Petrochemicals Market in India 2023

The petrochemical industry in India has been one of the fastest-growing industries in the country. Since the beginning, the Indian petrochemical industry has shown a notable growth rate. This industry also contributes largely to the economy of the country and the growth and development of the manufacturing industry. It provides the foundation for manufacturing industries like construction, packaging, pharmaceuticals, agriculture, textiles, etc.

The petrochemical industry is highly concentrated. The recent amalgamation of IPCL with RIL has made the industry more concentrated further, as they jointly account for over 70% of country's total petrochemical capacity. However, the scene is a bit different for the downstream petrochemical sector, which is highly fragmented in nature with over 40 companies existing in the market.

In terms of volume, the petrochemicals market was valued at 45.03 Mn tons in FY 2022 and is expected to reach 54.48 Mn tons in FY 2027 expanding at a CAGR of 3.83 % during the FY 2023 - FY 2027 forecast period.

Segment insights:

The petrochemical market in India may be segmented into three divisions - basic petrochemicals, intermediates, and other petro-based chemicals. The basic petrochemicals segment dominated the market, accounting for ~44.61% of the share of the market volume in FY 2022. Basic petrochemicals include polymers, synthetic fibers, synthetic rubber, synthetic detergent intermediates, and performance plastics.

Intermediates appeared to be the second-leading segment in FY 2022, followed by other petro-based chemicals. The increasing consumption of high-density polyethylene (HDPE), linear low-density polyethylene (LDPE), polypropylene, and polyvinyl chloride is expected to contribute to the growth of the basic petrochemicals segment.

Impact of COVID-19:

The petrochemical industry witnessed steady growth since the economic crisis of 2008. The growth momentum continued till 2018, owing to factors such as the high utilization level of strong margin growth, and the capacity addition of petrochemical plants. Petrochemical prices in India increased because a spike in COVID-19 cases and travel restrictions across the country resulted in a drop in demand from important downstream businesses.

The demand for petrochemicals is estimated to decline by around 15% by the end of 2022. However, the uneven demand side had a moderate impact on the market in the medium and long term. The financial performance of companies struggled in the first two quarters of FY 2021, only to exhibit stability from the third quarter onwards. Large players, with strong balance sheets and liquidity positions, were able to leverage their financial flexibility and cushion the initial impact on revenue.

Moreover, prospects for the petrochemical industry such as promoting a digital work environment, improved supply chain management, and fiscal and non-fiscal benefits for operating units are likely to propel the growth of the market.