8/6/2019 Productivity Improvements and Supply Chain Efficiencies
Will Mitigate Growing Petrochemical Industries Challenges
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Productivity Improvements and Supply Chain Efficiencies will
Mitigate Growing
Petrochemical Industries Challenges
By Rajabahadur V Arcot and Ritika Agrawal
Indias petrochemical industry is one among the fastest growing
industries. Presently, it is a
key sector of the Indian economy, representing 2 percent of the
worlds market. It isgrowing robustly, registering a growth of
almost 13 percent last year. The major growth
drivers of Indias petrochemical industry are specialty
chemicals, fertilizers, plastics, dyes
and intermediates.
The key segments of Indias petrochemical industry are: polymers,
synthetic fibers, olefins,
surfactants, polyester intermediates, aromatics, and major
petrochemicals, such as MX,
benzene, OX and toluene. Leading players in Indias petrochemical
space are Reliance
Industries, Haldia Petrochemicals, Indian Oil Corporation, Gas
Authority of India, and
National Organic Chemical Industry, Bongaigaon Refinery and
Petrochemicals, amongothers.
End products of the petrochemical industry are essential raw
materials for textile,
pharmaceutical, agricultural, packaging, infrastructure,
healthcare, automobile, information
technology, power, and electronics and telecommunications
industries. Massive
urbanization taking place in the country escalates the demand
for polymers; plastics have
penetrated almost all segments, including packaging,
agriculture, wires and cables,
electronic appliances, and others.
Per-capita polymer consumption in India is only 5.2 kilograms
compared to Chinas polymer
per capita consumption of 30 kilograms, and this shows the
growth potential for the
industry in the years to come.
Petrochemical Industries Challenges
Petrochemical industries are impacted due to escalating prices
of crude oil. The other
challenge is volatility of crude oil prices, unpredictable
demand and high cost of feedstock in
India compared to companies in the Middle East.
Petrochemicals, oil, gas, and others need specific modes of
transportation, such as
pipelines, ships, tankers, vessels, and railroads. Unlike other
industries, petrochemical
industries are limited to a few regions only, but the demand for
it is global. Large distances
involve multiple transportation modes before reaching the final
consumer. This results in
extended lead time, high inventory and transportation costs.
Moreover, the logistics
network of the petrochemical industry is highly inflexible, and
sometimes cost of logisticsare more than the cost of
production.
ARC believes that the high growth prospects of Indias
petrochemical industry, combined
with the need to balance demand supply scenario, call for
large-scale investments in
technology, infrastructure, capacity expansion, supply chain and
logistics. Despite daunting
challenges, opportunities for improvement, and cost control do
exist in supply chain and
logistics. Companies can adopt third party logistics for
efficient supply chain and can form
partnerships for the growth of the industry.
