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Kolkata, Aug. 27 Tata Strategic Management Group is expecting India to emerge as a regional petrochemical production hub in next five to seven years.

According to Mr Raju Bhinge, CEO of Tata Strategic Management Group, this will lead to increase in availability of base petrochemical products for downstream applications coupled with increased supply of organic chemical raw materials like olefins and aromatics at globally competitive costs.

“The petrochemical capacity growth rates, which was three to four per cent per annum over the last five years are expected to increase four times to 12 to 15 per cent a year over the next five-seven years,” he said.

At current prices, the downstream petrochemical industry production is expected to increase from the existing $15-$18 billion to $30-35 billion.

Growth story

Considering the asset intensive nature of the chemical industry, this would translate into investments of $12-15 billion (assuming a conservative asset-turnover ratio of 1.2-1.5) during this period.

The petrochemicals growth story is expected to be fuelled by the growth in refining sector. India’s refining capacity is expected to increase by 60 per cent from 135 million tonnes (mt) in 2006-07 to 210-225 million tonnes per annum (MTPA) in 2011-12.

Apart from generating an exportable surplus of 78 to 93 mt of refined products, the growth in refining capacity would also increase the production of naphtha — a feedstock for petrochemicals industry — by 8-10 mt. This coupled with reduction in usage of naphtha by power and fertiliser sector would take the total availability in 2011-12 to approximately 10.5 to 12.5 mt.

Naphtha availability

The projected availability of naphtha has already prompted Reliance, IOC, Haldia Petrochemicals and MRPL to announce major downstream expansions in naphtha crackers.

The olefin base chemical capacity is expected to increase from 4.5 MTPA to 8-10 MTPA. Aromatic base chemical capacity is expected to increase from 3.2 MTPA to five to six MTPA.

Vertical integration of these base chemical capacities would lead to near doubling of capacity in fiber intermediates and basic petrochemical end products.

(This article was published in the Business Line print edition dated August 28, 2007)
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