Contents

MESSAGE FROM KAMAL P. NANAVATY, PRESIDENT, CPMA, INDIA .................................................... 1

SECTION 1 ........................................................................................................ 2
THE INDIAN ECONOMY: REVIEW AND OUTLOOK..................................................................................... 3
THE INDIAN ECONOMY REVIEW OF 2022-23 ............................................................................................. 3
SNAPSHOT OF KEY INDICATORS ............................................................................................................... 5
I. GDP GROWTH..................................................................................................................................... 5
II. CORE INDUSTRIES PERFORMANCE ................................................................................................ 7
III. FOREX RESERVES ............................................................................................................................. 9
IX. INFLATION......................................................................................................................................... 10
X. RUPEE ............................................................................................................................................... 11
XI. OUTLOOK FOR 2023-24: INDIA ....................................................................................................... 12
SECTION 2 ...................................................................................................... 16
XII. PETROCHEMICAL INDUSTRY IN INDIA .......................................................................................... 17
XIII. PETROCHEMICAL INDUSTRY REVIEW OF 2022-23 & OUTLOOK FOR 2023-24 ......................... 22
XIV. FEEDSTOCK...................................................................................................................................... 29
A. NAPHTHA .......................................................................................................................................... 29
B. NATURAL GAS.................................................................................................................................. 30
C. COAL BED METHANE ...................................................................................................................... 39
D. METHANOL ....................................................................................................................................... 43
XV. BUILDING BLOCKS .......................................................................................................................... 49
A. ETHYLENE & PROPYLENE .............................................................................................................. 49
B. BUTADIENE ....................................................................................................................................... 57
C. STYRENE ........................................................................................................................................... 59
D. EDC AND VCM .................................................................................................................................. 62
E. AROMATICS – PARAXYLENE.......................................................................................................... 65
XVI. INTERMEDIATES .............................................................................................................................. 68
FIBRE INTERMEDIATES ............................................................................................................................. 68
XVII. POLYMERS, FIBRES AND ELASTOMERS ...................................................................................... 75
XVIII. POLYOLEFINS .................................................................................................................................. 78
XIX. VINYL’S: PVC .................................................................................................................................... 79
XX. STYRENICS ....................................................................................................................................... 83
A. POLYSTYRENE ................................................................................................................................. 83
B. ACRYLONITRILE-BUTADIENE-STYRENE (ABS) ............................................................................ 85
C. STYRENE-ACRYLONITRILE (SAN) .................................................................................................. 88
D. PET (POLYETHYLENE TEREPHTHALATE) .................................................................................... 90
XXI. SYNTHETIC FIBRES ....................................................................................................................... 102
XXII. SYNTHETIC RUBBER ..................................................................................................................... 108
XXIII. SURFACTANTS ............................................................................................................................... 123
XXIV. CARBON BLACK FEEDSTOCK & CARBON BLACK .................................................................... 126
XXV. OTHER KEY PETROCHEMICALS .................................................................................................. 130
XXVI. OUTLOOK FOR THE OVERALL INDIAN PETROCHEMICAL INDUSTRY .................................... 136
XXVII. OVERVIEW OF CIRCULARITY IN PLASTIC INDUSTRY ............................................................... 137
SECTION 3 ..................................................................................................... 135
STATISTICAL APPENDIX .......................................................................................................................... 135
FEEDSTOCK .............................................................................................................................................. 145
BUILDING BLOCKS (KT) ........................................................................................................................... 146
INTERMEDIATES (KT) ............................................................................................................................... 147
FIBRE INTERMEDIATES (KT) ................................................................................................................... 147
POLYMERS, FIBRES AND ELASTOMERS (KT) ...................................................................................... 148
VINYLS (KT) ............................................................................................................................................... 150
STYRENICS (KT) ........................................................................................................................................ 151
PET (KT) ..................................................................................................................................................... 151
SYNTHETIC FIBRES (KT) .......................................................................................................................... 152
SYNTHETIC RUBBER (KT) ........................................................................................................................ 153
OTHER KEY PETROCHEMICALS (KT) ..................................................................................................... 154
SURFACTANTS (KT) ................................................................................................................................. 155
CARBON BLACK & CBFS (KT) ................................................................................................................. 155
 TABLE
TABLE 1: INDIA’S GDP GROWTH PROJECTION – 2022-23 AND BEYOND ............................................ 13
TABLE 2: NAPHTHA DEMAND SUPPLY .................................................................................................... 29
TABLE 3: NATURAL GAS DEMAND SUPPLY ........................................................................................... 38
TABLE 4: COAL BED METHANE DEMAND SUPPLY ................................................................................ 42
TABLE 5: METHANOL DEMAND SUPPLY ................................................................................................. 48
TABLE 6: ETHYLENE & PROPYLENE NET AVAILABILITY ...................................................................... 49
TABLE 7: BUTADIENE DEMAND SUPPLY ................................................................................................ 58
TABLE 8: STYRENE DEMAND SUPPLY .................................................................................................... 61
TABLE 9: EDC & VCM IMPORT INTO INDIA .............................................................................................. 63
TABLE 10: PARAXYLENE DEMAND SUPPLY ........................................................................................... 65
TABLE 11: FIBRE INTERMEDIATE DEMAND SUPPLY ............................................................................. 71
TABLE 12: POLYMER DEMAND SUPPLY.................................................................................................. 77
TABLE 13: POLYOLEFIN DEMAND IN INDIA ACTUAL & PROJECTED .................................................. 78
TABLE 14: PVC DEMAND SUPPLY ............................................................................................................ 82
TABLE 15: POLYSTYRENE DEMAND SUPPLY ......................................................................................... 84
TABLE 16: ABS DEMAND SUPPLY ............................................................................................................ 86
TABLE 17: SAN DEMAND SUPPLY ............................................................................................................ 89
TABLE 18: PET DEMAND SUPPLY ............................................................................................................ 91
TABLE 19: DEMAND SUPPLY BALANCE OF SYNTHETIC FIBRE ........................................................... 97
TABLE 20: DEMAND SUPPLY BALANCE OF PBR, SBR, NBR, EPDM, BUTYL RUBBER &
HALO BUTYL RUBBER ............................................................................................................................. 110
TABLE 21: DEMAND & SUPPLY OF LAB & EO ....................................................................................... 116
TABLE 22: DEMAND SUPPLY BALANCE OF CBFS & CARBON BLACK ............................................. 121
TABLE 23: DEMAND SUPPLY BALANCE OF BENZENE, TOLUENE, MXS & OX ................................. 124
TABLE 24 PLASTIC WASTE GENERATION IN DIFFERENT COUNTRIES ............................................. 129
TABLE 25 EPR TARGETS FOR OBLIGATED ENTITIES (2021-22 WAIVED OFF).................................. 133
 FIGURE
FIGURE 1: INDIA’S GDP GROWTH (YEAR-ON-YEAR IN PERCENT) ......................................................... 6
FIGURE 2: CORE INDUSTRIES GROWTH RATE (IN PERCENT) ................................................................ 8
FIGURE 3: FOREX RESERVES ..................................................................................................................... 9
FIGURE 4: CPI AND WPI INFLATION (IN PERCENT) ................................................................................ 10
FIGURE 5: RUPEE MOVEMENT IN LAST ONE YEAR ............................................................................... 12
FIGURE 6: AGGREGATE PETROCHEMICAL DEMAND (ALL KEY SEGMENTS – MMT) ...................... 127
FIGURE 7: PLASTIC WASTE GENERATED FROM 1950 - 2020 ............................................................. 137
FIGURE 8: PLASTIC PACKAGING MARKET .......................................................................................... 139
FIGURE 9: SUP BAN ACROSS THE GLOBE ........................................................................................... 140
FIGURE 10: STATE/UT WISE PLASTIC WASTE GENERATION (CPCB)................................................ 141
FIGURE 11: STATUS OF REGISTRATION OF EPR (F.Y. 22-23) AS OF 27TH MARCH 2023 ................ 143
Message from Kamal P. Nanavaty,
President, CPMA, India
It is indeed my privilege to present the India
Petrochemical Report 2023, published every year by
CPMA.
This report has become a Reference Book for
Petrochemical Industry Professionals, representing
all its segments, covering review and outlook,
together with detailed statistics on capacity, demand,
production, import and export of key products.
CPMA enjoys the status of being the VOICE of the
Petrochemical Industry in the country, a credible
contact point for the Government, on all matters relating to growth of our industry.
In order to facilitate policy regime which ensures sustainable and responsible
growth, CPMA has been striving to lead various advocacy initiatives. CPMA has
now become the apex forum of the industry, at Government level as well as at
National Trade level, by affiliation with trade bodies including FICCI, CII and other
major Associations.

Indian Petrochemical industry has shown resilience in tough times and comes
forward with good rate of growth in consumption even during the worst economic
crises. We see a very bright future of consumption and growth of all major
petrochemical products and march towards self-sufficiency.

India indeed offers a vast potential for petrochemical industry to grow. The Indian
Government’s guiding principle for most segments of the economy are to be “Self
Reliant- Atmanirbhar”. New investments of nearly US$ 123 Bn is lined up in new
Petchem capacities which are at various stages of announcements, planning and
execution.

Sustainability is an integral part of our industry’s growth and this year theme for the
Asia Petrochemical Industry Conference happening in India after 13 years on
18th-19th May 2023. Petchem industry is passing through a phase of energy
transition, carbon neutrality and circularity. New investments are taking place in
sustainability and renewable feedstock based downstream plants and carbon
capture technologies. CPMA has included a special chapter in this report covering
how the industry has been supporting the various initiatives led by the Government
of India for Sustainability.

Thank you.
The Indian Economy: Review and Outlook

The Indian Economy Review of 2022-23

There was no dearth of headwinds throughout the year, which impacted India’s
path to economic recovery. The year began with the threat of the Omicron variant
of the coronavirus. Fortunately, the threat subsided fairly quickly, without impacting
the economy in any significant way. The only problem was that this headwind was
replaced by Russia’s invasion of Ukraine in mid-February, leading to further
disruptions in the global supply chain.

Another development to affect the Indian economy was the decision of several
major central banks, especially the US Federal Reserve, to reverse their loose
monetary policy stance. The ripple effect of the policy-tightening measures was felt
worldwide. The RBI wasn’t too far behind in tightening its stance either, with the
first interest rate hike being announced in May.

Overall, the year 2022 had been challenging for India from various economic
perspectives. While, on one hand the soaring inflation in India posed severe
challenges to the masses, on the other hand, the Reserve Bank of India (RBI) left
no stone unturned to address issues like falling foreign exchange (forex) reserves
of the country and depreciating value of Rupee against US dollar.

Even with these challenges with way India has sailed through made many
economists, brokerage firms and agencies like the International Monetary Fund
(IMF) and World Bank state in their latest reports that Indian economy will be fastest
growing among major economies in financial year 2022-23. As per IMF India to
contribute 15% of global growth in 2023.

A Brief Snapshot of The Economy

The Indian GDP

India’s economy expanded 13.5% in the April-June period of the current financial
year (2022-23), as against a 20.1% growth seen during the same period last year,
data released by the National Statistical Office (NSO), helped by good growth in
the contact-based services sector, robust domestic demand and capital
expenditure by the government, the two main pillars of the economy. This is the
fastest growth for the country’s economy in the past year despite global
recessionary threats looming large. In the previous three quarters since July 2021,
the economy had grown 8.4%, 5.4% and 4.1% respectively. As per economists,
going forward, the GDP is likely to face downside risk due to the tightening of
monetary policy by the RBI and higher oil and commodity prices. The economy had
contracted 23.9% in the April-June quarter of 2020 during the first wave of the
Covid-19 pandemic but grew 20.1% in the same quarter one year after in 2021.
The RBI had, however, predicted the first quarter economic growth to be at 16.2%.
Some normalization was seen in the September-end quarter, with GDP growth
slowing to 6.3%, driven by the contraction in the mining and manufacturing sectors,
along with high inflation, declining exports and rising input prices. In Q3 2022-23
GDP slowed down to 4.4%. However, it is expected that it may be on track to
achieve 7% for the fiscal.

Index of Industrial Production

In the first 10 months of FY23 (Apr-Jan), IIP grew 5.4 per cent against 13.7 per cent
during the year-ago period. Industrial production grew by 5.2% in January 2023.
This was just 2% in Jan’22 and 4.7% in Dec’22. Data also show that while the
manufacturing sector’s output increased by 3.7% in Jan against 1.9% last January,
mining output rose 8.8% and power generation surged 12.7% against 3% and
0.9%, respectively, during Jan 2023. The manufacturing sector’s output increased
by 3.7% in Jan against 1.9% last January, mining output rose 8.8% and power
generation surged 12.7% against 3% and 0.9%, respectively, during Jan 2023.

Core Industries
Growth in eight core infrastructure industries registered a four-month high in
January this year at 7.8% with seven of the eight sectors witnessing positive growth
amidst the higher capex push by the government and aided by a favourable base
effect.

Inflation
War in Ukraine caused major economic damage all across the globe and India was
no different. Retail inflation, as reflected by the CPI, remained above the RBI’s
upper tolerability level of 6% for 10 consecutive months to November, when it
eased slightly to 5.88%. Retail inflation recorded an eight-year high in June at
16.2%. While, WPI saw a high of 7.4% in Sep’22. Since then, WPI has seen a
steady decline and in the month of February 2023 it registered a low of 3.85%,
while retail inflation was 6.44% in the same month.

USD-INR exchange rate

The rupee declined over 11% in 2022 – one of the worst-performing currencies last
year in Asia but has reversed fortunes come 2023 and is ranked the third-best
currency so far behind the Indonesian rupiah and the Philippine peso. Rupee is
closer to replacing dollar as 18 nations agree to trade in INR.

Import and export

During the period of April to January 2022-23, overall export grew 17.33 per cent
to $641.24 billion as against $546.55 billion in the corresponding period of the last
fiscal i.e. April to January 2021-22.
Sectors which recorded positive growth include petroleum products, electronic
goods, rice, ready-made garments of textiles and chemicals.
GST
As per the latest trends, GST collections have now settled with robust collection,
revenue leakages and tax evasion being plugged and procedural issues getting
addressed. The gross goods and service tax (GST) revenue collection in the month
of February 2023 stood at Rs 1,49,577 crore, up around 12% on an annual basis.
With this, the monthly GST revenues remained over Rs 1.4 lakh crore for 12 straight
months in a row

Forex reserves
India's foreign exchange reserves increased by $4.53 billion to $588.78 billion
in the week ending April 28, 2023, as per the Reserve Bank of India.

Industrial Capex
Overall industrial capex is seen rising to nearly Rs 5.7 lakh crore on average
between fiscals 2023 and 2027, compared with Rs 3.7 lakh crore in the past five
fiscals. Nearly half of this incremental capex is being driven by the Production-
Linked Incentive (PLI) scheme and new-age sectors

FDI
India had recorded highest ever annual FDI inflow of USD 83.57 billion in the
Financial Year 2021-22. FDI equity inflows in manufacturing rose 76% in FY22.

Looking Ahead at 2023

With respect to investments, sectors that are projected to perform the best include
financial services, banking, insurance, capital goods, housing, defense,
infrastructure and the railways. However, the overall outlook remains clouded with
uncertainties especially with escalating crude oil prices, rising input prices and
weaker global demand remain a concern. A combination of monetary, fiscal and
financial market measures is needed to help the businesses and people cope with
the crisis.

Snapshot of Key Indicators

I. GDP growth
The Indian economy is predicted to grow by 7 per cent in financial year 2022-23,
according to the government’s second advance estimates of national income. The
7 per cent growth rate prediction matches the estimates made by Finance Minister
Nirmala Sitharaman in 2023-24 Union Budget speech, and also the predictions
made in the 2022-23 Economic Survey. Besides, government revised the GDP
growth for 2021-22 to 9.1% against the earlier estimate of 8.7%.
In the previous quarter (July-September 2022), India's pace of GDP growth had
slowed to 6.3% from 13.5% in Q1.
Figure 1: India’s GDP Growth (Year-on-Year in Percent)

With a 7 per cent growth rate estimated for the full financial year, GDP is expected
to grow at 5.1 per cent in the January-March quarter. With the revisions undertaken
for the previous fiscal, the GDP components for FY23 also underwent revision:
government final consumption expenditure has been revised down to 1.2 per cent
from 3.1 per cent earlier; private final consumption expenditure is now estimated at
7.3 per cent down from 7.7 per cent earlier, while gross fixed capital formation - an
indicator of investment - is seen growing 11.2 per cent as against earlier estimate
of 11.5 per cent. India's nominal GDP, which factors in the inflation rate, is set to
grow by 11.2 per cent in October-December as against 14.3 per cent in the year-
ago period. Gross Value Added or GVA which is GDP minus net product taxes
grew at 4.6 per cent in Q3.

Available data for Q3 and Q4:2022-23 indicates that economic activity in India
remains resilient. Urban consumption demand has been firming up, driven by a
sustained recovery in discretionary spending, especially on services, such as
travel, tourism and hospitality. Rural demand continues to show signs of
improvement as tractor sales and two-wheeler sales expanded in December.

Manufacturing continued to be in the negative territory for the second consecutive

quarter at (-)1.1 per cent in October-December as against (-) 3.6 per cent in April-
June and 1.3 per cent growth in the year-ago period, indicating impact of rising
input costs.
Meanwhile, electricity, gas, water supply and other utility services expanded by
8.2% as against 6% last quarter. Similarly, construction also improved to 8.4% from
5.8% in Q2. Agriculture and mining & quarrying also expanded by 3.7% each, while
trade, hotels and transport fell to 9.7%. Farm production is to grow by 3.7% which
is on account of a good kharif crop. A revival in construction activity by 8.4%
propped up low base was also supported by higher level of construction activity in
both houses as well as roads. Service sector components continued to do well on
the back of pent up demand especially in hospitality, travel, trade which led to
growth of 9.7% over 9.2% last year.

With a 7 per cent growth rate estimated for the full financial year, GDP is expected
to grow at 5.1 per cent in the January-March quarter. With the revisions undertaken
for the previous fiscal, the GDP components for FY23 also underwent revision:
government final consumption expenditure has been revised down to 1.2 per cent
from 3.1 per cent earlier; private final consumption expenditure is now estimated at
7.3 per cent down from 7.7 per cent earlier, while gross fixed capital formation - an
indicator of investment - is seen growing 11.2 per cent as against earlier estimate
of 11.5 per cent. India's nominal GDP, which factors in the inflation rate, is set to
grow by 11.2 per cent in October-December as against 14.3 per cent in the year-
ago period. Gross Value Added or GVA which is GDP minus net product taxes
grew at 4.6 per cent in Q3.

Available data for Q3 and Q4-2022-23 indicates that economic activity in India
remains resilient. Urban consumption demand has been firming up, driven by a
sustained recovery in discretionary spending, especially on services, such as
travel, tourism and hospitality. Rural demand continues to show signs of
improvement as tractor sales and two-wheeler sales expanded in December

ii. Core Industries Performance

Growth in eight core infrastructure industries registered a four-month high in
January this year at 7.8% with seven of the eight sectors witnessing positive growth
amidst the higher capex push by the government and aided by a favourable base
effect. It grew by 4% in January 2022 when the economy was still reeling from the
pandemic and the third wave of infections was underway. Previously, the eight core
industries posted a high growth of 8.3% in September 2022. Given that these core
sectors have a combined weight of 40.3% in the index of industrial production (IIP),
analysts expect IIP growth in the month to be at a robust 5% to 6% as against 4.3%
growth in December. The core sector growth for December was revised downwards
to 7% from 7.4% earlier.

The cumulative growth rate of the index of eight core industries during April-
January 2022-23 was 7.9% as against 11.6% a year ago.
In January 2023, three of the industries including fertilisers, coal and electricity
registered double digit growth. Coal production grew by 13.4% in January while
electricity generation registered a 12% growth. This is indicative of steady industrial
activity during the month. For the April to January 2022-23 period, its IIP grew by
16.1 percent. Crude oil production declined by 1.1 percent and its cumulative index
declined by 1.3 percent during April to January, 2022-23 over the corresponding
period of previous year.

Figure 2: Core Industries Growth Rate (in percent)

Similarly, natural gas production increased by 5.3 percent and its IIP grew by 1.4
percent. Petroleum refinery production increased by 4.5 percent and its cumulative
index increased by 5.4 per cent during April to January, 2022-23 over the
corresponding period of previous year, and analysts attributed this to both exports
and domestic demand remaining high.

Fertilizer production saw an increase of 17.9 percent and its IIP grew by 10.5
percent during April to January, 2022-23 over the corresponding period of previous
year. With the government focus on investments in infrastructure, steel and cement
production grew by 6.2% and 4.2% respectively in January. Steel’s cumulative
index increased by 7.1 percent., while for cement increased by 10 percent.
Electricity generation increased by 12 percent and its cumulative index increased
by 10.1 percent in April-January, 2022-23 over the corresponding period of
previous year.
iii. Forex reserves
India's foreign exchange reserves rose sharply by USD 12.798 billion to USD
572.801 billion in the week ending March 17, according to the Reserve Bank of
India's latest data. During the prior week that ended on March 10, India's foreign
exchange reserves declined by about USD 2.4 billion to USD 560.003 billion.

According to RBI's latest data, India's foreign currency assets, the biggest
component of the forex reserves, rose by USD 10.485 billion to USD 505.348
billion. Gold reserves during the latest week rose by USD 2.187 billion to USD
44.109 billion.

At the start of 2022, the overall forex reserves were at $633.61 billion and dropped
to a two-year low in October. Much of the decline can be attributed to RBI's
intervention and a rise in the cost of imported goods. It is still down sharply from a
peak of over $642 billion touched in September last year.

The forex reserves had been intermittently falling for months now largely because
of the RBI's intervention in the market to defend the depreciating rupee against a
surging US dollar.

The worst drop was in the week to February 10 when the reserves plunged by a
steep $8.32 billion to $566.95 billion.

The reserves have been falling as the rupee has been under pressure and the
monetary authority has been taking measures to defend the currency from extreme
volatility. In 2022, the cost of defending a falling rupee was over $115 billion of the
reserves. In October 2021, the forex kitty had reached an all-time high of $645
billion.
Figure 3: Forex Reserves
iv. Inflation
At 3.85%, India's wholesale inflation fell to lowest since january 2021 in february
2023. Decline in the rate of inflation in february, 2023 is primarily contributed by
fall in prices of crude petroleum and natural gas, non-food articles, food products,
minerals, computer, electronic and optical products, chemicals and chemical
products, electrical equipment and motor vehicles, trailers and semitrailers.

On month-on-month (MoM) basis, the WPI changed 0.20 per cent. The rate of
inflation based on WPI Food Index decreased from 2.95 per cent in january 2023
to 2.76% february 2023. Retail inflation inched lower to 6.44 per cent in february
from 6.52 per cent in january, even as it remained above the upper band of the 4+/-
2 per cent medium-term target of the Reserve Bank of India (RBI) for the second
consecutive month, data released by the National Statistical Office (NSO). While
food inflation eased marginally to 5.95 per cent in february from the revised level
of 6 per cent in january (earlier 5.94 per cent), inflation for cereals, milk and fruits
picked up.

Core inflation — non-food, non-fuel component — continued to remain above 6 per

cent mark for the fourth consecutive month, prompting expectations of another rate
hike of 25 basis points by the RBI in its upcoming policy review in April. Also, even
as rural inflation inched lower to 6.72 per cent in February from 6.85 per cent a
month ago, it continued to remain above urban inflation, which rose to 6.10 per cent
from 6 per cent.
Figure 4: CPI and WPI Inflation (in percent)
Experts said an inflation print above 6 per cent level for the second straight month
indicates a lag in the impact of monetary policy, under which the RBI has increased
the repo rate by a cumulative 250 basis points to 6.50 per cent since May last year.
They, however, said the headline inflation print is expected to ease March onwards
due to a significant base effect.

Retail inflation based on the Combined Price Index (Combined) had risen to a
three-month high of 6.52 per cent in January this year. It stood at 6.07 per cent in
February 2022, then rose to 6.95 per cent in March 2022 and further to 7.79 per
cent in April 2022.

Among the sub-groups, while vegetables continued to remain in deflationary mode

for the fourth consecutive month at (-)11.61 per cent in February, cereals inflation
increased to 16.73 per cent in February, the sixth consecutive month of double-
digit inflation. Inflation rate for milk and products increased to 9.65 per cent in
February from 8.79 per cent a month ago, while that for fruits rose to 6.38 per cent
from 2.93 per cent a month ago.

Though the government’s measures to cool off wheat inflation through open market
sales in February and reduction in reserve price is likely to show an impact on
inflation with a lag, sticky core inflation and onset of summer may push up
perishable products prices higher, as per experts.

In its latest monetary policy on February 8, the RBI had hiked the repo rate by 25
basis points. It had said that the outlook for inflation is mixed, projecting inflation at
6.5 per cent in 2022-23, with Q4 at 5.7 per cent.

vi. Rupee
2022 was a year of geopolitical tensions, soaring inflation and central banks
worldwide hiking rates trying to catch up to surging inflation. Especially the US Fed,
which caused the dollar to strengthen, affecting the rest of the world’s currencies.

The rupee declined over 11 percent in 2022 – the worst-performing Asian currency
– as it struggled against global developments. Most Asian countries, however,
depreciated more due to dollar’s inherent strength rather than their own weakness.
US dollar, current account deficit in the country, forex reserves and domestic
macro-economic developments will determine which way the rupee will move in
2023.

It is noteworthy here that the rupee was one of the worst-performing currencies last
year in Asia but has reversed fortunes come 2023 and is ranked the third-best
currency so far behind the Indonesian rupiah and the Philippine peso.
Last year, the rupee slid nearly 10 percent against the dollar and breached the 83
mark in October, a record low but since then it has strengthened despite a volatile
macro environment, threats from the ongoing Russia-Ukraine war and global
investors swaying towards the safe haven– US dollar.

Most emerging market currencies along with the rupee came under pressure after
Fed Chair Jerome Powell reaffirmed that the Fed is determined to bring inflation
down to its 2 percent target and an aggressive rate hike cycle will possibly continue
to slow the stubbornly high inflation in the US.

Back home, the RBI will most probably follow the US central bank’s footsteps and
keep tightening in order to tame the red-hot inflation. That is despite economic data
indicating growth to be below expectations in the last quarter as a gloomy global
outlook and rising borrowing costs hurt manufacturing and consumption.
Figure 5: Rupee Movement in last one year

Meanwhile, the Reserve Bank of India has reportedly been selling dollars, both
onshore and offshore, to prevent the rupee from weakening below the 83 against
dollar, according to several market participants, and will continue its vigil. In
January Indian currency strengthened to a one-month high against dollar, backed
by dollar inflows.

xi. Outlook for 2023-24: India

The economy is projected to grow 7 per cent this fiscal, according to the official
forecast, but many private forecasters have a lower outlook, ranging from 6.5 to 6.9
per cent. Many economists, brokerage firms and agencies like the IMF and World
Bank have in their latest reports stated that Indian economy will be fastest growing
among major economies in financial year 2022-23. As per IMF India to contribute
15% of global growth in 2023.
Even though existing global challenges like tightening monetary policy cycle,
slowing growth and elevated commodity prices may lead to a lower growth than
previous financial year, still India' growth will be robust due to strong domestic
demand. At present, global economy is navigating through incredibly rough waters
attributed mainly to global uncertainties, unfolding of conflict in Ukraine, the
reaction of financial and commodity markets to the changing scenarios, tight
monetary policy and more.

However, despite these hurdles, the World Bank in its latest India development
update said that India showed higher resilience to global shocks and better than
expected quarterly growth numbers. CRISIL agency has projected a growth of 6%
in FY24 lower than RBI estimates of 6.8% and 4.4% for the third quarter. Moody's
Investors Service recently in March 2023 raised India's economic growth estimate
for 2023 to 5.5 per cent from 4.8 per cent pegged earlier, on the back of a sharp
increase in capital expenditure in the Budget and a resilient economic momentum.
Table 1: India’s GDP Growth Projection – 2022-23 and beyond

Despite the fourth-quarter slowdown in consumer spending, analysts believe this

component of national expenditure is likely to do much of the heavy lifting for growth
in 2023 as inflation subsides and real spending power returns. Experts we also
believe that private investment will remain a strong source of economic growth,
helped along by the additional capital spending measures outlined in the latest
Union budget.

As a proxy measure for consumer spending, personal loan growth has been firming
in recent months, with the January 2023 growth rate edging up to 23.7% YoY.
Within this total, loans for big-ticket items such as vehicles and consumer durables
are both growing strongly, signalling no shortage of consumer confidence, along
with good growth in education loans. Credit card borrowing is also on the rise,
though not much faster than overall personal loans. The outlook for private
business investment also remains positive, and this is despite the increase in policy
rates that the RBI has had to implement to tame inflation. In support of private
investment, the banking sector is looking in decent shape despite the impact of the
pandemic, with non-performing loan ratios declining across all main banking sub-
groups. Scheduled commercial bank credit is growing strongly, and though the
gross fixed capital formation series that feeds into GDP is more volatile, all
indications are that it is growing robustly, and this should continue as rates peak
out and the monetary environment becomes less restrictive.

The recently released Union budget for 2023/24 also shows that government
support for the economy will continue to provide a solid backdrop for the business
sector, with strong infrastructure investment likely to help “crowd in” additional
business investment. Capital expenditure accounts for almost a quarter of the
Indian government’s expenditure in the coming fiscal year, totaling INR 13,709 bn,
an increase of 30% over the previous year. Infrastructure projects will be the main
beneficiary of such spending.

On the domestic front, the peak impact of the rate hikes -- 250 basis points since
May 2022, which has pushed interest rates above pre-Covid levels, will play out
more in the next fiscal. Retail inflation is expected to average 5 per cent in FY24
from 6.8 per cent in FY23, owing to the high-base effect and some softening of
crude and commodity prices. However, a good rabi harvest would help cool food
inflation, provided the monsoons are normal while the slowing economy should
moderate core inflation. However, risks to inflation are tilted upward, given the
ongoing heat wave and the World Meteorological Organization's prediction that an
El Nino warming is likely over the next couple of months.

On the external sector the country's external vulnerability is expected to decline

with a narrower current account deficit (CAD) and modest short-term external debt.
While CAD is expected to narrow to 2.4 per cent of GDP or USD 8 billion next fiscal
from an estimated 3 per cent of USD 100 billion this fiscal, its financing may face
challenges as foreign portfolio flows remain volatile and external commercial
borrowings are less attractive.

Infrastructure spending will drive overall capex by 12-16 per cent next fiscal. Overall
industrial capex is seen rising to nearly Rs 5.7 lakh crore on average between
fiscals 2023 and 2027, compared to Rs 3.7 lakh crore in the past five fiscals. Nearly
half of this incremental capex is being driven by the production-linked incentive
scheme and new-age sectors.
Merchandise exports are expected to grow at a tepid 2-4 per cent next fiscal and
5-7 per cent growth this fiscal, with the PLI scheme supporting demand owing to
global supply chain diversification and friend-shoring strategies.

Budget for FY24 announced one of the biggest-ever increases in capital spending
to create jobs. The capital spending increase, which would amount to 3.3 cent of
gross domestic product (GDP), will be the biggest such jump after an increase of
more than 37 per cent between 2020-21 and 2022. India is paying on investing in
the green economy, renewables with potential to shift the country towards clean
energy and keep growth going. This can be seen as potential for the future is to
translate this fiscal responsibility into a medium-term framework that gives even
stronger anchor to India’s public finances.

What is unique about India, is the fact that the public digital infrastructure is built in
a very agile manner. So private initiatives can tap into this public infrastructure and
benefit as well as support growth and employment in India. What is replicable is
this concept open, holistic approach to digitization using key building blocks.
India's G-20 presidency provides an opportunity for India to share this experience,
more broadly, especially with the developing world, so other countries can leapfrog
the way India, did it with its thoughtful approach to digitization. To achieve high
growth in the coming decades, India will need to sustain strong investment. Capital
in India has traditionally been mobilized by raising domestic savings and investing
it in productive assets.

Investment into infrastructure that enables growth, particularly in transport, energy

and communications, is critical to India's prospects. How well India can deliver on
this will go a long way to determining its growth path. Improving India's business
climate will also help increase investment.

Looking ahead, there are several factors that could impact the economy and
businesses. While the normalization of contact-based services, increased private
investment due to government initiatives (like PLI schemes & ‘China plus 1’
strategy), and improved rural consumption are positive developments, there are
also potential headwinds such as a global economic slowdown, high energy prices,
rising interest rates, and tighter financial conditions.
xii. Petrochemical Industry in India
Petrochemicals are a vital cog in the global industrial arena and a major growth
driver for economies. The petrochemical industry occupies a pivotal place in the
country’s economy, with increased domestic consumption and rising demand from
various end use sectors such as medicines, construction, agriculture, textiles,
automotive, etc.

It is one of the fastest growing sectors, with demand growing at a CAGR of 5%-
plus over the last five years in 2022-23 (with a blip in 2020-21). The penetration
level of petrochemicals in India is, however, far lower than the global average.
India’s per capita consumption stands at 12 kg compared to the global average of
35 kg, indicating significant headroom for growth.

The pandemic has brought about various changes in the India petrochemical
market, including digitization, increased consolidation activities, and a focus on
scenario-based planning. India is sitting in the cusp of per capita GDP as well as
per capital purchasing power and history has shown that once past this inflexion
point, the growth and demand for basic petrochemicals is insatiable. The direction
in which Indian society is moving will imminently lead to requirement of new
demand for basic petrochemicals as well as sow the foundation for speciality and
functional chemicals.

The vision for the next 5 years is to have investment-led growth, to be driven by
the private sector. To achieve this vision, the Government is working incessantly
on policies to attract investment, both from domestic and foreign sources. The
work-plan includes further liberalizing our FDI policy, simplification of labour laws,
further enhancing ease of doing business, power sector reforms, and reforms in
banking, insurance and pension sectors. The Government is reportedly targeting
some $1.4 trillion of new infrastructure projects to be completed by 2025.

Apart from the above, government’s ongoing efforts to promote economic

development in India are the main factor influencing the expansion of the
petrochemical industry. The Department of Chemicals and Petrochemicals (DCPC)
of the Government of India (GoI) has implemented several initiatives to improve the
industry’s overall competitiveness, quality, and output. Initiatives such as Make in
India, Aatmanirbhar Bharat Abhiyan, and the Production-Linked Incentive (PLI)
Scheme are implemented to attract domestic manufacturing and facilitate exports.

