India's petrochemical consumption growth to remain at 6-7% annually, capacity expansion to cut imports: Report

New Delhi [India], December 30 (ANI): India's domestic petrochemical consumption growth is expected to remain robust at 6-7 per cent per annum in the medium term, supported by continued economic expansion and steady demand from downstream industries, according to a report by CareEdge Ratings.
The report said that strong growth in consumption has made reducing dependence on imports a key strategic priority for the domestic petrochemical sector. In response, both public and private sector companies have announced aggressive plans to expand capacity across major petrochemical segments.
It stated, "India's petrochemical consumption growth is expected to remain robust at 6-7 per cent p.a. in the medium term, driven by economic expansion and downstream product demand."
The report highlighted that polypropylene (PP) capacity is expected to increase 1.8 times between FY25 and FY30, which is higher than the projected 1.4 times growth in demand over the same period. This capacity expansion is expected to significantly lower India's reliance on imports and could largely eliminate import dependence in polypropylene by FY30.
However, the report cautioned that while capacity additions are necessary, cost competitiveness will remain the key monitorable for domestic petrochemical players. A sustained recovery in product spreads and the ability to earn reasonable returns on large capital investments will depend on operating efficiency, global market conditions and pricing dynamics.
In the near term, prices and spreads in the domestic petrochemical sector are expected to remain weak due to global oversupply.
CareEdge Ratings pointed out that global capacity additions in the petrochemical sector have been significant in recent years, with China dominating most of these expansions. Since global demand did not grow at the same pace, the resulting demand-supply mismatch led to weak product spreads and pressure on operating profitability for Indian manufacturers over the three years ended FY25. Domestic players also faced intense competition from cheaper Chinese imports, which weighed on margins.
The report added that operating profitability improved marginally in H1FY26, mainly due to lower input costs, driven by a decline in crude oil prices.
Consumption of major petrochemicals in India, including polymers such as polypropylene (PP), high-density polyethylene (HDPE), low-density polyethylene (LDPE), linear low-density polyethylene (LLDPE) and polyvinyl chloride (PVC), along with aromatics and elastomers, has seen healthy growth over the past few years.
However, domestic capacity additions during this period remained limited, leading to high import dependence to meet rising consumption. To address this gap, domestic players have outlined large expansion plans.
The report concluded that while consumption growth remains strong, achieving optimal operating profitability will depend on improving cost competitiveness, favourable global demand-supply conditions and need-based government support amid continued global capacity additions. (ANI)