Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Roll No. 58
Economics Project
26.09.2016
ACKNOWLEDGEMENTS
Firstly, thanks to the Almighty who gave me the strength and determination to put all my
Secondly, I’d like to thank our Economics faculty, Eritriya Ma’am for allotting such an
enlightening topic and for all the help and co-operation extended by her in helping scrutinize the
same.
Thirdly, I’d like to thank my parents and friends for all their constant support without which this
Last but not the least, I would like to thank the Library staff and my respected seniors for
extending their help in finding the relevant books and articles required for the work.
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DECLARATION
I, Garima Sidar, a student of Semester 1, Hidayatullah National Law University Raipur, hereby
declare that the project work titled Petrochemical Industries in India is a genuine and original
record of work done be under the able Guidance of Ms. Eritriya Roy, Faculty, and HNLU
Raipur.
Garima Sidar
Semester 1 Section B
Roll No- 58
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TABLE OF CONTENTS
Introduction 5
Key Trends 12
Key Challenges 13
Key Opportunities 14
Conclusion 18
References 19
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INTRODUCTION
Petrochemical industry in India has been one of the fastest growing industries in the country.
Since the beginning, the Indian petrochemical industry has shown an enviable rate of growth.
This industry also has immense importance in the growth of economy of the country and the
growth and development of manufacturing industry as well. It provides the foundation for
manufacturing industries like construction, packaging, pharmaceuticals, agriculture, textiles etc.
The Indian petrochemical industry is a highly concentrated one and is oligopolistic in nature.
Even a few days back, only four major companies viz. Reliance Industries Ltd (RIL), Indian
Petrochemicals Corporation Ltd. (IPCL), Gas Authority of India Ltd. (GAIL) and Haldia
Petrochemicals Ltd. (HPL) used to dominate the industry at a large extent. 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 exist in the market.1
1
Business Map of India, Indian Petrochemical Industries, http://business.mapsofindia.com/india-petroleum-
industry/indian-petrochemical-companies,updated on –December 13,2011/visited on-September 18,2016
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Objectives
Research Methodology
This project work has been carried out following the descriptive and analytical approach. It
provides a deep approach into the topic of Petrochemical Industries in India and further
scrutinizes all the aspects of the same. Books and other references (including various websites)
were primarily helpful for the completion of this project. Footnotes have been provided wherever
necessary.
Data Collection
All the data collected for study are secondary and are analyzed. The review and the study
occurred from the various books from School of Law library and various articles and research
papers from e-data.
The origin of Petrochemical Industries and then how it got expanded with the pace of time. The
Indian Petrochemical Industries and their contribution to the global economy, key trends, and
key challenges, key opportunities related to the aspect of Indian Petrochemical Industries are
discussed here. Most famous Petrochemical Industries in India and their performance are
discussed in the project. Growth of Petrochemical Industries in India is described in the form of
conclusion.
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Before then, it used to be a tentative, experimental sector, starting with basic materials: synthetic
rubbers in the 1900s, Bakelite, the first petrochemical-derived plastic in 1907, the first
petrochemical solvent in the 1920s, polystyrene ... And it then moved to an incredible variety of
areas - from household goods (kitchen appliances, textile, furniture) to medicine (heart
pacemakers, transfusion bags), from leisure (running shoes, computers...) to highly specialised
fields like archaeology or crime detection.
widely used to make candles, various types of polishes, cartons and so forth.
Synthetic: This is another by-product that is of immense importance and which is
obtained by refining petroleum. Synthetic is used as a raw material for manufacturing
different types of garments.
Fertilizers: It is also used as fertilizers to protect crops from damage. Various kinds
Petrochemical products are used in varied forms in all fields. Ranging from common household
items to complex application, the users are extensively wide and different.2
2
Vaiv Jais, Significance of Petrochemical Products, ezinearticles.com/?Significance-of-Petrochemical-Industry-
and-Its-Products&id=5812171,Updated on-January 28,2011,Visited on-September 18,2016
Page |9
Indian Petrochemical Industries is one of the major revenue earning sectors in the Indian
economy. This is capital-intensive and since the demand for petrochemicals is always high in the
market, the Indian Petrochemical Companies have been playing significant role throughout.
OVERVIEW
Most of the Indian Petrochemical Companies were controlled by the state and was under the
state owned Indian Petroleum Corporation Limited till the early 1990s. It was after the
liberalization policies taken up by the Indian government that private investments were made in
petrochemical sector and one witnesses a healthy outcome of the Indian Petrochemical
Industries thereafter. Although there are many small and big petrochemical companies operating
in India, still the major integrated plants in this sector are like the Indian Petroleum Corporation
Limited, Reliance Industries, and NOCIL. The necessary features of the Indian Petrochemical
Companies
Of the leading petrochemical products produced by the Indian Petroleum Industries, polymers
comprise of nearly 70% of it. The PVC pipes and fittings are used in all sections of the economy
like agriculture, housing, construction, telecom, and others. The main processing types used by
the Indian Petrochemical Industries are:
Extrusion Molding
Injection Molding
Blow and Roto-molding
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Indian Petrochemical Industries produces a wide range of items required by the consumers of all
groups such as films, sheets, fibres, filaments, pipes, conduits, profiles, household products like
bath tubs, plastic crates, buckets, chairs, to name a few, bottles, containers, toys, house wares.
