Local and foreign petrochemical companies have planned to invest up to $124 billion to expand their operations in India by 2025. However, they are now facing challenges, including exorbitant land prices, expensive electrical power charges, high borrowing costs, and hefty inland transportation fees. Exacerbated by the impact of the COVID-19 pandemic, these rising costs could pause the momentum in India’s petrochemical expansion aimed to meet growing domestic demand.
While petrochemical demand from India’s automotive, electronics, and textiles sectors dropped during the pandemic, it is expected to rebound in line with the economic recovery. At the same time, demand from the packaging, private care, and healthcare segments continued to stage robust growth.
Analysts said land prices had multiplied by four to five folds in India in the past few years. Energy and transportation costs have also risen sharply over the same period. This makes India’s manufacturing sector disadvantaged against its peers in Southeast Asian countries. The analysts warned that high costs could offset the progress that the government had made through its “Made In India” initiative.