Implementation of the above measures would go a long way in making India an

attractive destination for investment and making it a global hub for manufacturing.
Some of the notable measures for promoting the growth of the petrochemical
industry are the mandatory standards set by the Bureau of Indian Standards (BIS),
public procurement policies for chemicals and petrochemicals, schemes for setting
up plastic parks, and adequate support for research and innovation by setting up
centers of excellence. All these policy incentives, low cost of manufacturing capital
goods and manpower, and overall demand scenario are boosting business
confidence to plan larger petrochemical complexes in India, which is evident from
recent project announcements by major public sector units, private sector refiners,
and niche specialty chemical players.

The Indian government has had announced many initiatives like Digital India,
Swachh Bharat, Start-up India and Skill development program etc. which have
started and will eventually expected to have a widespread multiplier effect.

Success of ‘Make in India’ programme will be a game changer and a big boost to
manufacturing in the country. Increased focus on agriculture and irrigation will
boost the demand for plastics along with GOI’s thrust on infrastructure followed by
a normal monsoon forecast in 2023 by IMD.

The continuing demand for housing, accounting for 60-65 per cent of cement
demand, and aggressive government investments in infrastructure will drive
demand, nudging cement-makers to add 145-155 MT in fresh capacity at an
investment of Rs 1.2 lakh crore by FY27, according to a CRISIL report. With 570
mt of installed capacity, India is the world's second-largest cement producer after
China. Between FY12 and FY23, the installed capacity grew by a whopping 61 per
cent to 570 MT from 353 MT in FY12 -- a net addition of 217 MT from 2013 to
2022 -- and FY22 saw the highest capacity addition of 34 MT.

Cement makers have been adding substantial capacity in the past too. In the five
fiscals through 2017, around 108 MT were added, while in the next five fiscals
through 2022, 109 MT were added despite pandemic-induced disruptions.

Most of the new capacity will come up in the eastern and central regions, which
add almost 57 per cent of the new capacity, due to the rural housing and
infrastructure boom in the areas. South and the North are expected to add 19 per
cent each, while the west will add only 5 per cent of incremental capacities over
the period. The demand for housing and cement will indirectly boost the demand
for petrochemicals in the country. Cement companies are expected to go on an
expansion spree and add 145-155 MT capacity between FY 2023 and 2027. That
translates to a 4-5 per cent compound annual growth rate on a high base. A robust
6-7 per cent CAGR expected in demand over these five fiscals will encourage the
growth in supply, as per Crisil. Cement production is an indicator for good growth
of raffia bags – positive for petrochemical sector.
The Union Budget 2023-24 presented was based on "seven priorities" - inclusive
development, reaching the last mile, infrastructure and investment, unleashing the
potential, green growth, youth power and financial sector.

If we consider the budgetary allocations of the ministries of civil aviation,

communications, housing and urban affairs, new and renewable energy, power,
ports, shipping and waterways, railways, and road transport and highways, which
represent transport and communications, green and urban infrastructure, it turns
out that 16.6 percent of the total expenditure and 2.5 percent of GDP in budget
2023 is dedicated to infrastructure. This represents an increase from the previous
year’s budget, which allocated 14.1 percent of total expenditure and 2.15 percent
of GDP to infrastructure.

The government is promoting domestic manufacturing projects via policy initiatives

such as the Production Linked Incentive Scheme aimed at boosting domestic
manufacturing and exports by providing incentives on incremental sales from
products made at domestic plants. The scheme has the potential of adding at least
another $55bn of production over the next five years across all manufacturing
sectors. This will lead to a quantum jump in the demand for petrochemicals such
as polymers, resins, fibres, bulk chemicals, paints, pigments, food additives, etc.

The Union Budget 2023-24 focuses on green and infrastructure development which
would be of great help to the Indian Chemical sector in FY 2023-24 and forward.

A few of the many such initiatives that are likely to result in new opportunity for
industries and positively push the demand for petrochemicals are:
- Union Budget 2023-24 allocated a total of Rs 19,518 crore to all metro
projects across India
- Around 810 km of metro lines are operational in 20 cities across the nation.
- More than 980 km of metro network currently under construction in 27 cities
- A budget arrangement of Rs 585 crore is proposed for the Kanpur Metro
Rail Project in the financial year 2023-2024.
- In addition to the Gurugram Metro, three other metro links proposed in 2024.
- Delhi Metro’s Phase 4 (Phase IV), has been planned to provide last-mile
connectivity
- Budget, announced to further improve the coaches of trains like Rajdhani,
Shatabdi, Duronto.
- Production of Vande Bharat Express will be revamped after 2.41 lakh crore
was allocated in Budget 2023.
- Railways have been allocated Rs 2.41 lakh crore in the Union Budget 2023-
24, the highest ever capital outlay for the sector.
- It is proposed to manufacture 4,500 newly designed automobile carrier
coaches with side entry, 5,000 LHB coaches and 58,000 wagons.
- The Railways is also planning to refurbish more than 1,000 coaches of these
premier trains. The interiors of these coaches will be modernized, and
passenger comfort will be improved. The above on-going metro projects and
refurnishing of coaches will boost the consumption of petrochemicals like
composites, polymers like ABS and also polyesters.
- To promote green energy, Railways will now set up Ultra Mega Solar Plant.
Moving towards zero carbon emission to reduce pollution, Railways is
constantly emphasizing on rail electrification.
- The construction of the country's first hydrogen train, developed entirely in
India, will be completed by December 2023. The hydrogen train will be
operationalized in the first phase on heritage lines such as the Kalka-Shimla
railway section.
- Road construction - The pace of construction of national highways in India
has improved with 8,064 km finished in the current financial year as on
February 28, 2023. This makes it 24.14 km per day on an average, with a
marginal improvement from the numbers from 2021-22 for the same period.
- Construction and expansion, including strengthening, of national highways,
touched 77,400km between April 2014 and October 2022
- Since inception till date (15.03.2023), a total of 8,06,681 km road length
(1,85,667 roads & 10,549 bridges) has been sanctioned under various
verticals of the Pradhan Mantri Gram Sadak Yojna (PMGSY), out of which
7,29,221 km road length has already been completed (1,74,423 roads &
7,912 bridges)
- 99,319 km of road length have been sanctioned so far under PMGSY –III,
out of which 64,331 km of road length has been sanctioned using new/ green
technology. Out of which 64,331 km road length, 18,983 km road length has
been completed. New / Green technology economizes construction cost of
road as well as facilitates effective disposal of different industrial and
municipal waste along with conserving use of virgin mining materials.
- Govt to invest Rs 1.25 lakh crore to develop world-class infrastructure at
ports
- Govt will iInvest Rs 1,00,000 to Rs 1,25,000 crore for capacity augmentation
and development of world-class infrastructure at ports.
- India has plans to invest US$ 82 billion in port projects by 2035. Jawaharlal
Nehru Port Trust (JNPT) Special Economic Zone (SEZ) became the first of
its kind operational port-based multi-product SEZ in India.
- APSEZ (Adani Ports and Special Economic Zone) plans to become the
world's largest private port company by 2030 and carbon neutral by 2025.
- With a projected budget of USD 130 billion, the Bharatmala Project proposes
to build or upgrade nearly 34,800 kms of national highways and border roads
to provide road connectivity throughout the nation.
- As part of the project, national highways, bridges, flyovers, bypasses, ring
roads, elevated corridors, tunnels, and overpasses will be built to improve
India's overall connectivity, particularly in the Northeastern regions.
 - With an investment of USD 600 million and technical support from the World
Bank, the development of inland waterways as a component of strategic
infrastructure seeks to build 111 National Waterways in India. By March
2023, the project is anticipated to be finished.
- Few Other Infrastructure Projects by the Indian Government
o Delhi- Mumbai Highway
o Ganga Expressway
o Bengaluru Metro
o Gati Shakti, the National Single Window System, the National
Monetization Plan, and the National Infrastructure Pipeline (NSWS).
o Spending on water supply, transportation, and urban infrastructure is
expected to drive the overall infrastructure investment to expand at a
CAGR of 11.4% between FY21 and FY26.

Seven PM MITRA mega textile parks announced by government will boost the
textiles sector in line with 5F (Farm to Fibre to Factory to Fashion to Foreign) vision.
Each park will come up in at least 1,000-acre land with ready nearby availability of
raw material, fully equipped infrastructure including port, road and rail connectivity,
water and power availability etc. The mega textile parks are expected to emerge
as manufacturing hubs, create employment, create global champions, and enable
access to state of the art textile technology.

Measures taken in the Budget by the government to incentivize domestic value

addition, promote Make in India and create a level-playing field for the domestic
industry are very positive steps towards making India a global manufacturing hub.

Safe drinking water to all Indians, micro-irrigation techniques for efficient use of
water in agriculture, road connectivity, rail network, electric vehicles, renewable
energy, affordable housing etc. - most of the sectors found mention in the recent
budget speech which augers well for the plastic sector and the demand for
petrochemicals in India. The opportunities are huge, and the petrochemical
industry stands to benefit in a big way. These proposals and the focus to support
the start-ups will also go a long way in encouraging domestic manufacturing and
demand.

Several Indian state-owned energy companies are making major investments to

boost their petrochemical activities and are expected to become significant players
in the sector. Despite the factor cost disadvantages, the domestic manufacturers
have committed thousands of crores of rupees to create new capacities in
petrochemical products. Some of these projects are at a preliminary stage; final
decisions are yet to be taken.
The Indian petrochemical industry could see around $144 bn (more than~10 lakh
crore) worth of new projects as the country moves to bridge the gap between the
shortage of domestic supply and increasing consumer demand.

Going forward the planned investments on drawing board would need some
government support and benefits so that they fructify and able to generate and
create more job opportunities in the country.

The overall outlook for the petrochemical industry in India is more positive than it
was in 2023 as several state-owned energy corporations have made investments
to boost petrochemical feedstock availability and extend their presence in the
downstream derivatives market.

The focus of the industry is to plan capacity addition and meet the domestic as well
as export demand. The industry needs to be nurtured with the right policies and
fiscal support from the government.

xiii. Petrochemical Industry Review of 2022-23 & Outlook for 2023-24

A. Global Petrochemical Industry Review

For the petrochemical industry, the past three years have been marked by
disruption and volatility. In 2020, the outbreak of COVID-19 led to increased
demand for household goods and consumer products, and petrochemicals proved
remarkably resilient. In 2021, rising commodity prices and supply chain disruption
resulted in record performance as well as a growing number of sustainability
partnerships and commitments, particularly in recycling.

And in the 2022 year, petrochemicals value creation was affected by the war in
Ukraine, global inflation, and the risk of recession—all while the world continued to
recover from the worst of the pandemic.

In 2022, four themes rose to prominence: eased supply chain constraints, regional
disparities, natural gas–linked chemicals volatility, and sustainability acceleration.

The global economy appears to be getting better because of signs that inflation
may have peaked in the West as some of the supply-chain pressures caused by
the pandemic continue to ease. Energy costs are also substantially down following
their peak immediately after the Russian invasion of Ukraine.

Among petrochemicals, polymers and olefins continue their struggle with high
supply and weak demand. These factors also adversely affect downstream
aromatic industries like paraxylene and benzene. Hence, 2023 promises to be an
eventful year for the petrochemical industry.
In the second half of 2022, however, profits began to return to pre-COVID-19 levels.
A major reason for this return to “normal” is that supply chain constraints began
easing at the beginning of the third quarter of 2022 as fleet capacity increased
and global demand for consumer goods waned. As a result, congestion across the
logistics value chain also began to ease, leading to price differentials for some
petrochemicals, such as polyethylene (PE) and polypropylene (PP), returning to
previously observed market behavior.

Slow economic growth in Asia continued to affect profitability. Zero-tolerance

measures for COVID-19 in China were one factor, which contributed to the
contraction of manufacturing activities in China and lower-than-expected
petrochemical demand. And decreased demand growth put downward pressure on
crucial petrochemical product prices. On the supply side, several large-scale
chemical projects, generally integrated crackers and derivatives units—most
years in the making—came online in 2022. As a result, some Asian players cut
operating rates.

Several polyolefin players are investing in feedstock recycling, via pyrolysis, at

increasing scale. In addition, the first announcements in advanced recycling on a
global scale were made around polyethylene terephthalate (PET) monomer
recycling, as well as growing investment in PET fiber (monomer) recycling.

The war, which began in February 2022, triggered new trade flows for some
petrochemical products, notably polymers, as European buyers started rejecting
Russian products, leading to increased supplies from Russia to China via land
transport.

Asia’s polymer market came under pressure due to these additional supplies,
triggering further cuts in steam cracker operating rates. In the first-half of 2022,
naphtha-fed steam crackers in Asia slashed operating rates to as low as 70% of
capacity as high feedstock naphtha costs had hit already-weak olefins margins.
Some market sources said steam cracker operating rates would likely recover
slightly in the second half of the year, as run rates were low in the first half and they
don’t expect the rates to fall further.

Trade momentum softened in the Asian benzene complex in late 2021. Global
benzene supplies hinged on downstream demand moving into the first half of 2022,
with the importance of styrene monomer sharply in focus with new capacities
coming online in Asia and following volatile disruption to production in both
European and US markets during 2021. In Asia, the view on benzene prices in the
second half of the year was mixed; following the unexpected toll on China's demand
which was dampened by COVID-19 outbreaks and lockdowns in major cities. This
trend of falling imports by China continued till end of 2022.
However, the steep reduction in run rates of around 20%-25% among Asian
producers allowed producers to maintain profitability despite high oil prices. As for
producers in Southeast Asian countries, flows continued to feed the Middle East
and Europe, which were safe havens for a handful of producers in 2022. Benzene-
based standalone plants faced negative margins for most of 2022, brought on by
high benzene costs and weak SM import demand from key regions: China, the US,
and Europe.

In 2022, on the demand side, the Asian polystyrene market faced the same outlook
as feedstock styrene, with concerns over continuous COVID-19 lockdowns in
China, affecting appetite for end products. This pushed consumer demand to
Southeast Asia. The acrylonitrile-butadiene-styrene outlook for the second quarter
remained mixed, with continuing consumer uncertainty due to COVID-19
lockdowns, and relatively cheaper domestic prices in China.

Asian toluene was expected to be rosier in the first half of 2022, when compared
with 2021, as demand is set to pick up with more economies returning to business
as usual and operations ramping up following the lifting of COVID-19 restrictions.
Toluene, alongside benzene, was well supported in the second half of 2021 and
producers looked to increase refinery production going into the new year. Asian
toluene prices continued to be supported amid tight inventories across Northeast
and Southeast Asia, as producers continue to run aromatics plants at lower rates.
The PX-toluene spread averaged around $180-$185/mt in H1 2022, while the
benzene-toluene spread averaged around $160-$170/mt, as per data by S&P
Global showed. According to some producers, spreads above $100-$120/mt signal
profitability.

The Asian purified terephthalic acid, or PTA, market faced an uncertain future, as
capacity expansions in China, a gradual recovery of demand in Asia and volatile
upstream prices in the wake of the ongoing war shroud the outlook for the second
half of the year. The ongoing Russia-Ukraine conflict will keep upstream prices
volatile, but trade participants hope that adjustments to run rates, coupled with
easing pandemic-related lockdowns in China will help offset the volatility to some
extent.

Asian paraxylene headed into 2022 under great pressure from increasing supply
driven by China’s intensive PX capacity expansion. Like the rest of the globe, Asian
PX was well supported in second quarter of 2022 by firm energy prices and short
supply due to run cuts and planned maintenance, with the PX-naphtha spread
widening to more than two-year highs. Despite improving margins in April-May,
healthier reforming profits encouraged Asian producers to maintain low run rates
for aromatics extraction units.
Global polyethylene market expectations were mixed for the second half of 2022
as new capacities ramp up, logistical issues continue to hamper trade and energy
costs remain firm. A continued war in Europe has global implications as Asia and
the Americas attempt to fill market share while Europe faces its own individual
regional issues. In Asia, market expectations varied amid rising costs and
oversupply due to expected supply coming online at the end of the year.

COVID-19 related shutdowns in Asia, the start of the hurricane season in the
Americas and an ongoing war in Europe challenged traditional supply-demand
market fundamentals for polypropylene in the second half of 2022.

Performance in the Asian styrene monomer (SM) market in 2022 had been
lacklustre as tepid derivative demand, lengthening supply and weak global
economics had pushed prices to below breakeven margins for producers.

For PVC, lingering COVID-19

shutdowns siphoned off Chinese
demand, prompting aggressive
exports that forced other Asian
producers to slash pricing to remain
competitive. Freight rates remained
high, but further PVC price cuts
restored Asian price influence on other
regions as the year progressed.

Chinese Customs data showed China's PVC exports in Q1 2022 reached 474,464
mt, while imports were 70,718 mt. Soft demand because of lockdowns, including
Shanghai, home to the world's largest container port, prompted robust outflows.
About 20% of those outflows went to India, which lifted antidumping duties on
Chinese- and US-origin PVC in February. Asian PVC prices dropped sharply
through 2022, and December offers came at the lowest since June 2020. Market
sources said those levels appeared to spur spot buying, raising expectations that
the slide could have reached its bottom.

Ethylene markets globally treaded with caution in H2 2022, as fears of an uptick in

inflation rates and economic slowdown could soften derivative demand. Market
sources expected Asian demand for US ethylene to rise in the second half of the
year, as regional producers also struggle with naphtha costs that rose alongside oil
in the fallout of Russia’s invasion of Ukraine. In Asia, ethylene demand looked set
to remain under pressure from weak derivative margins, with key downstream
products such as polyethylene, styrene monomer, and ethylene glycol continuing
to post losses. With upstream crude oil and naphtha prices volatile because of the
Russia-Ukraine war, several naphtha-fed steam cracker operators in Asia are
considered to run cuts from June, which tightened spot availability.
In Southeast Asia, increasing inflows of US-origin ethylene could hampered spot
demand, but H2 2022 turnarounds kept supply in check.

Propylene market conditions in the second half of 2022 is set to be challenging in

Asia amid weak downstream demand in the key market of China, while Europe
continued to focus on contract volumes amid uncertainty fanned by the Russia-
Ukraine War.

Asian propylene market expected to continue facing challenging conditions in H2,

with demand hinging on the progress of China’s COVID-19 restrictions. Price
volatility in upstream markets amid the Russian-Ukraine conflict continued to weigh
on margins. The sentiment on the demand side is seen to be bearish.

Global demand for polyethylene terephthalate was seen stable to strong in the
second half of 2022, though economic concerns amid inflation, Russia’s invasion
of Ukraine and the specter of continued COVID-19 surges could temper optimism.
In Asia, PET demand was seen stable through H2 amid consistent export inquiries
from the US, Europe and Southeast Asia. PET producers are expected to maintain
high operating rates amid strong demand as well as healthy margins despite
volatile upstream paraxylene and purified terephthalic acid prices.

Overall, petrochemicals remained the fastest-growing segment in the hydrocarbon

value chain and will continue to offer high growth and relatively high margins for
integrated-energy companies

B. Outlook for 2023-24

The Petrochemicals market is expected to register fluctuating growth trends in the
long term, while inflation and supply chain concerns are expected to continue in
2023. In 2023, petrochemical industry players might incur losses due to huge gap
in currency translation followed by contracting revenues, shrinking profit margins &
cost pressure on logistics and supply chain.

Controlling Inflation has become the first priority for global economies from last
quarter of 2022 and to be followed in 2023. With skewed economic situations, rise
in interest rate by governments to control spending and inflation, spiked oil and gas
prices, high inflation, geo-political issues including U.S. & China trade war, Russia-
Ukraine conflict to intensify the global economic issues.

Shifting consumer preferences in a projected economic downturn scenario,

amendments to industrial policies to align with growing environmental concerns,
huge fluctuations in raw material costs triggered by prevailing geo-political
tensions, and expected economic turbulences are noted as key challenges to be
addressed by the Petrochemicals industry players during the short and medium
term forecast.
The Petrochemicals market is expected to register fluctuating growth trends in the
long term, while inflation and supply chain concerns are expected to continue in
2023. As demand is slowing, especially in the US and Europe, the current global
supply-demand balance is likely to remain unchanged for the most part. But, given
likely higher demand from China (the country which has the strongest influence
upon demand), it is forecasted that the supply-demand balance in Northeast Asia
will come to show signs of a gradual recovery.

However, considering predictions that oil prices will stay high in 2023, demand is
vulnerable to fluctuating according to Chinese policy changes, and supply issue
burdens remain a factor. Given this backdrop, the extent of improvement in the
industry will likely be limited next year.

Petrochemicals market players' investments will be oriented towards acquiring new

technologies, securing raw materials, efficient procurement/inventory,
strengthening product portfolios, and leveraging capabilities to maintain growth
during challenging times. The economic and social challenges are noted to be
highly varying between different countries/markets and Petrochemicals
manufacturers and associated players are focused on country-specific strategies.
Crude oil prices fluctuating to the tune of $76/barrel in one year are emerging to be
a key concern for the Petrochemicals market, as fuel and chemical prices are
impacting many other segments.

Several trends are expected to affect demand for petrochemicals. Continued

growth of the critical end markets that consume petrochemicals—such as
packaging and construction—and economic development in China, India, and
Southeast Asia will have a positive effect on demand. Plastics recycling is also an
important driver for the industry because the material flow from advanced recycling
involves cracker and polymerization units.

China and Europe each account for around a quarter of the global capacity for
naphtha-based, high-value chemicals, but they have only very small shares of
capacity based on lighter feedstocks as a result of limited availability. China’s
burgeoning coal-based chemical industry, once a speculative proposition, now
embodies steady technological improvements. India is poised to grow strongly from
its current level of only 4% of global capacity to satisfy increasing domestic
demand.

About 42 MTA of ethylene capacity is expected to be added from 2022 to 2026

(including potential new projects), with China contributing about 19 MTA of
confirmed capacity (or 58 percent of the global total), followed by North America at
about five MTA (or 15 percent of the global total).
As per ICIS, PP projects will be delayed further to 2024, impacted by the pandemic
and poor margins, there will be a strong rise in new capacity in Asia in 2023. A total
of some 5.6m tonnes of effective new capacity are expected in China in 2023. Other
new projects in Asia will come from India, Vietnam and Malaysia. With new
paraxylene capacities in China in early 2023, Asian markets may face an
oversupply and sluggish market in PX-PTA. With increase in domestic consumption
and export, refinery margins in Asia are expected to be high.

Further, with supplies from China, the Asian toluene and mixed xylenes prices are
likely to stay afloat in H1 2023. Asia’s PVC market could rebound in early 2023, but
as per analysts, a comeback would likely be limited without a full demand recovery
in China. With market volatility remaining, there is no doubt about the urgency to
balance short-term solutions with long-term strategy to build resilience and ensure
future viability of business models. And while transformation is certainly not a new
theme in the industry, emerging trends are forcing business leaders to create
lasting change if the industry is to weather the storm in 2023 and beyond.

While the key themes of the transformation in the petrochemical industry remain,
the developments of the past year have put additional emphasis on risk mitigation
measures and significantly accelerated the need for action around new energy and
feedstock supply efforts. To succeed in 2023 and beyond chemical companies
must build resilience, accelerate investments in new and greener technologies, and
develop M&A and margin management as core capabilities.

Petrochemical companies are likely to focus on repositioning their asset portfolios

and balancing trade-offs between different strategic options with critical
considerations such as scale, the scope of products, and growth opportunities. To
deliver stronger growth and improve financial performance, firms should consider
honing their product and services portfolios further, evaluating several areas:
xiv. Feedstock

A. Naphtha
Naphtha is a major raw material for production of Ethylene, Propylene and
Aromatics. The current demand in country is lower than the production from
refineries and as a result, India has been an exporter of nearly 6-8 MMTPA.
However, In the year 2022-23, Naphtha exports were comparatively lower
compared to last year around 5676 KT as well as production and imports.

Naphtha consumption witnessed a flat growth in 2021-22 and a negative growth in

2022-23. Next fiscal the demand is expected to see an improvement due to
increase in demand from downstream products like Ethylene, Propylene demand.
Table 2: Naphtha Demand Supply

Naphtha (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Production 19381 19922 17016 -- --
Imports 1199 1246 893 -- --
Exports 6509 6861 5676 -- --
Apparent Demand 14100 14255 12047 -- --
Demand Growth% -1.2% 1.1% -15.5% -- --

Following in the footsteps of Reliance Industries Ltd (RIL), GAIL India Ltd (GAIL),
plans to import ethane from the United States to replace natural gas and naphtha
as feedstock for its petrochemical facilities. Moving in this direction, GAIL and the
Central Board of Direct Taxes (CBDT) entered into a landmark advance pricing
agreement (ArA) for determining the transfer pricing margin payable on its long-
term LNG sourcing contract from the USA for five years.
B. Natural Gas
Natural gas, 50-60% less polluting than coal, will work as the transition fuel that
can get India to its ambitious goal of net-zero emissions by 2070, when the nation
aspires to be fully powered by renewable energy. Natural gas consumption rose in
January 2023 for the first time since May and liquefied natural gas (LNG) imports
witnessed the first expansion in at least 15 months in early signs of domestic
demand revival helped by a drop in international prices.

India consumed 5.18 billion cubic meters (BCM) of natural gas in January, up 6.4%
from a year earlier, according to the oil ministry data. Imports of LNG rose 7.9% to
2.27 BCM. A 4% year-on-year rise in the local production of natural gas in January
also helped boost consumption.

Most of the LNG India imports are under the long-term supply pact and linked to
crude prices, which have fallen from the highs of $130 per barrel in March last year
to around $81 now. Oil prices have remained below $90 per barrel for the past
three months, keeping LNG imported under the long-term contract below $12-13
per mmbtu.

Even the Asian benchmark rates of LNG in the spot market, which has been
extremely volatile for one-and-a-half years, have fallen to around $15 per mmbtu
from $54 in August. India’s LNG imports had dropped 19% year-on-year in August.

Prices of locally produced natural gas have, however, risen sharply in a year but
have mostly remained lower than international rates.

As natural gas became expensive during the year, several commercial consumers
switched to alternative fuels such as liquefied petroleum gas (LPG) and fuel oil,
pushing up demand for both fuels.

The demand for natural gas is now beginning to return, an industry executive said,
warning that prices must stay stable for the recovery to become durable.

LNG imports for the April-January period are 14% lower than a year earlier.
Domestic natural gas consumption is 6.1% lower for the same period.

By February 2026, India will invest ₹3 lakh crore, or $40 billion, to expand gas
infrastructure — pipelines, port-based LNG (liquefied natural gas) regasification
terminals, city gas distribution (CGD) networks and gas exploration projects.

The investment will more than double the gas pipeline network from 16,000 km in
FY19 to 34,600 km by 2024.
The number of LNG import terminals will increase from five in 2016 to 10 by 2024
with capacity expanding from 35 million tonnes per annum (mtpa) to 62 mtpa.

Piped natural gas (PNG) connections will increase from 3.2 million in November
2016 to 60 million in 2030 (as of March-end 2022, India had 9.3 million).

As gas grid widens, 297 geographical areas (GAs) covering 98% of the country's
population and 88% area will get access to PNG.

The number of compressed natural gas (CNG) terminals will rise from 1,094 in
November 2016 to 10,000 by 2030, the year when government expects natural gas
to account for 15% of India's energy mix, up from 6% in FY15, when the foundation
of this transition was laid. Yet, it's just the beginning. The global average is 24.7%.

As of FY22, fertiliser companies accounted for 30% of the 178 mmscmd gas
consumption, followed by CGD (20%), power producers (15%), refinery and
petrochemical companies (14%) and others (21%). By FY30, refinery and
petrochemical units will account for 33%, followed by CGD (30%), fertiliser units
(17%), power companies (8%) and others (12%).

Natural gas — and later blue and green hydrogen — will be a crucial source of near
zero-carbon energy (green hydrogen is made from water electrolysis, while blue
hydrogen is extracted from carbon captured during industrial processes). That calls
for creation of infrastructure to meet this demand.
The expansion of gas network over last few years has been epic. Globally, around
20% trunk gas pipeline additions announced for completion up to 2026 are in India,
according to GlobalData, a data and analytics company.
That is about 18,600 kms (16,000 kms in FY19 to 34,600 kms by 2024), more than
the planned additions in China (17,810 km) and U.S. (12,305 km). GAIL India,
which accounted for 14,385 km gas pipelines as of March 2022, is building another
5,000 kms. IHB's Kandla-Gorakhpur pipeline would be linked with 22 LPG bottling
plants — Uttar Pradesh (13), Madhya Pradesh (six) and Gujarat (three). It will
transport 8.25 million metric tonne per annum (mmtpa) LPG, 25% of India's total
demand, to 34 crore users in these states. It will also supply LPG to 21 more bottling
plants in Maharashtra, Gujarat, Madhya Pradesh, Rajasthan and Uttar Pradesh.

OMCs are not far behind. IOC is building the national gas pipeline grid. At present,
1,800 km standalone projects are under implementation, in addition to JV pipelines
such as North-East Gas Grid and three other cross-country pipelines. Last year,
BPCL commissioned the 355-km Bina-Kanpur multi-product pipeline. HPCL
completed its cross-country pipeline projects like Vijayawada to Dharmapuri, which
includes a new terminal at Dharmapuri, and Hassan-Cherlapally LPG pipeline and
Barmer Palanpur Pipeline Project. Its ongoing projects include Bathinda Sangrur
Pipeline (BSPL Project and Haldia Panagarh LPG Pipeline Project (HPPL).

Work is on to build regional pipelines, too. Those under construction include

Kakinada-Vizag-Srikakulam, Ennore-Nellore, Kakinada-Vijayawada-Nellore and
Srikakulam-Angul in Andhra Pradesh, North-East Natural Gas Pipeline Grid, Kanai
Chhata-Shrirampur line in West Bengal, Mumbai-Nagpur-Jharsuguda line through
Maharashtra, Madhya Pradesh, Chhattisgarh and Odisha, and a line from
Jamnagar to Dwarka in Gujarat. The North-East Grid is being implemented by
Indradhanush Gas Grid, a venture of IOC, ONGC, GAIL, OIL and Assam-based
Numaligarh Refinery. It will be connected to Barauni-Guwahati natural gas trunk
line as part of the Urja Ganga scheme.

ONGC U-field onshore facilities of KG-DWN-98/2 Deep Water Block, situated in

Odalarevu of BR Ambedkar Konaseema district, dedicated to the nation by Prime
Minister Narendra Modi in November 2022. The project was developed at a cost of
INR 2,917 crore, and employment generation of ~3.4 million man-hours. It is part
of ONGC’s flagship deep water KG-DWN-98/2 Cluster-II development project in
the prolific Krishna Godavari Basin. The U-field is the deepest gas discovery of the
project, with gas production potential of about 3 million standard cubic metres of
gas per day.

Gas terminals are one of most important pieces of the puzzle as India meets over
half its gas demand through imports. The six LNG regasification terminals — Kochi,
Dabhol, Dahej, Hazira, Mundra and Ennore — have 40 mtpa capacity. These are
being expanded to 62 mtpa by 2024 with four new terminals, at Dhamra in Odisha,
Jaigarh in Maharashtra and Chhara and Jafrabad in Gujarat. Existing terminals are
also being expanded.
Petronet, for example, has two terminals, at Dahej (17.5 mmtpa) and Kochi (5
mmtpa). It is adding 5 mmtpa capacity at Dahej. It will be completed by the
beginning of 2025.
The company is also likely to build a floating terminal at Gopalpur in Odisha.
IndianOil LNG has developed a 5 mmtpa terminal at Kamarajar port in Ennore.

IOC has also entered into offtake agreements with developers of upcoming
terminals at Dhamra (3 mmtpa) and Jafrabad (1 mmtpa). It may also double
Ennore's capacity to 10 mmtpa when demand grows. The other big piece of the
coming gas infrastructure is piped gas to homes to reduce dependence on costlier
LPG bottling/distribution and lower use of more polluting ways of cooking food.

In end-March 2022, India had 93.02 lakh PNG connections and 4,433 CNG
stations. There were 297 GAs authorised by PNGRB in 27 states and UTs. Two
dozen companies have won bids for CGD infrastructure, including Gujarat Gas,
Indraprastha Gas, Mahanagar Gas, Adani Total Gas, Torrent, besides OMCs and
GAIL Gas that are focussed on specific regions.

India's projected demand of about 551 mmscmd natural gas (equivalent to 550.74
mmscmd) by 2040 is not a big ask in a world where already over 380 million tonnes
(equal to nearly 7,000 mmscmd natural gas) is traded every year. After the Ukraine-
Russia war, prices are widely expected to stabilize as Europe is set to import
additional 137 mmscmd LNG in 2022. IEA's world energy outlook 2022 says U.S.
gas demand will fall by 110 mmscmd by 2030.

Stronger climate policies will accelerate Europe's shift from gas. Due to current
high prices, India's gas demand for residential PNG may grow a modest 2-5% in
the shorter term, while CNG demand is expected to rise 25-30% on the back of
expanding network of CNG stations and number of vehicles as per CRISIL.

India's gas consumption was low for last 10 years. Reliance Industries discovery at
KG D-6 contributes 20% of domestic production (91 mmscmd) by supplying 19
mmscmd. Out of total natural gas produced in India, 67.3% is extracted offshore in
West and East, and the rest in Assam (10%), Rajasthan (5%), Tripura (5%), Gujarat
(4%), Tamil Nadu (4%), Andhra Pradesh (3%), Jharkhand, Madhya Pradesh, and
West Bengal (2%) and Arunachal Pradesh (0.1%).

Net domestic production, 127 mmscmd in FY12, fell to 76 mmscmd in FY20, but
rose to 91 mmscmd in FY22. As far as consumption goes, it went from 176
mmscmd in FY12 to 141 mmscmd by FY15. It rose slightly to 175 mmscmd by
FY20 before Covid-19 reduced demand to 166 mmscmd in FY21. In FY22, it rose
6.9% to 178 mmscmd, the highest in the last decade.
Government, too, is focusing on finding new reserves and tapping existing fields.
India is estimated to have natural gas reserves of 1.37 trillion cubic metres (TCM)
but has been unable to tap much of this potential. ONGC plans to increase gas
production from 57.3 mmscmd in FY22 to 57.5 mmscmd in FY23 and 66.6
mmscmd next year.

ONGC is going to develop the Daman Upside gas field project by investing ₹4,144
crore. ONGC is planning to invest ₹31,000 crore in exploration over the next three
years and has roped in ExxonMobil as E&P partner. The company has cumulatively
invested ₹1.5 lakh crore in E&P over past five years.

