India’s chemical market, estimated at approximately $250 billion (relying on who you ask and what you include) is extensively recognized as the fastest developing in the world, and projected to reach a length of $300 billion in 3 years. Much of the industry’s output – about 70% – largely serves the domestic market (though this varies throughout sub-sectors).
As a whole, the chemical industry is import dependent and from the previous few years volumes have been growing despite some augmentation of capacity. In the 5 years period between FY19 and FY24, imports grew 4% CAGR in volume terms and 5% in value terms, achieving a extent of almost 48-mt (for inorganic & organic chemicals and polymers) and a value of $65 billion.
Exports have also published a CAGR of 4% on a value basis in the same 5-year duration, achieving $56 billion in FY24. This amounts to just ~3% of worldwide trade, compared to 18% share for China and 12% for America. In 2024, China’s chemical exports to US ($33-bn) accounted for 12% of all of China’s exports and these are actually susceptible to disruption by excessive tariffs imposed by the US administration. Assuming high tariffs will reduce exports by 25%, this constitutes an ability $8 billion chance. How much of this India’s chemical industry can capture can be debated, however even though it is just half of, it still represents a sizeable one.
But India’s track record on exports is not very impressive in commodity chemicals. Where India has been a constant exporter (e.g., benzene, butadiene), it is essentially because of the inability to build a downstream industry that could add value to basic chemicals. This results in a piquant scenario – for example, at the same time as India exports sizeable volumes of benzene and butadiene, it imports large volumes of their derivatives along with styrene and most synthetic rubbers, respectively.
There are many reasons why India has struggled to construct a broad-based chemical industry, but lack of access to simple feedstock – mainly natural gas, ethylene and propylene – tops the list. But that is changing to some limit, and could spur investments.
C1 value chain
The lack access to cheap natural gas is proscribing choices to make investments in the C1 value chain, and to no wonder three C1 derivatives – methanol, acetic acid and vinyl acetate – are in the list of top-10 chemicals imported yearly. There is lots of talk of developing a methanol-based totally economy right here, however this can be on shaky foundations. Making methanol by other path apart from natural gas, such as coal or by gasification of Agri- and municipal-wastes, is capex-heavy, technologically complex, environmentally challenging, and energy-fierce. All of this will make such methanol valuable compared to the marketplace.
One workaround is to develop capacity for derivatives using imported methanol and this alternative is now being tried for acetic acid. GNFC and INEOS have declared the plans to construct a world-scale acetic acid plant in Bharuch (Gujarat) based on imported methanol (and captively produced carbon monoxide), and it remains to be seen how competitive that is.
Cheap natural gas is likewise proscribing investments within the ammonia value chain, which has greater effects for India thinking about ammonia is a main raw material for urea – the single-most essential nitrogenous fertilizer. India’s urea manufacturing expenses are higher than in gas-beneficial regions however given the strategic importance of the nutrient to the agrarian economy this has been assisted by generous subsidies paid to urea manufacturers to preserve prices artificially low. A coal-gasification based ammonia/urea venture is underneath implementation and it remains to be seen how its techno- economics compares to gas-based manufacturing.
C2 cost chain
In the ethylene cost chain, 3 chemicals stand-out from an imports perspective: styrene; monoethylene glycol (MEG); and ethylene dichloride (EDC) and the associated product, vinyl chloride monomer (VCM). Production of each is restricted via the lack of get right of entry to to ethylene, even though different factors also play a element.
Of the lot, styrene is arguably the only wherein the case for local investments is most powerful. It desires benzene (that is the highest volume chemical exported from India) and ethylene. Indian Oil Corporation is implementing one such styrene challenge (ability: 387-ktpa), but this could most effectively make a small dent in the imports of this monomer which crossed 2.0-mt in FY25.
MEG imports in FY25 were approximately 1.85-mt, by and large for making polyester resin (fibre and bottle grade) however the case for nearby investment is weaker here given this is a basic petrochemical whose manufacturing economics is essentially determined by using the rate of ethylene. India’s cracker operators have hitherto seen better cost realization for ethylene in making polyethylenes and this is not going to change. Much of the MEG India desires comes from the Middle East in which the price economics are compelling, and will live that way.
