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PRLog (Press Release)– Apr 01, 2011– The Indian petrochemicals industry has witnessed annual growth of around 14-15% over the 2005-2010 period and this double-digit growth is likely to be sustained over the medium term, according to BMI's latest India Petrochemicals Report.

India is on course to become the third largest consumer market for high-tech plastics after the US and China owing to growth in the automotive industry, which is set to grow by more than 6% per annum. In the short term, the main engine of the economy - domestic demand - will be fuelled by rising private consumption and fixed investment levels, as well as the need to rebuild inventories, which should drive petrochemicals demand.

The automotive sector will be a major force in driving engineering and high performance plastics and synthetic rubber in India and is fuelling the diversification of downstream industries. Producers are seeking to increase the value of production and raise margins by tapping into growth in the automotive industry, particularly in styrene butadiene rubber (SBR), which India does not currently produce, but is used in tyre production. A JV agreement between India Oil Companu (IOC), Taiwan's TSRC Corporation and Marubeni plans to establish an SBR unit at Panipat with capacity for 120,000tpa SBR due to come onstream by Q412. India imports up to 130,000tpa of SBR with demand rising by 10% per annum. Although the plan will use butadiene from the Panipat refinery, styrene will be imported.

However, some projects have been delayed, including IOC's planned new petrochemicals complex at Paradip with 1.2mn tpa PC, 700,000tpa PP and 600,000tpa styrene and its planned JV with Gas Authority of India Ltd (GAIL) at Barauni that includes a mixed feed cracker. Oil and Natural Gas Corporation (ONGC)'s US$3bn complex at Dahej is also likely to be delayed, following months of delays in awarding engineering contacts. The Dahej complex will have capacity of 1.1mn tpa of ethylene, and includes three PE units with a capacity of 350,000tpa each and a 350,000tpa PP plant. BMI believes the cost of the complex could rise by 20-30% owing to an increase in the price of inputs, which could deter investors. This could ultimately lead to the project's complete cancellation. Meanwhile, the 9mn tpa refinery that is being commissioned by GGSRL, an INR189bn (US$3.9bn) JV between Mittal Energy and HPCL in Bhatinda, Punjab, has had its start-up date moved by one year to February 2012. Downstream products include PP, solvents and LPG. Financial viability and land acquisition disputes are among the most common alfa romeo problems facing the petrochemicals industry.

In the Asia Petrochemicals Business Environment Ratings matrix, India has fallen from eighth to ninth place owing to a modest 0.2 point fall in its petrochemicals rating caused by a decline in its long-term political risk score. This puts it 0.1 point behind Australia and 16.6 points ahead of Indonesia.

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