To date, 20 major projects with cost of ₹59,000 crore are under implementation.
Reliance Industries is also increasing gas production. With commissioning of MJ
Field by end-2022, KG-D6 will increase its contribution to India's gas production to
nearly 30%.

RIL and BP are developing three deep-water gas developments in KG D6 — R

Cluster, Satellite Cluster and MJ — expected to produce 30 mmscmd gas by 2023.
Vedanta's Cairn Oil & Gas is aiming to expand gas production from 1,700 mmscmd
to 4,700 mmscmd by 2026.

Oil India Ltd (OIL), which produced 8.2 mmscmd of natural gas in FY22, the highest
since its inception 63 years ago, is pursuing E&P. It drilled seven exploratory and
31 development wells last year alone and is planning oil and gas exploration in
Assam and other areas — Assam Shelf & Assam Arakan Fold belt, Rajasthan
basin, Mahanadi onshore, Andaman onshore and Kerala-Konkan onshore.

Assets Abroad - India has 54 overseas oil and gas exploratory assets in 24
countries. ONGC Videsh has stake in 33 oil and gas projects in 15 countries and
gets oil and gas from 14 assets — production was about 12.330 million tonnes oil
equivalent (MTOE) in FY22, 1.4% of the projected Indian energy demand of 853
MTOE by 2030.

G2G Import Agreements - expected to account for 40-45% of India's gas imports
by 2030. India's gas imports have risen from 49 mmscmd of LNG in FY12 to 88
mmscmd in FY22. Qatar accounts for 40% with the rest coming from the U.A.E.,
Oman, U.S., Russia, Nigeria, Angola, Nigeria and Australia. Iran has also
expressed willingness to sell more oil and gas. GAIL has 14 mmtpa of LNG
contracts — almost 4.8 mmtpa from Qatar, 5.8 mmtpa from U.S. and 2.5 mmtpa
from Gazprom (Russia). GAIL is raising ₹25,000 crore for expansion over the next
two-three years. In 2021, 372.29 mmtpa LNG was traded globally. India's share
was 24.02 mmtpa (6.5%). The biggest importers were China (21.3%), Japan (20%)
and South Korea (12.6%).
Petronet LNG Ltd is heading forward in establishing its presence on the east coast
of India by signing a term sheet with Gopalpur Ports Limited on December 14, 2022
for establishing and operating LNG terminal at Gopalpur port in Odisha.

The company’s board had accorded investment approval for setting up the floating
storage and regasification unit (FSRU) based LNG terminal at Gopalpur. Petronet’s
project in the Ganjam district in Odisha, which is expected to be operational before
the end of 2025, will be financed by a combination of debt and equity.

The next big hope is the India-Oman natural gas pipeline. South Asia Gas
Enterprise, promoted by New Delhi-based Siddho Mal Group, and UK-based
Deepwater Technology Company, plan to set up a Middle East to India Deepwater
Pipeline from Oman-U.A.E. coast to Gujarat.

The pipeline can lead to savings of $1 billion a year according to current LNG prices
So far, talks at G2G level have not progressed much, say industry sources. Other
than natural gas, efforts are also on to meet demand via other forms of gas such
as biomass.

Government aims to produce 15 MMT compressed biogas (CBG) from 5,000 plants
by FY24 under Sustainable Alternative Towards Affordable Transportation scheme
launched in 2018.

As the gas network comes into its own, India's dreams of transitioning to a gas-
based economy will gradually become a reality.

Northeast Gas Grid (NEGG) project of Rs. 9,265 crores are underway and will
improve economy in NER.

Recently, India has asked state-run firms to increase imports of natural gas in
anticipation of higher power demand next summer, three government sources said,
aiming to avoid repeating a power crisis in April that was its worst in more than six
years.

While the share of natural gas in India's power generation was just 1.5% this year,
down from 3.3% in 2019 due to limited local availability and high global prices, the
authorities see it as a crucial stop-gap power source for crunch times, especially
when intense summer heat drives up air conditioning use.
In December 2022, The Petroleum and Natural Gas Regulatory Board (PNGRB)
authorised a total of 33,603 km of natural gas pipelines in the country under the
National Gas Grid. Kakinada - Vijayawada - Nellore natural gas pipeline forms part
of the National Gas Grid.

IOCL is planning for Infrastructure development for utilization of Natural gas at

Paradip Refinery. It is a strategic initiative for use of NG as an alternate fuel/Feed
in HGU, TPS and Process unit Heaters. It is cost effective and better to control the
emissions. The project envisaged for development of infrastructure for utilizing
Natural gas as a fuel in GT, HRSG, Existing HGU (Under BOO) and new HGU
coming up in Fuel quality upgradation project, utility Boilers and as make-up fuel in
Process unit Heaters at Paradip Refinery.

IOCL is also planning for Development of Infrastructure facility for Utilizing Natural
Gas at Haldia Refinery. It is a Strategic initiative for use of Natural Gas as an
alternate fuel/ Feed for GT (Present fuel is Naphtha) and Process Heaters and
Burners (present fuel is FO). It is very cost effective, environmentally friendly fuel
and helps in better emissions control. Haldia Refinery currently utilizes Naphtha as
feed and fuel for Hydrogen generation in HGU and as fuel in Gas Turbines for
power generation. Internal Fuel Oil is consumed as fuel in Boilers and process unit
furnaces. Refinery Fuel gas is consumed in process unit heaters.

The estimated Natural Gas consumption is 1.25 MMSCMD for process unit
heaters, boiler-4 and Gas Turbines which is estimated to go up to 2.57 MMSCMD
in the future considering HGU1 and HGU2.
Bharat Petroleum Corporation Ltd (BPCL) will invest Rs 1.4 lakh crore in
petrochemicals, city gas and clean energy in the next five years as it looks to non-
fuel businesses for growth. To expand natural gas footprints, BPCL is aggressively
bidding and securing city gas retailing licenses. It, along with its joint ventures, now
has licenses to retail CNG to automobiles and piped natural gas to households and
industries in 50 geographical areas (GAs) covering 105 districts.

GAIL's total Capex for FY22 is Rs. 7,700 crores, mainly on pipelines,
petrochemical, CGD projects, operational CapEx, equity contribution, and E&P.
The different major projects that GAIL have in hand this financial year were
Dhamra-Angu, Dhobi- Durgapur, Bokaro-Angul, Durgapur-Haldia, Barauni-
Guwahati, Dhamra-Haldia, KKBMPL, Srikakulam-Angul, Mumbai-Nagpur-
Jharsuguda; and major PC, a Petrochemical project, that is PDH PP that is coming
near year in Usar.

The first compressed natural gas (CNG) Terminal in the world will be built near
Gujarat's Bhavnagar port for an estimated cost of Rs 4,000 crore by a consortium
of the Mumbai-based Padmanabhan Mafatlal Group and the UK's Foresight Group.
The massive CNG Terminal project has a cargo handling capacity of 1.5 million
metric tonnes per annum (MMTPA). India’s import dependency based on
consumption for natural gas has decreased from 48.2% in Financial Year 2021-22
to 46.3% in Financial Year 2022-23 (April to October).
Table 3: Natural Gas Demand Supply

Natural Gas
(MMSCM)
2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Production 28672 34024 33573 -- --
Imports 33031 31906 27021 -- --
Exports 0 0 0 -- --
Apparent Demand 60815 65037 60594 -- --
Demand Growth% -5.2% 6.9% -6.8% -- --

As India is planning a massive expansion of LNG import infrastructure to spur gas

demand, LNG prices have skyrocketed and increased attention on the global
warming potential of methane (the major component of ‘natural’ gas) which is likely
lead to a major risk of underutilization of this infrastructure with billions of dollars’
worth of investment. In a nutshell, to strengthen energy security, there is an
urgency for investment in alternatives to gas to insulate India from balance of
payments risks and from the fuel’s inflationary pressure — and, most importantly,
to meet low-carbon goals.
C. Coal Bed Methane
CBM, a natural gas which contains 90-95% methane, gets absorbed and stored in
coal seams. India has a coal reserve of 285 billion tonnes, the world’s fourth-largest
coal reserves. and thus, holds significant prospects for exploration and exploitation
of CBM.

The Government has set a vision to make India a gas-based economy, by

increasing the share of gas in the energy mix. The Government is making all-out
efforts to reduce gas import dependence and has set the gas production target of
50 BCM by 2023-24. In this context, to augment domestic gas production, MoPNG
recently launched the Special Coal Bed Methane Bid Round-2021 (SCBM-21) with
15 CBM block are in 6 states and have prognosticated resource of 700 BCM.

In Oct 2022, India offered 26 oil and gas blocks and 16 coal bed methane blocks
in its latest exploration licensing round, according to the country's upstream
regulator, as the world's third largest oil consumer seeks to boost local output.
India, also the world's third-biggest oil importer, ships in about 84% of its oil needs
from overseas and wants to quickly monetize its oil and gas reserves to cut its
import bill.

India’s production of coal bed methane (CBM) for the 12 operational blocks at
present is expected at 759 million Standard Cubic Meters (MMSCM) in FY23 and
will further inch up to 1,072 MSCM in FY24. at present, 12 CBM blocks are active,
5 of which are in the production phase, 3 in the development phase, and 4 blocks
(awarded during SCBM-21) are under the exploration phase.
The total prognosticated CBM resource of the active CBM blocks (12) is about 480
billion cubic meters (BCM) of which 5.4 BCM CBM has been produced up to
October 2022. Government of India has now launched Special CBM Bid Round-
2022 (SCBM-22) with the offering of 16 CBM blocks covering an area of around
5800 sq km across 7 States.

RIL is currently producing Coal Bed Methane (CBM) from Block SP (West)– CBM–
2001/1. More than 300 wells are in production, with an average output of 0.73
MMSCMD gas during the year. To sustain plateau production, CBM development
is being undertaken in Blocks SP (West)–CBM–2001/1 and SP (East)–CBM–
2001/1.

In 2021, Reliance had sold three-fourths of the gas from the same CBM block to
an affiliate of the company. India Gas Solutions Private Limited, a 50: 50 joint
ventures of Reliance and UK's BP, bought 0.62 mmscmd out of 0.82 mmscmd gas
bid out in that auction. State-owned gas utility GAIL India Ltd cornered 0.17
mmscmd while 0.03 mmscmd was picked by Reliance Gas Pipeline - the entity that
transports gas from the CBM blocks in Madhya Pradesh to consumers. In March
2022, Reliance sold 0.65 million standard cubic metres per day (mmscmd) of gas
from its coal-bed methane (CBM) block SP-(West)-CBM-2001/1 at a USD 8.28 per
million British thermal unit. Reliance gets USD 6.13 for gas from its KG basin fields.
In 2021-22 RIL production of CBM was 10.2 BCF.

Reliance Industries is confident of commissioning new gas condensate field by end

of year. As per RIL, bringing on stream MJ development will boost Block KG D6's
gas output to 30% of India's total. In the second quarter of its 2023 financial year,
the operator realised an average $9.86 per million British thermal units for gas
produced at Block KG D6 versus $3.62 per million Btu in the same period last year
after the India government increased the gas price ceiling.

Reliance also benefited from a significantly higher price for the 2.43 billion cubic
feet of coalbed methane it produced in the second quarter of its 2023 financial year,
achieving $23.34 per million Btu – almost three and a half times higher than it had
realised in same period for its 2022 financial year. Looking ahead, the ceiling gas
price applicable for the R-Series and satellite fields on Block KG D6 will increase
to around $12.46 per million Btu for the second half of this financial year. Reliance
Gas Pipeline Limited, a subsidiary of RIL, operates the 302 km Shahdol-Phulpur
Pipeline from Shahdol (MP) to Phulpur (UP), connecting the CBM gas fields with
the Indian gas grid, thus providing access to consumers across the country.
Reliance is seeking a minimum USD 12.75 per million British thermal unit for coal
bed methane (CBM) from a block in Shahdol district of Madhya Pradesh, while
ONGC wants USD 9.35 for the same kind of fuel from North Karanpura in
Jharkhand, according to tender documents.
Reliance has sought bids for sale of 0.65 million standard cubic meters per day
from CBM block SP(West)-CBM-2001/1 for one year beginning April 1, 2023. RIL
is engaged in R&D efforts to increase recovery from CBM fields. The current focus
of this research is Bio-CBM. In CBM, methane gas is produced that is adsorbed
and trapped naturally in coal seams. The Bio-CBM technology uses microbe
injection to produce in-situ methane in places where either the coals are devoid of
methane or conventional CBM extraction is uneconomical.

Lab tests have shown encouraging results on the potential of methane production.
Research is underway to verify if this technology can be scaled up to commercial
level. RIL is leveraging its infrastructure (advance laboratories), diverse inter-
disciplinary technical skills, CBM production expertise, CBM fields and knowledge
of regulatory requirements to boost the Bio-CBM research.

Indian coalbed methane (CBM) producer Essar Oil and Gas Exploration and
Production (EOGEPL) plans to drill 200 new wells at its Raniganj East field over
the next two years with an investment of around 15bn ($190mn) to 20 bn INR.

Essar Oil and Gas Exploration and Production Ltd (EOGEPL) in June 2022 crossed
the 0.8 million standard cubic meters per day (mmscmd) mark of coal bed methane
production and is inching towards the benchmark of 1.0 mmscmd post
commissioning of the Urja Ganga Pipeline. As per, EOGEPL said its next milestone
remains 1.0 mmscmd of CBM production. EOGEPL is engaged in Raniganj East
CBM Block in West Bengal. As of now, EOGEPL operates around 350 wells in the
block and since May 2021.

In FY 2021-22, a 5 TPD (tonne per day) pilot plant was successfully commissioned
by TATA at Jamshedpur to capture CO2 from blast furnace gas. They have also
successfully tried continuous injection of Coal Bed Methane (CBM) gas in one of
our blast furnaces. Great Eastern Energy Corporation Ltd, a pioneer in the field of
coal bed methane in India, plans to invest about USD 2 billion (Rs 15,000 crore) in
shale gas exploration at its Raniganj South block in West Bengal. GEECL signed
the first CBM contract in India for the Raniganj South block on May 31, 2001. They
were the first to commercialize CBM in July 2007.

Prior to this, the firm’s Coal bed methane block was under an agreement with Coal
India Ltd since 1993. At that time, CBM was practically not present in Asia and was
still at a nascent stage worldwide.

The Coal Ministry has released policy guidelines for utilization of more than 7,900
acres of mined out or de-coaled land for setting up thermal and renewable energy
(RE) power plants, coal bed methane (CBM) extraction units, washeries, and coal
to chemical plants, among other uses.
These holdings are mined out or practically unsuitable for mining and are prone to
unauthorized encroachment which leads to government spending on security and
maintenance, an avoidable expense.

On April 22, the Coal Ministry came out with policy guidelines for granting lease by
land owning PSUs and coal PSUs to government and private sector entities. The
Union Cabinet had already approved the proposal on April 13, 2022.

Coal Ministry has decided that the maximum lease period for coal-bed methane
(CBM) extraction will be 30 years.

In September 2022, the government has signed contracts for 31 discovered small
fields (DSF) under the third round of bidding as well as for four coal bed methane
(CBM) blocks under the fifth round of bidding with 14 domestic companies, which
have been awarded these blocks.

Among these blocks, the Oil and Natural Gas Corporation (ONGC) has signed six
contracts for DSF, with 3 each for fields in the Arabian Sea and Bay of Bengal.
These include four contract areas as sole bidder and two contract areas in
partnership with Indian Oil Corporation Ltd. The ONGC has also signed two
contracts for CBM fields situated in Jharkhand and Madhya Pradesh. Cairn Oil &
Gas has also signed pacts for eight fields. The third round for DSF was launched
by the government on June 10, 2021, where 75 fields were clubbed under 31
contract areas. The CBM bidding round was launched on September 22, 2021,
which concluded on May 31 with 15 blocks under offer.
Table 4: Coal Bed Methane Demand Supply

Coal Bed Methane

(MMSCM)
2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Production 642 683 674 -- --
Imports -- -- -- -- --
Exports -- -- -- -- --
Apparent Demand -- -- -- -- --
Demand Growth% -- -- -- -- --

In yet another development, Oil and gas explorer Invenire Energy announce in
December 2022 that it will invest USD 500 million (about Rs 4,137 crore) over the
next 10 years to produce gas from coal seams (CBM) in a block in Madhya
Pradesh. Invenire Petrodyne Ltd (IPL), a subsidiary of the company, won a Coal
Bed Methane (CBM) block SP-ONHP(CBM)-2021/1 in Madhya Pradesh.

The revenue-sharing contract for the block, which is estimated to hold 2 trillion
cubic feet of in-place resources, was signed in September.
Invenire received a production license in December 2022. The block is estimated
to have a plateau of 3 million standard cubic metres per day of gas, which can be
used to fire power plants, manufacture fertilizer or turned into CNG to run
automobiles. The government is focused on raising domestic natural gas
production to help increase the share of the environment-friendly fuel in India's
primary energy basket to 15 per cent by 2030 from current 6.7 per cent.

D. Methanol
NITI Aayog’s ‘Methanol Economy’
programme is aimed at reducing India’s oil
import bill, greenhouse gas (GHG)
emissions, converting coal reserves and
municipal solid waste into methanol. It is
estimated that the methanol economy will
create close to 5 million jobs through
methanol production, application and
distribution services. Additionally, Rs 6,000 crore should be saved annually by
blending 20% DME (Di-methyl Ether, a derivative of methanol) in LPG.

Under the programme, five methanol plants based on high ash coal, five DME
plants, and one natural gas-based methanol production plant with a total production
of 20 MMT/annum in a joint venture with Israel are planned to be set up. In fact,
Thermax Ltd., a private enterprise, has successfully developed a 5 KW methanol-
based reformer on a Direct Methanol Fuel Cell (DMFC) with an aim of replacing
DG sets in mobile towers.

India’s major power producer NTPC Ltd has signed a non-binding Memorandum of
Understanding (MoU) with Italy-based Maire Tecnimont Group’s Indian arm
Tecnimont Pvt Ltd. Through this move, the two organizations aimed to jointly
evaluate and explore the possibility of developing a commercial-scale Green
Methanol Production facility at the NTPC project in India.

Further, the scope of this Green Methanol project includes capturing carbon from
NTPC power plants and converting it into green fuel. NTPC Renewable Energy
Ltd’s is in the process of setting up a pilot project at its Vindhyachal power plant in
Madhya Pradesh, which will feature India’s first carbon capture plant. As a pilot
project, the facility will be set up in Vindhyachal, wherein carbon dioxide emitted
from the plant will be mixed with hydrogen to form methanol.

India’s GACL, NTPC REL to produce green methanol

India’s Gujarat Alkalies & Chemicals Ltd (GACL) has entered into an agreement
with NTPC Renewable Energy (NTPC REL) to produce 75 tonnes/day of green
methanol and 35 tonnes/day of green ammonia.
The two plants, which will use renewable energy produced by NTPC REL, will be
India’s first commercial-scale green ammonia and green methanol projects. NTPC
REL signed a memorandum of understanding (MoU) with GACL to realize green
energy and green hydrogen objectives and the government’s efforts towards a
carbon-neutral environment.

NTPC will ensure a constant supply of 100MG (megawatts) of renewable energy

to the plants. The methanol and ammonia output will be used by GACL at its
Vadodara and Dahej complexes in western Gujarat state to produce various
downstream chemicals.

India’s first Coal to Methanol Plant starts commercial production

In Jan 2022, India’s first indigenously developed Coal to Methanol (CTM) Plant
started functioning with more than 99 % of purity opening a new avenue to convert
high ash coals to methanol. The 0.25 TPD (Tons per Day) capacity CTM pilot plant
was designed, developed, and installed by the BHEL, and has been producing
methanol with 99 % accuracy. Significantly, this conversion of high ash Indian coals
to methanol through the gasification route is the first of its kind technology
demonstration in India. After this project, the government is going to set up more
such plants to make the best use of high ash coal by converting it into methanol
fuel.

SFC Energy, FC TecNrgy to manufacture hydrogen and methanol fuel cells in India
In April 2022, a German firm SFC Energy and FC TecNrgy have inked a pact to
enter into manufacturing of hydrogen and methanol fuel cells in India. The venture
plans to set up a manufacturing unit, Research & Development and a repair centre
in Gurugram, Haryana. Further, they have also announced the launch of EFOY
Hydrogen Fuel Cell in India which is expected to play a significant role in meeting
the country's National Hydrogen targets which include plans to produce up to 5
million tonne of green hydrogen by 2030.

NTPC Floats Tender for a Methanol Synthesis Plant at its Facility in Uttar Pradesh
In October 2022, NTPC has invited bids to set up a 10-temperature programmed
desorption (TPD) methanol synthesis plant at its Vindhyachal facility in Uttar
Pradesh based on the design provided by TOYO, a Japanese hydrocarbon, and
petrochemical engineering company.

Faridabad to have first waste to methanol plant by December 2023

The Municipal Corporation of Gurugram (MCG) has identified 8 acres of land in
Faridabad’s Sihi to set up a ₹200 crore waste-to-methanol plant, where 500 tonnes
of waste will be converted into 50 kilo litres of methanol daily. Adding that the
corporation is likely to sign an agreement this week with their door-to-door waste
collection concessionaire Ecogreen so that waste is not sent to landfill and will be
directly sent to the plant instead.
This will also resolve issues at material recovery facilities (MRFs) where waste is
brought in a segregated manner and is then further segregated into various
categories according to their reusability and recyclability. The Haryana State
Pollution Control Board announced on November 16 that no more waste would be
dumped at the Bandhwari landfill in the Aravallis from February 1 next year.

Green Methanol has a wide range of applications, including serving as a base

material for the chemical industry, storing renewable electricity, and even as a
transportation fuel. It is also considered a substitute fuel for maritime fuel
applications. Green methanol can help the thermal power sector in tackling one of
its biggest challenges — reducing carbon emissions.

NITI Aayog has drawn out a road map to substitute 10% of Crude imports by 2030,
by Methanol alone. This requires approximately 30 MT of Methanol. Methanol &
DME are substantially cheaper than Petrol and Diesel and India can look to reduce
its fuel bill 30% by 2030.

With very little modifications to existing engines (vehicles) and fuel distribution
infrastructure, 15% of all vehicle fuels can be converted to Methanol & Di Methyl
Ether (DME).

In Jan 2022, Indian Oil Corp (IOC) rolled out M15 petrol -- 15 per cent blend of
methanol with petrol -- on a pilot basis in Assam's Tinsukia district.

Methanol can also be added to diesel, which trucks carrying goods and involved
long-distance trips use. Currently, methanol production is highest in two Coal India
plants in Dankuni (2000 tons per day) and Asansol (1800 tons per day), while the
five plants that produce methanol using natural gas produce a combined total of
2,192 tones daily. Much more can be done in the long term.

India is shortly going to implement Methanol 15 % blending program with Petrol

and cost of petrol is expected to come down immediately by 10% and M100
program for buses and trucks is also to be implemented shortly.

Global engine manufactures like Volvo, caterpillar, Mercedes and in collaboration

with Indian players can manufacture these engines under the Make in India and
will result in big FDI investments. The development of this sector will bring jobs in
the engineering sector.

Ashok Leyland has successfully converted trucks that run on CNG to run on only
methanol. In Kerala, the state road transport corporation is trying out buses that
run on 15 per cent methanol. Kirloskar is developing gensets that run on methanol
and Ashok Leyland, power generators.
Methanol can also be used for ships and barges; it will also be cheaper than using
diesel and certainly more useful when it comes to global warming. The "carbon
factor" or the amount of emissions of carbon dioxide is lower in methanol than
diesel, LNG and even ethanol. The CF or carbon factor in diesel is 3.206, in LNG,
it is 3.015, in ethanol, it is 1.913, while in methanol it is 1. 375. Emission levels in
methanol are almost half when methanol, made from biomass, is used, compared
with heavy fuel oil and fossil-based LNG.

Worldwide due to emission regulations being implemented stringently by IMO

(International Maritime Organization), marine sector is shifting to Methanol as fuel
of choice. Being a very efficient in liquid form and practically generating no SOx or
NOx, Methanol is much cheaper than LNG and Bunker / Heavy Oil. Sweden has
already about 17 boats, ferries, barges and a 1500 passengers cruise ship running
on Methanol.

India will convert about 50 Nos of vessels in the Port sector and various vessels
owned by government entities to operate on Methanol. This opportunity will also be
used to standardize all the marine regulations both sea and inland in parity with
International Maritime Organization rules and with global standards.

Indian Railways consumes about 3 billion litres a year and the annual diesel bill is
in excess of Rs. 15000 Crores. A Methanol locomotive prototype is being
implemented by Indian Railways under a grant by Department of Science &
Technology and once all 6000 diesel engines are converted to methanol (at very
minimal cost of less than 1 crore an engine), the annual diesel bill can be reduced
by 50%. Methanol conversion program in railways is complimentary to the goals of
electrification in Railways.

The cooking fuel program of Methanol liquid fuel and LPG-DME blending is a low
hanging fruit for India. A 20% blending program with LPG, without any infrastructure
modifications would result in a immediate savings of Rs.6000 Crores a year. Lakhs
of rural women will cook healthy and Methanol supplied in canisters would ensure
fuel supply in the remotest part of North East and Himalayas.

India’s first indigenously Designed High Ash Coal Gasification Based Methanol
Production Plant at Bharat Heavy Electricals Limited (BHEL) Research and
Development Centre, Hyderabad was inaugurated in January 2022. The project
was funded by the Department of Science and Technology, which provided a Rs
10 crore grant, at the initiative of NITI Aayog, PMO-India and the Ministry of Coal.

The 0.25 TPD (tonnes per day) capacity CTM pilot plant that has been indigenously
designed, developed and installed by BHEL is currently producing methanol with
purity of more than 99 per cent from high-ash Indian coal.
Significantly, this conversion of high-ash Indian coal to methanol through the
gasification route is the first-of-its-kind technology demonstration in India

Recently the Indian government approached Deccan Water Treatment Pvt. Ltd.
and its joint partner ScandiNAOS to promote methanol marine engines for the
defence and maritime industry as part of a strategy to bolster energy security and
improve air quality. Methanol is a viable, affordable alternative transportation fuel
due to its efficient combustion, ease of distribution, and wide availability around the
globe. India has set standards for M15 (15% methanol with 85% gasoline) for
gasoline engines. Last year, ARAI along with automobile companies like Hero
MotoCorp Ltd, Bajaj Auto, TVS, Honda Motorcycle and Scooter launched trials of
M15 two-wheelers under the Methanol Economy program spearheaded by NITI
Aayog.

Methanol can be used for producing various chemicals like formaldehyde, acetic
acid and olefins which can be exported and can be high foreign exchange earners.
Apart from coal, biomass/Municipal Solid Waste (MSW) to methanol can also be a
viable option for India which can be dovetailed with Swachh Bharat Mission. The
current availability of biomass in India is estimated to be in the range of 500-650
MT, however, a proper supply chain mechanism has to be created for the same so
that there is a continuous availability of biomass for methanol production.
Moreover, it can be an opportunity for India to use its landfills to convert it into
methanol and avoid problems such as toxins leaching into the soil and release of
GHG emissions etc. It can create close 5 million jobs through methanol
production/application or distribution services.

Methanol, can provide a cleaner alternative in rural areas for those families not
covered under the Pradhan Mantri Ujjwala Yojna. The Bureau of Indian standards
estimates that even partial use of methanol would reduce the country's cooking fuel
import bill by $US 100 billion and reduce pollution levels considerably.

The impact of using petrol and diesel with 15 per cent methanol would be
considerable. If by 2025, 10 percent of Indian vehicles used fuel with 15 per cent
methanol, carbon emissions would come down by 38,600 tons every year and
import costs of petroleum would come down by about US$ 450 million. If by 2030,
25 percent of vehicles in India used fuel with 15 percent methanol, it would reduce
carbon emissions by 116,000 tons annually and reduce petroleum import costs by
US$ 1,350 million.

Similar benefits can be obtained by blending methanol based Dimethyl ether or

DME in cooking gas. Using 20 per cent DME by 2025 will lead to import reduction
of 4.5 million tons of LPG, saving US$ 2,450 million and by 2030, a 20 per cent
blend would mean importing 5.7 million tons less LPG, saving US$3,160 million. It
would also reduce the PM Ujjwala subsidy considerably.
The government is planning to convert its inland waterways and army trucks into
methanol engines with an aim to promote alternative fuel to reduce India's
dependence on imported petrol and diesel.
Table 5: Methanol Demand Supply

Methanol (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 634 634 661 757 804
Production 205 204 172 235 293
Imports 2173 2470 2677 2643 2681
Exports 9 16 16 16 16
Apparent Demand 2368 2632 2833 2862 2958
Demand Growth% 3.5% 11.2% 7.6% 1.0% 3.4%

Conventionally, methanol is produced from coal and natural gas. India is rich in
coal reserves that can support the production of methanol. The National Coal
Gasification Mission aims for 100 MT of coal gasification by 2030 to produce utility
chemicals including methanol.

India has diverse sustainable feedstocks– such as captured carbon dioxide,

municipal solid waste (MSW), and agricultural residue for the production of
renewable methanol which is a carbon-neutral hydrogen carrier that offers a
pathway for the energy transition. Bio-methanol produced from biomass feedstocks
holds great potential to meet the growing energy demand and support the rural
economy of the country. Indore was adjudged the cleanest city for the fifth year in
a row in the Union government’s annual survey.

The Indore Municipal Corporation earns INR 80 million annually from the plants
which convert waste into useful biofuel products. This could be amplified and
extended to pan-Indian cities where bio methanol could support efficient waste
management systems, provide economic opportunities, and reduce carbon
footprints.

With the highest hydrogen-to-carbon ratio of any liquid fuel, methanol is a superior
hydrogen carrier that supports the faster development of hydrogen economies by
enabling the adoption of hydrogen as a fuel today. Thus, any investments in India’s
methanol economy would be an investment in the hydrogen economy of the future.

Policy interventions to encourage the role of low carbon and net carbon-neutral
fuels like renewable methanol would strengthen the country’s energy security and
offer India a viable and practical alternative fuel that can be produced with
indigenous resources.
Investments in dedicated pilot and demonstration of renewable methanol
technologies with the inclusion of the private sector could enhance the scale-up of
the renewable methanol. Beyond policies to support production, there should also
be a focus on demand creation for renewable methanol in the Indian market.

There is a need to develop a supportive policy landscape that creates commercial

opportunities for the increased adoption of methanol for different applications such
as mobility and power generation. Additionally, India could also look at the scope
of expanding its markets internationally positioning itself as an international hub for
renewable methanol production with the intention of exploring exporting
opportunities.

xv. Building Blocks

A. Ethylene & Propylene

Ethylene Capacity touched 7853 KT in India in 2022-23
and is expected to increase to 8677 KT in next fiscal with
capacity additions planned by HMEL. Ethylene
consumption in the country rose from 7253 KT in 2021-22
to 7333 KT in 2022-23 and is forecasted to witness a
further growth next fiscal to 7557 KT, before touching
7701 KT by 2024-25.

Table 6: Ethylene & Propylene net availability

Ethylene (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 7477 7477 7853 8677 8677
Production 7158 7311 7312 7595 7761
Imports 50 59 56 31 60
Exports 134 118 35 70 120
Net Availability 7074 7253 7333 7557 7701
Propylene (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 6614 6614 7071 7602 7602
Production 5621 5835 5908 5735 5923
Imports 10 27 15 0 0
Exports 15 0 0 0 0
Net Availability 5615 5862 5923 5735 5923

Exports of Ethylene witnessed a dip from 35 KT in 2022-23 and is projected to rise

to 120 KT levels once again in 2024-25. While production rose from 7311 KT to
7312 KT in 2022-23. It is forecasted to increase further in next fiscal year i.e., 2023-
24 to 7595 KT and then bounce back to 7761 by 2025.
Propylene demand rose from 5862 KT in 2021-22 to
5923 KT in 2022-23 and is expected to rise further to
5735 KT by 2023-24 and further to 5923 KT by 2023-24.
Capacity is expected to witness an increase from 7071
KT presently to 7602 KT by 2023-24 with HMEL plant
becoming fully operational. Production rose from 5835
KT in 2021-22 to 5908 KT in 2022-23. It is projected to
witness a dip and touch 5735 KT in 2023-24 before
rising and touching 5923 KT by 2024-25.

The Ratnagiri Refinery & Petrochemicals Ltd (RRPCL), has seen a cost increase
by India by 36 per cent to $60bn. RRPCL has previously described this complex to
be capable of 1.2 million barrels a day of processing capacity for Euro-VI fuels and
aviation fuels with an eventual petrochemical component of over 50 units. The
original location for the refinery was Nanar in Maharashtra’s Ratnagiri district but
this was scrapped in March in 2019 following protests by the locals. The Ministry
of Environment, Forest and Climate Change had provided environmental clearance
for the Ratnagiri oil refinery in March 2018. The project was earlier proposed at
Nanar village in the Rajapur taluka in 2014. A survey was undertaken, along with
soil testing and the submission of a feasibility report and environmental
permissions. However, the project came to a standstill due to protests over land
acquisition. It was later proposed at Barsu and Solgaon, the other side of Nanar
near the Jaitapur Atomic project.

A total of 11 villages are set to be affected by the project. Among these are Barasu,
Solgaon, Goval, Devache Gothane, Shivane Khurd, Sogamwadi, Rautwadi, and
others that are located around the Arjuna river in the Rajarpur taluka. Delays in
acquiring a 15,000-acre land parcel have almost stalled the project, initially planned
for 2025, and boosted costs by 36% to $60 billion, as per estimates made in 2019.

In Feb 2022, Bharat Petroleum Corp Ltd (BPCL) decided to discontinue its planned
specialty polyols petrochemicals project in Kochi due to cost overruns, and instead
looking at building polypropylene (PP) plant at the site. The proposed polyols
project was supposed to have a 250,000 tonnes/year polyols plant, a 100,000
tonnes/year propylene glycol (PG) unit, a 300,000 tonnes/year propylene oxide
(PO) line and a 140,000 tonnes/year Monoethylene glycol (MEG) plant.

Feasibility studies and other pre-project activities are in progress to establish

ethylene cracker project at Bina Refinery in Madhya Pradesh and a polypropylene
project at Kochi Refinery in Kerala. Planned PP plant at the site would use up
250,000 tonnes/year of propylene, which were initially earmarked for the polyols
project. The company produces 500,000 tonnes/year of propylene at its Kochi
refinery, half of which goes into various downstream operations at the site.
The projects are likely to take around four years for completion once the
environmental clearance is received and are expected to come on stream by 2026.

