Rising capital costs, global equipment and manpower shortage to slow investment in Indian petrochem sector

Rising capital costs and global equipment and manpower shortage have decelerated investments in the Indian petrochem sector. The Rs 65,000 crore Indian petrochemical sector has announced capacity expansion programs to the tune of 3 mln tons over the next 3-4 years. The expansion program includes: Reliance Industries' 9,00,000 ton polypropylene plant and a 2 mln tons cracker facility in Jamnagar Haldia Petrochemicals Ltd (HPL)'s capacity expansion from 1 million tons to 1.4 million tons. Expansion is also being considered by GAIL, Indian Oil Corporation, Supreme and Chemplast. This phenomenon is not restricted to India alone. Globally, major expansion projects are facing delays of almost 1-3 years. Additionally, revival of the 5% duty on import of naphtha in the Union Budget could further slowdown investments in this sector.