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 class.
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 plateau.
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 decade.
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, geo-textiles, etc.
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 this process.
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 management.
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 well.
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 sector.
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 structures
- 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 Plan.
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.|