EDC and VCM imports into India in FY25 have been about 617-kt and 594-kt respectively, and all went into the manufacture of polyvinyl chloride (PVC) resin (of which India is the world’s biggest importer). VCM is derived from EDC (by means of dehydrochlorination), and the latter desires both ethylene and chlorine. While India’s chlor-alkali industry has lengthy had a chlorine-surplus hassle, integrated manufacturing of PVC through the globally preferred oxychlorination path has been constrained with the aid of ethylene availability at web sites in which chlorine is likewise to be had.
That is converting, and two PVC tasks – one by Reliance Industries Ltd. And the other through the Adani Group – are below implementation. While the primary is based at the classical course, the second bypasses the ethylene availability issue as it’s far based totally on acetylene derived from coal-based calcium carbide. This is a direction simplest practiced in China and a small unit in India, and, while commissioned, can be the primary massive-scale coal-based chemical task in the us of a.
C3 cost chain
Propylene is quite less difficult to access and in an Indian context deliver has advanced and could retain to achieve this. Till some years ago nearly all propylene produced become consigned to polypropylene (PP), to the near-whole exclusion of different derivatives. But that has changed now. Aside of the classical assets from naphtha cracking (which is on the better end of the coins-cost curve) and from fluidised catalytic crackers (FCC) at refineries, there is the choice of propane dehydrogenation (PDH), which almost completely produces propylene at attractive economics.
Propylene availability from all three sources is improving in India. A couple of naphtha crackers are in the advanced tiers of implementation; and every massive refinery is making an investment in deep catalytic cracking for generating propylene as a approach to elevate their stakes in petrochemicals. PDH is a less complicated, decrease capital fee path to the olefin (in comparison to a naphtha cracker) and the markets for the feedstock (propane) are substantial and transparent and suppliers are near India (e.g., the Middle East). The gas primary, GAIL India Ltd., is constructing India’s united states of America’s first PDH plant at Usar (Maharashtra) at a fee of $1.2-bn, and one more will comply with.
All of those trends are prompting investments in propylene derivatives – phenol/acetone, isopropyl alcohol, acrylic acid & esters, oxo-alcohols (n-butanol, isobutanol, 2-ethylhexanol), propylene oxide (PO) & propylene glycol. Two phenol/acetone tasks are in the offing and when commissioned will dent the imports for these chemical compounds which had been 484-kt and 238-kt in FY25. There also are opportunities to build enormous price chains primarily based on these derivatives, as also help others. PO, as an example, is wanted to make polyether polyols that complement isocyanates (TDI and MDI) for the manufacture of polyurethanes. Phenol and acetone are both wanted for making bisphenol A, a key raw fabric for polycarbonate resin for which the first task has been introduced via Deepak Nitrite Ltd.
More needed
Despite these initiatives, the distance among demand and deliver for many huge volume chemical compounds will not disappear – indicative that extra investments are needed. Furthermore, several other opportunities deserve attention. These encompass the isocyanates referred in advance, engineering plastics, detergent uncooked substances (alpha-olefins, fatty alcohols), products from the C6+ fee chains, amongst others. For a few, demand might not appear enormous now but will become so within the timelines wherein the tasks come to fruition. For some, technologies might not be available, and joint ventures can be a manner forward. In a few, bad competitiveness (in an worldwide context) will hold investments away, and appropriate guidelines and tariff systems could be had to relatively mitigate the disadvantage.
While India gives numerous possibilities for brand spanking new investments, economic viability of projects will hinge on making sure competitiveness in a exceedingly difficult outside environment. Investors ought to make sure innate competitiveness, a good way to want sound guidelines from government; world-magnificence infrastructure in committed zones where investors can plug-and-play; astute product & era choices with the aid of assignment promoters; a continuing attention on price optimization via operational excellence; and deployment of recent-age virtual technology, together with synthetic intelligence throughout enterprise functions.
