Page 132 - CW E-Magazine (12-11-2024)

Point of View

Major private sector investments include RIL’s 1.5-mtpa PVC project, as well as a 3-mtpa PTA plant at Jamnagar; Nayara’s 450-ktpa
PP plant at Vadinar (which has just gone on stream) and HPL’s phenol/acetone project at Haldia with phenol capacity of 300-ktpa and
matching acetone capacity of 185-ktpa. The Adani Group is also adding about 1-mtpa of PVC capacity, but this is coal-based.

In addition to the projects cited above, there are several others at an early stage of conceptualization. Not all of these will make the
cut, and timelines are still unclear.

Several commonalities
There are several commonalities amongst the firm projects. For one, the emphasis seems to be on building the C3 (propylene) value
chain. This is not surprising as FCC propylene offers a simple, low-cost route to the olefin and one that can be conveniently retrofitted
into existing refinery operations.

There is also an overwhelming emphasis on PP production, which may not be wise, as it runs the risk of overbuild should demand
growth not pan out as anticipated. There are other propylene derivatives that can be considered, and these merit attention if not by
the refiners themselves then by third party investors for whom it will be more worthwhile. Much will hinge on the commercials of
the olefin supply arrangement, but such business models are widely followed, including here in India, let alone in other countries.

Demand and deficits
What these investments mean for self-sufficiency in petrochemicals is hard to estimate. Historical growth trends in demand, especially
for polymers, while offering a clue, may not be entirely accurate in the world of tomorrow. The polymers industry is under intense pressure
to deliver on circular initiatives in a bid to curb the plastics waste management problem, and demand growth for virgin polymers is widely
expected to lag historical growth trends. By how much, is, however, difficult to predict, as much will depend on regulations both at the
national as well as international levels. A global treaty to curtail plastics production is now being debated, and resisted by emerging
economies including India and China. Whatever its outcome it will not be the last to put pressure on the industry.

One estimate carried out by IOC pegs the net deficit for basic petrochemicals rising from about 11-mt in 2024 to 48-mt in 2040.
But these numbers hide a lot of assumptions that could yet go wrong.

Where else to invest?
The top-20 products imported into India in FY24 together added up to about 19.5-mt in volume and $17-bn in market value. Nine
are commodity polymers and their raw materials, and they total up to about 8.9-mt. But there is a universe of other petrochemicals that
include PTA, methanol, toluene, monoethylene glycol (MEG), acetic acid, LAB, and butyl acrylate, that in FY24 contributed to about 10-mt
in imports. While investments are expected in some, there are none for the majority for valid reasons including lack of access to cheap
feedstock (for methanol, acetic acid), inability to source technology at competitive costs (for LAB), and poor competitiveness against
imports from low-cost production centres in the Middle East, Southeast Asia, and China (for MEG).

But there are several other opportunities that do not figure on this list and deserve consideration. These include isocyanates, engineering
plastics, detergent raw materials (alpha-olefins, fatty alcohols), products from the C6+ value chains, amongst others. For some, demand
may not seem sizeable now but will become so in the timelines in which the projects will come to fruition. For a few technologies may
not be available for the asking and joint ventures may be the only way to access them. In some instances, poor competitiveness (in an
international context) will keep investments away, and suitable policies and tariff structures will be needed to ensure no adverse impacts
from unfair trade.

Importantly, the government needs to recognise that the chemical industry as a key enabler of modern living, and not a nuisance to be
constrained through regulation and red-tape. The priority must be on developing well-developed clusters where not just the petrochemical
industry, but also the broad chemical industry – including the fine and speciality chemical industries, wherein India’s competitiveness
is well recognised – can locate and start operations in double-quick time. Clusters are efficient and safe locales where the industry can
thrive, as several countries have amply shown.

India needs a much larger and more diversified chemical industry than it has now. The former it seems is happening. Not so sure of
the latter. The herd mentality to investments needs to change. Those who have dared to do so – and there are a few examples – have
been amply rewarded. More need to emulate, not imitate, them!
Ravi Raghavan

132 Chemical Weekly November 12, 2024

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