In January 2022, Bharat Petroleum Corporation Limited (BPCL) set up a

superabsorbent polymer (SAP) technology demonstration plant of 200 tonne per
annum at the Kochi Refinery. Using the in-house acrylic acid as feedstock, SAP
technology is used in various hygiene products such as diapers and other
incontinence products. Bharat Petroleum Corporation Limited’s Kochi refinery
dispatched the first indigenous superabsorbent polymer from its Propylene
Derivatives Petrochemical Complex in July 2022.

Superabsorbent polymer (SAP), the key component of sanitary napkins, and other
incontinence products is being produced for the first time in India. The technology
for this niche petrochemical is not available for licensing, and the R&D centre of
BPCL took this challenge to develop an end-to-end process for the production of
hygienic SAP, and a demonstration plant of 200 tonne per annum have been set
up at Kochi Refinery. SAP is made using the in-house acrylic acid produced at
Kochi Refinery.

The demonstration project will be followed by setting up a commercial plant of

50,000 tonne per annum capacity, thereby saving foreign exchange worth ₹1,000
crore to make India Atmanirbhar in this niche, and fast-growing segment.

BPCL R&D team has developed the technology for production of hygiene grade
SAP.SAP is produced using the acrylic acid which is manufactured at the new
Propylene Derivatives Petrochemical Complex at Kochi Refinery. Presently,
manufacturing units of these products in India are importing SAP. Large quantity of
napkins, diapers and under-pads are also being imported.

Assam-based Numaligarh Refinery Limited (NRL)has achieved financial closure

for its upcoming 6 MMTPA refinery expansion project. Numaligarh has finalized
more details of the new diesel hydrotreating unit it will be installing as part of its
multi-year expansion.

Toyo Engineering Corp. a subsidiary, Toyo Engineering India Pte Ltd, had been
awarded a contract by NRL for the engineering, procurement, construction and
commissioning of 3.55 million mt/year diesel hydrotreating unit. The finalization of
the details came on the back of the refiner saying in May it will use Honeywell's
UOP technology to produce clean-burning diesel fuel in compliance with India's
Euro 6 emissions standards and increase crude oil conversion. NRL is undertaking
a project to triple its capacity to 9 million mt/year. Numaligarh Refinery Ltd. has also
Axens to provide technical support and licensed technology for its planned
expansion.
Axens will provide technical support and license a naphtha hydrotreating unit,
continuous catalytic reforming unit, isomerization, and fluid catalytic cracker. The
company was aiming to complete the expansion project by 2025.

Indian Oil Corp. has received environmental clearance for a capacity upgrade
project at its Mathura refinery. The capacity expansion project includes residue
upgrade and distillate yield improvement programs. The upgraded crude
processing capacity will be 11 million mt/year.

India's HPCL had postponed its target of raising its existing capacity of 8.3 million
mt at its Vizag refinery to 15 million mt by December 2022. In 2020, the refiner had
set the target for capacity upgrade by 2023-24 (April-March).

The latest revised completion deadline for the expansion project brought forward
the target by two years. The initial deadline for the completion of the project along
with a bottom-upgrade program was March 2020. The expansion project involves
the installation of primary processing units such as a CDU -- replacing one of the
three existing CDUs -- a hydrocracker, and a naphtha isomerization unit.

Indian Oil Corp. has awarded an engineering, procurement, construction, and

commissioning (EPCC) contract to Paris-based Technip for its expansion project
at the Barauni refinery in the eastern state of Bihar. The contract involves the
installation of a 1 million mt/year "once-through" hydrocracker unit (OHCU), a fuel
gas treatment unit (FGTU) and associated facilities.

The expansion project will increase its capacity by 50% to 180,000 b/d and add
petrochemicals such as polypropylene to the product portfolio. The initial plan for
the completion of the capacity project was scheduled for 2021. But the second
wave of the coronavirus pandemic may result in this being rescheduled. The
Project envisages capacity expansion of Barauni refinery capacity from current 6.0
MMTPA to 9.0 MMTPA. The expansion would enhance the flexibility in operations
and would also improve the refining margin. It is also proposed to implement
Polypropylene unit of 200 TMTPA capacity for processing propylene feed stock.

In March 2023, it was announced that the capacity of Bongaigaon Refinery and
Petrochemicals Ltd, a part of Indian Oil in Assam's Chirang district will be expanded
to five million metric tonne per annum from the existing 2.7 MMTPA

IOC has asked the Union ministry of chemicals and fertilisers to make available the
adjacent 175 acres land of the defunct Hindustan Fertilizer Corporation for the
project. The company plans to replicate the Paradip model at Haldia. At the Haldia
refinery, IOC is currently setting up a second Catalytic Dewaxing Unit (CDW-II) at
a cost of Rs 1,019 Crore. The CDW unit will help in augmenting API Group-II &
Group-III Lube oil base stock (LOBS) production.
IOC-owned Gujarat refinery's capacity expansion project is set to be over by Sept.
30, 2024, a delay of one-and-a-half years from the previous deadline. The delay is
primarily a result of the coronavirus pandemic. The initial deadline was
contemplated for 2020. The existing smaller capacity atmospheric unit and vacuum
units will be replaced by a large atmospheric vacuum unit (AVU). The project also
involves a revamp of the existing hydrogen generation unit, a new n-butanol
processing unit and a revamp of the linear alkylbenzenes (LAB) unit.

Nayara, which operates a 20 million tonne-a-year oil refinery at Vadinar in Gujarat,

has adopted a phase-wise asset development strategy to enter into the
petrochemicals sector. Under Phase-1 of the project, Nayara is setting up a 450-
kilo tonne per annum polypropylene plant at its Vadinar refinery in Gujarat - a
propylene recovery unit along with upgrades to the existing FCC Unit (Fluidized
Catalytic Cracking Unit) and a polypropylene unit (PPU).

The company had laid the foundation stone for their petrochemical project for a 450
KTPA polypropylene plant in November 2021. As per company, the Phase-1
project development has achieved over 85 per cent progress and expects
production of its first petrochemical product i.e., polypropylene by Q4 of 2023.

The refinery expansion project is part of the government of India’s initiative towards
“Hydrocarbon Vision 2030” for the northeast region of India. The efforts are aimed
at exploiting the region’s hydrocarbon sector to facilitate economic development,
enhance the access to clean fuels, increase the availability of petroleum products
and create employment opportunities. Numaligarh Refinery Ltd (NRL) will use
Honeywell UOP technology to produce cleaner-burning diesel fuel in compliance
with India’s BS-VI emission standards and increase crude oil conversion.

The LuPech project will produce import substitutes like Lube Oil Base Stock
(LOBS) and Polypropylene. The Acrylics/Oxo Alcohol Project at Dumad and
Gujarat Refinery will manufacture value-added Butyl Acrylate, a key ingredient for
paints, coatings, adhesives, textile chemicals, plasticizer industry, and other similar
products.

Indian Oil has let a contract to Chevron Lummus Global to license process
technologies for units involved in the LuPech portion of its project to expand crude
oil processing capacity of its Koyali refinery.

The inclusion of the petrochemical-lube integration component comes as part of

IOC's strategy to create a building block for future production of niche chemicals
with a potential to increase petrochemical and specialty products integration index
on incremental crude throughput to improve margins.
These projects will strengthen the IOC’s readiness for venturing into petrochemical
projects like PVC, Styrene, Acrylonitrile, Poly-Methyl Methacrylate and Ethylene
Oxide in future. The Petrochemicals & Specialty products (Gr-II/III LOBS)
integration index based on additional crude oil added under this project is estimated
to be 20.7%.

As per IOC, MoU was also signed for infrastructure facilities at Dumad for Koyali-
Ahmednagar-Solapur Pipeline and tank truck loading facility for Linear Alkyl
Benzene (LAB) - a feed-stock for detergent industries.

The other infrastructure projects envisaged are a new flare system at the Gujarat
refinery and a hydrogen dispensing facility for Fuel Cell Electric Vehicles (FCEV).

The refinery will be implementing India's first hydrogen dispensing facility as a clean
fuel initiative. This facility aims to fuel hydrogen buses plying between Vadodara
and Kevadia /Sabarmati Ashram. Gujarat Refinery is now poised to grow to 18
MMTPA capacity. New units for the production of polypropylene, butyl acrylate and
lube oil base stocks will also be added to the refinery's portfolio.

State-owned Indian Oil Corp (IOC) board in Sep 2020 approved an investment of
Rs 1,268 crore for setting up a needle coker unit at the firm's Paradip refinery in
Odisha.

At the 15 mtpa capacity Paradip refinery, IOC is setting up a Paraxylene & Purified
Terephthalic Acid (PX-PTA) unit with capacity of 1.2 MMTPA at Paradip in
Jagatsingpur district of Odisha. The Rs 13,805.00 Crore project is expected to be
ready by January 2024. As of November 2022, around 54 per cent work on the
project was completed and an amount of Rs. 2002.71 crore expenditure was
incurred on the project.

Once complete the project is expected to generate employment of around 10,000

people. The hydrocarbon processing complex comprising a light crude oil refinery,
aromatics complex and ethylene cracker units.

In addition to Haldia Petrochemicals, the HLCA also approved the proposal of

state-run Indian Oil Corp to set up a polyester product manufacturing unit of 300
kilo tonnes per annum (KTPA) capacity at an investment of $ 280 million in the
textiles park coming up at Bhadrak district. The proposed textile park of Indian Oil
Corporation Limited (IOCL) in Bhadrak will be functional in 2023-24.

The project will create employment opportunities for many people and is expected
to be implemented within four years of land allotment. Considering the large
population base and high GDP growth rate of Odisha and the country overall, the
demand for these products is likely to be huge.
It is worth considering that entire eastern India and nearby countries like
Bangladesh are dependent on sourcing polyester fibres from the western part of
India to meet the clothing demand of the region.

Therefore, it is envisaged that setting up PTA unit will trigger investment in these
products and will catalyze the growth of further downstream processing units along
the value chain, driving economic growth of the region. Since the total polyester
chain starting from spinning to garments is a labor-intensive process, it is estimated
that direct and indirect employment generation potential of the project is about one
lakh people.

GAIL is diversifying its Petrochemical business by entering into Polypropylene

business. GAIL is setting up a 500 KTA PP plant based on PDH technology at Usar,
Maharashtra to be commissioned by 2025 and another 60 KTA PP plant is also
being set up at PATA petrochemical complex to be commissioned by 2024.

M/s W R Grace is the technology Licensor for both the upcoming PP plants and
will be utilizing Unipol PP process technology with latest generation catalyst to
produce world class PP products. Homopolymer Polypropylene grades will be
produced at Usar PP plant whereas both Homopolymer as well as Co-Polymer
Polypropylene grades will be produced from Pata PP plant.

GAIL (India) Ltd has revised its petrochemical expansion plan of Pata
petrochemical complex and has decided to add some offsite storage facilities to
ensure efficient feedstock and product storage. As per the GAIL’s initial strategy,
the investment capital over the addition of 60KTPA Polypropylene unit at the gas-
based Pata petrochemical complex in Uttar Pradesh was estimated around INR
7.50 billion.

However, the PSU came up with some changes after a detailed study of the project
plan wherein it suggested some necessary additions, particularly with respect to
the feedstock and product storage facilities. The company has henceforth
escalated the project cost by over 20% to INR 9.10 billion. According to a company
official, since the petrochemical site is landlocked, one of the important additions
to the project plan will be an offsite warehouse capable of holding nearly two
months of Polypropylene inventory.

As per the project proposal, GAIL plans to use around 50,000 tpy of polymer grade
Propylene produced at the Pata plant as the key feedstock for the new PP unit.
Currently, GAIL is selling the Propylene produced at its Pata complex to several
clients.

In addition, the Pata complex has the capacity to produce 810 KTPA of
Polyethylene (PE) and 20 KTPA of Butene-1.
Polypropylene, popularly known as PP, is a tough crystalline thermoplastic
produced from Propylene serving versatile applications such as plastic, fibre in
automobiles, consumer goods and furniture, apart from other industrial uses.

By stepping into Polypropylene production, GAIL is expanding its petrochemicals

portfolio and entering the league of major manufacturers of the country when India
is already following the footsteps of becoming a global manufacturing hub.

GAIL is planning to import ethane from the US to replace natural gas and naphtha
as feedstock at petrochemical plants. GAIL has signed a memorandum of
understanding with Shell Energy India to explore opportunities for infrastructure
development for ethane sourcing. GAIL in Feb’23 floated a tender to hire a very
large ethane carrier (VLEC) for 20 years starting mid-2026 for importing ethane
from the US. The ship with capacity of 80,000 to 99,000 cubic metres is targeted
to take deliveries from the US ports of Marcus Hook, Nederland, Morgan's Point or
Beaumont and deliver ethane at Dahej or Hazira in Gujarat or Dabhol in
Maharashtra.

GAIL has a petrochemical plant at Pata, near Kanpur in Uttar Pradesh, and is also
looking to set up another unit at Usar in Maharashtra. The company had to cut
down on run rate at Pata after the government diverted gas supplies from the plant
to city gas suppliers. This led to its profitability being impacted and so now the
company is looking to supplement the feedstock with ethane.

A consortium of Tecnimont SpA and Tecnimont Private Ltd., subsidiaries of Maire

Tecnimont SpA, have received a contract from Indian Oil Corp. Ltd. (IOCL) to set
up a new paraxylene unit and relevant offsite facilities in Paradip, Odisha, India.
The project will involve construction of a new 800,000-t/y paraxylene plant, which
will feed an adjacent 1.2- million-t/y purified terephthalic acid (PTA) unit. Both
facilities are expected to be complete by early 2024.

Under the lump-sum contract, valued at around $450- million, the consortium will
be responsible for the engineering, procurement, construction and commissioning
activities of the paraxylene unit up to the performance guarantees test run. IOCL is
currently building a 357,000-t/y ethylene glycol (EG) plant at Paradip, which is
scheduled to begin operations towards the end of this year. PTA from the new
complex will be used as feedstock in the EG plant.

Ethylene Glycol is extensively used in the manufacture of items like polyester fibre,
bottle & film grade chips, solvents, coolant, textiles, packaging, PET film, sheet and
molded containers for food packaging, which have a sustained industrial demand.
The project is seen as a key driver for the growing textiles industry in the region
and will cater to the rising demand for polyester fibre.
With a textiles park proposed at Bhadrak, there will be huge opportunity for
supplying raw material to downstream textile units.

B. Butadiene
Butadiene market on application basis is segmented into
plastic, chemical and rubber industry.

It is a raw material for PBR, SBR, NBR, ABS, Adiponitrile,

Styrene Butadiene Latex, and other applications. The
market was negatively impacted by COVID-19.

Prices of Butadiene had climbed up in the Asia-Pacific

region during the first quarter of 2022, owing to increased
demand for Butadiene in the manufacturing of synthetic rubbers. Butadiene costs
had risen due to increased demand for elastomers in the region. High upstream
crude oil prices then, as well as a scarcity of supply in the region as a result of
Russia's invasion of Ukraine, had a substantial impact on production rates and
operational costs. Because there was no competition, the rising value of upstream
Crude oil put pressure on industries to meet downstream demand. As a result, the
crisis in Ukraine severely hampered supply networks.

Butadiene prices surged in the Asia-Pacific region during the second quarter of
2022, owing to boosted demand for Butadiene manufacturing synthetic rubbers.
Butadiene costs have risen due to the high demand for elastomers in the region.
Prices in China appeared to be growing despite an increase in Covid cases and
shutdown limitations. Furthermore, the high costs of Butadiene were attributed to
the skyrocketing crude oil value amidst the Russia-Ukraine war.

During the third quarter of 2022, Butadiene prices showed mixed sentiments in the
Asia- Pacific region. During July and August, prices plunged by 8.1% and 14.6%,
respectively. The price decline was attributed to insufficient inventory and weak
demand from the downstream synthetic rubber industries

Butadiene price has witnessed an upward trend in the Asia and European markets,
backed by the improved buying sentiment in the region. In addition, volatile energy
prices, the reopening of the Chinese market, high Asian import prices, and
sanctions on Russian imports by the European Union further accelerated the prices
of Butadiene in the respective regions.

In initial periods of FY 23 Butadiene prices surged owing to boosted demand for

Butadiene and high crude oil prices. From Q2 prices plunged due to insufficient
inventory and weak demand from the downstream industry and prices showed
recovery by Q4.
Butadiene prices are anticipated to intensify across Asian and European markets
in the coming quarters of 2023. Additionally, demand from downstream Synthetic
Rubber, Polymer, and other industries is expected to increase in Q2 and Q3 of
2023 as it is the major demand season for the automotive and construction
industries

While automotive and parts manufacture play by far the largest role, other
industries producing electronics, plastic goods (e.g., gloves), and appliances are
also influencing the global butadiene market.

Butadiene and butadiene derivative production in this region remain limited to India.
This is not expected to change in the foreseeable future. Butadiene capacity
additions in the last decade outpaced investments in derivatives, enabling India to
become a significant exporter of refined butadiene. In contrast, India remains a net
importer of butadiene derivatives, primarily SBR and PBR. SBR import volumes
have declined with the start-up of new SBR plants by Reliance and IOC, but they
will increase again as strong automotive production growth is expected throughout
the forecast period.
Table 7: Butadiene Demand Supply

Butadiene (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 605 605 605 605 605
Production 461 505 462 505 505
Imports 0 0 0 0 0
Exports 134 163 150 159 155
Apparent Demand 327 342 312 346 350
Demand Growth% -0.6% 4.6% -8.8% 10.9% 1.2%

The region has historically been a net exporter of butadiene monomer as OPaL
and Haldia Petrochemical do not have any downstream derivative units. This trend
will increase the region’s net import position in butadiene net equivalent trade to an
estimated 300,000 metric tons by the end of the decade. Haldia exported 61 KT of
Butadiene in CY22. It is vital to mention that Asia is and will remain a key region
with respect to butadiene rubber consumption and production.

Lummus Technology in April 2022 announced that its Green Circle business and
Synthos S.A. have reached a major milestone in the development of advanced bio-
butadiene technology. After completing a successful feasibility study in 2021,
Lummus and Synthos have concluded that the bio-butadiene technology is ready
for implementation, and the companies have agreed to move into the engineering
and design phase of the project.
Given the confidence in the technology and the strong market demand for
renewable materials, Synthos has committed to building a plant with a capacity of
40,000 metric tons of bio-butadiene per year – twice as much as the companies
had originally planned. In addition to the plant capacity expansion, Synthos has
confirmed that it will license BASF’s butadiene extraction technology from Lummus
and leverage Lummus’ digitalization capabilities for operational efficiency and
reliability.

The commercialization with Synthos of this biotechnology for more sustainable

rubber products is one of several sustainable process solutions that are making a
positive impact. Lummus Technology (Houston) announced that Butadiene LLP
has selected its iC4 CATOFIN, CATADIENE, CDMtbe technologies and BASF’s
butadiene extraction technology for units at Butadiene LLP’s new petrochemical
plant in Atyrau, Kazakhstan.

C. Styrene
The entire demand for styrene is met through
imports due to lack of any production facilities within
the country. This makes the demand susceptible to
international fluctuations in prices as well in its
availability. Benzene, the primary feedstock for
styrene, has a direct influence on the supply of
styrene to India since feedstock prices determine
the prevalent market dynamics.

Due to lack of production facilities, India is entirely dependent on imports from other
countries to meet its growing styrene demand. An abrupt change in international
prices therefore, harshly affects domestic users in the country. Since there are no
plans of any capacity initiations in the near future, international producers hold an
extraordinary grip on the domestic market.

The prices of Styrene in the Asia-Pacific region followed the uptrend sentiments in
Q1. Flourishing downstream industries, such as plastic rubber, disposable cups
affected the market sentiments positively in the domestic market. The feed stock
Benzene and Ethylene prices surged up accompanying crude oil prices. The
outbreak of Omicron virus in China, forced the manufacturers to halt their
production causing supply disruption in the Asia-Pacific market as major
manufacturers have terminated their production temporarily. The prices of Styrene
in January observed to be $1197/ton CFR Shanghai, China.

Asia-Pacific region observed a positive growth of Styrene towards the quarter-end.

Monthly average styrene price – (SEA basis) gained around 11% since Feb to
reach $1397/ton in March 2022.
As styrene surged to $1397/ton SEA within a month, it became a major concern for
all ABS producers, as styrene monomer forms 55% of ABS production. As of the
first two weeks of March, Styrene prices settled down USD at 1410/tonne. This was
the highest since Feb 2020.

During the third Quarter of 2022, Styrene prices in the Asia-Pacific region fell. The
drop in feedstock Benzene and Ethylene prices as a result of the slowing crude oil
values was a crucial element influencing the market dynamics of Styrene. In China,
production costs fell in tandem with feedstock prices. On the other hand, in the
Indian market, Styrene prices were stable in terms of demand during Q3.

Steady demand, government levies, rupee-dollar depreciation, and refinery

concept ratio have all impacted domestic petroleum prices, according to market
participants. Furthermore, the availability of sufficient feedstock with Indian
manufacturers and competitiveness in the Indian market have prompted
manufacturers to lower Styrene pricing in the Asia Pacific region.

The Asia Pacific market witnessed a continuous decline in Styrene prices on the
back of falling feedstock Benzene prices. The high production rates, coupled with
muted demand from the downstream industries, kept the prices for the product very
low throughout Q4.

The Chinese market remained quiet in Q4 due to the covid restrictions and muted
demand in the Chinese domestic market. Similarly, the Korean market remained
loaded with supplies, and thus India could import Styrene at a discounted rate.

Styrene is relatively inexpensive to move and hence, widely exchanged between

different regions. Asia currently accounts for more than half of global styrene
demand and is expected to remain the global styrene growth driver. Continued
industrial development, population growth and rising income levels are key drivers,
all of which are dominant in the upcoming Asian markets and in India.

The Indian Styrenics Market stood at 889 KT in 2021-22 while it is expected to

touch 1173 KT in 2022-23 with imports touching 880 KT in April-Jan period. The
demand of Styrene has been continuously increasing in Indian plastics market from
past few years. The end segment with high styrene consumption has been
automobiles, packaging, building and constructions, consumer products, medical
devices and others. The favorable government policies & rapid expansion in
projects such as Smart Cities has increased consumption of styrene used in the
plastic products.

The major demand for styrene is from the automotive application in which it is used
as an alternative material to metals and steel to reduce the weight of the vehicle
which in turn increases the efficiency.
Indian Styrene Market was impacted by COVID-19 in 2021-22, however with a
buoyant retail sale of vehicles in India a jump of 16% to around 1.8 million units in
February, helped in part by strong demand during the wedding season, and ease
of chip storages, automakers launching new models to tap into the rising demand
has helped demand for Styrenics in India. The demand for products like nylon tires,
foam seating, and paints, which are made from benzene-derived intermediates like
nylon, styrene, and phenol resins, also witnessed a surge in market demand.

West India has been dominating the market accounted about 65% of the Styrene
market in FY2022. Western states like Gujarat and Maharashtra have been the key
consumer of styrene due to presence of leading industries of paints & coatings,
packaging and automotives located in these regions. By FY2023, imports meet all
of India's styrene requirement. Although India Oil Corporation Limited (IOCL), one
of the biggest refineries for refining, transportation and marketing of petroleum
products is aiming for a greenfield expansion at Panipat, Haryana, which is
estimated to be operational by FY2026-27 with a capacity of 387 KT. This shall
help the imports coming into India to reduce.
Table 8: Styrene Demand Supply

Styrene (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Imports 738 889 1173 1266 1368
Exports 0 0 0 0 0
Apparent Demand 738 889 1173 1266 1368
Demand Growth% -15.8% 20.5% 31.9% 7.9% 8.1%

The downstream ABS and polystyrene (PS) markets witnessed good demand in
2022 with demand from end-users such as the home appliance and automotive
industries. A lot ultimately depends on the global economic recovery. Imports are
projected to increase ~8% in next two fiscals to reach 1368 KT by 2025.

In September 2022, the Indian government once again extended the

implementation of mandatory quality certification for styrene imports till 3rd April
2023. Some international suppliers are already registered with the Bureau of Indian
Standards (BIS) for certification, but the completion process may take longer.
D. EDC and VCM
Almost the entire production of EDC and VCM in India are consumed captively by
the polymer manufacturers for production of PVC and hence, PVC manufacturers
who do not have facilities for captive production of EDC and VCM have to rely
entirely on imports to meet their demand for PVC building blocks viz. EDC and
VCM.

RIL has committed to establishing a chemical manufacturing unit in Abu Dhabi to

generate 940,000 MTPA Chlor-Alkali, 1.1 MMTPA, Ethylene Dichloride (EDC) and
360,000 MTPA Polyvinyl Chloride (PVC) facility.

In India, the price of Ethylene Dichloride reduced in Q1 2022 when compared with
previous quarter due to slipping feedstock Ethylene and Chlorine market. However,
the market sentiments improved in the month of March and prices rose due to
strong downstream market.

Feedstock Ethylene prices marched high with improved product demand on the
back of constrained product availability in the region. On the top of that, the demand
of Ethylene Dichloride in the region surged supported by price gain. Upstream
crude oil prices also jumped in the Asian market due to accelerating tension
between Ukraine and Russia. In India, the price of Ethylene Dichloride towards the
quarter end were observed to be USD 788/ton CFR Mundra. Downstream PVC
market remained on the lower end with deterred construction sector and high
inventories among the enterprises.
 Table 9: EDC & VCM Import into India

EDC (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 247 247 247 247 247
Production 244 244 245 245 245
Imports 471 490 510 510 510
Exports 0 0 0 0 0
Apparent Demand 715 734 755 755 755
Growth (%) -18.1% 2.7% 2.9% 0.0% 0.0%
VCM (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 996 996 996 996 996
Production 974 1007 943 963 977
Imports 500 500 521 525 525
Exports 0 0 0 0 0
Apparent Demand 1474 1507 1464 1488 1502
Growth (%) -4.2% 2.2% -2.9% 1.6% 0.9%

In Q2 2022, the prices of Ethylene Dichloride in the Asian market reduced with
succeeding months due to affected purchasing appetite and muted market
fundamentals. With fluctuations in crude and Naphtha values, the price of Ethylene
also declined in the region owing to weak demand and deterred market sentiments.
Feedstock Ethylene offers in India have crashed, taking down the costs of
downstream PVC due to rising supplies and low purchasing activities affecting the
price trend. Narrowed supply and demand gap resulted in the stabilized price
movement for Ethylene Dichloride as bearish buying sentiments were witnessed
amongst the domestic buyers in India.

In Q4’23, Spot EDC availability seen tighter as integrated producers are allocating
more volume for captive PVC. Caustic Soda overhang continues leading to lower
caustic prices in global markets. US and Europe CA plants operating rates have
increased, arbitrage opportunities for spot US to Europe and South America have
shrunk- More caustic is likely to be available Ex USGC. This might put pressure on
caustic prices. EDC prices are in increasing trend. Current spot EDC offers are in
CFR WCI 380 – 395$/ton levels for April shipments. EDC outlook – Availability
expected to remain tight in Q2 and related prices are expected to remain stable to
slightly downward trend depending on PVC scenarios.

EDC demand witnessed a positive growth of 3% in 2022-23. While the next

financial year demand is expected to see flat growth. While VCM witnessed a
negative growth of 3% in 2022-23 and is expecting a marginal growth in next two
fiscals. In case of EDC imports, there was an increase of 20 KT in 2022-23. Imports
in case of VCM is expected to pick up marginally in next two years to around
525 KT.
Vinyl Chloride Monomer (VCM) prices surged in Q1-2022 due to high feedstock
Ethylene costs. Insufficient supply of raw material resulted in increased production
cost of Vinyl Chloride Monomer and created pressure on the downstream
enterprises to fulfill the desired market requirement. Additionally, bullish energy
costs influenced the prices of Vinyl Chloride in Asian region. Crude oil prices soared
throughout the quarter, refineries using Naphtha as cracker feed remained under
pressure from exorbitant feedstock prices of Ethylene. Moreover, several planned
shutdowns in feedstock Ethylene chemical plants also consequently resulted in rise
in prices of VCM in regional market of Asia.

Due to high feedstock Ethylene costs, Vinyl Chloride Monomer (VCM) prices
surged in Q2, 2022. Inadequate inventory availability and crippled overseas raw
material supply resulted in escalated production cost of Vinyl Chloride Monomer in
this Quarter. High inflation pressured the downstream enterprises to fulfill the
desired market requirement by passing the cost burden to consumers. Additionally,
bullish energy values due to ongoing heat waves in the region influenced the prices
of Vinyl Chloride monomers. Moreover, several planned maintenance shutdowns
in Gujarat chemical plants also caused a rise in the prices of VCM in Asia. Prices
of VCM settled at an upward trajectory in the Second Quarter of 2022.

Due to lower downstream consumer confidence in the PVC manufacturing industry,

Vinyl Chloride Monomer (VCM) prices dropped in Q3 2022. Adequate inventory
availability and crippled overseas demand fundamentals have resulted in the cut in
production of downstream PVC in this Quarter. High inflation pressured the
downstream enterprises to make sales at lower margins in the local market.
Additionally, the rise in market uncertainties and port congestion due to wages
dispute has led to a dip in the buying sentiments in the region during the third
Quarter. Prices of VCM settled at a downward trajectory in the third Quarter of
2022, with a commodity price ease of 11% in September in the Indian market.

The VCM (Vinyl Chloride Monomer) prices showed a plunging trend in the Q4 of
2022 in the APAC region due to ample inventories and muted consumer demand
from the downstream PVC manufacturing segment.

The VCM price dropped in the Asian market amid bearish domestic downstream
PVC offers and dampened export offers. Moreover, the cheaper imports in the
region and ease in the feedstock Chlorine costs affected the price momentum of
VCM.
E. Aromatics – Paraxylene
Asian paraxylene headed into 2022 under
great pressure from increasing supply
driven by China’s intensive PX capacity
expansion. Like the rest of the globe, Asian
PX was well supported in second quarter of
2022 by firm energy prices and short
supply due to run cuts and planned
maintenance, with the PX-naphtha spread
widening to more than two-year highs. Despite improving margins in April-May,
healthier reforming profits encouraged Asian producers to maintain low run rates
for aromatics extraction units.

In Asia, the paraxylene deficit is estimated to average 115,000 mt per month in Q2

2023. China's Shenghong Petrochemical will start its 2.2 million mt/year No. 2
purified terephthalic acid line at Lianyungang from around March 25-26 after
turnaround. The company had shut its no. 2 PTA line earlier in March for
maintenance. The company has another PTA line with a capacity of 1.5 million
mt/year that has been shut for a year. There are no immediate plans to start
operations at the idled line, as per the company source, citing weak PTA-
paraxylene margins.

India exported 2.2 million metric tons of PX in 2021. Poor demand for imports from
mainland China and healthy gasoline margins have resulted in a deep decline in
PX exports, which are expected to be declining by almost 64% in 2022 to about
600 KT from previous year. On the other hand, Haldia company will continue to
import for logistical and strategic reasons, so overall import volumes are expected
to remain largely unchanged.

India takes up to about 5.2% of world’s total PX capacity, as world’s third largest
PX producer following China and South Korea. India is one of the major suppliers
of PX to China. PX imports in India were around 540 KT in 2022-23 and it is
expected to rise to 671 KT next two years.
Table 10: Paraxylene Demand Supply

(KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 5860 5900 5900 6101 6760
Production 5109 4839 3756 3703 5256
Imports 615 557 540 671 671
Exports 2242 1670 600 390 1137
Apparent Demand 3297 3772 3696 3984 4789
Demand Growth% -15.6% 14.4% -2.0% 7.8% 20.2%
PX consumption touched 3696 KT in 2022-23 a dip of 2% from previous year.
However, it is expected to touch 3984 KT by 2023-24, growing at ~8% and at a
double digit in 2024-25 at 20% in India.

PX demand is expected to increase in coming years, mainly on account of a healthy

growth in textile production, which will lead to a healthy growth in PTA.

Prices for Paraxylene in the Asia-Pacific region increased throughout the quarter
in China and India, owing to the increasing price trend for its feedstock market.
Crude oil prices increased after OPEC+, an alliance of the Organization of the
Petroleum Exporting Countries and other producing nations, including Russia,
whose output has fallen by about 1 million BPD following Western sanctions on
Moscow over its invasion of Ukraine. Further, tight supply amid healthy demand
from downstream Purified Terephthalic Acid (PTA) and Polyethylene Terephthalate
(PET) Bottle contributed to the soaring pricing of Paraxylene.

Paraxylene feedstock such as Toluene, Ethylene, and mixed Xylene has been firm
since the end of April, which continued its upward trend until June. Thus, the price
of Paraxylene saw an upward rally in the Asia-Pacific region. The prices settled at
USD 2097/MT Ex-Ahmedabad and USD 1307/MT FOB Shanghai, respectively, in
June 2022.

Paraxylene Prices in the Asia-Pacific region declined throughout the Q3’23. China's
Paraxylene end-use market frequently experienced difficult market conditions.
Weakness continued to be heard in the paraxylene market since the start of this
quarter, falling around USD -57/MT. Stable polyester demand and low PTA
operating rates kept offers for Paraxylene lower as inventory remained high.

Paraxylene prices initially in the Asia-Pacific Region were held high with an
improved demand outlook in the fourth quarter. The market situation was bullish as
for PTA, polyester plant operation rates rose; thus, the demand in the domestic
regions also rose. However, slow demand and healthy supply sent the price of
Paraxylene the other way. The support from the global polyester market was
affected because of weak global spending. Weak sales in the polyester market also
had an impact on the price. In the month of November, the price stood at USD
1140/MT FOB Shanghai. The demand from downstream industries was bearish
because the consumer’s confidence in the end-use polyester industries was not
healthy to support the upward trend

PX prices dipped marginally amidst bearish upstream around 20 th March 2023.

However, steady demand recovery bolstered trade for April-May delivery. Over the
week lesser loss in Aromatics over naphtha supported margins; PX-Nap delta rose
$56/MT,BZ-Nap margin $40/MT and TL-Nap by $38/MT respectively.
IOC has given the EPCC contract for its new PX plant at Paradip to Tecnimont SPA
and Tecnimont Private Ltd. which will deliver engineering, procurement,
construction, and commissioning (EPCC) of the complex’s new PX plant and
related offsite installations. Once completed, the new plant will have a PX
production capacity of 800,000 tpy, which will be used as feedstock for an adjacent
1.2-million tpy PTA plant to be built as part of complex.

