New Delhi, Dec 29 : Indiaâ??s petrochemical consumption growth is expected to remain robust at 6-7 per cent per annum in the medium term, driven by economic expansion and downstream product demand, according to a report released on Monday.

Against this backdrop, reducing reliance on imports is viewed as a key strategic aim. Consequently, both public and private-sector companies have developed aggressive plans to increase their petrochemical capacity, said the CareEdge Ratings report.

Polypropylene capacity is expected to rise 1.8 times between FY25-FY30, surpassing the envisaged demand growth of 1.4 times, which could largely eliminate import dependence by FY30, the report states.

â??However, improving cost competitiveness, leading to a recovery in the trajectory of spreads and thereby earning reasonable returns on their investments, would remain the key monitorable for domestic petrochemical players,â?? said Rabin Bihani, Associate Director, CareEdge Ratings.

Prices and spreads in the domestic petrochemical sector are expected to remain weak in the near term due to global oversupply. There has been marginal recovery in spreads in H1FY26 which could support approximately 200 bps improvement in EBITDA margin in FY26.

"However, sustained recovery and achievement of optimum operating profitability would hinge more on their cost competitiveness, global demand-supply scenario and need-based support from the Government given sizeable global capacity additions especially by China, which has impacted the profitability of Indian manufacturers for an extended period of timeâ??, said Hardik Shah, Director, CareEdge Ratings.

The report states that the consumption of major petrochemicals, comprising of polymers, including Polypropylene (PP), High Density Polyethylene (HDPE), Low Density Polyethylene (LDPE), Linear Low Density Polyethylene (LLDPE), Polyvinyl Chloride (PVC), aromatics and elastomers, have witnessed a healthy growth in India over the past few years and the same is expected to sustain going forward. However, domestic capacity additions during this period remained limited, resulting in a high dependence on imports to meet increased domestic consumption.

Globally, there was significant capacity addition in the petrochemical sector, largely dominated by China, over the last few years, while global demand did not improve at the same pace, which resulted in demand-supply mismatch leading to weak product spreads and pressure on operating profitability of Indian manufacturers for the last three years ended FY25 as they had to encounter competition from cheaper Chinese imports, the report added.

/IANS