Imperative Resilience

India’s petrochemical sector, a critical foundation for industrial growth, manufacturing, and consumer products, is under serious threat. While its long-term fundamentals—rising per capita consumption, expanding downstream industries, and robust demand from sectors like construction, packaging, and automobiles—remain strong, the domestic industry is increasingly being undermined by a flood of cheap, dumped imports, particularly from China. Unless urgent steps are taken to protect and promote domestic capacity, India risks repeating the mistakes made by Europe in the energy sector—becoming critically dependent on external supply chains that could be disrupted during global tensions or conflicts.

A Global Glut with Local Consequences

The global petrochemical industry is suffering from a historic supply glut, driven by aggressive capacity expansions, particularly in China and the Middle East. Between 2022 and 2024 alone, global ethylene capacity surged by over 42 million tonnes, while demand rose by just 14 million tonnes, according to industry reports. This oversupply has triggered a collapse in global prices and margins, putting immense pressure on domestic producers. This is impacting the financial viability and strategic planning of even the largest players including the Public Sector Undertakings.

In the PVC segment, India has been particularly hard-hit by Chinese exports. India’s PVC imports from China have jumped over 400 per cent in the last five years, reaching over 500,000 tonnes in FY24, according to data from the Ministry of Commerce. In total, over 1.2 million tonnes of PVC was imported into India in FY24, with China emerging as the largest single source.

The situation is no different in polyethylene (PE) and polypropylene (PP), where domestic players have raised repeated alarms about under-invoicing and unfair trade practices. Prices of HDPE and LLDPE have fallen by over 40 per cent in the past three years in India’s spot markets, driven primarily by cheap Gulf and Chinese imports.

Structural Cost Disadvantages for Indian Producers

The cost structure of Indian petrochemical production also adds to the sector’s vulnerability. Indian crackers are predominantly naphtha-based, exposing them to oil price volatility, unlike US and Middle Eastern producers who benefit from low-cost ethane and propane feedstocks. While some diversification has begun — such as RIL importing ethane via tankers — the Indian industry remains high-cost, fragmented, and logistically challenged. With freight, energy, and regulatory compliance costs higher in India, the gap between global and domestic competitiveness continues to widen.

This structural disadvantage is worsened by policy uncertainty. Regulatory overhangs relating to plastic bans, Extended Producer Responsibility (EPR), and environmental clearances have made long-term planning difficult. New ESG (Environmental, Social, and Governance) scrutiny is also raising the bar for fundraising, with petrochemical projects often seen as “fossil-heavy” and therefore unfriendly to institutional capital.

The Case for Strategic Self-Sufficiency

The case for building self-sufficiency in India’s petrochemical industry is no longer just economic — it is strategic. In the event of future geopolitical tensions involving China, such as a Taiwan Strait crisis or a South China Sea escalation, Chinese exports of key raw materials could be suddenly restricted.

Dependence on an adversarial or unpredictable supplier is a strategic vulnerability that India cannot afford, especially when domestic capacity is available, viable, and employment-generating — but currently underutilised and unsupported.

Time for Strong and Targeted Government Support

The Government of India must urgently address this systemic risk by actively supporting the development and protection of domestic petrochemical manufacturing, especially in the PVC, PE, and PP segments.

At a recent industry consultation convened by the Chintan Research Foundation (CRF), a series of pragmatic, targeted policy interventions were proposed to level the playing field and drive self-sufficiency. These include:

1. Rationalization of Import Duties: Rationalization of import duties on PE/PP in view of the clear disadvantage of Indian Petchem manufacturers vis-à-vis overseas suppliers, in line with WTO-bound rates, to ensure a viable price floor for domestic producers.

2. Enforce Anti-Dumping Measures: Expedite investigations and impose anti-dumping duties on Chinese PVC suspension resin, where prima facie evidence of below-cost pricing exists.

3. Introduce a Production-Linked Incentive (PLI) Scheme: Design a targeted PLI scheme for domestic petrochemicals, especially for players achieving over 80 per cent capacity utilization and backward integration with recycled or bio-based feedstocks.

4. Feedstock Support Mechanisms: Create a naphtha and ethane price stabilization fund or subsidy mechanism to de-risk feedstock cost volatility, enabling Indian crackers to compete globally.

5. Petrochemical Infrastructure Push: Invest in dedicated pipelines, storage, and port terminals for polymers and feedstocks, to lower logistics costs and reduce reliance on trucking and imports.

6. Technology Transition Funding: Provide concessional finance, sovereign guarantees, and tax breaks for greenfield or brownfield projects that commit to low-carbon operations.

Domestic Capacity must be Increased

It is especially important that new entrants into the sector receive the institutional and financial support necessary to weather this low-margin environment. If these projects collapse or are scaled back due to short-term dumping pressure, India will not only lose out on job creation and investment, but also risk becoming even more import-dependent in the future.

The financial viability of new projects — which involve long gestation periods and high upfront costs — depends heavily on predictable input costs, reasonable domestic prices, and policy stability.

Conclusion: From Strategic Vulnerability to Industrial Resilience

India’s petrochemical sector is not just another industrial vertical — it is the backbone of manufacturing, agriculture, housing, textiles, and consumer goods. A nation that aspires to be a USD 5 trillion economy, and a reliable supply chain hub for the world, cannot afford to import 40–60 per cent of its key polymers from potentially hostile or unreliable sources.

It is time for a comprehensive, forward-looking industrial strategy that supports domestic producers, encourages green technologies, and builds capacity before it is too late.

The writer is the President of CRF, formerly an IAS officer & Director, WTO. Views expressed are personal