The PX plant will receive its feedstock of reformate from the refinery’s existing UOP
LLC-licensed continuous catalyst regeneration (CCR) platforming unit, according
to official project documents from IOC and the government of India. Maire
Tecnimont—which valued the lump-sum EPCC contract at about $450 million—
said mechanical completion of the PX plant is scheduled for 33 months from the
award date, or sometime in early 2024. In official project documents filed by IOC
with the government of India, the operator said the PX plant will consist of an
integrated, UOP-licensed aromatics block that includes the following proprietary
units and technologies: a xylene fractionation unit, a Sulfolane unit, a benzene-
toluene fractionation unit, a Tatoray unit, a Parex unit, an Isomar unit. The
complex’s PTA will consist of two sections, the first of which will use a feedstock of
PX to produce crude terephthalic acid (CTA). A second section of the plant will then
use the CTA to produce high-purity PTA, according to IOC.
xvi. Intermediates

Fibre Intermediates
The textile industry contributes 5% to the GDP from domestic trade and 7% from
foreign exports. However, these values are expected to increase this year, making
this industry one of the leaders in the Indian economy

India synthetic fiber industry is the new addendum to the ever-growing Indian
Textile Industry as it plays a vital role in the Indian Textile industry. The synthetic
fiber industry of India has shown tremendous business potential and the industry
has grown stupendously over the recent years.

The primary or key raw materials used to make polyester are Purified Terephthalic
Acid (PTA) and Mono Ethylene Glycol (MEG). Both PTA & MEG are also used in
large quantity in non-textiles segment applications. Textile applications accounts
for only 60-65% of the total polyester production in India. PTA & MEG are a key
raw material that also caters to packaging (bottle & film), automobiles and industrial
applications.

India is net importer of PTA and MEG and thus the demand-supply situation in the
international market has an influence on the domestic prices. The export scenario
of the Indian textiles industry remains good.

PTA import volumes into India shot up in 2021-22 to 1297 KT from 590 KT in the
previous year. Imports are expected to see a rise again in next fiscal to touch 2000
KT. In April 2022, while the prices of PTA increased by 26% from October 2021 to
April 2022, the prices of MEG declined by 23% in same period.
PTA prices as per Platts, in 2021-22 over 2020-21 rose 51% and from Apr’22 to
Feb’23 prices increased by 15%. However, from $914/ton in Apr’22, the prices had
reduced to $775 in Feb’23.

While MEG as per Platts, in 2021-22 over 2020-21 rose 35% and from Apr’22 to
Feb’23 prices crashed by 22%. India witnessed huge imports of MEG in 2022-23
almost 1600 KT, mainly from Kuwait, Saudi Arab, UAE and Singapore. While
Middle east does have a feedstock advantage and location proximity to India.

In case of MEG, re-investment economics is unfavourable due to exportable

surplus in Asia. Further there is expansion plan of around 25 million tons in China
during 2023-2035 period. Volatility in Crude price, as well as that of Paraxylene,
has caused considerable loss to the industry in terms of Inventory losses. While in
recent times the prices of petrochemical feedstock has increased significantly, the
import price of MEG has seen a decline.

This terrible situation is led to shutting down of the domestic MEG industry. Indian
Glycols Limited (150 KTA, ~7% of Indian capacity had severely cut down MEG
operations to merely 25% and Indian Oil Corporation (Capacity 325 KTA) had taken
the plant under complete shutdown since Jul’22 till January 2023. Reliance
Industries Limited (Capacity 1740 KTA) has also been reduced by 20% and is
implementing quick plans to further reduce by another 10%.

Collectively domestic MEG producers were not running over ~85% average since
last Financial Year and which has further dropped to 80% since this calendar year
2022 and further dropped to ~70-75%. The situation is becoming alarming for entire
polyester value chain as MEG plants are shutting down in India will also impact
polyester industry operations adversely. The shutdown of PTA plants also led to
increase in imports.

The last PTA capacity addition commenced in the region was back in 2015, when
Reliance Industries started two megaton plants within a few months of the start of
the first plant. Since then, PTA capacity has remained mostly stable (barring some
small debottlenecks) at 6.4 million metric tons per year. Production has almost
always been at peak possible rates, with PTA availability determining polyester
production. Several technical factors have limited PTA production to about 90% in
the region over the past five years. In late 2020 and 2021, for the first time in several
years, there was a broad-based shutdown of PTA plants in the country, primarily
due to lower polyester operating rates during the pandemic, which was made up
for by a large increase in imports in 2021-22.

Currently, India’s PTA capacity is at ~ 6.4 MMTPA of which RIL commands a lion's
share of ~78% (4.5 MMTPA).
Reliance will also expand its polyester chain capacity by adding 3 million mt/year
of purified terephthalic acid capacity and 1 million mt/year of polyethylene
terephthalate capacity at Dahej, Gujarat state, by 2026, as announced at the
company's annual general meeting.

The new capacity at Dahej would boost its capacity by ~ 60% by FY26. More than
60% of the end usage application for PTA is in the textile space (polyester fibre and
yarn). Considering the vast export potential, the Government of India has already
announced incentives to promote the growth of manmade fibre industry through
production linked incentive scheme (PLI). Material increase in capacity by the
market leader signifies bright prospects for India’s man-made textile value chain.

JBF was in the process of building a PTA plant with an initial estimated start date
of 2017. This project was co-located with the OMPL PX plant in Mangalore, India,
and JBF was the first merchant licensor of BP’s new generation technology.
However, that company ran into commercial difficulties in 2017 and the project had
been stalled since then, despite being almost 90% complete. In October 2022,
GAIL (India) won the financial bid to take over the debt-laden asset through an
insolvency process. After duly securing ownership of the asset, the company plans
to be able to start-up the plant in 2025, at the earliest.

In India, poor margins and limited PTA availability had discouraged polyester
capacity additions over the past couple of years. However, additional polyester
capacity has been starting up since 2022, which will increase PTA demand in the
region, although growth rates will be constrained by the lack of additional local PTA
supply, which is not expected to become available until 2025.

In India, PTA capacity available is enough to meet domestic demand (6.4 Mn

Tons). However, capacity utilization was only 74% in 2021 and 80% in 2022.
Domestic PTA Industry has planned for capacity addition to take care of future
domestic demand. Expansion of 5.5 Mn Tons over existing 6.4 MMT is planned by
domestic PTA players. There has been a huge overcapacity in Asia with total PTA
exportable surplus of ~26 MMT collectively available with China, Korea, Thailand
and Vietnam, and is likely go up to 33 MMT by 2025.

China alone is having over capacity of 18 Mn Tons in 2022 which is around three
times of India’s domestic PTA consumption of India and is expected to go up to 27
Mn Tons in 2025 which will be four times the expected domestic PTA consumption
of India. After the removal of ADD on PTA imports, there has been a sharp increase
in PTA imports of around 130% in 2021 over 2018, mainly from China (increasing
by more than 1500%).
 Table 11: Fibre Intermediate Demand Supply

ACN 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 0 0 0 70 70
Production 0 0 0 35 65
Imports 135 176 222 215 205
Exports 0 0 0 0 0
Demand 135 176 222 250 270
Demand Growth (%) -23.3% 30.4% 26.1% 12.6% 8.0%
Caprolactam 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 70 120 120 120 120
Production 72 86 90 94 100
Imports 68 74 74 74 74
Exports 6 0 0 0 0
Demand 134 160 164 168 174
Demand Growth (%) -11.3% 19.4% 2.5% 2.4% 3.6%
PTA 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 6440 6440 6440 6440 6440
Production 5082 5616 5645 5796 5796
Imports 611 1350 1550 1800 2200
Exports 130 53 1.944 0 0
Demand 5563 6913 7193.056 7596 7996
Demand Growth (%) -14.6% 24.3% 4.1% 5.6% 5.3%
MEG 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 2215 2215 2279 2705 2705
Production 2036 1969 1642 2225 2396
Imports 648 950 1400 1000 1000
Exports 284 27 20 30 30
Demand 2400 2892 3022 3195 3366
Demand Growth (%) -7.3% 20.5% 4.5% 5.7% 5.4%

Indian PTA industry has enough capacity to meet domestic demand (6.4 Mn Tons).
However, capacity utilization was only 74% in 2021 and 80% in 2022. Domestic
PTA Industry has also planned to enhance capacity to take care of future domestic
demand. Expansion of 5.5 Mn Tons over existing 6.4 MMT is planned. Total PTA
exportable surplus of ~26 MMT collectively available with China, Korea, Thailand
and Vietnam, likely go up to 33 MMT by 2025.

China alone is having over capacity of 18 Mn Tons in 2022 which is thrice the
domestic PTA consumption of India, and it is expected to go up to 27 Mn Tons in
2025 which will be four times the expected domestic PTA consumption of India.
After the removal of ADD on PTA imports, there has been a sharp increase in PTA
imports of around 130% in 2021 over 2018, mainly from China (increasing by more
than 1500%). The demand for fiber intermediates is driven by its increasing use in
the manufacturing of synthetic fiber such as polyester and others. The fiber
intermediates market is likely to grow on account of the increasing demand for
synthetic fibres in various applications such as clothing, furniture, and upholstery.
The expanding textiles industry, as a result of increased spending on clothing
coupled with changing fashion trends, is likely to propel the growth of the fiber
intermediates market.

Recently, strategic partnerships have emerged as the key trend gaining popularity
in the mono ethylene glycol market. Major companies operating in the mono
ethylene glycol sector are looking for partnerships to reinforce their position in the
market. For instance, in March 2022, Braskem, a Brazil-based petrochemical
company, partnered with Sojitz Corporation, a Japan-based trading company. This
partnership aims to increase the industrial production and sale of chemicals made
from renewable sources.

Meanwhile, the EU imposed antidumping duties on MEG imports from the US and
Saudi Arabia in late 2021, leading to more US and Saudi Arabian MEG supplies in
Asia at times. Additionally, in late October 2022, India dropped its antidumping
investigation on MEG imports from the US, Kuwait and Saudi Arabia, renewing
attention for US export cargoes to the country. Asian MEG margins were
uncompetitive, as per analysts. Asian price outlook remained mixed amid weak
demand in the wake of an uncertain economic outlook and rising costs, as per
analysts. With the bullish stance of suppliers, however, prices need to move up in
line with rising oil costs, while production cuts would continue until the margins
strengthen, analysts added. Upcoming MEG plants in 2023 will add to oversupply,
but there may be delays to the new starts given a shaky macroeconomy and
inflation, as per analysts. The companies that plan to open these coal-based plants
at a lower rate than not start at all as the investment had been made. The MEG
demand outlook is mixed, with polyester accounting for more than 60% of MEG
demand and China continuing to dominate trade flows and futures as it accounted
for 60% of global demand.

ACN production was stopped by RIL and demand is being met by imports on the
back of pesticide industry doing well. However, RIL has plans to re-start the
production by 2022-23 end by adding 70 KT. HPL, in the second phase of revamp
of Nagarjuna Oil Corp Ltd (NOCL) refinery, the company plans to setup a 1.6m
tonnes/year paraxylene (PX) line and a 1.25m tonnes/year purified terephthalic
acid (PTA) plant.
India’s petrochemical giant, Indian Oil Corp. (IOCL) gave a nod for an investment
of INR 13,805 crore towards setting up a plant in Odisha's seaport city of Paradip,
solely dedicated towards manufacturing raw materials for the textile sector. The
construction of this Paraxylene (PX) and Purified Terephthalic Acid (PTA) plant is
slated to complete by 2024. As stated by a company official, the upcoming plant
would be integrated with the Indian Oil's refinery located in the port town of
Jagatsinghpur district.

The petrochemicals complex will have PX production capacity of 800 KTPA which
would serve as the feedstock for manufacturing purified terephthalic acid which is
a key raw material for the production of polyester yarns. The PTA plant capacity
would stand nearly at 1200,000 tpy post the commissioning. Plant backed by
IOCL’s upcoming MEG facility in Paradip would serve as a source of feedstock for
the company’s upcoming 357 KT textile yarn manufacturing project located in the
city of Bhadrak in Odisha.

MEG plant has been commissioned recently by IOC. The project will help in
consolidating the Polyester business of the corporation by way of producing MEG
which will be is used in manufacturing Polyester fibres, Bottle grade Chips &
Polyester film grade chips. MEG is also used in non-Polyester applications, like to
produce Antifreeze, Coolants, Paint formulations & Acrylic binders etc. This Project
envisages recovery of ethylene present in FCC off-gases and then upgrading it to
MEG, Di Ethylene Glycol (DEG) and Tri Ethylene Glycol (TEG) at Paradip Refinery.

MEG plant has been commissioned recently by IOC. The project will help in
consolidating the Polyester business of the corporation by way of producing MEG
which is used to manufacture Polyester fibres, Bottle grade Chips & Polyester film
grade chips. In non-Polyester applications, MEG is used to produce Antifreeze,
Coolants, Paint formulations & Acrylic binders etc. This Project envisages recovery
of ethylene present in FCC off-gases and then upgrading it to MEG, Di Ethylene
Glycol (DEG) and Tri Ethylene Glycol (TEG) at Paradip Refinery.

Demand for Caprolactam was subdued as compared to last year in India. Despite
the pandemic-led adverse market scenario in which raw material prices sky-
rocketed in the international markets. FACT produced 963,000 MT fertiliser during
the year. Total fertilizer sales for the year crossed one million MT.

Another highlight for FACT during the year is the restart of Caprolactam production
after about nine years. The company produced 20,835 MT of Caprolactam resulting
in considerable reduction in import of Caprolactam to the country. FACT is also
planning to increase its production capacity with an additional NP fertilizer plant at
its Cochin Division located at Ambalamedu. The work for the new project has
already started and is expected to be completed by 2024. This will add another
500,000 MT to the total production capacity of the company.
Majority of the Caprolactam produced in India is utilized during the production of
nylon 6 fibres and nylon 6 resins, to cater textile and engineering plastic product
manufacturers, respectively. In 2021-22 the demand rebounded to staggering 20%
from negative a year back. It is expected to however see a tepid growth in coming
two years. In another development outside India, in August 2022 San Diego-based
biotechnology firm Genomatica (Geno) and its collaboration with Asahi Kasei to
commercialize renewably sourced nylon 66. Nylon 6,6 is produced using
approximately 50% HMDA along with ~50% adipic acid. ow, the company reports
that it is one step closer to commercialization of renewable nylon 6 with its long-
term partner Aquafil, Italy’s nylon 6 fiber producer.

The partners produced the first several tons of plant-based nylon-6 building block
caprolactam, have converted it to nylon 6 polymer and are now in the process of
transforming it for evaluation in nylon applications, ranging from yarns for textile
and carpet to engineering plastics for automotive as part of pre-commercial
quantities from demonstration production taking place in Europe. Geno also
confirmed that they also are currently exploring a range of opportunities in North
America and internationally. Having successfully completed the pilot-scale
production runs of 100% plant-based nylon 6, the partners have advanced to
production of pre-commercial quantities which will help determine the final design
of future commercial plants. The material will go to leading global brands and their
value chain partners who are eager to explore and develop renewable products,
create showcase goods and test feedback with customers. A significant
collaboration is with Covestro, which this past January, announced that the
partners had teamed up to be the first to successfully produce significant volumes
of a plant-based version of HDMA. Asahi Kasei currently produces petro-based
nylon 6,6 under the brand Leona™ an engineering plastic featuring outstanding
heat resistance and rigidity for use in automotive and electronics applications as
well as yarn for airbag fabric.
xvii. Polymers, Fibres and Elastomers
There was no dearth of headwinds throughout the year, which impacted India’s
path to economic recovery. The year began with the threat of the Omicron variant
of the coronavirus. Fortunately, the threat subsided fairly quickly, without impacting
the economy in any significant way. The only problem was that this headwind was
replaced by Russia’s invasion of Ukraine in mid-February, leading to further
disruptions in the global supply chain.

The chemical industry in India experienced robust growth in 2022 and was one of
the few industries that recovered well after the COVID-19 pandemic. It has the
potential to keep growing in the upcoming years. Overall, business environment
started improving in 2022. Economy started to come back to normalcy, the demand
started to see a pickup from end use sectors as people once again began
purchasing. Other events and conference and even the big public events, like the
fabulous Indian Premier League, supported consumption. Packaging is a key
downstream sector for PE. Food packaging supported the PE demand and pushed
converters to include a wide range of packaging options. Essential goods
manufacturers in India have also added smaller packaging sizes to their product
lines to increase accessibility for low-income customers.
The rising consumption has helped balance demand with supply in India. With the
increasing purchasing power, the demand for petrochemical is on the roll. The
products cover all the essential daily use items ranging from housing, clothing,
construction, automobiles, horticulture, furniture, household items, packaging,
medical appliances and much more. This has given polymers the much-needed
push in the country. The per capita consumption of polymer has reached the
saturation level in US whereas India is expected to maintain a high economic
growth propelling the country’s polymer consumption. Polymers witnessed a robust
growth of 10% in 2022-23, with rise in demand in PVC close to 30%, all PE
(LD+LLD+HD) 9%, and polypropylene 5%.

LDPE witnessed highest share under general purpose, followed by EC, AL, MP
and HD in 2022-23. In case of LLDPE, Butene 1 MI saw the maximum growth,
followed by Metallocene and Butene 2 MI. In case of HDPE, maximum growth was
seen in blow molding segment, followed HM pipe, injection molding and raffia.

HMEL was expected to begin its new PE plant soon with 450 KT HDPE capacity
and 800 KT, LLD/HD swing plant. January witnessed OPAL operating at reduced
rates because of tight gas availability, 340 KT HDPE, 720 KT LLD/HD. Whereas
Haldia faced some technical issue at its naphtha-based cracker. It too was
operating at reduced rates 330 KT LLD and 615 KT LLD/HD plant and 330 KT PP
plant. PP demand remained firm in Q1’23 with demand for grain and fertilizer
packaging with increased agricultural activity.

With HMEL capacity addition, the HDPE capacity in India is projected to touch
3515 KT by 2024-25 and demand 3730 KT. Similarly, in case of LLDPE, the
capacity by 2024-25 is projected to touch 2945 KT and demand 3225 KT.

As per Nayara Energy, the Phase-1 project development has achieved over 85 per
cent progress and expects production of its first petrochemical product i.e.,
polypropylene by Q4 of 2023. In case of PVC supply availability remained a
concerned for Indian buyers in first half of 2023. With industrial activity, especially
construction and agricultural acidity with rainy season on the anvil, demand for
agricultural pipe used in irrigation is likely to boost PVC demand.

Important to highlight is that India is deficit in Polyethylene (PE), is dependent on

imports for fulfilling demand. Presently on account of demand supply gap especially
in LD/LLDPE, imports are arriving to cover up the shortfall. More investments in
this segment needs to be encouraged to bridge the demand-supply gap going
forward. In case of PE, HDPE imports registered ~1200 KT coming into India in
April January period
In case of Polypropylene – India has large surplus capacity despite which
significant imports take place (1100 KT in 2021-22), mainly from FTA countries –
Singapore etc. PVC - India has a deficit of 2 MMT for a long time now, where
industry needs government policy intervention. RIL plans to add 1.5 million tonnes
a year of fresh capacity while Adani group which intended to build 2 million tonnes
a year of the production facility has put this project on hold. If this project came
along total planned combined capacity of 3.5 million tonnes will more than triple
India’s capacity in a few years. IOCL has recently announced an investment of Rs.
4000 crore for a PVC project of 200 KT to bridge the supply deficit expected
increase further with growing demand in the country.
Table 12: Polymer Demand Supply

Polymers (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 14157 14190 14405 16162 16739
Production 12350 12857 11922 14995 15512
Op Rate (%) 87% 91% 83% 93% 93%
Import 3601 4089 6344 4601 5250
Exports 1799 1024 490 351 380
Net Trade -1802 -3065 -5854 -4250 -4870
Demand 14696 15913 17523 18832 20132
Demand Growth % 0.0% 8.3% 10.1% 7.5% 6.9%

The Indian domestic polymer industry (like global industry) was dominated by
Polyolefins (PE & PP). After clocking a flat growth in 2020-21 the polymer growth
witnessed a rebound growing at 10%. The demand is expected to be around 7% in
next two fiscals as well. Polymer import dependency witnessed an increase with
PVC, PP, HDPE imports witnessing a rise in 2022-23.

In 2022-23 net trade deficit of total polymers stood at 5854 KT which was higher
than previous year which stood at 3065 KT. India’s petrochemical demand is likely
to more than triple in the next two decades due to the evolution of new crude-to-
chemicals technologies coupled with rapidly changing consumer lifestyles which
calls for an increase in plastic consumption.

Overall, the polymer industry has seen strong growth in 2022 and is expected to
continue growing in 2023, with the global demand for resins and polymers
increasing. It is estimated that the focus on sustainability and green solutions in the
industry will be increased. It is because companies are looking forward to more
eco-friendly ways of producing and using polymers. Efforts would be made towards
creating new and improved polymers that can meet the needs of a rapidly changing
world.
xviii. Polyolefins
Table 13: Polyolefin Demand in India Actual & Projected

(KTA) Actual Projected % change year on year

2020-21 2021-22 2022-23 2023-24 2024-25 2021-22 2022-23 2023-24 2024-25

LDPE+EVA 973 1047 1073 1153 1243 8% 2% 7% 8%
LLDPE 2518 2650 2781 2983 3225 5% 5% 7% 8%
HDPE 2775 2933 3200 3500 3730 6% 9% 9% 7%
PP 5358 6089 6370 6816 7293 14% 5% 7% 7%
Polyolefins 11624 12719 13424 14452 15491 9% 6% 8% 7%
Source: Industry Estimates

India’s polyolefin demand witnessed a 6 percent growth in the current financial year
ending March 2023 because of a revival in the domestic consumers’ sentiment,
especially in rural markets where the growing agriculture economy and demand
from infra sectors encouraged buyers to take advantage of the current low price
and fill the past two years Covid-related consumption gap.

As per estimates India’s polyolefin demand was 13.4 million tonnes for the financial
year 2022-23 compared to 12.72 million tonnes in the previous year. The source
further estimates India’s polyolefin demand would continue to rise to 15.4 million
tonnes in the financial year 2024-25. All PE registered a modest demand growth of
6.2% in 2022-23 to touch 6846 KT. By 2025, demand is forecasted to touch 7965
KT with end use sector demand increasing.
xix. Vinyl’s: PVC
India is the world’s largest importer of PVC resin, followed by the US and China.
The country imported more than 2 million. tonne, and half of the over 3.9 million
tonne annual demand 2023-24. Most of the imports were made from Japan,
Taiwan, China and South Korea in 2021-22 and current year 2022-23. The imports
bridge the gap between demand & domestic supply in case of PVC resin. Despite
rapid growth in demand expected in India linked with GDP, the wide gap in
demand-supply is likely to persist.

Given the supply deficit in the country, the consumption growth is driven mainly by
imports with domestic capacity having remained stagnant over last several years.
As per industry estimates, total PVC imports of ~2.1 million MT are expected in
India in FY23 taking share of imports to ~60% of total PVC consumption of ~3.7
million MT expected in India in FY23 after recovering the lost ground due to Covid.

The import offers to India have fallen by more than 46% from Mar 2022 to Mar 2023
under shadow of weak demand globally which has resulted in fierce competition
amongst PVC exporters mainly Chinese & US amidst surplus supply and has
forced them to continue to lower their price offers to international markets in fear of
losing out their market share to competition.
US and Asian producers have looked at export markets in India and elsewhere
which were better off in terms of demand for offloading their surplus inventory. Last
year, the zero covid lockdowns in China amid poor construction demand hurt local
demand for PVC there. This caused surplus inventory to build up and lifted their
exports which led to bearish pricing sentiment globally. Rising interest rates and
high inflation have siphoned off domestic housing demand in US and Europe which
in turn has weakened the demand for PVC in these markets. Normalization of
container freights has also influenced this decline besides poor demand & lower
Asian offers.

Besides price competition from US PVC supplies last year amid falling PVC offers
from China, the global caustic soda rally amid soaring utility costs ensured that
PVC operating rates remained high globally, offsetting the losses from PVC
operations and contributing further to PVC slump.

Asia especially China & the US, both are expected to be dependent on exports for
now with domestic demand seen sluggish amid pressure to maintain reduced rates.
While China has relaxed Covid-19 related restrictions/policies now, weakness in
their housing and construction markets has continued to keep their domestic PVC
demand muted as of now.

While uncertainty regarding US interest rate hikes & global inflation remain, a global
demand recovery would likely be limited without a full demand recovery in China
that will impact competitiveness of US PVC exports in global markets. The demand
in China is definitely better than last year, but, it still remains below par. With some
new capacities also expected there, it will remain a net exporter. Amid decline in
energy costs from record highs, there is cautious optimism in US & Europe even
as high inflation rates and continued geopolitical pressures weigh on consumer
spending. Global markets could see a slow recovery in CY23, with prices largely
seen to have bottomed out amid high feedstock costs.

Pipes & fittings used in Agriculture & Construction account for more than 70% of
PVC resin consumption in India as against ~45% for the world. The other key
drivers for PVC Resin is the growth coming from applications other than pipes such
as packaging, profiles, pharmaceuticals segments, etc. which are expected to
account for a higher share of the demand for PVC Resins in the years to come.
India’s per capita PVC consumption is 2.4 kg which is low compared to 10.3 kg in
China & 12.7 kg in US. With steady rise in demand and promising prospects in the
downstream agriculture, building & construction and infrastructure segments amid
high dependence on imports, India is likely to remain at the forefront of the global
PVC market.
PVC market witnessed a staggering growth in 2022-23 growing at 30% and
demand touching 3679 KT. Industry likely to grow at 7% to 3934 KTA in 2023-24,
with imports of ~2416 KTA and further increasing to 2650 KT by 2024-25.

India has a deficit of 2 MMT for a long time now, where industry needs government
policy intervention. With RIL plans to add 1.5 million tonnes a year of fresh capacity
while Adani group which intended to build 2 million tonnes a year of the production
facility has put this project on hold. If this project came along total planned
combined capacity of 3.5 million tonnes will more than triple India’s capacity in a
few years. IOCL has recently announced an investment of Rs. 4000 crore for a
PVC project of 200 KT to bridge the supply deficit expected increase further with
growing demand in the country. In suspension PVC, Chemplast Sanmar has
331,000 tonnes/year of capacity in Cuddalore after completing a 31,000 tonne/year
debottlenecking in May 2022. Its 41,000 tonne/year specialty PVC paste project in
Cuddalore is on track to be commissioned in H2 of the company’s fiscal year 2024
(October 2023-March 2024).

DCW Limited ("DCW"), a leading speciality chemical company in India, plans to

double its CPVC capacity by adding another 10KT capacity. The Company also
plan to augment the capacity utilization of its SIOP plant to 100% with some line
balancing Capex to generate an additional 10KT of production per annum. As per
Company estimates, the CPVC project is expected to be commissioned in 2nd half
of FY24 & SIOP de-bottlenecking to be completed by Q1 of FY24.

Meghmani Finechem Limited (MFL), in January 2023 announced it has expanded

its manufacturing capacity of CPVC, 1.5 folds to 75,000 tonne per annum (TPA).
The company will be adding another 45,000 TPA by the fourth quarter of 2023-24.
In India, inventory level was reported to be high after huge PVC imports in
February, which slashed buying appetite for import materials. Industry sources
estimated imports of PVC into India in February at around 325,000 mt, against
245,000 mt in January. An Indian producer said the import quantity in February is
quiet high into India and traders have been reducing offers. Consumption is very
strong, but the only thing is availability is very high.

On the other hand, PVC demand remained strong in India as March-May is the
peak consumption period after slow season around the end of March. Meanwhile,
the price spread between PVC and vinyl chloride monomer feedstock was
calculated at $105/mt March 15, the lowest level since July 6, 2022, when the
spread was calculated at $90/mt, according to the data. The spread is lower than
the typical breakeven level of $150/mt, the data showed.
 Table 14: PVC Demand Supply

PVC (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 1557 1557 1617 1672 1717
Production 1367 1414 1493 1508 1510
Imports 1394 1433 2186 2416 2650
Exports 19
Apparent Demand 2745 2834 3679 3934 4170
Demand Growth% -15.8% 3.3% 29.8% 6.9% 6.0%

While announcing the Budget for the financial year 2022-23, India’s finance
minister Nirmala Sitharaman laid special emphasis on the government’s flagship –
‘Har Ghar Nal se Jal’ - scheme to provide tap water to the rural household by
allocating a 20 percent increase in allocation under this scheme.

Current coverage of ‘Har Ghar Nal se Jal’ scheme is 87 million households. Of

these, 55 million households were provided tap water in the last two years. The
allocation of Rs 60,000 crore has been made to cover 38 million households in
2022-23. The ‘Har Ghar Nal se Jal’ scheme is likely to boost the demand for PVC
pipes in India. As per the existing regulation, the government doesn’t encourage
the participation of non-ISI (Indian Standard Institute) marked pipes for application
in any government-sponsored project. Hence, most players in the unorganized
sector would not be availed of this benefit.

The implementation of drinking water supply works to ensure tap water supply in
rural villages to raise demand for materials like cement, bricks, gravel, sand, steel,
pipes, motors, faucets, etc. on one hand and engagement of unskilled, semi-skilled
and skilled workers for creation as well as for operation and maintenance of water
supply schemes on the other. This also boosts the rural economy and income
generation to people in rural areas. Apart from India, new PVC capacity is coming
up in Middle East. Qatar Vinyl Co’s (QVC) new 350,000 tonne/year polyvinyl
chloride (PVC) plant in Mesaieed is slated for completion in mid-2025, with
Industries Qatar expected to have a direct 44.8% stake in the company in May
2026.

The PVC plant, which will be the first in Qatar, will be integrated with QVC’s existing
vinyl chloride monomer (VCM), ethylene dichloride (EDC) and caustic soda
facilities in Mesaieed. Currently, QVC is a joint venture among three entities –
MPHC, Qatar Petrochemical Company (QAPCO) – a subsidiary of Industries Qatar
– with a 31.9% stake, and Qatar Energy with a 12.9% stake. This ownership
structure will expire on 1 May 2026, MPHC and Industries Qatar. Being the first
PVC plant in the State of Qatar, the project aims to position Qatar as a new regional
player in PVC production, while reinforcing the downstream value chain.
xx. Styrenics

A. Polystyrene
In 2022, on the demand side, the Asian polystyrene market faced the same outlook
as feedstock styrene, with concerns over continuous COVID-19 lockdowns in
China, affecting appetite for end products. This pushed consumer demand to
Southeast Asia. The acrylonitrile-butadiene-styrene outlook for the second quarter
remained mixed, with continuing consumer uncertainty due to COVID-19
lockdowns, and relatively cheaper domestic prices in China. Around 3 7 Mt/year of
new capacity will come on stream over 2022 2025 and most in Northeast Asia. All
of the new capacity in Northeast Asia will occur in China. However, we do expect
delay considering the overall supply and demand market conditions. Some
elimination of old plants should also occur in the future considering the fierce
competition among both PS producers and ABS producers.
One new PS plant expected to start production in India later in 2023.

Supreme Petrochem has announced that Consent to Operate (CTO) has been
received by company from Maharashtra Pollution Control Board (MPCB) on 30th
December 2022 for polystyrene (PS) and Expandable Polystyrene (EPS) capacity
expansion projects at its plant situated at Village Amdoshi, Taluka- Roha, District-
Raigad, Maharashtra. Consequently, the company's effective manufacturing
capacity of Polystyrene (PS) will stand increased from the existing 2,20,000 MTA
to 3,00,000 MTA and Expandable Polystyrene (EPS) will stand increased from the
existing 50,000 MTA to 85,000 MTA. The company also completed EPS production
facility revamp programme / commissioning trials at its plant situated at Manali New
Town, Chennai, Tamil Nadu on 28/12/2022 and consequently the effective
production capacity of EPS at Manali Plant has increased from the existing 24000
TPA to 33000 TPA. In 2022, Supreme Petrochem Board approved the Phase II
expansion of its expandable polystyrene (EPS) plant at Nagothane, Maharashtra
by 30,000 MTA. The board of the company also approved setting of second-line of
Extruded Polystyrene Board
(XPS) with the capacity of
1,00,000 M3 and increasing the
Masterbatch and Compounds
capacity by 50,000 MTA

General polystyrene is also used

in disposable medical products
such as test tubes, test kit shells,
diagnostic products, culture plates
and tissue trays.
Bathroom accessories and gardening equipment are also made from GPPS.
The range of applications for this type of polystyrene is very wide. GPPS is used
for disposable cups, case for a box lunch and a household dishes, confectionary
tray, package, CD cases, container for a seasoning, various films, etc. Packaging
is the largest segment for HIPS. It is used for food packaging (of meat trays, egg
cartons, fruit trays, dairy packaging, etc.), industrial packaging, and consumer
packaging (of cassettes, CD covers, etc.). The food packaging sector has kept
demand positive during the coronavirus pandemic that has destroyed styrene draw
from other sectors. HIPS has seen a good demand from appliances like air
conditioners specially for the body and indoor unit panel. It has recently seen a
jump in demand in COVID testing kit, Malaria testing kit, pregnancy kit. Apart from
these, there is good demand for HIPS for probiotic bottles and cups for ice-cream
and curd by various manufacturers and food containers of various sizes.

On account of falling feedstock Styrene prices, the Asia Pacific market saw a
steady reduction in Polystyrene prices. The fourth quarter saw relatively low prices
for the commodity due to strong production rates and weak demand from the
downstream industries. Due to COVID restrictions and weak demand in the
domestic Chinese market, the Chinese market remained quiet in Q4.

The prices of Polystyrene remained diminishing throughout the third quarter of

2022 in the APAC region. The key factor governing the market sentiments of
Polystyrene is the diminishing prices of crude oil in the international market.
Feedstock Styrene prices kept declining in the Chinese market, proportionally
impacting the market prices of Polystyrene.
Table 15: Polystyrene Demand Supply

Polystyrene (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 490 490 518 518 518
Production 212 240 260 315 330
Imports 42 34 65 60 60
Exports 27 30 25 60 60
Apparent Demand 227 240 300 315 330
Demand Growth% -9.9% 5.7% 25.0% 5.0% 4.8%

In the second quarter, approximately a 3% price hike was witnessed in the prices
of Polystyrene in the Asia-Pacific market. Asian countries suffered from restricted
transportation elevating the market prices of Polystyrene. The demand from
packaging and disposable cutlery industries in countries such as India and South
Korea governed the elevated market prices of Polystyrene in the Asia-Pacific
market. In Q1 of 2022, the Asia Pacific market witnessed growth of 9.1% as
opposed to Q4 of 2021.
The surge in the prices occurred due to surging feedstock Styrene prices and high
crude oil prices. Further demand growth will however rely on global economic
recovery for both domestic and export markets, given great uncertainties. After
witnessing a negative demand growth in 2020-21, demand for Polystyrene
witnessed a modest growth in 2021-22 and in 2022-23 a robust growth of 25%. It
is forecasted that next two fiscal years will see a lower growth of around 5% and
demand will touch 330 KT. Imports witnessed an increase in 2022-23 and is
expected to remain around 60 KT in next two years.

