Refiners are relying on strategic crude reserves and carefully managed tanker arrivals to maintain fuel stability. However, the downstream plastics industry has entered what market participants describe as a period of “forced slowdown” due to limited raw material availability.
Across several industrial regions, PP and PE plants have either halted operations or reduced output significantly, leaving plastic converters struggling with limited supply and uncertain delivery timelines.
Energy disruptions trigger production cuts
The supply disruption is largely linked to energy shortages caused by tensions in the Middle East, which have severely impacted India’s key LNG and LPG import routes passing through the Strait of Hormuz.
With energy security now considered a national priority, authorities have focused on ensuring sufficient gas supplies for domestic use, particularly household LPG consumption. This policy shift has significantly reduced feedstock availability for the petrochemical sector.
Plant shutdowns and force majeure declarations
The impact on production has been substantial. ONGC Petro additions Limited (OPaL) has declared force majeure and shut down its PE and PP production lines at the Dahej complex.
Shortly afterward, Manali Petrochemicals suspended operations at its Plant-1 facility in Chennai on March 12 after propylene supply from neighboring Chennai Petroleum Corporation Limited (CPCL) was halted. CPCL was instructed by authorities to divert its propylene streams toward LPG production.
At Reliance Industries’ Jamnagar complex, the company reported a technical disruption at its LDPE plant during the week.
Meanwhile, GAIL (India) Ltd. faces a challenging situation at its Pata complex. Although the company recently commissioned a 60,000 ton per year PP unit on March 9, gas supply restrictions have forced the operator to reduce output at existing PE units in order to manage available feedstock.
Market trading slows sharply
The supply shortage has significantly disrupted trading activity. In Mumbai’s polymer trading centers, business slowed sharply following a large price revision on March 11, 2026.
Market participants reported price increases of approximately INR 23,000–28,000 per ton, although traders say the primary issue is no longer price but availability.
One trader in Mumbai commented that the market is experiencing a supply deficit of roughly 25% in PP and nearly 40% in PE, creating what he described as a “transactional freeze” where many buyers are unable to secure material.
In northern India, the situation is becoming more critical. Small-scale converters in the Delhi industrial region are struggling to keep operations running due to limited feedstock availability.
A local trader noted that some processors are requesting as little as 5 tons of material simply to keep machinery operating. If major complexes such as OPaL remain offline, some manufacturers may be forced to shut down production lines in the near future.
Refining sector maintains stability
Despite the pressure on petrochemical production, the refining sector appears to be maintaining a relatively stable position.
A source from a northern Indian refinery indicated that although some facilities are running below capacity, many refiners maintain crude reserves sufficient for at least two months of operations.
Recent tanker arrivals have also helped ease concerns. On March 11, the Suezmax tanker Shenlong docked in Mumbai carrying Saudi crude oil, and industry sources expect additional tankers to arrive in the coming weeks to support fuel supply.
Government policy shift drives the changes
The production cuts are largely the result of regulatory action by the Ministry of Petroleum and Natural Gas.
On March 9, 2026, the government invoked provisions under the Essential Commodities Act, granting 100% priority to domestic piped gas and LPG production. Petrochemical plants are now receiving only 60–70% of their normal gas supply, forcing producers to reduce operating rates.
Estimated production losses
Based on current assessments as of March 13, 2026, the estimated annual capacity impact on India’s polymer market is significant.
For PP, about 340,000 tons per year of capacity is fully shut down, while an additional 1.4 million tons is operating at reduced rates, resulting in an effective loss of around 1.74 million tons per year.
For PE, roughly 1.46 million tons per year of capacity has been completely halted, with another 900,000 tons affected by partial operating cuts. This brings the total effective loss to about 2.36 million tons per year.
While crude tanker arrivals are helping maintain fuel supply stability, the petrochemical sector continues to absorb the largest impact. Until geopolitical conditions stabilize, India’s plastics industry is expected to remain under severe supply pressure, with approximately 25% of PP and 38% of PE availability currently disrupted.
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