Supply chains hit, Government asks industry if local production of 200 petro items possible
These items cumulatively account for annual imports worth over $50 billion and the missive from the DPIIT, issued Wednesday, comes amid the West Asia crisis that has caused price and supply related challenges for the industry.
The list of items suggests that India’s import substitution strategy cannot rely on a single policy instrument, such as tariffs or PLI schemes. The Department for Promotion of Industry and Internal Trade (DPIIT), in a meeting with the petrochemical industry, has asked them to “urgently respond” on the scope to indigenise the production of over 200 highly import-dependent petrochemical items, The Indian Express has learnt.
These items cumulatively account for annual imports worth over $50 billion and the missive from the DPIIT, issued Wednesday, comes amid the West Asia crisis that has caused price and supply related challenges for the industry.
Most petrochemicals listed by the DPIIT are intermediate products that are used in packaging, construction, automotive, agricultural, textile and paints. Items like PVC, polyethylene (LDPE, LLDPE), polypropylene, polystyrene, ABS are the backbone of packaging films, pipes, containers and consumer goods. Any supply disruption of these items directly hits FMCG, construction and e-commerce packaging.
The list of items also includes high-value imports ranging from phosphoric acid, ammonia, acetic acid, toluene used in agriculture, food production, and industrial manufacturing, plastics and resins such as polypropylene, polycarbonates and propylene copolymers that go into the production of automotive components, packaging materials, and medical devices.
While the Indian industry and consumers have been relatively shielded by the impact of the West Asia crisis due to the low-cost inventory, the closure of the Strait of Hormuz is depleting the inventory and a more pronounced impact across the industry may be felt if the crisis continues.
Ajay Srivastava, former trade officer and founder of think tank GTRI, said that out of the total imports in the petrochemical industry that is worth $56 billion, only a limited set of sectors show meaningful domestic export capability, while a large number of product lines remain heavily import-dependent with negligible exports.
The list of items suggests that India’s import substitution strategy cannot rely on a single policy instrument, such as tariffs or PLI schemes. Different categories require very different policy responses depending on the level of existing domestic capability, scale gaps, technology intensity and supply-chain dependence, Srivastava said.
A query mailed by The Indian Express to DPIIT did not elicit a response.
The GTRI’s analysis of the data showed that imported items of value over $500 million, such as phosphoric acid, polypropylene, gold compounds, polycarbonates, suspension grade PVC, resin, India’s most strategically vulnerable product categories, are extremely high imports with almost no domestic capability. Such dependence may expose India to external supply-chain shocks, geopolitical risks and long-term trade imbalances, he said.
Items such as PVC pipes, polycarbonates (roofing sheets), epoxy resins (coatings, adhesives), and MDI/polyurethanes (insulation foam) are primarily used in housing, commercial real estate, and government infrastructure projects. Similarly, MDI, polyurethanes, carbon blacks (tyre filler), engineering plastics (polyamide/nylon), and isocyanates go into vehicle interiors, tyres, bumpers, and industrial coatings.
Some of these items are also key raw materials for fertiliser and urea production. These included phosphoric acid, used in fertiliser production and anhydrous ammonia, a feedstock for urea.
Items like PET (terephthalic acid), acrylic fibres (acrylonitrile), nylon-6/6,6 (polyamide), and vinyl acetate are used in the garment and technical textiles industry. Similarly, Butyl acrylate, methyl methacrylate, epoxy resins, toluene, xylene, and ethylene glycol feed the decorative and industrial coatings value chain.
Ajay Joshi, a chemical sector expert, said most of these items are crude oil and natural gas derivatives and faced supply chain disruption due to the West Asia crisis. While the drive to indigenise chemical production is the right ambition, it faces a structural gap, Joshi told The Indian Express.
“You can’t localise manufacturing when the feedstock itself is imported. Over 85% of our crude oil is shipped in, and most chemicals we aim to produce domestically are ultimately petroleum derivatives. The intent is strong, but the foundation remains borrowed,” he said.
According to Joshi, linking India’s latest push for coal gasification to the chemical value chain could be the right policy direction given the country’s huge coal reserves. “What we need now is a feedstock-first industrial policy that connects our coal reserves to our chemical ambitions,” he said.
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