B. Acrylonitrile-Butadiene-Styrene (ABS)
In the first two months of the third
Quarter of 2022, the Acrylonitrile
Butadiene Styrene prices declined in
the Asian market due to the
feedstock's weak cost pressure. The
quotations from feedstock Butadiene
were lower in Asia, which affected the
Indian market. In China, the decline of
the domestic butadiene market slowed
down in August. At the end of the
month, the quotations of major
manufacturers increased, and the
market atmosphere warmed up. The
main reason was the contradiction
between supply and demand. The
supply was on the high side, while the
downstream demand was relatively
low, and the external market was slightly boosted.

In September, the price of ABS saw a slightly upward trajectory due to high
feedstock Styrene prices in the Asian market. The cost of Acrylonitrile Butadiene
Styrene was recorded at USD 1582/MT on a CFR JNPT basis during the quarter
ending.

Acrylonitrile Butadiene Styrene prices fell in the Asian market during the second
quarter of 2022, with prices hovering at INR 188475/ton ABS Bulk High Flow Grade
Ex-Pune during June with a quarterly decline of 0.3% in India. The support for the
ABS cost side was diminished by the general decline in the market for the upstream
three materials. Recent days have seen a rise in tension between Russia and
Ukraine, leading to the closure of numerous oil fields and fluctuations in crude oil
prices. However, the market diverged significantly due to price transmission to the
ABS business chain.
The effects of the domestic plague on logistics are still being felt in East China,
where businesses and merchants continue to oppose shipments, and downstream
consumers frequently keep production on little needs.

The price of ABS saw declined trend during the final quarter of 2022 in the Asia
Pacific region. The three feedstocks saw mixed price trends in the Chinese
domestic market.

The demand from the downstream construction and automotive sectors was low
due to the Zero COVID-19 restriction, and the orders from domestic buyers were
reduced and inventories stockpiled in the market. At the same time, India also
followed the same trend due to high inventory from the exporting nations, and the
traders had significant availability of the product. Due to the year-end, some traders
were selling the product at low prices in the domestic market.
Table 16: ABS Demand Supply

ABS (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 205 215 225 230 230
Production 122 123 180 195 200
Imports 88 100 60 60 60
Exports 0 0 0 0 0
Apparent Demand 210 223 240 255 260
Demand Growth% -16.0% 6.2% 7.6% 6.3% 2.0%

Prices of ABS remained uncertain in the Asian region. In China, values decreased
by 6% during Q1 of 2022 amid the low demand from downstream industries. ABS
spot Shanghai prices settled at USD 2320 per tonne. However, in the Indian
Market, prices turned firm in March because of disruption in the global supply chain
amidst the Ukraine – Russia war scenario. However, raw material prices fluctuated
in the stable to firm range throughout the quarter in India. ABS Bulk High flow grade
prices showcased a decline of 15% in India from the last quarter of 2021. Demand
for ABS is growing at 6-7% since last two years.

While capacity additions are happening in China for Styrene, ABS and Polystyrene,
all these capacities are utilized.

India also is witnessing capacity expansions in ABS, as 10 KT was added by

Bhansali Engineering in 2022-23 and Lotte (Only compounding) added 10 KT since
year 2021-22, Supreme expanded Polystyrene capacity by 28 KT to reach 300 KT
in 2022-23.
Supreme Petrochem has undertaken Project for manufacture of Mass Acrylonitrile
Butadiene Styrene (mABS) at Village Amdoshi-Wangani, District-Raigad,
Maharashtra (India), with two Lines of 70 KTA each aggregating 140 KTA. Line I is
scheduled to go on stream by June 2024 and Line II is planned for completion by
March 2025. The Company has already entered into an agreement for License and
Basic Engineering Design for Line I of 70 KTA with M/s Vesralis-Eni Chemicals
Group. The total project cost for both lines shall be funded from the Company's
own funds. ABS has also seen a spurt in demand with the introduction of EVs
(electric vehicles) and fast expanding two wheelers market in India.

Two wheelers and appliances infact provide a huge scope for ABS applications in
India. And leading brands in India are expanding the use of ABS in the
manufacturing of their products in India example for refrigerators etc. ABS is used
as a raw material in various industries such as automotive, plastic, construction,
and others and all these industries showed a good recovery this year. Another
example is of Toys market in India. With toy imports from China reduced to BIS
specifications India has got oxygen to work and grow in this space and use of ABS
has gone up in this segment. Moulders have also invested heavily in India and
setting up new plants signalling good demand for ABS.

Asian market witnessed an overall supply recovery for polymers including

feedstock PC and ABS during the month of April and May, which ultimately led to
an ease in the regional prices. Besides, feeble demand from downstream
manufacturers played a significant role in pulling down the prices of feedstock ABS
and PC and their other derivative products in the region.

Demand in India continued to be supported by schools and offices means that

computers and the peripherals such as monitors, mouses, and keyboards are now
essential products, and with spurt in house construction activity in India has led to
rising demand for television sets and refrigerators. Increasing use of ABS in
fabrication industry, 3D printing or injection molding process is also supplementing
the growth of the market.

The rising demand for ABS from the

automotive sector and the rise in
demand for plastic pipes and sheets
will further accelerate the growth of
the market. ABS demand in India
witnessed a growth of 7.6% in 2022-
23 and is expected to grow around
the same in the following year before
witnessing a dip by 2025.
C. Styrene-Acrylonitrile (SAN)
Styrene Acrylonitrile prices plunged in the Asian market during the fourth quarter
of 2022 on the back of falling feedstock Styrene prices. Demand in the domestic
market remained subdued, and despite the festivities, the price of Styrene
Acrylonitrile remained unchanged in India, as did offtakes. Similarly, in other Asian
countries, supplies remained sufficient, and demand was unaltered. Hence the
market activity remained gloomy.

Furthermore, the import availability of the material remained steady in Indian ports
from Korea, China, and other exporting countries. Thus, inventory levels have been
termed stable throughout the quarter. In Q3, the prices of Styrene Acrylonitrile
continued to follow the retardation in China as the market remained quiet. Typhoon
Chaba destroyed the country's commercial hubs, proportionally impacting the
prices of Styrene Acrylonitrile. Major manufacturers had to shut down the plant on
a temporary basis for maintenance.

The decline in productivity rate and slow demand from downstream household
appliances such as refrigerators and electronic appliances became the key factor
for the decline in prices in the domestic market. Stagnancy in the prices of Styrene
Acrylonitrile in the Indian market was witnessed during the third week of July.

The demand for downstream medical devices, along with electronic appliances,
remained stagnant in the Indian market. The feedstock, Styrene prices kept on
declining in India, impacting the production cost of SAN in the domestic market.
However, demand for downstream medical devices and electronic appliances in
the Indian market remained flat. SAN prices for CFR Qingdao in the Chinese region
settled at USD 1 700/MT as a ripple effect.
The overall market trend of Styrene Acrylonitrile dwindled in the second quarter in
the Asia-Pacific market. Drastic fall was witnessed towards the quarter-end as the
Asian market remained quiet on the back of the restricted movement. Chinese
market remained muted as lockdown curbs were reimposed, halting the operational
rate of Styrene Acrylonitrile.

Immobility in the market led to a decline in demand from downstream, automotive,

and packaging sectors, consequently impacting the market dynamics of Styrene
Acrylonitrile in Asia-Pacific. The movement of cargo was stagnant. This led to the
availability of enough inventories to cater to the slow demand from the domestic
market. As a ripple effect, the market dynamics were slow in the Asian market.

In the first quarter of 2022, the market sentiments of Styrene Acrylonitrile in Asia-
Pacific region observed a growth of 16% as compared to Q4 of 2021. The prices
ranged from USD1947/ton CFR Shanghai in January 2022 to USD2000/ton, CFR
Shanghai China towards the end of the first quarter of 2022.

The prices of Styrene Acrylonitrile moved briskly due to the conflict between Russia
and Ukraine which consequently increased the feed (styrene and acrylic acid)
showing its proportional effects on the Asia-Pacific market.

Flourishing cosmetics and healthcare industries in the Asian market had boosted
the prices of Styrene Acrylonitrile. Moreover, after the implementation of lockdown
in China, the manufactures were forced to terminate the production of Styrene
Acrylonitrile temporarily, consequently increasing the prices of Styrene Acrylonitrile
in Asia-Pacific.
Table 17: SAN Demand Supply

SAN (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 170 170 170 175 175
Production 107 111 145 155 160
Imports 8 14 15 12 12
Exports 0 0 0 0 0
Apparent Demand 115 125 160 167 172
Demand Growth% -19.0% 8.7% 28.0% 4.4% 3.0%

SAN had been witnessing healthy growth in last two years due to its wide-ranging
usage in consumer electronics, appliances and automotive sector.

Significant demand for SAN is observed in various sectors owing to its impressive
properties like high rigidity, high heat resistance, and chemical resistance.
Increasing demand for Styrene Acrylonitrile in the electronics sector for jacketing
of air conditioner impellers, dial switches, and industrial battery switches on
account of its thermal insulation properties is expected to escalate the demand for
SAN in India.

Owing to the appreciable usage of SAN in autoclavable devices, medical light

diffusers, and dental applications, the demand for SAN is anticipated to grow
considerably on growth in the demand for medical devices due to potential
advances in the healthcare sector after Coronavirus stress. In addition to this,
demand for SAN in packaging applications in the cosmetic and food industry to
further drive the growth of the Indian SAN market

Demand for SAN is dependent on the yearly production of derivative Acrylonitrile

Butadiene Styrene (ABS). With capacity expansion of ABS in 2022-23, SAN
demand also witnessed a staggering growth of 28%in the said year.

The Indian writing instruments industry, which has been growing at a CAGR of
about 15% over the last decade, is already worth about Rs.2,500 crore and is
marked by a fierce competition among brands like Add Gel, Cello, Flair, Luxor, Linc,
Reynolds, Rotomac, Stic, Today’s and hundreds of other small-scale and
unorganised players. While the low-value segment (which includes ball point and
gel pens) constitutes 80% of the Indian market, mid (pens priced in the range of
Rs.20 to Rs.500) and high-end (the price tag goes as high as in lakhs) writing
instruments make for the rest 20%. Pen industry is growing at a fast space in India
now and SAN has seen a huge demand in
the pen market as well.

Dependance on Swiss machines have now

seen a decline owing to high waiting time to
import. Secondly the manufacturing on pens
in India has also seen a rise due to shift seen
in manufacturing from China to India, as
China has been moving and adopting to 3D
printers and robotics for manufacturing
pens. It is expected there will be an increase
in demand of SAN grades, with a focus on
consumer and industrial applications.

D. PET (Polyethylene Terephthalate)

In FY22-23, the estimated PET domestic demand was 1.5 MMT growing more than
pre COVID level. It overcame the degrowth during last two years, supported by
post COVID economic recovery. No significant capacity was added last year.
The demand drivers are primarily downstream consumption growth in different
application segments, which is propelled by increased on the go consumption
backed by strong summer seasonal demand last year, opening of educational
institutions, Offices, strong tourism, major festivities & marriage season. Demand
in country liquor segment of PET is 10% of the total PET demand.

Jars for household usage and edible oil consists of 15% of PET demand. Rest other
sectors such as pharma, personal / home care etc., contribute to remaining 20% of
the PET market.

PET market continuously rose in India in the Q1 2022 owing to the high demand
from packaging and textile industries. The speculations around the global crude oil
supply were unable to ease hence crude oil prices was trending upwards since the
beginning of Ukraine-Russia conflict affected its derivatives paraxylene and PTA
market. This had caused overall cost pressure on key value chains including PET.
Thus, PET price rose significantly and were assessed at USD1972.28/MT.

The Indian market for PET was ruled by its feedstock, which remained high in Q2.
In Q3, the Indian market witnessed a declining trend as a result of lower demand
and weakened feedstock PTA prices. Due to uncertainties in international price,
inflationary pressure cash flow remained a challenge for brand owners and small
converters, need based buying maintained with average raw material inventory 4-
5 days. The cash crunch eased out in third quarter of the year.
Table 18: PET Demand Supply

PET (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 2020 2055 2241 2574 2610
Production 1757 1788 2062 2394 2427
Imports 165 105.5 98 90 75
Exports 802 711 649 837 708
Apparent Demand 1120 1182 1510 1646 1794
Demand Growth% -0.4% 5.5% 27.7% 9.0% 9.0%

PET Imports into India FY 23 were around 100 KT, reduction by 4% over last year.
85% share of imports from China, Vietnam and Taiwan. Bangladesh’s new capacity
addition Meghna Group took rest 14% share. Major customers in South & East like
Sibi Polymers, Indopet, Varun Beverages and SNJ continued to import material.

Total Downstream investment estimated in FY22-23: 400 Cr; Capacity addition –

130 KT. Major Equipment suppliers are Husky/Krauss Maffei/SIPA/ASB and
Ferromatik.
Brand owners stayed active in launching different variants with new PET
applications.
- DAVAT launched drinks in different pack sizes (Limpoo, Love Apple, Malty);
- Storia Launched Nimbu Pani, Coconut water changing shape and size of
the bottle.
- Asian Beverages launched different variant of the bottle
- Dabur is planning to enter Cola segment.
- Coke has launched Limca Sportz. No Fizz product.
- Parle launched Smoodh (flavoured milk) packed in PET (Aseptic line)

Main driver behind India's PET demand growth is more widespread use of PET
packaging in the beverage sector in India.The outlook of domestic industry is very
positive with estimated growth of 9% in next year. New capacities are lined up IVL-
Nagpur (252 KT), Sumilon (144 KT), Jindal (90 KT) and Uflex (72 KT).

Braskem has been developing a chemo-catalytic production of MEG/MPG using

sugar since 2017 in partnership with Haldor Topsoe. MEG is the raw material for
the production of PET resin. Sojitz is also looking to produce biomass-derived
paraxylene via the Isobutanol pathway in order to be able to manufacture 100%
bio-based PET.

Sojitz have recently signed an agreement to form a JV focused on the production

and commercialization of BioMEG and BioMPG (monopropylene glycol). With the
completion of the technology development in 2022, the business plan foresees the
implementation of three industrial plants, with the start of operation of the first unit
in 2025.
xxi. Synthetic Fibres
Textiles is India’s foremost manufacturing industry. It has a significant impact on
the economy by contributing to industrial output, employment generation and the
export earnings of the country. India synthetic fiber industry is the new addendum
to the ever-growing Indian Textile Industry as it plays a vital role in the Indian Textile
industry. The synthetic fiber industry of India has shown tremendous business
potential and the industry has grown stupendously over the recent years.

Synthetic textile industry in India is self-reliant across the value chain right from raw
materials to the garmenting.

Fabrics made from synthetic fibres are international standard and known for their
excellent workmanship, colours, comforts, durability and other technical properties.
Due to heavy investments in world-class manufacturing plants, continuous
innovation, untiring entrepreneurship, new product mix and strategic market
expansion, India is soon going to cloth the entire world and set to take centre stage
in the global arena.

India is the second largest producer of synthetic fibres after China. The synthetic
fibre value chain is vertically integrated with upstream and downstream linkages
from raw materials to finished goods. Production of synthetic fibres in India
increased from 7954 KT in 2001 – 2022 to 8553 KT in 2022 – 2023 it is expected
to touch 10098 KT by 2024 – 2025
Government has recently announced to set up 7 Mega Integrated Textile Region
and Apparel (PM MITRA) Parks with a total outlay of Rs. 4,445 crores. The Parks
will come up in Tamil Nadu, Telangana, Gujarat, Karnataka, Madhya Pradesh,
Uttar Pradesh and Maharashtra. This will provide a big boost to synthetic fibre
industry in the country. The Indian textile sector is set to benefit from the
government’s priorities outlined in the budget 2023. The budget indicates the
government’s commitment to enhancing the textile sector’s competitiveness,
employment opportunities, and exports.

The government has set aside substantial funds for the textile industry, including
Rs. 10,000 crore for the production-linked incentive (PLI) scheme for textiles, Rs.
500 crore for the Indian Technical Textiles Mission, and Rs. 1,000 crore for the
National Technical Textiles Mission. These measures are expected to boost the
sector’s production and exports, as well as create more employment opportunities
for people in the country. PM Gati Shakti presents significant opportunities for
technical textiles to be used extensively. The Production Linked Incentive (PLI)
Scheme for textiles for Man Made Fibre Fabrics & Apparel, and Technical Textiles
is expected to attract investment of Rs. 19,798 crores for manufacturing. The
response of the industry has been very encouraging.

In addition, the government has announced several other initiatives to support the
textile sector, including establishing mega textile parks, providing infrastructure
development support, increasing support for the Handloom sector, and supporting
the growth of the jute sector. The textile sector is a significant contributor to India’s
economy, and the government’s focus on it in the 2023-24 budget is expected to
have a positive impact on the sector’s growth and development. The government’s
commitment to the textile sector’s development is also in line with its goal of making
India a global manufacturing hub and boosting its exports.

Government support
- Rs 10,683 cr Production Linked Incentive scheme in place
- Man Made Fibre (MMF), garments, technical textiles focus areas
- 7 PM Mega Integrated Textile Region & Apparel Parks planned
- MITRA scheme providing complete value chain support for textile
- $100 billion export target by 2030
- Incentive scheme for textile value chain
- Cotton Price Stabilisation Fund Scheme to push exports
- Replace Technology Upgradation Fund Scheme with PLI type plan
- Issue claims for 40,000 pending cases in ATUFS

Presently, India’s per capita fibre consumption is around 6.0 kg / per capita of which
MMF consumption per capita is 3.7 kg / capita only which is among the lowest as
compared to the world per capita MMF consumption which is around 10.1 kg / per
capita.
Hence, there is ample scope for increasing MMF per capita fibre consumption in
India and synthetic fibre will play the leading role in the growth story. There has
been an increasing awareness of unsustainable practices in the textiles industry
including carbon emissions, high energy and water input, usage of chemicals
polluting water and impacting aquatic life and high level of pre- consumer and post-
consumer wastes with tonnes ending up in landfills. The focus on green growth
along with the G20 priority of Lifestyle for Environment - LiFE would help make
textiles more sustainable and transition from linear to circular models. The recent
EU Strategy for Sustainable Textiles is also set to impact the suppliers in India with
greater compliances and quality adherence requirements including across recycled
fibres, reduce and repair ecosystem and producer responsibility.

With the increased awareness and consumer consciousness, India should

proactively gear up with focus on revamping:
- Processes including circular designs, use of blended fibres, natural source
fibres, Zero Liquid Discharge (ZLD), Effluent treatment plants (ETP),
chemicals management and use of eco-friendly dyes.
- Practices including reducing use of energy while increasing share of
renewables in the energy mix, and conserving water.
- Policies including safety at workplace.

With an emphasis on more sustainable fashion and Indian industry geared up to

compete in the new paradigm. To improve sustainability credential, India industry
is promoting recycling of PET products to prepare polyester fibre. Besides the
Government, the Industry is also gearing up with various initiatives promoting
innovation, digitization, increasing competitiveness and lowering cost of doing
business. Textiles 4.0 smart factories of the future are being conceptualized with
focus on intelligent manufacturing, end to end digitization, use of IoT, big data and
AI. With such pragmatic interventions, India is poised to attract substantial
investments and unleash tremendous potential in, both as a manufacturing and a
sourcing hub.

2023 has dawned with bright hopes for the Indian textile industry. The industry
seems to be headed towards a positive steady growth phase, after a period of
turbulence and uncertainty. With a world that is hopefully coming to the end of the
pandemic, things are looking up for the textile industry. This buoyant mood stems
from the series of measures taken by the Union Government to revive the fortunes
of the textile industry.

The sector was in dire need of some positive policy measures in this Budget. As
the second-largest source of employment in India after agriculture, the textile
industry must be viewed as a strategic sector that could be used to resuscitate both
consumption and employment thus creating a multiplier effect on the economy.
Demand momentum is expected to continue in FY23 in view of the reduction in
impact of COVID-19 and re-opening of retail space malls offices and schools along
with the reduction in logistics issues for export demand. Domestic demand for all
the textile sub-sectors has continued to improve from 2QFY22, after a slight dip in
1QFY22.

The increased demand momentum along with the supply chain issues has
increased the realizations. Demand for cotton remained all-time high in 2HFY21,
leading to reduced opening stock for the new cotton season. The rise in prices of
cotton has led spinners to accumulate the stock. The demand for MMF has also
continued to increase, mainly due to the rise in cotton prices, leading to a shift of
demand from cotton to MMF, to an extent.

From the highs of the pandemic, growth and demand for the textiles sector has
moderated this financial year. The Russia-Ukraine war, high inflation and the threat
of a looming recession in key markets like the US and Europe have led to a
slowdown in exports. The silver lining for the sector has, however, been robust
domestic demand and new pockets of growth.

The demand momentum sustained for home textiles in the domestic market
because of improved consumer spending. About 100 smart cities that are being
established have a huge opportunity for home textile as well because people are
shifting to these places and getting established there. So, markets are no more
restricted to metros. It is a good sign for manufacturers, retailers and for India as a
country, as prosperity is spreading in the smaller pockets. It is becoming visible in
retail sales in home categories as well. India’s annual textile and apparel exports
stood at USD 44.4 billion in FY 2022 with an increase of 41 per cent compared to
last year
 Table 19: Demand Supply Balance of Synthetic Fibre

PSF 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 2702 2762 2784 2919 2950
Production 1500 1650 1760 1813 1867
Imports 25 24 20 20 20
Exports 216 274 218 177 177
Demand 1290 1378 1530 1576 1622
Demand Growth (%) -11.3% 6.9% 11.1% 3.0% 2.9%
POY 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 3480 3480 3480 3766 4088
Production 2190 2861 2931 3238 3529
Imports 144 75 162 70 50
Exports 106 179 86 108 120
Demand 2228 2757 3007 3200 3459
Demand Growth (%) -12.6% 23.7% 9.1% 6.4% 8.1%
PTY 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 2640 2995 3115 3335 3645
Production 1911 2460 2817 3010 3269
Imports 13 13 17 14 14
Exports 360 503 338 420 540
Demand 1564 1970 2496 2604 2743
Demand Growth (%) -12.1% 25.9% 26.7% 4.3% 5.3%
IDY 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 62 69 69 69 70
Production 41 54 56 62 67
Imports 36 51 50 55 63
Exports 9 10 8 9 9
Demand 71 92 98 113 130
Demand Growth (%) 18.3% 30.0% 6.5% 15.3% 15.0%
FDY 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 1254 1259 1313 1475 1493
Production 629 929 989 1163 1366
Imports 52 146 215 100 60
Exports 19 25 14 30 70
Demand 686 1033 1194 1333 1416
Demand Growth (%) -28.1% 50.7% 15.6% 11.6% 6.2%
India had been somewhat slow to capitalize on the sourcing shift from China
towards South-east Asia, an opportunity quickly seized by Vietnam and
Bangladesh to grow alternative apparel markets.

Still, Indian ready-made garment (RMG) exports have seen respectable traction in
recent months, as trade diversification within Asia gathered steam because of
geopolitical reasons.

According to the latest industry data, the value of Indian RMG exports in the first
11 months of fiscal 2022-23 (April to February) grew 3.5% to some $15bn. With
increased investment and policy reforms, India is looking to boost apparel exports
to $100bn by 2030.

In 2022-23, the combined production of synthetic fibre (PSF, POY, PTY, IDY, FDY)
increased to 7951 KT from 7374 KT in the previous year. The same is expected to
touch 9381 KT by 2024-25.

The demand which had derailed to negative 16% in 2020-21 owing to the current
pandemic situation grew at a robust rate of 28% in 2021-22. In 2022-23, demand
grew at healthy growth of 16%. The same is expected to grow further to touch 8761
KT by 2024-25.

Demand across end-user industry rebounded along with the textile demand picking
up however high costs issues are still prevailing and hurting the manufacturers.
The overall synthetic fibre capacity is expected to touch 9244 KT by 2024-25.
xxii. Synthetic Rubber
Carrying on its post COVID-19 recovery, the Indian automobile industry saw the
easing of the supply chain crisis that had caused serious disruptions in 2021. Sales
were back and September 2022 saw wholesale numbers set a new monthly
benchmark of 3,55,946 units. The recent spike in the costs of commodities and raw
materials have put pressure on auto and auto components companies’ bottom line
during Q223. Companies tried to offset this cost by increasing the price of the end
products. But market conditions and competition meant that they could not pass it
on fully. The good news is that raw material and commodity prices have now started
softening and market watchers say that the auto industry should start seeing the
benefits from Q3 onwards.

The Indian automobile industry is setting out on a journey with hopes for a
sustained growth momentum in 2023 and further embracing clean technology amid
the lurking speed breakers of rising interest rates and cost increases due to new
emission and safety norms, having witnessed a strong comeback from the COVID-
led downturn this year.
While the passenger vehicles (PV) segment is set for record sales in 2022 despite
the lingering effects of supply chain constraints and semiconductor shortages, the
two-wheeler space is yet to see sustained sales buoyancy after having suffered for
most of the year.

According to industry estimates, PV sales can reach around 38 lakh units this year.
The three-wheelers and commercial vehicles segments have also witnessed good
growth in 2022 compared to 2021, albeit on a low base of last year, which was
affected by the second wave of COVID-19 and manufacturers will be keen to carry
forward the momentum to the new year.

As per industry observers, 2023 will also see acceleration in adoption of electric
vehicles, which has already started taking root in 2022, especially in the two-
wheelers segment.

The Bureau of Energy Efficiency has launched a new Star Labelling programme
for tyres, similar to the one seen on ACs and refrigerators. Here, this rating will
indicate the rolling resistance and the tyre's fuel efficiency potential. A low rolling
resistance will attract a higher star rating, thus potentially increasing one’s fuel
savings and lowering emissions.

Michelin became the first tyre brand in India to gain a 5-star rating in the newly
introduced star labelling programme. Its tyres for commercial vehicles were also
the first to receive a 4-star rating. Michelin tested its Latitude Sport 3 and Pilot Sport
4 tyres for SUVs.

Calendar year 2022, which started on a high note with 252,466 units in January, is
set to close by scaling a new peak, breaking many records along the way for car
makers in the country. And this performance comes on the back of PV sales
accelerating past the 300,000-unit sales mark for for five months this year (see
retail sales data table below).

Passenger Vehicle Sales in India in 2022 With sales of an estimated 40,000-odd units in
Month Units Sold
January 2,52,466
December, the auto retail industry would generate a
February 2,77,405 turnover of over $5 billion or Rs 41,235 crore in a single
March 3,36,000 month, facilitating a minimum of over Rs 10,000 crore to
April 2,76,326
May 2,85,000 Rs 12,000 crore of GST collection for the government.
June 3,03,250
July 2,92,414 CY2022 to set a new benchmark for PV sales
August 3,19,500
September 3,36,638 Given the strong and sustained momentum, the Indian
October 3,64,671 passenger vehicle market is set to close the calendar
November 2,87,929
year with a record 3.7 million units in retail sales, which
December (Estimated) 4,05,000
Total Sales in CY2022 37,36,599 constitutes YoY growth of 19% (CY2021: over 3.1 million
Data: Industry Sources units).
 India Becomes World's Third Largest Auto Maker On an average, carmakers delivered
Top 5 Country/Territory CY2022 % Growth over 300,000 cars in a month, which is
1 Mainland China 24.8 3.60% approximately 40,000 units per month
2 United States 13.8 -8.30% higher than in 2021.
3 India 4.4 23.40%
4 Japan 4.2 -4.40% India beats Japan in the global car
5 Germany 2.8 -2.90% race
Above table is based on light vehicle sales (0-6 tons) in million units
A strong bounce back in the demand for
Data Source: S&P Global Mobility personal mobility and last-mile
deliveries after the pandemic have
helped India overtake Japan in car sales for the first time ever. India is now the
third largest auto market in the world in 2022.

According to global forecasting agency S&P Global Mobility, Indian light vehicle
sales for 2022 are set to grow by over 22% to 4.4 million units, whereas Japanese
market sales are expected to slip to 4.2 million units. Light vehicle sales include all
passenger vehicles, small commercial vehicles and vans up to six tonnes.

Retains No. 4 position in light vehicle production

In terms of output, India has retained its position as the fourth largest light vehicle
producer with an output crossing a milestone of over five million units for the first
time ever — the actual numbers are likely to be officially published within a
fortnight's time.

Data Source: S&P Global Mobility

Strong double-digit growth for second straight year

Asia's third biggest economy was the fastest-growing market in 2022 and no other
country posted consecutive strong double-digit (over 20%) growth in the world.
In spite of major disruptions, the Indian light vehicle market has swelled at a
compounded annual growth rate of 3% in the last decade while most of the matured
markets have registered flat growth or negative growth.

On a low base of FY22, domestic auto industry is expected to grow by 25% in FY23
While the shortage of chips and supplies from China did disrupt production and
supplies in the first half of 2022, the way India managed the Russia-Ukraine crisis
helped the country to manage inflationary challenges well.

India imports over 80% of its crude annually to meet its mobility needs. During
CY2022, India started sourcing more crude from Russia than ever before. From
importing about 1% of the total crude requirement, almost 25% of fuel was imported
from Russia by September 22. This helped India to counter inflation and provided
a stable economy compared to other major economies of the world.

While the move to source crude from Russia paid off in 2022, the decision to
continue to buy despite the G7 price cap on the Russian Urals and its implications
will decide the future stability of the economy, experts feel.

S&P Global Mobility forecasts the momentum to moderate and it expects India light
vehicle production to grow by just 5 to 8% in 2023, with the pent-up demand getting
saturated and inventory at the dealership returning to normalcy.

Apart from the economic headwinds of inflation, there are structural challenges the
country continues to face. The rising congestion and increased pollution in Indian
cities are one of the major challenges in front of the government and policymakers.
Even as the penetration is low, the vehicle density in India is on the rise.
It has increased from 15 cars per thousand in 2010 to 36 cars per thousand in
2022, as per S&P’s latest findings.

Riding high on fresh capacity addition and improving production the domestic tyre
industry is hoping to generate an incremental turnover of $ 3 billion or Rs 25000
crore in the next three years and cross a turnover of Rs 1 lakh crore, as per a new
report by Automotive Tyre Manufacturers Association (ATMA).

At present the overall turnover of the domestic tyre industry stands at Rs 75,000
crore.

As per ATMA report, the domestic tyre industry has already completed an
investment of over Rs 35,000 crore in the last three years aided by improved
efficiency via debottlenecking and fresh capacity creation. It also noted that the
investments that have been undertaken in a challenging time period span across
all the key tyre segments with major beneficiary being Truck & Bus Radials (TBR)
and Passenger Car Radials (PCR) manufacturing.
In view of the normal monsoon, the rural economy is also picking up. Festive
season has led to a new resurgence in Auto sales. Premiumization of the
Passenger car market with clear preference for SUVs is creating an exponential
rise in demand for higher profile tyres for 16 inch wheels and above. According to
ATMA, the Indian tyre industry recorded a 50 percent jump in exports in FY 22. And
despite recessionary trends in the key export markets, the exports have increased
in double digits in the ongoing year too.

Four leading tyre makers will invest Rs 1,100 crore to increase rubber plantation in
Northeast and West Bengal as part of a five-year project being implemented by the
Automotive Tyre Manufacturers' Association (ATMA) in association with the
Rubber Board. This is the first of its kind project in the world where the consuming
industry is working in collaboration with government agencies to ramp up
production of natural rubber to increase availability of this strategic raw material.
As part of the project, ATMA plans to develop two lakh hectares of rubber plantation
in Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura
and West Bengal.

CESL has floated second tender under the National Electric Bus Program, this time
for 4,675 eBuses for Rs 5000 crore. This is the third tender for electric buses,
following the Grand Challenge tender of 5,450 e-buses that catalyzed this business
and a recently concluded tender for 6465 electric buses. The tender is based on a
dry lease contract, allowing STUs to deploy their own bus drivers. Three states -
Delhi, Kerala and Telangana are covered in this tender, deploying 2400, 775 and
1500 e-Buses respectively. This is the third tender for electric buses in less than
15 months, with a total cumulative volume of 16,590 e-Buses across the country,
equivalent to 33% of the target given to CESL. Aiming to accelerate EV adoption
and cut down fuel imports, carbon emissions and air pollution, STUs in Delhi,
Kerala and Telangana will deploy 4675 electric buses on the basis of a “dry lease”

The Madras Rubber Factory (MRF) has decided to invest Rs 1,000 crore to not
only expand its existing facility but also to create a new specialty assembly line at
Sangareddy. Taiwan-based Continental Carbon has set up its first greenfield
project in India at Gujarat’s Dahej for producing carbon black with an investment of
around USD 200 million. The first unit was set up through acquisition routes in the
National Capital Region (NCR) in 2000. The capacity of the NCR unit with two
production lines is 85,000 tonnes carbon black per annum. While the new unit is
the company’s first greenfield set up in India having an annual capacity of 1,50,000
tonnes with four production lines. The company’s total installed capacity in India to
manufacture carbon black stands at 2,35,000 tonnes annually with six production
lines. Since the demand for carbon black is rising especially from the automobile
and tyre industry. The company will focus on research and development (R&D)
activities in carbon black manufacturing and usage at the company’s NCR unit.
Yokohama Rubber Co. (YRC) has started production at its third Indian off-road off-
road tyre manufacturing plant in Visakhapatnam, Andhra Pradesh. Commenced
about four months ahead of schedule, the facility is aimed at Yokohama Off-
Highway Tires (YOHT). This new plant, like the existing facilities in Dahej, Gujarat,
and Tirunelveli, Tamil Nadu, will produce YOHT’s core Alliance, Galaxy and Primex
off-highway tyre brands – which are used on agricultural, construction, industrial
and forestry machinery.

According to the tyremaker, the Visakhapatnam unit will have a daily manufacturing
capacity of 69 tonnes in rubber weight in its initial production stage. The daily
capacity will be increased to 132 tonnes in the second phase, which is scheduled
to start in the first quarter of 2024. Further expansion of the plant capacity is under
consideration. Once fully completed, the Visakhapatnam facility will raise
Yokohama’s overall production capacity for off-road tyres to 548 tonnes (rubber
weight) per day. The new line is scheduled to start production in the fourth quarter
of 2024 and will increase Yokohama Rubber Co. capacity to 4.5 million tyres.

