Introduction:

India’s chemical and petrochemical sector is taking shape as the country feeds its ambition to emerge as a global manufacturing hub. The government is particularly focusing on specialty chemicals. Other than the improvements in the global competitiveness index and the smooth road of doing business, the country’s swift V-shaped economic recovery following the pandemic has solidified its position as an attractive destination for global investments. In this article, we have dived deep into the latest updates of 2024 in the Indian petrochemical sector and chemical sector. Thus, this read is going to give you insights and understand the dynamics and opportunities of the industry.

Growth drivers and opportunities:

The country is dependent on its imports for petrochemicals and the growing demand on the other hand is pushing the industry and these factors, it may need to build over 15 large-scale petrochemical plants by 2035. Presently, the country has only 11 operational naphtha or dual-feed cracker complexes that produce about 7.05 million tonnes of ethylene annually. Additionally, about 6 aromatic complexes are producing 5.5 million tonnes of xylene. With the increasing demand for plastics, we can expect a significant rise of about 35 million by 2028 and thus India is facing pressure to ramp up their production.

Rapid urbanization, rising disposable incomes and expanding middle class and their economic conditions are surging the demand for petrochemical products such as polymers, synthetic fibres and plastics. From a bird’s eye view, we can say that the chemical and petrochemical industry occupies the central position and meets the basic needs of the people. Therefore, to meet this growing demand, major players are investing in the capacity expansion and modernization of the facilities. Although the new petrochemical complexes and refineries are being set up to accentuate the production capacity. These advancements are helping to cater to diverse market requirements as well.

The growth of the chemical and petrochemical industry is closely linked with the booming demand of some of the key sectors. Industries such as textiles, automotive, and construction are expanding rapidly and these are increasing the demand for chemicals involved such as dyes, paints etc. and some petrochemical products such as plastics, and synthetic fibers.

The export demand due to the strengthened manufacturing capabilities has led to rising global demand for its chemical and petrochemical products. Especially the shift away from China as a manufacturing hub has led to higher demand for Indian exports, which include specialty chemicals, pharmaceuticals, and plastics. These factors position India as a significant supplier across the globe. Therefore, the interconnected demand is propelling the industry’s growth.

The petrochemical sector showcases promising investment opportunities and the coming decade offers potential investments of about $30 billion. The Indian government is addressing current challenges and focused on implementing flagship initiatives to enhance competitiveness, quality, and industry output.

The country also possesses a significant advantage with 80% of petrochemical capacity that is integrated with petroleum refineries that ensure feedstock certainty. The nation’s increased refining capacity which is from 215 million metric tonnes per annum in 2013-2014 to 251.2 MMTPA at present. Thereby making India the world’s fourth-largest refining capacity after the United States, China, and Russia.

Evolving industry ecosystem:

100% FDI Foreign Direct Investment:

The government allows 100% FDI under the automatic route in the chemicals sector except hazardous chemicals. This has stimulated foreign investment, boosting the industry. In addition to these, policies such as petrochemical and Petroleum Investment Regions (PCPIRs) and plastic parks promoted large-scale research, innovation and development, thereby enhancing the infrastructure and growth.

Policies like PCPIRs and Plastic Parks:

Petrochemical and Petroleum Investment Regions (PCPIRs) and Plastic Parks promote large-scale research, innovation, and development, enhancing infrastructure and growth. These policies help in designing and developing the chemical and petrochemical industry by creating specialized industrial zones. It includes developing dedicated spaces with world-class infrastructure, reducing costs and improving efficiency for petrochemical projects.

The policies encourage research and development, and these parks promote innovation in materials, processes and technologies. Furthermore, these policies help in creating employment opportunities and upskilling local talent, strengthening the industry workforce.

They foster collaborations between the industries, academia and government. Thereby enhancing the competitiveness of Indian companies in global markets.

Other than these, Duty drawbacks and tax incentives further attract investments, supporting the industry’s expansion.

Strong policy support fosters a thriving ecosystem and enhances the country’s global competitiveness:

$18.48 billion FDI: A significant foreign investment in the chemical sector excluding fertilizers between 2000 to 2021 demonstrated investor confidence and supported industry growth.

Policy on sustainability focus: The government promoted eco-friendly practices, encouraging the industry to adopt circular economy principles for sustainable growth. Growing environmental awareness has prompted green chemistry and sustainable practices in the industry. Companies are investing in bio-based chemicals and thereby adopting more sustainable production methods. This shift aligns with the global trends and moves the industry towards sustainability. Thereby positioning India as a competitive player in eco-friendly chemicals.

PLI SCHEME triggering boom in India’s chemicals and petrochemicals industry:

The Indian government has urged the chemicals and petrochemicals industry to adopt 4.0 to reach the high growth orbit. In February 2022, the Indian government encouraged the idea of extending the PLI scheme to the chemicals and petrochemicals industry and now the aim is to boost domestic production and exports. The ultimate goal is to make the country self-reliant in the sector.

