee the expansion of the industry, the development of jobs, and the nation’s independence.