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Indian petrochemicals make way into Pakistan

September 14, 2012 10:21 IST

An oil rigEven though liquid fuels from India are yet to make entry into Pakistan, Indian companies are increasingly finding the neighbouring country as an important export destination for petrochemicals.

State-run Indian Oil Corp Ltd plans to sell around 5,000 tonnes of polypropylene to Pakistan every month this year, double the last year's monthly average.

Reliance Industries Ltd, the largest private sector oil company in the country, also sells around 6,000 tonnes of the polymer every month to Pakistan, a person in the business told Business Standard.

Besides, the Bhatinda Refinery, jointly promoted by steel magnate Lakshmi N Mittal and Hindustan Petroleum Corp Ltd is testing waters in the neighbouring country and has already appointed an agent, the official, who did not want to be named, said.

Polypropylene is a thermoplastic polymer used in a wide variety of applications including packaging and labelling, textiles, stationery, plastic parts and reusable containers of various types.

The enhanced trade of petrochemicals with Pakistan puts Indian companies in direct competition with Saudi Basic Industries Corp, one of the world's leading manufacturers of chemicals, fertilisers and plastics, and Kuwait Petrochemical Corp.

IndianOil had been exporting polypropylene to Pakistan after its Panipat naphtha cracker went on stream in early 2010. "Polymer was never in the negative list of Pakistan.

However, we have been able to step up exports only recently. It is a win-win situation for both nations, said an IndianOil official, also on condition of anonymity.

"We have a surplus while Pakistan does

not produce any polymer. For them, the advantage comes due to low logistics cost, while we are able to get some premium over internationally benchmarked price," the official added.

India has a polypropylene surplus of 5 million tonnes (mt), while Pakistan's annual demand hovers around 6 mt. IndianOil has a polypropylene production capacity of 1 mt of which it sold close to 30,000 tonnes to Pakistan last year.

"This year, we have doubled our dispatches and aim to export 60,000 tonnes," the official said. At the current realisation of Rs 75,000 a tonne, the value of 60,000 tonnes would be around Rs 450 crore (Rs 4.5 billion).

Inadvertently, IndianOil has eaten into some of the markets that the Mukesh Ambani-led RIL was catering to in Pakistan.

Before IndianOil, RIL was the main exporter to Pakistan through the Karachi port.

It used to export around 8,000 tonnes every month to Pakistan.

However, with IndianOil increasing exports this year through the Attari and Wagah checkposts, it has taken away the markets like Lahore due to its proximity to the Panipat refinery.

The Panipat refinery is witnessing an increase in demand from the areas around Lahore.

Owing to its proximity, the IndianOil refinery offers Lahore consumers a competitive landed price, comfort of consistent and timely supplies and good quality.

IndianOil is focusing on the petrochemical business as it is able to get market-linked prices unlike its main business of fuel retailing that is marred by government price controls.

In the quarter ended June 30, the company had revenues of Rs 3,207 crore (Rs 32.07 billion) from the petrochemical business, while its net sales stood at Rs 96,602 crore (Rs 966.02 billion).

Ajay Modi and Jyoti Mukul in New Delhi