For India to become a global manufacturing hub, the role of chemical and petrochemical as well as oil and gas industry becomes a very crucial one.

"By 2030, the petrochemicals refining capacity will reach 310 million metric tons from the current 250 million metric tons. By 2047, are expecting it to reach around 400 plus million metric tons and no guess India will be one of the top five refining hubs and also the petrochemical hub of the world,” stated Sanjay Khanna, Director (Refineries), Bharat Petroleum Corporation Limited while speaking at the recently concluded 4th Edition of NextGen Chemical and Petrochemical Summit 2024 organized by the Indian Chemical News in Mumbai.

“The position of being a global manufacturing hub can be definitely realized with each stakeholder playing its part. India has got all the right ingredients and it is just a matter of time that we will tap the potential," added Khanna while sharing his insights at the inaugural session, ‘Making India a Global Manufacturing Hub: Opportunities & Challenges’.

Khanna emphasized the need for cost competitiveness of feedstocks, addressing land and power costs besides importance of free trade agreements.

Elaborating further, Khanna added, “We are the provider of both feed and energy to the industry. As per International Energy agency's latest report, global energy landscape is going through a major metamorphosis. In-fact during COPE 26, the industry was almost written off and it had almost taken over everything by the alternate energy but subsequently people realized that the downstream industry is not yet ready and it will take some time.

“Now it has come out amply clear that the transition is inevitable but it is going to take its own sweet time and for a country like India it is all the more relevant to have our fossil fuel availability. At the same time. We are having the multiple challenges for our own industry. In the form of alternative energy, biofuel, and natural gas, these are some challenges for the Indian refining industry.”

Explaining the current scenario, Khanna said: “On one hand, inefficient old refineries are closing down in India but we are still talking about new refineries with higher petrochemical intensity, much more energy efficiency. With the use of green energy coming to petrochemicals, India is one of the least consumer as of today.

“Our number is in the range of 10-12 kg while the world average is somewhere 38 kg. But the good news is that we are on the path where if this industry is going to grow, being our own consumers gives us a lot of advantage. That is why the industry is going to grow in a very big way in times to come with driving factors such as rising disposable income, a lot of urbanization and a semi-urbanization shift in the consumer preference to healthier and environmentally friendly options. In terms of alternatives when you look at paper or glass or even metal you can say that it is a far more environmentally friendly option compared to them.

“The challenge is how do you handle the wastage and for that also in that field many work is happening. The labour cost gives us the competitive advantage and there is a China plus policy for the global companies and last but not the least, especially for the refining companies where energy transition it is going to happen.”

Expressing his optimism, Khanna mentioned: “From refinery, we can go into the petrochemical industry. We see a big bright spot for petrochemicals in the time to come and sometime back we heard that in order to cater all the demand of the country we require one ethylene cracker per year for 10 years. While it looked impossible earlier, now every year we are getting almost one cracker.

“Last year BPCL announced and this year Reliance Industries has announced and there are many plants in the pipeline. As for the latest commitment from the oil industry by 2030 when the refining capacity is reaching 310 from 250 million metric tons to 310 million metric tons today the contribution of petrochemical from oil industry which is approximately 29 million metric tonne petrochemicals it is likely to touch 46 million metric tonne petrochemicals.

“The petrochemical is another area where our contribution as a country is not very significant but I am very pleased to announce that BPCL was the leading company when way back in 2016 we had taken the decision to venture into petrochemicals.” 

Talking about the challenges faced by the industry, Khanna opined: “First and foremost is the feedstock especially when countries such as UAE is providing (C2H2) acetylene grade at $1.2 per MMBTU and Saudi Arabia at $1.8 while for India it is in the range of $10 to 12 per MMBTU. Despite cheap labour cost and power you can't compete on this. 

“Second challenge for Indian petrochemical manufacturers is again the cost of capital. For India, the typical cost is in the range of 8 to 9% while in Japan it is less than 1% and in China it is in the range of 4 to 5%.

“Thirdly, the mega plants require huge land and today getting land is a big challenge. The support from the state in offering the land is required because land and water are the two intense utilities which are required.

“Another key challenge for the industry is the free trade agreement and that we have with the Singapore, South Korea, Japan and UAE. It is definitely a non-level playing field especially for the petrochemical fed stock rich region. However, with the necessary intervention through the government policies, we will be overcoming these challenges too.”