The Indian economy has come a long way since the 1991
economic reforms. A decade and a half of economic reform and
globalization is yielding returns that cut across all income
groups. The domestic economic expansion has also accelerated
growth within the industrial and services sectors.
India is forecast to emerge as one of the top five economies
by 2025. This nations rapid economic growth has spurred
demand for a wide range of petrochemicals. Consumption of key
petrochemicals, such as polymers, is
projected to show double-digit
increases due to strong support by Indias growing middle
The after-effects from the global recession did not
significantly impact India due to strong internal
fundamentals. Yet, currency exchange rate problems are a
reality. If India is to sustain this rapid growth rate, then
certain development areas of the nation and its people will
need more attention.
The polyolefin industry plays a vital role in economic
development. This industry is one of the fastest-growing
sectors within the Indian economy. Plastics have not only
supplemented, but are also substituted for conventional
materials in many applications. Energy efficiency, competitive
packaging alternatives, consumer durable and nondurable
applications, advanced materials in high-tech applications,
etc. are some of the drivers for substitution. Plastics have
penetrated all sectors and are essential to daily life.
Yet, the per-capita consumption of polymers in India
languishes at 6.5 kg/yr compared to the global average of 24
kg/yr. In developed nations, the per-capita consumption of
polymers exceeds 80 kg/yr. There are significant growth
opportunities in Indias polyolefins industry.
India is a net exporter of petroleum-based products, as
shown in Fig. 1. This nation has the potential
to export 1.5 MMbpd of these products by 2015. Benefiting from
greater availability of naphtha from recent refinery capacity additions, several
major petrochemical producers have announced new polymer
plants, as shown in Fig. 2.
Fig. 1. Indian
refined product balance, 19982015.
Fig. 2. Polyolefin
production capacities and operating
Polymer supplies are set to boom
The key to sustainable growth is facilitating the increased
usage of plastics while taking care of environmental concerns through
initiatives for collection, disposal and waste recycling.
Fig. 3 shows the supply/demand scenario for
polyolefins in India. While PE is more balanced in supply and
demand requirements, PP will see an exportable surplus over the
short term (Fig. 3).
Fig. 3. Polymer
supply-demand trends for the Indian sub-
PP demand in India is around 3.7 MMtons and
is estimated to grow at an annual rate of approximately 13%
over the next five years. PP has the greatest demand share, and
it accounts for over 40% of the total polyolefins market. There
is strong intrinsic growth in the biaxially oriented PP film;
several new units are being commissioned. Along with raffia
segments and coupled with new capacities, PP is performing
strongly in India. This nation exports 0.6 MMtpy of PP.
LDPE demand in India is estimated at 0.2
MMtpy. Around 75% of LDPE demand is for film and sheet
applications such as packaging and plastic bags; the remainder
is directed to raffia lamination. LDPE continues to be
substituted by LLDPE. Accordingly, LDPE demand is expected to
grow at 2%/yr to 3%/yr over the next five years, and then
LLDPE demand is estimated at 1.4 MMtpy,
with 70% of the demand used for film and sheet applications.
LLDPE is also the most commonly used polymer for roto-molding
of water tanks and intermediate bulk carriers. Domestic demand
for LLDPE is expected to increase by 12.5%/yr due to growth in
the film and sheet sector, combined with equally strong demand
growth in applications such as water tanks, automobile
components and toys.
HDPE demand is estimated at 2 MMtpy. The
market is varied, with 23% of the demand for film and sheet,
whereas injection and blow-molding applications each account
for 19%. Raffia is also a significant application for HDPE in
India. HDPE pipes, although accounting for only 12% of the
market, are slated for huge expansion through the
agriculture/irrigation and construction sectors. HDPE demand is
also forecast to grow 10%/yr. India is a net importer of HDPE.
The mentioned projections will result in an
investment potential of $8 billion in upstream cracker
complexes and polymer plants, and about $6 billion in the
downstream plastics sector.
The Indian polymer market is supply driven. The major
consumption states are Maharashtra, Gujarat, Daman, West Bengal
and Uttar Pradesh. One of the common threads binding these
states is the proximate polymer plant.
Nandan Nilekani, co-chairman of Infosys, explains the
existence of a double hump in Indias demographics. The first
hump came from southern India and resulted in economic growth
in that region. He believes that the second hump will come from
the northern states. The northern population will be younger
than the southern population, as 50% of the population growth
in India will be in the northern states over the next
Accordingly, the northern region will witness a demand
explosion for polymers, provided that supplies are available.
IOCLs polymer plant at Panipat has proven to be a
catalyst for new growth in northern India. The new polymer
plant, which came online in Bhatinda, will support further
growth in this region.
Initiatives by the Indian and Pakistani governments to
stimulate and enhance cross-border trade via the land route
between their countries will add a new dimension to petrochemical markets. Pakistan is
the fifth most-populated nation in the world, and the northern
Indian plants are within 400 km from Lahore, Pakistans
major consumption center. IOCL is already exporting significant
volumesup to 8,000 metric tons/month of PP and ethylene
oxide (EO) to Pakistan. The new producer from Bhatinda, HMEL,
is certain to follow suit with PP.
