Supply fears rise as govt pushes local production of 200 petrochemical imports

With supply chain concerns mounting due to the West Asia crisis, the government has asked the petrochemical industry to urgently assess whether India can localize production of more than 200 highly import-dependent petrochemical products, sources said.

The Department for Promotion of Industry and Internal Trade (DPIIT) raised the issue during a meeting with industry stakeholders, as disruptions linked to the regional conflict begin to expose vulnerabilities in India’s petrochemical supply chain.

The 200-plus items identified by the government account for annual imports worth more than $50 billion. Many are essential industrial intermediates used across packaging, construction, automobiles, agriculture, textiles and paints — sectors where even minor supply shocks can ripple across the broader economy.

Products such as PVC, polyethylene (LDPE, LLDPE), polypropylene, polystyrene and ABS form the backbone of packaging films, pipes, containers and a wide range of consumer goods. Any prolonged disruption in their supply could directly impact FMCG manufacturing, housing projects and e-commerce packaging.

The list also includes high-value imports such as phosphoric acid, ammonia, acetic acid and toluene, which are widely used in fertilizers, food production and industrial manufacturing. Plastics and advanced resins like polycarbonates and propylene copolymers, vital for automotive parts, medical devices and packaging materials, also feature prominently.

While Indian companies have so far been cushioned by low-cost inventories, industry experts warn that this buffer is shrinking as uncertainty around the Strait of Hormuz intensifies. A prolonged crisis could soon translate into sharper price spikes and supply shortages.

Ajay Srivastava, former trade officer and founder of Global Trade Research Initiative (GTRI), said India remains deeply dependent on imports despite its large petrochemical market.

“Out of the total $56 billion petrochemical imports, only a limited set of sectors show meaningful domestic export capability. A large number of product lines remain heavily import-dependent with negligible exports,” he said.

According to GTRI’s analysis, imports worth over $500 million — including phosphoric acid, polypropylene, polycarbonates and suspension-grade PVC resin — represent some of India’s most strategically vulnerable product categories due to almost non-existent domestic manufacturing capacity.

“This dependence leaves India exposed to supply chain shocks, geopolitical disruptions and long-term trade imbalances,” Srivastava warned.

He added that India’s import substitution push cannot rely on a single policy lever such as tariffs or production-linked incentives (PLI). “Different product categories need different responses depending on technology intensity, domestic capability gaps and supply-chain dependence,” he said.

Many of the identified products are deeply embedded in critical sectors. PVC pipes, epoxy resins and polycarbonates are widely used in housing and infrastructure, while MDI, polyurethanes, carbon black and engineering plastics are essential to vehicle manufacturing.

Several are also vital inputs for fertilizer production, including phosphoric acid and anhydrous ammonia, both central to urea manufacturing.

Textiles and paints are equally exposed. Inputs such as PET, acrylic fibres, nylon, vinyl acetate, butyl acrylate and ethylene glycol are crucial to garments, technical textiles and decorative coatings.

Chemical sector expert Ajay Joshi said the government’s ambition to localize production is strategically sound, but faces a basic structural challenge — India still imports the raw feedstock.

“You cannot fully localize manufacturing when the feedstock itself is imported. More than 85% of our crude oil comes from abroad, and most of these chemicals are petroleum derivatives. The intent is right, but the foundation remains borrowed,” he said.

Joshi suggested that linking India’s coal gasification plans to its chemical manufacturing strategy could offer a more sustainable long-term solution.

“What India needs is a feedstock-first industrial policy — one that connects its abundant coal reserves to its chemical ambitions,” he said.