India’s petrochemical sector is very significant or at an inflection point, and PVC (polyvinyl chloride) plays the main lead in this story. As India works toward the ambitious goal of becoming a $10 trillion economy by 2030, as per the vision of PM Modi increasing the domestic PVC production has never been more important. This incredibly versatile material has applications in everything from construction and agriculture to healthcare and manufacturing, making it a harbinger of India’s industrial progress.

The demand for PVC is growing and there is a very good reason for that.  India is rapidly putting more capital in infrastructure development be it roads and bridges to housing, also since the Indian economic output has a lot of contribution from agriculture,  sustainable agriculture is gaining traction too .   PVC’s contribution to India’s economy is impossible to ignore. As new urban areas expand and the population continues to grow, the need for sustainable infrastructure and good enough water management becomes increasingly important, and because of its affordability, durability, and sustainability, PVC is perfect to meet these challenges head-on.

A Growing Gap Between Demand and Production

India’s demand for PVC has been swiftly increasing, it is growing at a decent rate of 7% CAGR over the last decade. Infrastructure projects by the government of India, irrigation initiatives to improve agri productivity, and a thriving manufacturing sector all thanks to the PLI scheme and Make in  India initiatives have all contributed to this upward demand surge.  Unfortunately, domestic supply has not kept pace with the demand, growing at just 1.4% CAGR during the same period.

Here’s the reality check for the PVC industry

• Annual PVC Demand (2024): ~4 million tons
• Domestic Production: ~1.8 million tons
• Imports: ~2.2 million tons.

As of today , imports amount to  60% of India’s total PVC demand,   making India one of the world’s largest importers of the PVC. Most of this PVC comes from only three countries – China, Japan, and Thailand.

While this supply chain has filled the immediate demand-supply gap, it’s also created risks in India’s supply chain. To reduce this risk and strengthen its industrial base, India must strategize to increase domestic production.

PVC in India: Untapped Potential

India’s per capita PVC consumption currently is at just 2 kg which is far behind countries like China (10 kg) and the United States (11.8 kg).  Products like Pipes and fittings dominate PVC usage in India, making up 73% of total consumption. Government programs like the Pradhan Mantri Krishi Sinchayi Yojana and Har Ghar Jal have further increased demand of these. .

However, there’s still so much room for growth in other segments like films, sheets, and cables. These underserved areas present a very big opportunity for expansion, provided the right policies and investments are in place.

Challenges in PVC Manufacturing and Trade

India’s domestic PVC production is currently led by a few key players which produce PVC in a large scale, economies of scale is important as PVC is considered a commodity input.

1. Reliance Industries: 755,000 tons per year
2. Chemplast Sanmar: 270,000 tons per year
3. Finolex Industries: 260,000 tons per year

Despite the government’s efforts to reduce imports through trade barriers like anti-dumping duties and increased customs tariffs (raised from 7.5% to 10%), imports have still been growing. PVC imports have grown at a remarkable 22% CAGR over the last two decades, highlighting the limited impact of these policies.  In fact, the policies towards the petrochemicals industry have been very stringent for imports, to give a brief idea of the state of affairs, here are very facts.

Tariff Tactics

India is infamously called the  “tariff king” because of its protectionist approach to trade around the worlds.  These policies aim to protect domestic industries but have faced criticism for their effectiveness.

1. In the last 25 years, India has imposed    17.7% of the world’s anti-dumping policies but it  only accounts for 2.5% of global imports.
2. These actions haven’t really had much impact on stopping China from exporting goods to India.
3. All these policies  (around 60%) are focused on the Chemicals and Plastics sectors.

Despite these efforts, PVC production in India hasn’t shown much promise.  This is a big concern since PVC is crucial for many MSME industries and other downstream consumer industries.

The Inflection point ? : The Adani-Indorama Partnership

In a move that could significantly the industry, the Adani Group has joined hands with Thailand’s Indorama Resources to form Valor Petrochemicals Limited. This JV  aims to create a production capacity of 2 million tons per annum and it could significantly reduce India’s reliance on imports. It also aligns perfectly with the government’s vision of increasing petrochemical production to 50 million tons by 2030.

The Strategic Risk of Import Dependency

India’s heavy dependence on PVC imports poses a serious risk to its overall economy. PVC is very important for sectors like agriculture (15% of GDP), infrastructure (9%), and healthcare (5.2%), collectively amounting  to  29% of India’s  GDP. Any changes in PVC imports could seriously threaten nearly 33%  of India’s economy.

The Way Forward

PVC industry of India  has   immense potential and equally important challenges. Although  domestic supply has struggled to keep pace with demand, initiatives like the Adani-Indorama partnership offer some hope. By fostering strategic investments, implementing progressive policies, and adopting sustainable manufacturing practices, India can turn PVC into a key driver to grow its economy to a $10 trillion economy. Also, Considering the fact that PVC is used majorly by MSME and agricultural and allied sectors, it is important to understand that PVC resin is an essential raw material for the  ” Atmanirbhar “Bharat initiative.

By

Ankur Kushwaha ,Sr Consultant , Invest Punjab