India has a unique advantage in terms of demographics. While
demographic trends in other key economiessuch as Brazil,
China and the G8 countriesare demonstrating a decline in
the working-age population (age group of 1560 years),
this group is expected to expand in India.
As other nations endure a graying of the workforce and a
potential shortage of workers, India, will have no labor
shortage. In addition, as the economy becomes increasingly
globalized, the aspirations of the Indian consumer are rising
and the increasing disposable income of Indias new middle
class are fueling demand for various goods and services.
Indias population of 1.2 billion people is the
second-largest in the world after China.
Key focus areas
Certain key areas are important not only to the Indian
plastics industry but also to the economy as a whole.
Agriculture. Increasing agricultural
productivity to meet growing demand for food and to achieve
food security is one of the key objectives for this nation.
Improved post-harvest handling and packaging to minimize waste
are a key challenges. Plastics are vital inputs in this area.
Only through increased plastics usage can these targets be
achieved. Plastic pipes, films, drip systems for
micro-irrigation projects, packaging films, crates for handling
and storage, etc., all significantly raise agricultural
productivity and contribute to domestic food security.
Infrastructure. According to the World
Bank, infrastructure improvement will be a key factor to
support high growth in India. Improving urban infrastructure,
water distribution systems and sewage systems along with
building roads, ports, airports and other components of
infrastructure are possible through increased usage of plastics
in various forms, such as plastic pipes, profiles,
Public health. The role of plastics in
enhancing public health infrastructure is evident. Plastic
syringes, blood bags, drip pouches, etc., are central to any
health infrastructure. The rural health infrastructure needs
significant improvement, and plastics will play a key role in
Water management. While India accounts for
17% of the global population and 30% of the worlds
livestock, this nation has only 4% of the global water
resources. India faces the formidable challenges of achieving
water and food securitya key step in the Indian
governments objective of poverty alleviation. The World
Bank estimates that demand for fresh water could rise to about
105 billion cubic metric tons by 2025 from the present level of
75 billion cubic metric tons. However, projections reveal
declining per-capita availability of water as the population
continues to grow. Plastics will play a key role in water
Conservation. Plastics are part of the
conservation of natural resources such as wood, minerals, etc.,
by providing a cost-effective and environmentally-friendly
alternatives to natural resources. Expanding Indias
forest is one of the key targets at the national level;
plastics are likely to play a pivotal role in this process, as
Employment. Generating employment
opportunities is key to the concept of inclusive
growth. In India, the plastic industry provides
employment to 3.7 million people (directly and indirectly) and
has the potential to generate an additional 4.5 million jobs.
With the adoption of micro-irrigation, which depends
substantially on plastic pipes, drippers and mulch film, an
additional 17 million people can be employed in the rural
Environment. Lack of awareness about
plastics and the absence of an appropriate mechanism for
separating biodegradable and non-biodegradable waste have
created a flawed public perception over polymers. India is a
nation in which the plastic recycling industry is well
developed. Apart from the low weight of plastic, design
optionssuch as multilayer extrusionhave further
reduced materials requirements for specific end uses. There is
a need to educate the public on the merits of plastics.
Hurdles to Indias market potential.
Economic, political, infrastructure, environmental, regulatory
and petrochemical feedstock challenges weigh down
Indias market potential. These hurdles include:
- Technology upgrading
- Rationalization of indirect taxes and duty
- Compliance of quality standards
- Regulatory frameworks
- Creating/upgrading existing plastic clusters/dedicated
plastic parks with quality infrastructure
- Human resources development
- Plastic waste management and recycling
- Feedstocks, including availability and pricing
- InfrastructurePCPIRs, cluster formations, dedicated
plastic parks, roads, ports, warehouses, etc.
As a sector, the Indian plastics industry has received
little attention from policy-makers. It is time that this
industry is recognized for its role and contributions to
domestic growth and development.
Government focus areas should be facilitate the creation of
a world-class infrastructure through policy initiatives such as PCPIRs,
adapting a cluster approach and developing and promoting
plastic parks and petrochemical export processing zones.
Likewise, programs must focus on investing in R&D and human
resource development, modernization and technology upgrading, adopting
new-generation technologies, improving operational
efficiencies, facilitating environmentally friendly and
recycling technologies, and removing structural constraints for
the sustained growth of the domestic industry.
The Indian petrochemical industry is poised for
a supply-driven demand boom, given Indias key drivers in
demographics (trained labor force, a large working-age
population and intrinsic population growth) and per-capita
income growth. HP
Report on Working Group on Chemicals and Petrochemicals, 11th Five Year
ICIS Website, Plants & Projects.
CMAI Market Study for IOCL.
||Bharat Petroleum Corp., Ltd.
||Indial Oil Corp., Ltd.
||GAIL (India), Ltd.
||Mittal Energy, Ltd.
||Hindustan Petroleum Corp., Ltd.
||MRPL Mangalore Refinery and Petrochemicals Ltd.
||Reliance Industries Ltd.
||ONGC Petro Additions Ltd.