The petrochemicals are also used in the healthcare and pharmaceutical sectors. The demand for
plasticizers are increasing with the growing size of the middle classes in India, as plastics are
used in all domains like that of packaging, agriculture, wires, cables, Medicare etc..
Ethane, propane, butane and Natural Gas Liquid (NGL) obtained from the natural gas are the
other important feed-stocks used in the petrochemical industry. The basic building blocks olefins
(ethylene, propylene & butadiene) and aromatics (benzene, toluene and xylene) are the major
raw materials from which most of the chemicals are derived. The two major segments for
petrochemicals are:- Basic petrochemicals and End-product petrochemicals The feedstock are
used to derive the basic petrochemicals. Basic petrochemicals can be reclassified as olefins
(ethylene, propylene and butadiene) and aromatics (benzene and xylene). These basic
petrochemicals are then used to create end products which are very useful to be utilised in many
ways.3
3
Business Map of India, Indian Petrochemical Industries, http://business.mapsofindia.com/india-petroleum-
industry/indian-petrochemical-companies,updated on –December 13,2011/visited on-September 18,2016
P a g e | 11
KEY TRENDS
Market Trends
Technological Trends
Product switch: Linear low density polyethylene is increasingly replacing the usage
of low density polyethylene in India. Only 1 ton of ethylene is required to produce 1 ton
of LLDPE whereas > 1 ton of ethylene is required to produce 1 ton of LDPE.
Change in feedstock mix: With increased availability of shale gas, natural gas and
new gas finds the dependency on naphtha as major feedstock for petrochemicals
complexes have reduced.
Regulatory Trends
Reduced fiscal benefits: As India is fast becoming a refining and petrochemical surplus
nation; Government has also taken away the income tax holidays and other fiscal benefits from
the industry. Only oil exploration companies now enjoy the benefits based on the profit-sharing
mechanism with the government.
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KEY CHALLENGES
Volatility in raw material prices: More than 50% of global petrochemical capacities
are based on naphtha, a crude oil derived product. The prices of crude oil products have witnessed
significant volatility, thereby making petrochemicals prices highly volatile.
Increased competition: Large capacity additions taking place in ethane rich Middle
East and shale gas rich US. Shale gas brought a renewed competitive advantage to the US
petrochemical sector. Out of the 30 million tons of ethylene capacity additions expected during
period 2014 and 2018, 12.5 million tons is expected in the US alone. Since, ethane& shale gas
based petrochemical products are cheaper than petrochemical products in India; domestic
producers are expected to witness margins pressure.
High entry barriers: Given the capital intensive nature of the petrochemical plant and
tariff barriers, new entrants and small and medium size companies are prohibited from easily
entering into the market.
KEY OPPORTUNITIES
Backward & forward integration: Given the volatility of crude oil prices and
India's heavy dependency on oil imports, there is opportunity for oil and oil related
companies to reap benefits of increase in presence across the value chain. For e.g.
Reliance Industries Ltd. successfully backward integrated from refining and
petrochemical company to oil and gas exploration. ONGC which is primarily an
exploration company recently built a Greenfield petrochemical project (OMPL).
Improved feedstock supply: Availability of feedstock dictates the location of the
plant. Domestic products are uncompetitive due to high costs of naphtha when compared
with ethane based products from Middle East. One means to improve the competitiveness
of the domestic products is by improving the infrastructure support as is the case in
Middle East, China and Singapore. Also going forward, as more natural gas becomes
available in India, the domestic players are likely to shift from naphtha to cheaper natural
gas thereby increasing their competitiveness in the market.
More value-add products in portfolio: Demand for performance plastics such
as biodegradable polymers is expected to be on rise across the world including India.
Given the environment concerns with traditional plastics, companies should look at
expanding their portfolio and include more value add products.
Increased geographical presence: Given the capital intensive nature of the
project and high costs associated in India (due to no duty waivers, no/ very less tax
exemptions and high interest costs), the domestic companies may also look outside for
organic and inorganic opportunities.