Another critical concern for the government is to control pollution and align the sector with stringent pollution control regulations and rising labour costs while diversifying the products and production capabilities.

The launch of the Production Linked Incentive Scheme in April 2020 has assisted manufacturing in some chosen industries and under the scheme the government was able to provide businesses the incentives based on the sales of goods that are produced domestically.

Now the government is strengthening the domestic industrial capacity and the scheme had an outlay of $26 billion which made the scheme expand its benefits across 14 sectors.

Innovation promotion: Schemes like the National Petrochemical Awards and Centres of Excellence encourage research technological advancements and innovation. In the past decade, several leading companies have been involved in the development of new chemicals and innovating production methods. For instance, Tata Chemicals has been focusing heavily on R and D to develop new chemical products like advanced materials for energy storage, including lithium-ion battery materials, which is crucial for the electric vehicle sector.

UPL Ltd. is an agrochemical giant that has invested significantly in R&D thereby creating innovative crop protection solutions such as biopesticides and biostimulants. These are considered more sustainable for agriculture.

Reliance Industries is advancing in polymer development through R&D in petrochemical derivatives and therefore improving plastic sustainability for automotive and packaging sectors.

Skilled workforce: Investment in training ensures a competent labour force that is capable of meeting the industry demands and driving further growth and modernization.

Global trends that support the nation’s growth:

The petrochemical industry is driving the global oil consumption. According to the International Energy Agency, the petrochemical industry will be a major driver of oil demand thereby contributing to over a third of its growth by the year 2030. It will also account for nearly half of that growth, surpassing the transportation sector.

The push of fossil fuel usage due to factors such as climate change, dependency on alternative fuels, electrification, and better fuel economy is also creating an impact on the industry.

The profitability of the petrochemical products in the next two decades is expected to contribute to the future of the petrochemicals industry and is expected to create a major significance for both the global energy security and the environment.

The petrochemical growth in EU has not been moving over a few years now due to high consumption of plastic. Whereas the Asia and Middle East regions have been witnessing long-term growth due to the development of petrochemical hubs.

 Challenges that lay ahead:

The feedstock prices suffer volatility and that impacts the production costs directly. This also affects the profit margins of the companies and the fluctuations in crude oil prices, geopolitical tensions, and supply chain disruptions highlight the demand for robust risk management strategies and proactive measures to mitigate the market uncertainties.

Since the petrochemical sector is undergoing digital transformation and automation, the demand for a skilled workforce equipped with technical expertise and adaptive capabilities is considered a significant challenge as they are the prime requirements to drive innovation and productivity. The industry should pay attention to nurturing the quality of human resources.

Although the petrochemical industry is booming, we must agree and understand its cyclical nature. Therefore, there will be certain uncertainties and the global petrochemical industry will be challenged with the trade restrictions due to war. There is also an inclination towards circular economy and sustainability and several bans are brought on single-use plastics. These are some real challenges in the industry.

Indian Chemicals and Petrochemicals industry today:

The petrochemicals industry in India is considered an ideal sector for the Make in India and Aatmanirbhar Bharat Abhiyan Strategy. In the past, the Indian petrochemical players have expanded their portfolios to drive the net margin. Therefore the primary focus is to obtain Naphtha as feedstock as much as possible. In that process, the companies are trying to leverage straightforward technologies and produce basic petrochemical building blocks such as ethylene, propylene, butadiene and aromatics.

To produce specialty chemicals, the petrochemical intermediates should be manufactured. These petrochemical intermediates are necessary for producing specialty chemicals, which are then used to manufacture consumer goods and technology-related products. The major polymer intermediates include ethylene oxide, propylene oxide, polyols, phenol, styrene and rubber derivatives. These are utilized in manufacturing varied consumer products.

India has put their strategies rightly, and its refineries have expanded their petrochemical capabilities to boost their profits by producing key materials for plastics, whereas the refining margins remain flat. By 2035, it is expected that the country may have about 20 refinery-petrochemical plants to cater to the rising plastic demand. These refinery petrochemical plants are built in the industrial zones to cut costs by sharing the utilities and infrastructure. Furthermore, the country has developed and implemented new technologies that convert crude oil directly into chemicals are becoming popular due to higher profit margins. These successful plants in China and the Middle East, such as those by Exxon, Hengli, and Yanbu.

The importance of implementing technologies and developments was reiterated during the 12th Biennial International Exhibition and Conference India Chem 2022 held at Pragati Maidan. In that conference, Dr. Mansukh Mandaviya said that there will be critical requirements of import as the requirements of the nation should be fulfilled by the nation. He also added that the nation should work towards increasing the exports and reducing the imports.

Final thoughts…

India’s petrochemical and chemical industries are on the cusp of transformative growth and the growth is supported by strong governmental policies and demand. Although the challenges are volatile with the feedstock prices and skilled labour remaining intact, the country is intensively focusing on innovation and sustainability and securing its position as a leader in the global chemical landscape.