Tyre manufacturer JK Tyre & Industries will be investing ₹1100 crore for expanding
capacity over the next two years. The investment will result in increasing the
capacity by 13 per cent in passenger vehicle tyres. Earlier, the company had
planned an investment of ₹700 crore in 2018 but that was scrapped because of the
coronavirus. The company is expecting to maintain its export level at ₹1,900 crore.

Tyre major CEAT plans to invest another Rs. 700-800 crore in the next 9-12 months
as it nearly doubles capacity at its Chennai plant with an eye on global markets like
Europe and the US. CEAT invested around Rs. 1,400-1,500 crore in the Chennai
plant so far and the ramp up will mean another Rs. 700-800 crore investment.
CEAT’s new plant at Ambernath (Maharashtra) ramped up production from 50 MT
to 80 MT per day.

TVS Srichakra is implementing a project pertaining to establishment of Off-highway

tyres (OHT) plant in Madurai (Tamil Nadu) at a total cost of Rs 320 crore. Phase 1
of the capex will be completed by the first quarter of fiscal 2023. The OHT
expansion project has an additional revenue potential of Rs 200-250 crore per
annum, subsequent to ramp-up and stabilization of the plant in three years with
100% of output catering to the EU agriculture market.

Rajratan Global Wire, a manufacturer of tyre bead wire/reinforcement wire, is

planning to invest INR 370 crore to increase its bead wire production capacity from
100,000 tonnes to 180,000 tonnes per annum. INR 70 crore is being invested in
Rajratan's Thailand-located tyre bead wire manufacturing plant. This plant's
capacity has risen from 40,000 tonnes to 60,000 tonnes per annum.
The company caters to the demand of Thailand-based, and international tyre
makers from this sole international facility. Tyre makers including Apollo,
Bridgestone, CEAT, Goodyear, JK Tyre, MRF, TVS Tyres, Yokohama, and more
are included in the company's list of national and international clients. Notably, tyre
bead wires constitute a 3-4% cost in the overall bill of materials (BoM) for raw
materials used in manufacturing a tyre. The remaining INR 300 crore has been
planned to be invested in Rajratan's upcoming Chennai facility which will begin part
operations by March 2024. Rajratan, after the deployment of the Chennai facility,
will have three tyre bead wire manufacturing locations located in Indore, Chennai,
and Thailand.

Mitas’s (Trelleborg Wheel Systems) newest two-wheeler tyre production facility in

India has been formally inaugurated. The factory, which will serve global
motorcycle tyre markets, is the result of a joint venture with the Mahansaria Group.
Apollo Tyres inaugurated their Chennai tyre testing facility in December 2022.

Automobile companies have lined up their investment plans in India.

M&M to invest Rs 10,000 cr to set up plant in Pune for upcoming EV range
Auto major aims to have 30% of its sales to be from electric vehicles by 2027.
Automaker Kia India plans to invest Rs 2,000 crore over the next four years to scale
up its presence in the electric vehicle segment.

Suzuki to invest Rs 30,000 cr on 2 new plants. The factory at Hansalpur in Gujarat

will be completed by 2026 and make cells for electric vehicles (EV) that the
company will make in India. The upcoming Maruti Suzuki plant at Kharkhoda in
Haryana, meanwhile, will make EVs and petrol-driven cars and will have an annual
capacity to make one million units.

Maruti Suzuki India (MSI) in May 2022 announced, its new manufacturing facility in
Haryana, the company's third in the state, would reach peak production capacity of
10 lakh units per annum in the next eight years entailing a total investment of Rs
18,000 crore. The new facility, which would come at an 800-acre site at IMT
Kharkhoda in Sonipat district, will entail total investment of Rs 11,000 crore in the
first phase with a production capacity of 2.5 lakh units per annum. The first set of
vehicles are expected to roll out from the facility in 2025.

MG Motor India plans to invest about ₹4,000 crore in a second manufacturing unit,
for which it is in talks with several State governments, including Gujarat where its
first facility is located, according to a top company official. Tata Motors Ltd signed
an agreement in August 2022 to buy Ford Motor's manufacturing plant in the
western state of Gujarat for 7.26 billion rupees ($91.5 million).
The company, which is expanding the annual production capacity of its current
plant at Halol in Gujarat to 1.25 lakh units by 2023, is looking to add another 1.75
lakh units capacity from the second plant and take its overall capacity to 3 lakh
units a year in the next two years.

Switch Mobility, the electric vehicle arm of Ashok Leyland, is all set to invest around
Rs 1,000 crore for setting up a new manufacturing unit in South India. The company
is also in talks with financial investors to raise over $200 million for its expansion.
Switch in April 2022 lined up investments of about 300 million pound across the UK
and India to develop its range of electric buses and light commercial vehicles

Ola Electrics is set to acquire around 1500 acres land in Tamil Nadu to set up a
electric vehicle factory, Ola already has around 500 acres in the area and is now
adding a much bigger land parcel. Ola is expected to invest around Rs. 1 lakh crore
by the end of the decade in the ‘electric vehicles’ park that it is setting up at the
Krishnagiri district in Tamil Nadu.

US-based Biliti Electric Inc in April 2022 said it is planning to invest USD 150 million
(around Rs 1,144 crore) to set up an electric three-wheeler plant with a production
capacity of 2.5 lakh units per year in Telangana. The new plant is estimated to drive
private investment of USD 150 million and create over 3,000 jobs in the state,
aligning with the state's policy to become a global hub for electric vehicle (EV) and
energy storage manufacturing, the California-based company said in a statement.
Biliti currently operates through an exclusive manufacturing partnership with
Hyderabad-based Gayam Motor Works (GMW) for manufacturing its three-
wheelers.

Electric vehicle (EV) startup Mecwin India has announced an investment of Rs 500
million to set up an EV manufacturing plant in Bengaluru, Karnataka. The
manufacturing facility will focus on indigenous EV motors and controllers and is
expected to be operational by the end of this year. The facility targets to have an
initial manufacturing capacity of 2,000 units per day.

Recently, Mecwin also entered the EV retrofitting market following a Rs 15 billion

deal with the Raipur-based Tatva Group. Under the partnership, Mecwin will
manufacture and supply 500,000 retrofitting kits, including motor, controller,
lithium-ion battery, and charger, for different vehicles over the next three years to
Tatva Group.

As per ICRA, demand for tyres in India is likely to grow 6-8% in FY23, with tyre
manufacturers witnessing margins expansion in second half of the fiscal. Demand
will be driven by strong growth in OE (original equipment), and a slight increase
growth in replacement volumes as well as softening prices of natural rubber and
crude oil derivatives since July.
ICRA expects, OE demand to witness a low double-digit growth supported by
factors like easing supply-related headwinds in the passenger vehicle (PV)
segment, improving two-wheeler (2W) demand, and strong growth in commercial
vehicle (CV) segment amid favourable macro-economic environment.

Replacement demand, which forms around two-third of tyre demand, is likely to

witness mid-single digit growth in FY23 following a strong FY22.

The growth in tyre exports from India was robust in FY22, supported by healthy
demand from key export destinations such as the US and European nations.
However, the economic slowdown in the US and European nations is expected to
impact export demand and growth is expected to be flat in FY23. Tyre industry
revenues continue to breach record high levels as they recorded a strong YoY
growth of 29% during H1 FY2023 driven by stable demand and favourable
realizations.

After a mixed second quarter (Q2), there are multiple tailwinds for Indian tyre
companies. Higher volumes from automotive makers (especially the original
equipment manufacturer segment) and steady replacement demand are key
drivers on the top-line front. The bigger trigger, however, is the easing of commodity
prices on the back of falling crude oil-related inputs, as well as natural rubber
prices. Together, the two account for over 60 per cent of the raw material cost as
a percentage of sales.

As per experts, while this is the fourth straight quarter, when industry profit margins
have remained affected by the effect of elevated input and freight costs. However,
with the softening prices of natural rubber and crude oil derivatives since July 2022
and a stable pricing environment, the industry’s margins will witness expansion in
H2 FY23.

The same might not be significant given the higher OE skew in the revenue mix.
The margins shall remain exposed to vulnerability in movement in crude and rubber
prices, going forward.Tyre industry has been investing around 10% of its revenues
in capacity expansion over the past few years.

ICRA expects the industry to continue to invest 10-12% of the revenues in the
medium term. While part of the capex will be debt-funded, the credit profiles of tyre
manufacturers would be supported by healthy earnings and cash reserves.

Sales of commercial vehicles - a barometer of economic activity - are expected to

come close to the pre-pandemic peak of over a million units in the ongoing financial
year on the back of improved fleet utilizations, strong replacement demand and
pick-up in road construction projects across the country.
Industry estimates around 1.02 million commercial vehicles will be sold in the local
market by the close of the fiscal year, aided by robust recovery in demand for small
commercial vehicles (less than 3.5 tonne) and light & medium duty (LMD) trucks
that will breach previous peaks.

Total sales of commercial vehicles are expected to fall shy by merely 40,000-
45,000 units compared to record sales of 1.06 million units registered in FY19.
Increased government spends on infrastructure development, better availability of
financing and replacement demand will support sales of commercial vehicles,
especially of heavy-duty trucks, going forward.

Replacement sales of commercial vehicles have been muted the last few years
with consumers deferring purchases amid economic uncertainties as well as the
outbreak of Covid-19, which has been adversely impacting utilization rates and
profitability. M&HCV trucks are expected to grow by 15-20% in FY2023 and 10-
12% in FY2024, with growth continuing to be supported by traction in construction
and mining activities, as well as pent-up replacement demand. The rubber products
industry is looking for a demand boost as cheaper synthetic rubber and declining
prices of natural rubber have helped to lower production cost.

While the tyre sector, the largest consumer of both forms of rubber, is facing
subdued demand, the non-tyre segment is witnessing a buoyancy in activities.
Synthetic rubber Synthetic Rubber prices, which surged with the intensification of
COVID-19 and the outbreak of the Russia-Ukraine war, have now declined. SR has
become cheaper because of weak demand the world over.

Synthetic Rubber prices went up as much as 80 percent after the war started. They
had dropped by 30- 40 percent. Similar to FY22, PBR & SBR deltas were high at
$1040 & $815 in FY23; (5-year average for PBR & SBR is $686 & $619
respectively). In India, the Styrene-Butadiene Rubber market was termed in early
2022 as stable to firm owing to high feedstock prices and robust demand
fundamentals. India imports all its Styrene, and major exporters have been Far
East Asian, Southeast Asian and Middle East Asian countries.

Styrene prices were on the uptrend as crude volatility left limited space for price
normalization for overseas manufacturers. Consequently, SBR prices have also
been robust in Q1 22/23, and a significant climb was observed in the market.

As of the 1st week of March, SBR prices were assessed at INR 172410 per MT
(USD 2260.48 per MT) on an Ex-location basis. In the third quarter of 2022-23,
Styrene-Butadiene Rubber prices followed the downward trend in the Indian market
(average USD 1481 per MT). Since January 2023, the prices for SBR have
witnessed a uptrend from an average of USD 1463 in Jan to USD 1810 per MT on
17th March 2023.
SBR which accounts for 40% of the total synthetic rubber demand is consumed
mostly in the tyre sector. Considering the large amount of SBR that is being
consumed in the manufacture of tyres and tyre products, demand is very much
dependent on the automotive industry and tyre sectors as a whole.

On a positive note, growing use of low-rolling-resistance tyres to reduce fuel

consumption and decrease CO2 emissions should increase SBR demand. Low
rolling resistance tires are acquiring significant popularity, with heightened
emphasis on improving vehicular performance outcomes catalyzing growth.
Furthermore, growing consciousness about environmental sustainability is
prompting manufacturers to incorporate several changes in the nature of materials
used during the production process. This trend has boded well for overall market
growth. In the long-run, low rolling resistance tires with a wide band width are
expected to account for bulk of the overall demand, while sales across the
aftermarket segment are anticipated to surge incredibly.

In India, the Styrene-Butadiene Rubber market has been termed as stable to firm
owing to high feedstock prices and robust demand fundamentals. India imports all
its Styrene, and major exporters have been Far East Asian, Southeast Asian and
Middle East Asian countries. SBR industry remained flat in FY23 largely due to
slowdown in its largest downstream application of two wheeler softness and
shutdowns by both RIL & ISRL and is expected to clock a modest growth of around
6% in next two fiscals.

The Board of Indian Oil Corporation Ltd (IndianOil) at its meeting held on 16th
March 2022 had accorded approval for implementation of Poly-Butadiene Rubber
(PBR) Project at Indian Oil's Naphtha Cracker Complex at Panipat, Haryana at an
estimated investment of Rs.1459 crore which is expected to be operational by
2025. The plant will have a PBR production capacity of 60,000 tonnes per annum
based on state-of-the-art technology provided by Goodyear Tire & Rubber
Company which is also the leading global manufacturer of automotive tyres.
Butadiene is the primary raw material for the production of PBR which shall be
available from existing Naphtha Cracker Complex of the Company.
 Table 20: Demand Supply Balance of PBR, SBR, NBR, EPDM, BUTYL RUBBER & HALO
BUTYL RUBBER

PBR 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 135 135 135 135 135
Production 129 133 126 135 135
Imports 90 96 100 107 118
Exports 23 21 2 4 1
Demand 200 210 224 238 253
Demand Growth (%) 8.2% 4.9% 6.7% 6.3% 6.3%
SBR 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 270 270 270 270 270
Production 205 225 199 235 251
Imports 77 91 85 87 86
Exports 22 11 6 9 9
Demand 273 292 292 311 328
Demand Growth (%) 8.6% 6.7% 0.0% 6.7% 5.5%
NBR 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 14 14 15 16 17
Production 12 13 14 16 17
Imports 34 30 37 40 43
Exports 0 0 1 1 1
Demand 46 43 51 55 59
Demand Growth (%) -1.8% -7.1% 20.0% 7.4% 7.3%
EPDM 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 0 0 0 0 0
Production 0 0 0 0
Imports 42 50 61 63 65
Exports 0 0 0 0 0
Demand 42 50 61 63 65
Demand Growth (%) -6.7% 19.0% 22.7% 2.7% 3.2%
BUTYL
RUBBER+HALO 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
BUTYL RUBBER
Capacity 120 120 120 120 120
Production 54 56 78 108 120
Imports 85 79 61 50 39
Exports 25 19 17 33 28
Demand 114 115 121 125 131
Demand Growth (%) 15.2% 1.1% 5.3% 2.6% 5.3%
Tyre industry is the largest consumer of PBR in India with more than 80%, while
balance is for other industries such as footwear, conveyor belts, etc. In view of the
present deficit in PBR production in India and the steadily growing demand, the
demand-supply deficit is expected to grow considerably in the future.

The implementation of the Project would reduce nation's import dependency for
PBR, thereby, aiding to Atmanirbhar Bharat and Make in India vision for the nation.
With the commissioning of this project, the Petrochemical Intensity Index of Panipat
Refinery & Petrochemical Complex will increase from 15.9% to 18.05% along-with
other upcoming projects. EPDM demand rebounded and witnessed a healthy
growth of 6% in 2021-22. However, in next two fiscals the growth is forecasted to
be a tad lower at around 4%. EPDM gets its name from the chemicals (monomers)
that are mixed together in various proportions: ethylene, propylene and diene,
where the ethylene content is usually between 45% to 75%.

Roofing made from EPDM can last 30-50 years, and liners can last for 20 years.
Today EPDM manufacturing is one of the fastest growing segments of the synthetic
rubber market, being the primary choice for automotive and industrial applications.
It has long replaced natural rubber. EPDM is used in automotive and industrial hose
products due to their thermal and oxidative stability and chemical resistance to
polar organic and aqueous inorganic fluids. Excellent physical properties of EPDM
make EPDM hoses extremely durable.

They may have a longer lifespan than the car itself that they are built in. EPDM has
great noise reduction properties and it also bonds quickly with metal which gives a
strong barrier against weather conditions as well as the environment, road surface
and engine vibration. What’s more it has low electrical conductivity and is also
steam and water resistant.

EPDM is used in the automotive and construction

industry for sealing purposes, as window and door
seals, protective pads and electrical gaskets, as
well. EPDM is used in heating, ventilation and air
conditioning machinery, such as compressor
grommets, mandrel-formed drain tubes, pressure
switch tubing. EPDM can also be found in vehicle
weather stripping, seals, sealant, wire and cable harnesses, and brake systems.
Blends of EPDMs and other polymers (PP) are also used for car bumpers, fender
extensions, and rub strips.

Growing demand for cars and building and production coupled with demand
increase for other software areas is expected to power the call for EPDM rubber.
Moreover, increasing call for electricals is also an influencing component helping
demand upward push for EPDM. Moreover, as the demand for electric vehicles is
increasing, it is expected that in the
future, EPDM will also thrive as it is
used heavily in automotive products.
In a study it has been found that the
ethylene-propylene-diene-monomer
(EPDM) rubber waste from discarded
non-tire automotive rubber parts is
explored as an asphalt binder modifier.

Offtake of EPDM has been impacted as the microchips s hortage continue to crimp
operations at automotive plants. In second-half 2022, rising global inflation took
another toll on the automotive sector, as poor end-use consumer confidence limited
growth and recovery of new car sales in India and China, both of which are major
car markets in the region. Asian spot prices for ethylene propylene diene monomer
(EPDM) imports hit new lows for the year 2022 in Q4-2022, and a near-term
recovery seems unlikely if the persistently bearish global economic conditions
remain.

On 30 November, CFR (cost & freight) SE (southeast) Asia/India prices for EPDM
were at an average of $2,400/tonne, a level not seen since March 2021, ICIS data
shows.

The continuing territorial disputes with neighbouring countries have increased the
demand for defensive equipment in India. This has resulted in greater usage of
synthetic elastomer-based goods by government military product manufacturing
agencies, such as the Defence Research & Development Organisation (DRDO).
For instance, in August 2022, DRDO announced procuring EPDM-kevlar rubber
lining for ASTRA MK-2 air-to-air missile, which will be used to protect the rocket
casings from hot gases. Such developments are expected to provide a necessary
push for the product demand in defence applications.

Reliance is the only producer of PBR in India. PBR demand grew at 7% in 2022-
23 on the back of strong demand from downstream segments of Passenger
Vehicles & Commercial Vehicles and is forecasted to grow at a modest rate of 6.3%
in next two fiscal years.

While Butyl rubber demand grew at a robust rate in 2022-23, Halo butyl rubber
demand de-grew at 5% in 2022-23. Nitrile Butadiene Rubber Latex (NBR) is one
of the most commonly used rubber compounds across a wide range of industries.
NBR which has a demand in end use applications like Auto components, Rice
Rollers, Hoses, NBR/PVC blend, Insulation Foam, moulded Rubber Parts, Cots &
Apron, Jointing Sheets, LPG Tubing, Oil Seals, Industrial Parts, Cork Sheets,
Gaskets, Belts, Compounds, Cooker Gasket, Industrial Rollers, Footwear, Brake
pads & Clutches etc., witnessed a staggering demand growth of 20% in 2022-23,
however is expected to slow down to around 7% in next two fiscals. Apcotex is the
sole producer of NBR in India.

The demand for nitrile butadiene rubber in India, China, and ASEAN countries
stems mostly from bulk manufacture of molded and extruded polymer products and
automotive components. In September 2022, the Indian cabinet approved a USD
3.5 billion incentive scheme to promote the production of fuel-cell and battery-
electric vehicles, as well as drone manufacturing.

These incentive programs are projected to drive the Indian automobile market and
have an influence on the NBR market throughout the forecast period.

Because of increased investment in the healthcare business, there is likely to be

an increase in demand for NBR gloves, notably in the medical sector. To prevent
the transmission of pathogens into the patient's body during operations and
examinations, gloves are frequently utilized.

A further factor projected to speed up market value growth over the coming years
is the increased demand for disposable gloves across a variety of industries,
particularly in the food sector.
xxiii. Surfactants
LAB continues to be work horse for the surfactant industry with demand hovering
around 700 KTA. To cater growing demand, IOCL expanded their capacity from
140KT to 162KTA during FY’23. Domestic O/R was @93% (excluding RIL 60KT
shut capacity). Due to IOCL DBN shutdown, Indian production for FY’23 is ~400KT
and the balance demand was met by imports.

With capacity addition, Indian imports requirement for next year is likely to be
reduced to 200 to 230KT. Due to increase in the crude and energy prices, LAB
prices were at elevated level leading to flat LAB demand growth. With falling raw
material prices, demand is poised to grow. IOCL LAB plant has undergone a
revamp during 2022 to an increased capacity of 162 KTA now from earlier 120
KTA. With 162 KTA, IOC now stands as the single largest LAB supplier in India.

In August 2022, Cepsa supplied the first batch of NextLab (Linear alkyl Benzene)
to Unilever for linear alkylbenzene sulphonate (LAS)-based surfactant
manufacturing. NextLab is the first linear alkylbenzene (LAB) to be both renewable
and biodegradable as an alternative to the traditional fossil LAB. Cepsa in April
2022 had introduced NextLAB, a sustainable linear alkyl benzene made from
renewable and recycled raw materials. NextLAB is mainly used to produce
biodegradable household laundry and cleaning products.
Early 2022, the Asian market for linear alkyl benzene (LAB) started on a bullish
trend as the availability of upstream Benzene was low owing to the failure to meet
the supply need of upstream crude oil in the Asian countries. The prices hiked in
March again as production in China remained halted on the account of winter
Olympics. LAB imports were seen higher in 2022-23 and is expected to see a dip
next year as well. While there was marginal quantity of exports in 2021-22 however
further no exports have taken place nor is expected to take place in next two fiscals.
Imports from Saudi Arab, Qatar, Thailand, and China are coming into India. Imports
from Saudi Arab have seen an increase from 68 KT in 2017-18 to 156 KT in 2021-
22 and ~136 KT in April- Jan period, estimating 182 KT in 2022-23.

Domestic demand for LAB was negative in 2022-23 registering a de-growth of 3%

which is expected to witness a bounce back and clock 3% growth in 2023-24.

In recent times, India is one of the largest producers of soaps and detergents,
globally. Government initiatives, such as the Swachh Bharat Mission, promote
health and hygiene. Such initiatives, along with growing usage of soaps and
detergent, have led to the growth of the manufacturing industry, which is further
boosting the demand for LAB in the country.

The heightened focus on home and personal hygiene due to COVID-19 had
bolstered the demand for detergents, liquid soaps, industrial cleaners, and
sanitizers, most of which require the benzene-based chemical in their production.

However, sales of such cleaning agents remain much lower than their peak and
there is much scope in demand to pick up with the upcoming monsoon season in
India and an uptick in related diseases thereof is expected to keep the demand
intact. The spreads of the chemical—the difference between manufacturing and
distributor price—have increased in the last few weeks as the supplies in the
domestic market have sold out due to the tight demand situation, analysts said.

Indian EO demand of 310 KT is expected to grow at 5 to 6% in FY’23 in line with

GDP. EO is not directly Imported in India due to its hazardous nature, however, EO
derivatives are imported. Reliance industries has increased its capacity by 40KTA
in DMD during FY’23 and has plans increase further in FY’24 to cater to growing
Indian demand. Demand for EO is expected to clock double digit growth of 13% in
2023-24.
 Table 21: Demand & Supply of LAB & EO

LAB 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 550 550 572 597 597
Production 449 457 405 488 488
Imports 253 273 303 232 245
Exports 0 2 0 0 0
Demand 706 723 701 721 733
Demand Growth (%) 5.6% 2.3% -3.0% 2.8% 1.7%
EO 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 293 303 320 368 382
Production 263 302 320 363 377
Imports 0 0 0 0 0
Exports 1 1 1 1 1
Demand 264 303 320 363 377
Demand Growth (%) 5.1% 14.9% 5.5% 13.4% 3.9%

EO domestic demand is driven by Infrastructure, HPC (health and personal care),

agrochemicals, solvents, antifreeze, textiles, detergents, adhesives, polyurethane
foam, and pharmaceuticals. Smaller amounts are present in fumigants, sterilant for
spices and cosmetics, as well as during hospital sterilization of surgical equipment.
Persistent hike in demand for the product is due to enormous production of MEG
for polyester fabrics and PET. Increasing consumption of DEG in plasticizers
industry is also contributing to the rising demand of the product.
xxiv. Carbon Black Feedstock & Carbon Black
Carbon black is one of the reinforces that frequently used in tyre industry owing to
its effect on mechanical and dynamic properties of tyres. It is used in various
formulations with different rubber types to customize the performance properties of
tires. It is used in various formulations with different rubber types to customize the
performance properties of tyre.

Industrial carbon black is an important resource used in tyre production and in the
manufacture of other industrial rubber products. Carbon black recovered from end-
of-life tyres saves fossil raw materials and will contribute significantly to reducing
CO2 emissions. The specific use of carbon black in rubber compounds increases
the stability, strength and durability of tyres. In a standard passenger car tyre, the
amount of carbon black to which tyres owe their black color is 15-20 percent.

- Growth in the adoption of electric cars and self-driving cars is likely to act as an
opportunity in the future.
- Asia-Pacific dominated the market across the globe with the largest consumption
from the countries such as China and India.

CBFS demand is high but availability from US refineries is limited. Under COVID
situation poor demand of gasoline witnessed. Refineries are running with lower
throughput. Whereas high demand for Carbon Black is there both for domestic as
well as in international market. USGC market is therefore under premium $7-9 per
bbl instead of conventional discounted rate.

Carbon Black demand across OHT segments remained strong in FY22 on account
of higher global food prices which improved farmer realizations as well as
profitability and increased capex spends by various governments which aided
growth for mining and construction equipment.
Demand momentum to continue across geographies and segments, driven by pick-
up in economic activities, government spending on infra worldwide and robust
prices of commodities and agricultural commodities. There is good demand from
mining as well as agriculture sectors in the OHT segment.

Balkrishna Industries Ltd. (BIL), a Mumbai-based Indian multinational engaged in

the manufacture of tyres for agricultural, industrial, and OTR (off-the-road) vehicles,
has completed the expansion plan of a 55,000 MTPA (metric tonne per annum)
carbon black project and power plant in Bhuj, Gujarat, as on December 31, 2022.
Post the Brownfield capex, capacity of the tyre plant will stand at 335,000 MTPA.
This would require an investment of Rs. 800 crores.

In a bid to cater to the growing demand in the marketplace, Balkrishna Industries,

a supplier of tyres to off-highway and agriculture segments has put off its plans to
shut its old plant in Waluj, Maharashtra. Instead, it will use it to meet incremental
demand along with the newly commissioned greenfield plant which is just five kms
from the old plant. Given the current business outlook, the company has now
decided to continue operations at both the plants along with modernizing the old
plant, the company said in a statement.

The capex of around Rs 350 crore allotted for it, will help bring economies of scale.
This will take up the overall capacity to over 55,000 MTPA at a single site and is
expected to be ready by H1FY24. “The achievable capacity will increase back to
3,60,000 MTPA by H1FY24 post commissioning of the Waluj brownfield project,”
the company informed investors. The project of advanced carbon material for
30,000 MTPA will be commissioned in Q4FY23. Capex for this purpose would
amount to Rs. 650 crores.

The third part of capex would be invested in modernization, automation, and

technology upgradation at its Bhuj and Gujarat plants. Capex cost for this purpose
is estimated around Rs. 450 crore and is expected to be completed by end-
H1FY23. Capex plans are embarked, given the current market demand, both
domestic and global. The company manufactures and distributes off-highway tyres
(OHT) for agricultural and construction vehicles and has also pivoted to earth-
moving and mining tyres.In April 2022, Continental inaugurated its 149,000 square
feet greenfield surface solutions plant in Pune. The manufacturing facility, which
has an investment of Rs 200 crore, will produce premium surface materials for car
interiors (including EVs) and two-wheeler seats for its domestic market and exports.
The plant, Continental’s 16th facility globally, will initially manufacture Acella Eco
and Acella Lux material, with the addition of eco-friendly foam foil Yorn and Yorn
Light material in the future. It has an annual production capacity of five million
square metres of surface material, which can be dialled up to 10 million.
Continental is consistently expanding its activities in the area of circular economy.
To this end, the premium tire manufacturer has signed a development agreement
with Pyrum Innovations, a specialist in the pyrolysis of end-of-life tires.

The aim of the collaboration is to further optimize and expand the recycling of end-
of-life tires through pyrolysis. In the future, among other things, particularly high-
quality recovered carbon black (rCB) is to be obtained for tire production of
Continental.

Continental Carbon India Limited (CCIL) is in process of establishing a state-of-

the-art green field plant in Visakhapatnam, Andhra Pradesh, India. The new plant
will comprise of two manufacturing lines of name plate capacity totaling 150,000
TPA of furnace grade carbon black for application mainly in the rubber industry.
About 40 MW Power and 35 TPH steam will be by–products of the manufacturing
process. Continental Carbon Eco Technology Private Limited (CCET), a subsidiary
of CSRC, plans to build a new Carbon Black Plant with a design annual capacity
of 150000 TPA Carbon Black Plant with 16 MW cogeneration (waste heat recovery)
power plant in GIDC, Dahej Industrial Estate Gujarat, India.

Epsilon Carbon, a coal tar derivatives company, has established India’s first
integrated carbon black complex with Rs 550 crore investment at Bellary,
Karnataka. With the new investment, the company will scale its production from an
installed annual capacity of 115,000 tonnes to 215,000 tonnes.

As part of Phase-II, Epsilon will expand its capacity by 65,000 tpa at an additional
investment of Rs 350 crore, taking the total investment close to Rs 900 crore. The
anthracene oil generated in the coal tar distillation process will be used as a clean
feedstock in the carbon black unit. The security of raw materials and consistency
in feedstock quality help Epsilon Carbon produce consistent quality carbon black.

In a first, the integrated carbon complex uses waste coke oven gas from the steel
plant as a fuel, and the tail-gas from the carbon black unit is fed back to the steel
complex for pre-heating operations. Compared to other plants that use three per
cent sulphur as feedstock, Epsilon Carbon’s new unit uses 0.3-0.5 per cent captive
low-sulphur as feedstock. Epsilon Carbon has manufacturing facilities in
Karnataka, Chhattisgarh and Orissa — strategically close to raw material sources
and customers.

Epsilon Carbon plans expansion into Europe, US markets. Further, the company
will expand its carbon black capacity to 3,00,000 tpa to become the country’s
largest single-location carbon black plant. The unit enjoys natural competitive
advantage by providing a complete backward integration support for Raw material
sourcing. The Anthracene oil generated in the coal tar distillation process will be
used as a clean feedstock in the carbon black unit.
Epsilon Carbon, the world’s leading producer of carbon black, plans to venture into
the cathode sector with world’s first polymetallic nodule plant with an investment of
Rs 1,200 crore. Epsilon Carbon Private Ltd., a carbon black company, has signed
a Memorandum of Understanding with Nasdaq-listed The Metals Company Inc.
(TMC) to jointly undertake a pre-feasibility study for a commercial-scale deep-sea
nodule processing plant in India. Following this study, both firms plan to jointly set
up the “world’s first commercial polymetallic nodule processing plant” in India

Epsilon, with its commercial production of synthetic graphite and a pipeline to

produce 30,000 TPA of NMC and 20,000 TPA of LFP by 2025, will contribute
significantly towards helping Indian giga factories of the future to meet their local-
content requirement. The agreement involves TMC supplying 1 million tonnes of
nodules from which the proposed commercial polymetallic nodule plant will process
30,000 tonnes of cathodes that can create 25 GW of cell capacity by 2025. TMC
will supply 1 million tonnes of dry nodules that can create a production capacity of
over 30,000 tonnes of intermediate nickel-copper-cobalt product per annum, which
is sufficient to manufacture 25 GW of cell capacity. Epsilon already makes anodes
for traditional acid batteries and this plant is a move to enter the lithium-ion batteries
space. Since no local company is making lithium-ion batteries, there is no domestic
demand now, but the government sees the market growing to 1 lakh tonnes by
2030.
Phillips Carbon Black Ltd (PCBL) is in the process to commercialize greenfield
capex in Chennai with a 150 ktpa carbon black plant likely to start production from
December 2022 and the company is coming up with a brownfield project in Mundra
of 40 KT. One line of capacity of roughly 20,000 on a gross basis and this is Phase
1 and this should be through by last quarter of this financial year or maybe little
early next financial year. So that is the target PCBL is looking at and with this
20,000 additional, the total capacity on gross basis of specialty will go up from
72,000 to 112,000 tonnes, this is gross capacity.
Russia is a major supplier of carbon black so is the case with China. Because of
this issue, Russia is little bit getting restricted in terms of supply of carbon black to
different countries, particularly Western countries. So that is one advantage to
Indian producers, say that on the supply side there is a challenge maybe constraint
from Russian side. On the other side, China is the largest producer of carbon black,
but in that country over a period there is consolidation, which is happening. Also,
there is a drive from government on restriction of pollution and consequently many
small players of carbon black they have shut their shops.

And thirdly also the availability of raw material, which basically used to come from
steel industry of China, that availability also shut because of technological shift in
manufacturing process of steel from blast furnace to electric arc furnace technology
and consequently the availability of raw material has gone down.
Hence, China is no longer such a strong player what it used to be at one point of
time in carbon black.

For Indian manufacturers it is an opportunity, as on one side Russia is impacted,

on the other side, China is not as strong as it was in the past. So, in spite of this
Russia-Ukraine issue and pandemic issue, one should be looking at positive and
decent growth going forward.

