Petrochemical Consumption To Grow 6–7% Annually; Import Reduction A Priority: CareEdge Report

New Delhi, Dec 31 (KNN) India’s domestic petrochemical consumption is expected to grow at a robust 6–7 per cent per annum over the medium term, supported by sustained economic expansion and steady demand from downstream industries, according to a report by CareEdge Ratings.

The rating agency said the strong growth trajectory has made reducing import dependence a strategic priority for the sector, prompting both public and private companies to announce aggressive capacity expansion plans across key petrochemical segments.

Capacity Expansion Aimed at Import Substitution

The report highlighted that polypropylene (PP) capacity is projected to rise 1.8 times between FY25 and FY30, outpacing the estimated 1.4 times increase in demand during the same period. This expansion is expected to significantly reduce India’s reliance on imports and could largely eliminate import dependence in PP by FY30, reported ANI.

However, CareEdge cautioned that while capacity additions are essential, cost competitiveness will remain a critical factor for domestic players. The ability to generate reasonable returns on large capital investments will depend on operating efficiency, pricing discipline and prevailing global market conditions.

Global Oversupply to Keep Near-Term Spreads Weak

In the near term, prices and product spreads in the domestic petrochemical sector are expected to remain under pressure due to global oversupply. 

The report noted that substantial capacity additions globally—led largely by China—have outpaced demand growth, resulting in a demand-supply imbalance.

This mismatch weighed on product spreads and operating profitability for Indian petrochemical manufacturers over the three years ended FY25, with additional pressure from cheaper Chinese imports intensifying competition in the domestic market.

Marginal Profitability Improvement in FY26

Operating profitability showed a marginal improvement in the first half of FY26, primarily due to lower input costs following a decline in crude oil prices, the report said.

Consumption of major petrochemicals in India—including polymers such as PP, HDPE, LDPE, LLDPE and PVC, as well as aromatics and elastomers—has recorded healthy growth in recent years. However, limited domestic capacity additions during this period led to high import dependence to meet rising demand.

Cost Competitiveness Key to Sustained Profitability

CareEdge concluded that while consumption growth remains strong and expansion plans are underway, achieving optimal operating profitability will hinge on improved cost competitiveness, more balanced global demand-supply conditions and need-based policy support, particularly in the context of continued global capacity additions.

(KNN Bureau)