New Delhi: Indian Oil Corporation Limited (IOCL), India’s second-largest petrochemical producer, plans to nearly triple its petrochemical capacity by 2030. However, a new report by the Institute for Energy Economics and Financial Analysis (IEEFA) warns that changing market conditions could affect the returns from this expansion.
IOCL aims to increase its petrochemical capacity from 4.3 million metric tonnes per annum (MMTPA) to 13.2 MMTPA by 2030. It also plans to raise its petrochemical intensity index (PII) from 6.1% to 15%, increasing the share of crude oil converted into petrochemical feedstocks.
The expansion supports the Centre’s target of increasing India’s PII from 5% to 15–20% and raising national petrochemical capacity from 29.62 MMTPA to 46 MMTPA by 2030.
Global Oversupply Puts Pressure on Margins
Petrochemicals account for just 3% of IOCL’s revenue but make up around 24% of the company’s Rs 1.04 lakh crore committed to major ongoing projects.
The report points to global oversupply from the US, China and West Asia, weak downstream demand, and high crude and naphtha prices as factors squeezing margins.
While IOCL’s petrochemical revenue reached nearly Rs 28,000 crore in FY 2024-25, profitability weakened sharply. Segment profit fell 86.5% year-on-year to Rs 11.93 crore in the April-June quarter.
“The market that IOCL is expanding into has changed significantly,” said Swathi Seshadri, Research Lead, Global Petrochemicals at IEEFA and author of the report. “With global oversupply squeezing margins, a more measured expansion that focuses on chemicals for essential uses over commodity polymers could help the company generate more dependable returns.”
Report Raises Energy Security Concerns
India imports around 88% of its crude oil and relies on crude for approximately 93% of its petrochemical output. The report argues that expanding petrochemical production using imported feedstock may not necessarily strengthen energy security.
“Import substitution will not secure India’s energy needs if the feedstock used to make the petrochemicals is still imported,” Seshadri said. “Rationalising demand for non-essential plastics and investing in renewable energy would better serve India’s long-term interests.”
Decarbonisation Strategy Under Scrutiny
The report also examines IOCL’s climate strategy. Around 96% of the company’s operational emissions are Scope 1 emissions, while its net-zero plans largely focus on renewable energy, green hydrogen, biofuels and energy efficiency.
According to IEEFA, these measures mainly address energy-related emissions and may not adequately tackle emissions from petrochemical processes and feedstocks. The report also notes that IOCL’s Scope 3 emissions remain undisclosed.
IEEFA recommends that IOCL review the scale of its planned expansion, prioritise chemicals for essential uses, address its Scope 1 emissions and consider greater diversification into alternative and renewable energy sources.