India's petrochemical demand stays strong despite import pressure

India’s consumption of major petrochemicals has recorded healthy growth over the past few years and is expected to sustain going forward, according to CareEdge Ratings.  

Petrochemicals 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, along with aromatics and elastomers, have all witnessed sustained growth in recent years.

Despite rising demand, domestic capacity additions remained limited, resulting in a sharp increase in import dependence. Imports averaged around 6 million tonnes during  fiscal 2019 (FY19) to fiscal 2022 (FY22) but surged to about 9 million tonnes annually in FY23 and FY24. This rise was driven by strong domestic consumption, the absence of fresh domestic capacities and cheaper imports following large global capacity additions. Elevated imports in FY23 and FY24 adversely affected domestic capacity utilisation and intensified competitive pressures on Indian manufacturers.

Globally, the petrochemical sector witnessed significant capacity expansion over the past few years, led largely by China, while demand growth lagged behind. This demand–supply mismatch kept product spreads weak and weighed on the operating profitability of Indian producers for the three years ended FY25, as they faced competition from low-priced Chinese imports. Operating profitability improved marginally in the first half (H1) of FY26, supported mainly by lower input costs following a decline in crude oil prices, although overall spreads remained subdued.

Policy changes also influenced import trends. The year-on-year decline in aggregate imports in FY25 was largely due to lower polyethylene imports following the imposition of the Quality Control Order (QCO) in January 2024. However, in November 2025, the Government rescinded QCOs on several petrochemical products to improve domestic availability and enhance competitiveness of downstream industries. This move could lead to higher imports over the medium term, making effective competition management crucial for domestic players.

For FY26, imports are expected to remain broadly at FY25 levels, as there has been no significant increase through October 2025. Against this backdrop, both public and private sector companies have announced large capacity expansion plans, particularly in PP and PVC, to reduce import dependence.

Polypropylene capacity is expected to rise 1.8 times between FY25 and FY30, exceeding the anticipated demand growth of 1.4 times and potentially eliminating import dependence by FY30, according to CareEdge Ratings.

However, improving cost competitiveness, leading to a recovery in the trajectory of spreads and thereby earning reasonable returns on their investments, would remain the key monitorable for domestic petrochemical players, said Rabin Bihani, associate director, CareEdge Ratings.

Prices and spreads in the domestic petrochemical sector are expected to remain weak in the near term due to global oversupply. While there has been marginal recovery in spreads in H1 FY26 which could support ~200 bps improvement in EBITDA margin in FY26, sustained recovery and achievement of optimum operating profitability would hinge more on their cost competitiveness, global demand-supply scenario and need-based support from the Government given sizeable global capacity additions especially by China, which has impacted the profitability of Indian manufacturers for an extended period of time’, said Hardik Shah, director, CareEdge Rating.

ALCHEMPro News Desk (HU)