Opportunity for reverse SEZ: Industry players can work closely with the Indian
government to set up reverse SEZs in countries like Mozambique, Iran and Myanmar. As a part
of this, the Indian company can setup a gas cracker to produce ethylene and its derivatives which
can be sent to India for the manufacture of further downstream value added products or they can
coin vest in upcoming plants with off-take agreements. Government has to take initiative in
incentivizing the imports from these countries; also it has to work closely with these governments
to safeguard the Indian investments.4
4
Indian Petrochemical Industries, Indian Chemicals and Petrochemicals Sector,32-38
P a g e | 15
The biggest Vishakhapatnam Petrochemicals Plant is called Andhra Petrochemicals Ltd. It was
promoted jointly in 1984 by two major bodies’ viz., Andhra Sugars Ltd. and Andhra Pradesh
Industrial Development Corporation. Andhra Petrochemicals Ltd. is mainly into the production
of Oxoalcohols and it possesses a license to produce 30000 mtpa of Ox alcohols. The company
started its operations in 1994 and since then, it has efficiently raised its production capacity to
42000 mtpa. The plant uses state-of-the-art technology supplied from London and was started
with an investment capital amounting to ` 2290 million. The products that the plant specializes in
are:
I-Butanol is used in amino resin, isobutyl, acetate, plasticizers, printing inks, urethane catalysts,
nitro cellulose lacquers, rubber chemicals, pesticides, resins, pharmaceuticals, varnishes, etc.
N-Butanol is used in adhesives, acrylates, plasticizers, and detergents. 2-EH product is used for
acrylates, lube and fuel additives, surfactants, mining, solvent extractions, oil, and agro-
chemicals. Andhra Petrochemicals Ltd. being the biggest Vishakapatnam Petrochemicals Plant,
has been upgrading its facilities, which include APGPCL power, sea water cooling tower, diesel
power generation, steam generation, and raw water storage.
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IBP PETROLEUM
BP, one of the most important petrochemical company in India and a part of the Indian Oil
Corporation family, has earned a name in the production of petroleum, industrial explosives, and
Cryogenic Engineering. Moreover, IBP offers a variety of products for the consumers and have
set up subsidiaries and joint venture companies all across the country. In the year the IBP
touched it’s highest ever turnover with sales reaching Rs.15, 818 crore with the growth being
16%.
History
In the year 1909, IBP was incorporated as the Indo-Burma Petroleum Company limited in
Rangoon and in 1942 the corporate office of the petrochemical company was shifted to India. It
is nearly a century that IBP have been serving the core sector of the economy with its diversified
product range. In the recent year of 2007, IBP and the mother company Indian Oil Corporation
Limited got merged, which no doubt have increased the prestige of the IBP in the economy. This
merger will enhance the infrastructure, product support, and technology strength of IBP and
strengthen their retail marketing further. Apart from petroleum, IBP also produces industrial
explosives and this is in fact the sole central public sector company in India dealing with such
products.
Activities
The Company deals with petrochemical products like petroleum, industrial explosives, and
cryogenics. In the coming years the company wishes to increase their market participation
regarding the marketing of these products. The IBP is engaged in the manufacturing and
marketing of bulk slurry emulsion explosives like Cartridged and Site Mixed, Cast Boosters, and
Detonating Fuse. Other than the petroleum and chemical business groups there is the engineering
business group of IBP, which is mainly concerned with the manufacturing and marketing of
small cryogenic containers for transporting and storing liquid Nitrogen, Oxygen and Argon with
the help of high vacuum technology.
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Performances of IBP
This petrochemical company over the years has been accredited with the prestigious ISO-9002
certification for their performances. Some of the main highlights of the operations of IBP are
like-
CONCLUSION
Outlook for the Overall Indian Petrochemical Industry India's aggregated demand for
petrochemicals increased by 4% in 2013-14 over 2012-13. Combining the demand for all the key
segments in the petrochemical industry aggregate demand for the entire petrochemical sector in
India is likely to increase from 30 MMT in 2013-14 to 31 MMT in 2014-15 and further to 35
MMT in 2015-16 as depicted in figure below. At the aggregate level, therefore, demand for
petrochemicals in India is expected to grow at 6% and 10% per annum in 2014-15 and 2015-16
respectively. Aggregate Petrochemical Demand (All key segments – MMT) n Polymers are
likely to register growth rate of 6.7% and 9.3% in 2014-15 and 2015-16. Polyolefins are
expected to grow at 7.2% and 7.9% in 2014-15 and 2015-16 with the start-up of new capacities.
Surfactants are projected to grow at ~5% and 9% in the same period. Synthetic rubbers are
expected to register demand growth in the range of 7% in next two years. n Other key
petrochemicals expected to grow at ~7% in 2015-16. India's demand from the automobiles,
packaging, and agriculture and infrastructure sector is expected to grow at healthy rate with
easing of government's monetary policy. This optimism is based on the expectation that India's
GDP would again grow at 7% plus in 2014-15.5
5
Asian Petrochemical Industry Conference, Indian Petrochemical Industry, cpmaindia.com/pdf/apic-country-
2015/apic2015-india-report.pdf,Updated on-May 8,2015,Visited on-September 18,2016
P a g e | 19
REFERENCES
http://business.mapsofindia.com/india-petrol
http://ezinearticles.com/?Significance-of-Petrochemical-Industry-and-Its-
Products&id=5812171
http://business.mapsofindia.com/india-petroleum-industry/indian-
petrochemical-companies
cpmaindia.com/pdf/apic-country-2015/apic2015-india-report.pdf