Demand-supply environment for carbon black is expected to remain favourable

supported by strong demand outlook, which bodes for high carbon black margin in
the near term. The problems the carbon black industry has faced in the last few
years—short supply, logistics problems, difficulties in increasing capacity,
competition from silica, and the costs of environmental compliance.
Table 22: Demand Supply Balance of CBFS & Carbon Black

CBFS 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 2822 2822 2900 3050 3100
Production 2258 2254 2404 2720 2720
Imports 2032 1894 2512 2432 2500
Exports 480 42 580 650 650
Demand 2258 2254 2412 2532 2743
Demand Growth (%) -9.8% -0.2% 7.0% 5.0% 8.3%
Carbon Black 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 1542 1542 1610 1750 1800
Production 1234 1230 1388 1550 1580
Imports 30 30 50 50 50
Exports 210 400 380 450 450
Demand 1264 1268 1360 1480 1595
Demand Growth (%) -4.9% 0.3% 7.3% 8.8% 7.8%

Indian Carbon black manufacturers are expecting positive demand and adding
capacities as well. Carbon black industry grew at a flat rate in 2020-21 at 0.3%
while it grew at a 7.3% in 2021-22 and 8.8%in 2022-23. It is expected to grow at a
healthy robust growth of 7.8% next fiscal before clocking a flat 0.3% growth in 2024-
25. Meanwhile, CBFS too registered a growth of 7% in 2022-23 and expected to
be grow at 5% by 2023-24.

xxv. Other Key Petrochemicals

Overall other key petrochemicals demand in 2022-23 witnessed a growth of 8%
and is expected to grow around 9% in next fiscal year. Benzene demand which
saw double digit growth in 2022-23 growing at 15.7%. While the next fiscal it is
expected witness no growth.
In the last few years, Benzene export volume has been larger than domestic
demand. However, in 2022-23, exports were down from previous year. Haldia
exported 113 KT of benzene in CY22.Between 2017 and 2022, Indian Subcontinent
benzene production increased from around 1.6 million metric tons to almost 2.1
million metric tons. After the 2022 capacity increase from Mangalore Refinery and
Petrochemical Ltd’s reformer/transalkylation = PX operations on the back of
deteriorated PX margins and reformate base benzene production. Benzene
production is forecasted to grow, in line with new capacity addition by Indian Oil
Corporation Limited’s refinery and paraxylene (PX) unit in 2025.

India is a major benzene exporter and will remain so over the next few years.
Exports increased from 0.7 MMT in 2017 0.8 MMT which was a dip, however, it is
expected to increase to 1.3 million metric tons in next year 2023-24. In the last five
years, Indian benzene export volume had been substantially larger than domestic
demand. Despite steady demand growth, India is expected to export approximately
1.3-1.1 million metric tons of benzene per year in the next two years and it will
increase further supported mainly by new pygas based benzene capacity additions.

Reliance Industries accounts for slightly more than half of the benzene capacity in
the Indian Subcontinent in 2022-23. From 2023, HPCL Mittal Energy is expected
to start a pygas-based extraction unit with a benzene capacity of 240,000 metric
tons per year in line with a new naphtha cracker. Benzene production will reach
almost 2.22 million metric tons in 2025, with pygas, reformate, and transalkylation
continuing to be the major supply sources.

The largest part of regional benzene demand comes from cumene, which
represented 29% of total benzene demand in 2023. The next-largest derivatives
were alkylbenzene and chlorobenzene, which represented 36% and 15%,
respectively, of total 2022-23 benzene demand.

The Asian benchmark FOB Korea benzene market has been on a rollercoaster ride
since March 2023. The prices opened low at 924 $/Mt on 1 March 2023 but soon
surged by about 20$ in the first week, reaching 944 $/Mt. However, the prices
lowered back by nearly 13$ in the second week to settle at 931 $/Mt due to lowered
crude oil and naphtha prices. The benzene prices are under pressure as the
conversion cost to downstream products looks negative due to narrowed cracking
spreads.

The downstream solvents phenol and styrene prices are also below the break-even
range due to lower prices caused by weak demand. As a result, the benzene
outlook looks bearish for March 2023, as significant price corrections are
anticipated to bring downstream conversion break even. The current market
conditions require producers to be cautious and keep a close eye on the
developments in the industry to make informed decisions.
The benzene market is dynamic and staying ahead of the curve will be crucial for
businesses to succeed in the long run.

Toluene, an essential chemical compound in the global market, has been

experiencing a mixed trend in March 2023. The international market saw toluene
prices opening at 891 $/mt FOB Korea and jumping nearly 13$ in the first week to
904 $/mt on increased demand from China. However, prices fell almost 10$ in the
second week to 894 $/mt due to upstream crude and naphtha prices.
 Table 23: Demand Supply Balance of Benzene, Toluene, MXS & OX

(KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Benzene
Capacity 2470 2470 2470 2710 2710
Production 2003 2124 1698 2195 1978
Imports 0 0 0 0 0
Exports 1483 1508 888 1385 1168
Demand 600 700 810 810 810
Demand Growth (%) -11.8% 16.7% 15.7% 0.0% 0.0%
Toluene 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 175 175 175 175 175
Production 120 120 130 130 130
Imports 556 510 510 550 550
Exports 18 17 11 0 0
Demand 658 613 629 680 680
Demand Growth (%) 14.6% -6.8% 2.6% 8.1% 0.0%
MXS 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 90 90 90 90 90
Production 57 62 56 58 58
Imports 160 275 310 330 350
Exports 0 0 0 0 0
Demand 199 335 365 386 407
Demand Growth (%) -39.2% 68.1% 9.0% 5.8% 5.4%
OX 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 450 450 450 450 450
Production 522 512 406 384 384
Imports 25 15 19 152 206
Exports 252 173 52 34 34
Demand 297 357 368 502 556
Demand Growth (%) 6.1% 20.3% 3.1% 36.4% 10.8%

On the domestic front, toluene prices fell nearly 8 Rs/kg in two weeks to Rs. 81 Ex
Kandla and Mumbai due to weak demand and high port inventory. In addition,
demand for Toluene did not improve as anticipated from pharma, paints coatings,
and packaging due to the Holi festival holidays and the financial accounting year
closing ahead. The domestic outlook for toluene in March 2023 looks mixed due to
high inventory at all the ports and poor demand from downstream, resulting in lower
domestic manufacturer prices, which makes toluene bearish.
Toluene has the capability to dissolve several organic compounds and hence it is
gaining popularity as solvent in paints, lacquers, thinners, glues, correction fluid
and nail polish remover.

Toluene being a major by - product in the manufacturing process of Styrene, has

applications in the production of Toluene diisocynate for further manufacturing of
Polyurethane which is further used in the manufacturing of foams for furniture,
seats etc.

Toluene is also used in manufacture of Trinitrotoluene (TNT) which is used in small

quantities for making explosives. With the increasing demand of cleaner and better
fuels for automobiles, Toluene is used as an ingredient to produce better quality
fuel by using it in the blending of petrol.

Toluene witnessed a negative demand in 2021-22. However, it rebounded and

witnessed a positive growth of 2.6% in 2022-23 and is expected to witness a robust
growth of 8% next fiscal. Toluene prices in the domestic market witnessed a low in
dec’22 touching $831/MT. A consistent rise in Toluene prices was observed since
then till March 2023, bolstered by a prominent recovery in industrial activities post
decline in pandemic cases in India. Around 24th Mar’23, toluene prices were around
$970/MT. Furthermore, the usage of packaging made up of polystyrene, an
intermediate derived from benzene, has increased in food and e-commerce
applications, which, in turn, has stimulated the market demand for benzene.

Among all segments, Ortho-Xylene has witnessed the highest growth rate and will
continue to do so in the forecast duration, owing to its extensive use as a solvent
in several industries. Ortho-xylene is also used as an industrial feedstock to
produce phthalic anhydride, which is then used in the production of plastic in end-
user industries. In terms of application, the automotive segment is expected to see
a considerable shift due to its extensive use in coating of automotive parts such as
the engine, interior & exterior parts and others. The rising demand for polyethylene
terephthalate (PET) and pure isophthalic acid (PIA) is expected to drive the market
during the forecast period. Furthermore, the increasing use of the product in various
sectors such as paints & coatings and textile will also contribute to the growth.

MXS had witnessed a double-digit staggering growth in demand at 68% in 2021-

22, after witnessing a dip of 39% in previous year. However, in 2022-23 the demand
grew by 9%. MXS mainly goes into Paints sector. Consumer demand in paints
revived after taking a hit in the first two months of 2022 following 20-23% price hike.
Russia-Ukraine conflict had an adverse impact on raw material prices for the Indian
paint & coating producers during the most of 2022. High crude prices for the most
part of the year 2022 resulted in high raw material costs for Indian paint & coating
producers. Major paint producers increased their prices five times in quick
succession during May- October 2022.
Thankfully Prices of key inputs such as crude-based monomers and titanium
dioxide eased during October- December 2022 period, providing a much-needed
relief for the paint & coating producers.

High raw material prices had an adverse impact on the profitability of the paint &
coating producers. Despite the successive price hikes, paint producers were
unable to pass-on the full increased costs to consumers.

According to a forecast by Indian Paint Association, Indian paint & coating industry
will be worth INR 1,000 billion ($12.34 billion) during the next five year, a growth of
43pc from the current levels. Architectural segment has been the mainstay of Indian
paint & coating industry. The segment witnessed strong growth in 2022 on the back
of vibrant construction sector. Healthy construction pipeline in the country,
ambitious schemes by Indian government such as ‘Housing for All’, and rising
urbanization have been the main demand drivers of architectural coatings in the
country. These factors are expected to play a major role in the future growth of the
architectural paint consumption in the country in the medium and long term.

Accounting for more than 30 percent of India’s paint & coating industry, industrial
segment of the paints & coating industry has rapidly grown over the years. Primarily
driven by steady growth in the automotive segment, industrial coating segment is
expected to increase its share in the overall paint & coating industry in the coming
years. Growth in the automotive coating segment has been driven by growing
automotive industry in the country. India has overtaken Japan to become the third
largest vehicle market in 2022 after China and the US, selling more than 4.25
million vehicles riding on pent- up demand and enhanced production by carmakers.

Imports in case of MXS are expected to rise to 206 KT by 2024-25.

Meanwhile, OX registered a growth of 3.1% in 2022-23, and is forecasted to
witness double-digit growth of 36% in 2023-24. There is no new capacity addition
lined up for OX.
xxvi. Outlook for the Overall Indian Petrochemical Industry
India’s aggregated demand for petrochemicals declined by 7% in 2020-21 due to
the pandemic which affected the demand supply and had affected the supply chain,
had grown by 13% in 2021-22. However, in 2022-23 it showed a slower growth but
modest growing at 8%. The forecast for next two year shows the growth to grow
around 7%. It is forecasted that the overall industry would have a healthy growth in
next fiscal and the demand will touch 56 MMT and a further increase to touch 60
MMT by 2025, which reinstates the increase in consumption of petrochemicals
across value chains in the future and healthy growth of the industry.

Figure 6: Aggregate Petrochemical Demand (All key segments – MMT)

Polymers are likely to register a healthy growth in the coming year 2023-24 and
lock around 7.5% growth. Polyolefins are also expected to grow at 7.7% in 2023-
24. Surfactants are projected to grow at 6% in the same period. Synthetic rubbers
are expected to register demand growth of 6% in the said period. Other key
petrochemicals expected to grow at a 9% in the same period.
xxvii. Overview of circularity in plastic industry
Increase Plastic Circularity, Decrease Plastic Waste
Preamble
Plastics play an undeniable role in the fast tracking of urbanization. From its
inception, they have provided an ease of living like no other towards the pocket as
well as towards overall functionality.

They are very resource-efficient due to their ability to provide high strength-to-
weight ratio, stiffness, toughness, ductility, corrosion resistance, bio-inertness, high
thermal and electrical insulation, non-toxicity, and excellent durability at a relatively
low lifetime cost when compared to other materials.

But with the plethora of benefits that plastics have brought us in all sectors of
consumption, especially healthcare, they have also brought in a lackadaisical
attitude of littering and waste pollution.

In 2020, the world produced 367 million metric tons of plastic waste, a number that
is only set to increase in the coming years. While it is imperative to reduce the
generation of plastic waste, efforts to manage and dispose of the existing waste
are on the forefront to address the plastic pollution crisis.

Figure 7: Plastic waste generated from 1950 - 2020

According to the UNEP Global Waste Management Outlook, 3 billion people do not
have access to controlled disposal services for solid waste, and 2 billion people still
lack access to regular waste collection. Therefore, a large portion of plastic waste
is either littered or inadequately disposed. Hence, if we want to continue reaping
the benefits of plastics, we need to keep the material in the supply chain for as long
as possible and reduce its careless disposal. To make that happen, everyone in
the supply chain needs to work towards creating a closed loop.
World Plastics Scenario
As per baseline report on plastic waste by United Nation Environmental Program
(UNEP), plastic waste generated by different countries is given below. This reflects
that China generated the largest amount waste with the US running in a close
second. India with its large amount of population, generated the fifth highest
amount of plastic waste in the world.

Table 24: Plastic waste generation in different countries

S.No. Countries Plastic waste (MT) Reference Year

1. China 61 2016
2. US 34.5 2015
3. Indonesia 9.6 2018
4. Japan 8.9 2018
5. India 3.5 2020
6. Canada 3.2 2016
7. Australia 2.5 2016
8. Sweden 1.6 2016
9. UK 1.5 2018
10. Israel 0.9 2018
11. Switzerland 0.78 2019
12. Denmark 0.35 2017
13. Zimbabwe 0.3 2019
Source: Baseline report on plastic waste and CPCB
https://gridarendal-websitelive.s3.amazonaws.com/production/documents/:s_document/554/original/UNEP-CHW-PWPWG.1-INF-4.English.pdf?1594295332

Global production of plastics in million tons (Plastic Atlas 2019 | Plastic soup foundation)
The global plastic packaging market size was valued at USD 355.0 billion in 2021
and is expected to expand at a compound annual growth rate (CAGR) of 4.2% from
2022 to 2030. The expanding size of key application industries including food and
beverages, pharmaceuticals, personal and household care, and growing
penetration of organized as well as e-retail across the world, are primarily fueling
growth in the industry.

Due to its flexibility, rigidity, transparency, and lightweight nature, plastic packaging
is favoured by key industries such as personal care, food and beverage, and
industrial, over other materials such as metal or glass.

Plastics have a significant environmental footprint compared to many other

materials. This is due to several factors, including the large amounts of energy
required to produce and transport plastics, as well as their persistence in the
environment.
The demand for single-serve consumer packaging has been rapidly increasing due
to its convenience, particularly in the past few years. The rise in awareness about
waterborne diseases, the growing focus on health and well-being, and the increase
in spending capacity among consumers have led to a surge in the demand for
packaged drinking water globally, which is expected to have a positive impact on
the industry.

Figure 8: Plastic Packaging Market

To decrease the waste caused by single use plastics, as of September 2021,

around 127 countries have implemented some form of regulation or ban on single-
use plastics (SUPs), including plastic bags, straws, utensils, and polystyrene foam
containers.

The Government of India banned Single Use Plastics in July 2022.

Some of the countries that have implemented full or partial bans on SUPs include
Canada, France, Germany, Italy, the United Kingdom, Australia, India, China,
Rwanda, Chile, Columbia and Kenya, among others.

There is no federal ban on single-use plastics (SUPs) in the United States, but
some cities and states have implemented their own regulations eg.. New York,
Hawaii, Maine etc.
 Figure 9: SUP ban across the globe

Therefore, the need for a change has been identified and actions are being taken
through various channels and pacts. Work needs to be done towards building a
robust collection and recyclable ecosystem.

Indian Plastics Scenario

The Plastics Industry is a significant source of employment in India, contributing to

a considerable portion of the workforce, and valued at approximately INR 5.1 lakh
crore (USD 73 billion). Due to the widespread use of plastics in various sectors, the
industry is experiencing rapid growth and is considered to be one of the fastest-
growing industries.

As per details provided by 35 States/UTs on implementation of Plastic Waste

Management Rules, it is estimated that plastic waste generation during the year
2019-20 is approximately 34,69,780 TPA.
 Figure 10: State/UT wise plastic waste generation (CPCB)

In India, the recycling and recovery of plastic waste accounts for 60% of the total
amount generated. While this number is much larger as compared to the global
rate, we still need to hold ourselves to higher recycling and environmentally
conscious standards.

Regulations
The Indian Government has implemented various environmental laws pertaining to
plastics, with a particular focus on managing and reducing plastic waste pollution.
These policies have been key focus areas for the government in their efforts to
address the environmental impact of plastics in the country.

In an effort to address littering caused by lightweight plastic carry bags, the Indian
Government has mandated an increase in their thickness. As of December 31,
2022, the minimum thickness of plastic carry bags has been increased from 50
microns to 120 microns. The aim is to reduce the use of flimsy plastic bags and
encourage the use of more durable ones, thereby reducing plastic waste and its
impact on the environment.

The Plastic Waste Management Rules 2016 published on 16th February 2022
stress the minimization of plastic waste, segregation at source, recycling, and
implementing the polluters pay principle for the sustainability of the waste
management system. The Rules hold Producers, Importers, and Brand Owners
(PIBOs) responsible for managing the plastic packaging waste that they put in the
market and provide incentives to Plastic Waste Processors (PWPs) for collection
and recycling of the waste.
Below are the targets for Extended Producer Responsibility (EPR) as per the PWM
Rules 2022 that begin with collection and move further to Recycling, use of
Recycled content and Reuse. The plastic packaging has been divided only the
following categories:-

• Category I : Rigid plastic packaging

• Category II : Flexible plastic packaging of single layer or multilayer (more
than one layer with different types of plastic), plastic sheets or like and
covers made of plastic sheet, carry bags, plastic sachet or pouches;
• Category III : Multilayered plastic packaging (at least one layer of plastic and
at least one layer of material other than plastic)
• Category IV : Plastic sheet or like used for packaging as well as carry bags
made of compostable plastics.
Table 25 EPR Targets for obligated entities (2021-22 waived off)
EPR Recycling Obligation Recycled Content Reuse
Targets Excluding EOL

Year Cat. Cat. Cat. Cat. Cat. Cat. Cat. Cat. Cat.
I II III IV I II III IA IB
2021-22 25
2022-23 70
2023-24 100
2024-25 100 50 30 30 50
2025-26 100 60 40 40 60 30 10 5 10 70
2026-27 100 70 50 50 70 40 10 5 15 75
2027-28 100 80 60 60 80 50 20 10 20 80
2028-29 100 80 60 60 80 60 20 10 25 85
Onwards
Category 1A (0.9 litre or kg but less than 4.9 litres or kg)
Category 1B (> 4.9 litres or kg)

The Industry has been supportive and compliant of all the various initiatives led by
the Government of India. By the end of 2023 financial year, more than 6650
obligated entities had registered on the CPCB portal.
 Figure 11: Status of registration of EPR (F.Y. 22-23) as of 27th March 2023
Category-wise EPR Targets (TPA) for registered PIBO (F.Y. 22-23)

Registered
Entities Category-wise EPR Targets
(TPA) for registered PIBO
20%
(F.Y. 22-23)
Cat II,
1500000
49% Cat I, 1155302.3
QUANTITY (TPA)

1000000 873271.2
31% Cat III,
500000 358082.3 Cat IV,
2470.7
0
Brand Owner Producer Cat I Cat II Cat III Cat IV
CATEGORIES
Importer

The government has emphasized the importance of resource efficiency, circular

economy practices, and the use of recycled plastics. On the other hand, the plastics
Industry has also recognized the need for responsible waste management and has
implemented several initiatives, such as improving the recyclability of plastic
products and increasing the use of recycled plastic in their manufacturing
processes.

Furthermore, the industry has also invested in research and development to identify
alternative materials and production methods that are more environmentally
sustainable.

Collaborative efforts between the government and the plastics industry are crucial
in reducing plastic waste pollution while promoting economic growth and increasing
sustainability and circular economy.
Feedstock
Naphtha (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Production 19381 19922 17016 --
Imports 1199 1246 893 --
Exports 6509 6861 5676 --
Apparent Demand 14100 14255 12047 --
Demand Growth% -1.2% 1.1% -15.5% --

Natural Gas (MMSCM) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Production 28672 34024 33573 -- --
Imports 33031 31906 27021 -- --
Exports 0 0 0 -- --
Apparent Demand 60815 65037 60594 -- --
Demand Growth% -5.2% 6.9% -6.8% -- --

Coal Bed Methane

(MMSCM)
2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Production 642 683 674 -- --
Imports -- -- -- -- --
Exports -- -- -- -- --
Apparent Demand -- -- -- -- --
Demand Growth% -- -- -- -- --

Methanol (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E

Capacity 634 634 661 757 804
Production 205 204 172 235 293
Imports 2173 2470 2677 2643 2681
Exports 9 16 16 16 16
Apparent Demand 2368 2632 2833 2862 2958
Demand Growth% 3.5% 11.2% 7.6% 1.0% 3.4%
Building Blocks (KT)
Ethylene 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 7477 7477 7853 8677 8677
Production 7158 7311 7312 7595 7761
Imports 50 59 56 31 60
Exports 134 118 35 70 120
Net Availability 7074 7253 7333 7557 7701
Propylene 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 6614 6614 7071 7602 7602
Production 5621 5835 5908 5735 5923
Imports 10 27 15 0 0
Exports 15 0 0 0 0
Net Availability 5615 5862 5923 5735 5923
Butadiene 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 605 605 605 605 605
Production 461 505 462 505 505
Imports 0 0 0 0 0
Exports 134 163 150 159 155
Apparent Demand 327 342 312 346 350
Demand Growth% -0.6% 4.6% -8.8% 10.9% 1.2%
Styrene
Imports 738 889 1173 1266 1368
Exports 0 0 0 0 0
Net Trade 738 889 1173 1266 1368
Demand Growth% -15.8% 20.5% 31.9% 7.9% 8.1%
EDC 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 247 247 247 247 247
Production 244 244 245 245 245
Imports 471 490 510 510 510
Exports
Apparent Demand 715 734 755 755 755
Demand Growth% -18.1% 2.7% 2.9% 0.0% 0.0%
VCM 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 996 996 996 996 996
Production 974 1007 943 963 977
Imports 500 500 521 525 525
Exports
Apparent Demand 1474 1507 1464 1488 1502
Demand Growth% -4.2% 2.2% -2.9% 1.6% 0.9%
 Aromatics 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
PX
Capacity 5860 5900 5900 6101 6760
Production 5109 4839 3756 3703 5256
Imports 615 557 540 671 671
Exports 2242 1670 600 390 1137
Apparent Demand 3297 3772 3696 3984 4789
Demand Growth% -15.6% 14.4% -2.0% 7.8% 20.2%

Intermediates (KT)
Fibre Intermediates (KT)
ACN 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 0 0 0 70 70
Production 0 0 0 35 65
Imports 135 176 222 215 205
Exports 0 0 0 0 0
Apparent Demand 135 176 222 250 270
Demand Growth% -23.3% 30.4% 26.1% 12.6% 8.0%
Caprolactam 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 70 120 120 120 120
Production 72 86 90 94 100
Imports 68 74 74 74 74
Exports 6 0 0 0 0
Apparent Demand 134 160 164 168 174
Demand Growth% -11.3% 19.4% 2.5% 2.4% 3.6%
PTA 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 6440 6440 6440 6440 6440
Production 5082 5616 5645 5796 5796
Imports 611 1350 1550 1800 2200
Exports 130 53 2 0 0
Apparent Demand 5563 6913 7193.056 7596 7996
Demand Growth% -14.6% 24.3% 4.1% 5.6% 5.3%
MEG 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 2215 2215 2279 2705 2705
Production 2036 1969 1642 2225 2396
Imports 648 950 1400 1000 1000
Exports 284 27 20 30 30
Apparent Demand 2400 2892 3022 3195 3366
Demand Growth% -7.3% 20.5% 4.5% 5.7% 5.4%
Polymers (KT)
LDPE 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 650 650 650 650 650
Production 619 583 583 623 620
Imports 265 345 345 344 390
Exports 134 47 47 49 0
Apparent Demand 783 865 865 928 1010
Demand Growth% 3.1% 10.5% 0.0% 7.3% 8.9%
EVA 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 0 0 0 0 0
Production 0 0 0 0 0
Imports 190 182 208 225 233
Exports 0 0 0 0 0
Apparent Demand 190 182 208 225 233
Demand Growth% -2.1% -4.2% 14.3% 8.2% 3.6%
LLDPE 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 2545 2545 2545 2945 2945
Production 2372 2392 2025 2798 2798
Imports 476 532 845 460 625
Exports 452 268 86 100 100
Apparent Demand 2518 2650 2781 2983 3225
Demand Growth% 9.4% 5.3% 5.0% 7.3% 8.1%
HDPE 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
HDPE Capacity 2665 2665 2665 3515 3515
LLDPE Capacity 2545 2545 2545 2945 2945
Total Capacity 5210 5210 5210 6460 6460
Production 2473 2415 2041 3339 3339
Imports 547 599 1220 450 600
Exports 370 173 30 30 100
Apparent Demand 2775 2933 3200 3500 3730
Demand Growth% 8.8% 5.7% 9.1% 9.4% 6.6%
All PE 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 5860 5860 5860 7110 7110
Production 5464 5390 4648 6760 6757
Imports 1287 1476 2410 1254 1615
Exports 956 488 163 179 200
Apparent Demand 6076 6448 6846 7411 7965
Demand Growth% 8.3% 6.1% 6.2% 8.3% 7.5%
PP 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 6100 6100 6220 6600 7110
Production 5210 5710 5401 6270 6755
Imports 682 954 1473 646 691
Exports 815 486 300 100 100
Apparent Demand 5358 6089 6370 6816 7293
Demand Growth% 1.9% 13.6% 4.6% 7.0% 7.0%
Polyolefins 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 11960 11960 12080 13710 14220
Production 10674 11100 10049 13030 13512
Imports 2159 2612 4091 2124 2539
Exports 1771 974 463 279 300
Apparent Demand 11624 12719 13424 14452 15491
Demand Growth% 5.0% 9.4% 5.5% 7.7% 7.2%
PVC 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 1557 1557 1617 1672 1717
Production 1367 1414 1493 1508 1510
Imports 1394 1433 2186 2416 2650
Exports 19
Apparent Demand 2745 2834 3679 3934 4170
Demand Growth% -15.8% 3.3% 29.8% 6.9% 6.0%
PS 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 490 490 518 518 518
Production 212 240 260 315 330
Imports 42 34 65 60 60
Exports 27 30 25 60 60
Apparent Demand 227 240 300 315 330
Demand Growth% -9.9% 5.7% 25.0% 5.0% 4.8%
EPS 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 150 183 190 262 284
Production 97 103 120 142 160
Imports 6 10 2 1 1
Exports 1 1 2 12 20
Apparent Demand 101 120 120 131 141
Demand Growth% -14.4% 18.8% 0.0% 9.2% 7.6%
 Polymers (KT) 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 14157 14190 14405 16132 16709
Production 12350 12857 11922 14995 15512
OR (%) 87% 91% 83% 93% 93%
Imports 3601 4089 6344 4601 5250
Exports 1799 1024 490 351 380
Net Trade -1802 -3065 -5854 -4250 -4870
Apparent Demand 14696 15913 17523 18832 20132
Demand Growth% 0.0% 8.3% 10.1% 7.5% 6.9%

Vinyls (KT)
2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
PVC
Capacity 1557 1557 1617 1672 1717
Production 1367 1414 1493 1508 1510
Imports 1394 1433 2186 2416 2650
Exports 19
Apparent Demand 2745 2834 3679 3934 4170
Demand Growth% -15.8% 3.3% 29.8% 6.9% 6.0%
Styrenics (KT)
PS 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 490 490 518 518 518
Production 212 240 260 315 330
Imports 42 34 65 60 60
Exports 27 30 25 60 60
Apparent Demand 227 240 300 315 330
Demand Growth% -9.9% 5.7% 25.0% 5.0% 4.8%
ABS 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 205 215 225 230 230
Production 122 123 180 195 200
Imports 88 100 60 60 60
Exports 0 0 0 0 0
Apparent Demand 210 223 240 255 260
Demand Growth% -16.0% 6.2% 7.6% 6.3% 2.0%
SAN 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 170 170 170 175 175
Production 107 111 145 155 160
Imports 8 14 15 12 12
Exports 0 0 0 0 0
Apparent Demand 115 125 160 167 172
Demand Growth% -19.0% 8.7% 28.0% 4.4% 3.0%

PET (KT)
PET 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 2020 2055 2241 2574 2610
Production 1757 1788 2062 2394 2427
Imports 165 105.5 98 90 75
Exports 802 711 649 837 708
Demand 1120 1182 1510 1646 1794
Demand Growth (%) -0.4% 5.5% 27.7% 9.0% 9.0%
Synthetic Fibres (KT)
PSF 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 2702 2762 2784 2919 2950
Production 1500 1650 1760 1813 1867
Imports 25 24 20 20 20
Exports 216 274 218 177 177
Demand 1290 1378 1530 1576 1622
Demand Growth (%) -11.3% 6.9% 11.1% 3.0% 2.9%
POY 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 3480 3480 3480 3766 4088
Production 2190 2861 2931 3238 3529
Imports 144 75 162 70 50
Exports 106 179 86 108 120
Demand 2228 2757 3007 3200 3459
Demand Growth (%) -12.6% 23.7% 9.1% 6.4% 8.1%
PTY 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 2640 2995 3115 3335 3645
Production 1911 2460 2817 3010 3269
Imports 13 13 17 14 14
Exports 360 503 338 420 540
Demand 1564 1970 2496 2604 2743
Demand Growth (%) -12.1% 25.9% 26.7% 4.3% 5.3%
IDY 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 62 69 69 69 70
Production 41 54 56 62 67
Imports 36 51 50 55 63
Exports 9 10 8 9 9
Demand 71 92 98 113 130
Demand Growth (%) 18.3% 30.0% 6.5% 15.3% 15.0%
FDY 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 1254 1259 1313 1475 1493
Production 629 929 989 1163 1366
Imports 52 146 215 100 60
Exports 19 25 14 30 70
Demand 686 1033 1194 1333 1416
Demand Growth (%) -28.1% 50.7% 15.6% 11.6% 6.2%
Synthetic Rubber (KT)
PBR 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 135 135 135 135 135
Production 129 133 126 135 135
Imports 90 96 100 107 118
Exports 23 21 2 4 1
Demand 200 210 224 238 253
Demand Growth (%) 8.2% 4.9% 6.7% 6.3% 6.3%
SBR 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 270 270 270 270 270
Production 205 225 199 235 251
Imports 77 91 85 87 86
Exports 22 11 6 9 9
Demand 273 292 291.5 311 328
Demand Growth (%) 8.6% 6.7% 0.0% 6.7% 5.5%
NBR 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 14 14 15 16 17
Production 12 13 14 16 17
Imports 34 30 37 40 43
Exports 0 0 1 1 1
Demand 46 43 51 55 59
Demand Growth (%) -1.8% -7.1% 20.0% 7.4% 7.3%
EPDM 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 0 0 0 0 0
Production 0 0 0 0
Imports 42 50 61 63 65
Exports 0 0 0 0 0
Demand 42 50 61 63 65
Demand Growth (%) -6.7% 19.0% 22.7% 2.7% 3.2%
BUTYL RUBBER+HALO
BUTYL RUBBER
2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 120 120 120 120 120
Production 54 56 78 108 120
Imports 85 79 61 50 39
Exports 25 19 17 33 28
Demand 114 115 121 125 131
Demand Growth (%) 15.2% 1.1% 5.3% 2.6% 5.3%
Other Key Petrochemicals (KT)
2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Benzene
Capacity 2470 2470 2470 2710 2710
Production 2003 2124 2174 2358 2222
Imports 0 0 0 0 0
Exports 1483 1508 888 1385 1168
Apparent Demand 600 700 810 810 810
Demand Growth% -11.8% 16.7% 15.7% 0.0% 0.0%
Toluene 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 175 175 175 175 175
Production 120 120 130 130 130
Imports 556 510 510 550 550
Exports 18 17 11 0 0
Apparent Demand 658 613 629 680 680
Demand Growth% 14.6% -6.8% 2.6% 8.1% 0.0%
MXS 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 90 90 90 90 90
Production 57 62 56 58 58
Imports 160 275 310 330 350
Exports 0 0 0 0 0
Apparent Demand 199 335 365 386 407
Demand Growth% -39.2% 68.1% 9.0% 5.8% 5.4%
OX 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 450 450 450 450 450
Production 522 512 406 384 384
Imports 25 15 19 152 206
Exports 252 173 52 34 34
Apparent Demand 297 357 368 502 556
Demand Growth% 6.1% 20.3% 3.1% 36.4% 10.8%
Surfactants (KT)
LAB 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 550 550 572 597 597
Production 449 457 405 488 488
Imports 253 273 303 232 245
Exports 0 2 0 0 0
Apparent Demand 706 723 701 721 733
Demand Growth% 5.6% 2.3% -3.0% 2.8% 1.7%
EO 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 293 303 320 368 382
Production 263 302 320 363 377
Imports 0 0 0 0 0
Exports 1 1 1 1 1
Apparent Demand 264 303 320 363 377
Demand Growth% 5.1% 14.9% 5.5% 13.4% 3.9%

Carbon Black & CBFS (KT)

CBFS 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 2822 2822 2900 3050 3100
Production 2258 2254 2404 2720 2720
Imports 2032 1894 2512 2432 2500
Exports 480 42 580 650 650
Demand 2258 2254 2412 2532 2743
Demand Growth (%) -9.8% -0.2% 7.0% 5.0% 8.3%
Carbon Black 2020-21 A 2021-22 A 2022-23 A 2023-24 E 2024-25 E
Capacity 1542 1542 1610 1750 1800
Production 1234 1230 1388 1550 1580
Imports 30 30 50 50 50
Exports 210 400 380 450 450
Demand 1264 1268 1360 1480 1595
Demand Growth (%) -4.9% 0.3% 7.3% 8.8% 7.8%
 Chemicals & Petrochemicals Manufacturers’ Association
CPMA is the apex forum representing the Indian Petrochemical Industry, established in
1993, and the Association offers its members a podium to collectively present their ideas,
voice their concerns and offer suggestions on relevant issues. It provides a linkage
between the industry, the Government and society. It interacts with policy makers and
industry associations to develop and maintain harmonious and conducive business
conditions.

The Association, registered under the Indian Societies Act, is widely recognized as one
of the national apex bodies of the Indian Petrochemical Industry by all Ministries and
Departments of Government of India, apex Chambers of Commerce and Industry and
other related Associations in India and abroad. CPMA is affiliated to the Confederation of
Indian Industry (CII). The Association is also a Steering Committee Member of the Asia
Petrochemical Industry Conference (APIC) and had successfully hosted the annual APIC
2010 conference on May 13-14, 2010 in Mumbai.

CPMA has various sub-committees constituted to effectively focus on key areas within
petrochemicals like Polyolefins, Vinyl’s, Styrenics, Glycols, Elastomers, Fibre
Intermediates and Surfactants. CPMA has also taken the lead to set up and promote the
India Centre for Plastics in the Environment (ICPE) to deal with all environmental issues
connected with the usage of plastics.
CPMA Members

Associate Members: - Braskem SA, SABIC Innovative Plastics India Pvt Ltd, Indorama
Industries Ltd, Jindal Polyfilms, HPL Additives, ICIS, KLJ Group
Address
Chemicals & Petrochemicals Manufacturers’ Association
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