Rise in Domestic Demand Cuts Naphtha Exports from India

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's naphtha exports are expected to decrease, as demand is increasing in the country's domestic market. Most Indian oil-marketing companies, including Indian Oil Corporation Limited (BSE:530965) (New Delhi), Hindustan Petroleum Corporation (BSE:500104) and Bharat Petroleum Corporation Limited (BSE:500547) (BPCL) (Mumbai, India), have upgraded their refineries and will begin producing refined naphtha. Also, the Ministry of Petroleum has decided to make petro products cheaper in the domestic market. Naphtha is the raw material for the production of polymer and is used in the manufacturing of petrol.

The movement of crude prices has made global naphtha prices volatile. The demand for naphtha is increasing due to the rising demand for the polymer in the manufacturing of polypropylene, polyethylene and PVC.

IOCL has set up a naphtha cracker plant at its Panipat refinery to cater to the burgeoning demand for naphtha in the domestic market. ONGC and MRPL are also coming up with new cracker units in Dahej, Gujarat, Mangalore and Karnataka.

Reliance Industries Limited (BSE:500325) (Mumbai) manufactures polymers from naphtha and gas. IOC and Haldia Petrochemicals Limited (Kolkata, West Bengal) are naphtha-based polymer manufacturers. Haldia Petrochemicals is the only player which completely depends on imported naphtha. HPCL has set up a polymer plant in a joint venture with Mittal Group, at Bhaitinda in Punjab.

Although naphtha consumption in India had dropped from a high of 13.9 million tons in 2006-07 to 10.1 million tons in 2009-10, it has started picking up gradually, reaching 10.7 million tons in 2010-11. Naphtha exports, on the other hand, grew sharply from a few hundred tons in 2000-01 to 93 million tons in 2007-08, and stand at 110 million tons in 2010-11. According to the Ministry of Petroleum's data, the demand for naphtha in domestic market for fiscal year 2012 is estimated to grow 11.45%.

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