In her 2024 budget speech, Union finance minister Nirmala Sitharaman mentioned that “PVC (Poly Vinyl Chloride) flex banners are non-biodegradable and hazardous for environment and health. To curb their imports, I propose to raise the basic customs duty (BCD) on them from 10 to 25%.”
Basic Customs Duty (BCD) is a type of tax imposed on imported goods in India, which is primarily used to protect domestic industries from competition from imported goods. It also serves as a source of revenue for the government.
Six days later, on July 28, news emerged that the Adani Group had achieved financial closure for its proposed 2000 Kilo Tonnes Per Annum (KTPA) Coal to PVC plant and it would be operational by December 2026. Perhaps this is the real reason for the finance minister to increase BCD on PVC in the 2024 Union budget.
If the material was so hazardous that the government wanted to restrict the import, then why is the environmental clearance for this project, whose emissions are three times more than PVC, made from oil, not revoked?
Ethylene, a major ingredient used in PVC production, is typically derived from petroleum, natural gas or coal, all of which are fossil fuels. This makes PVC a fossil fuel-based plastic. Financial closure signifies that all necessary financial arrangements and funding commitments have been formally made and are in place.
According to PlastIndia Foundation’s 2021-22 report, the demand for PVC in 2021-22 was 2.8 Million Metric Tons Per Annum (MMTPA), which contributed to 18% of the total demand of major plastics in India.
According to the Chemicals and Petrochemicals Manufacturers Association of India, PVC installed capacity, production, imports and consumption in 2022-23 stood at 1,617.00 Kilotonne (KT), 1,493.00 KT, 1,493.00 KT, and 3,679.00 KT respectively. There are a total of five producers of PVC in India, with Reliance Industries Limited (RIL) producing 48% of all PVC.
On the other hand, there is a planned expansion to the tune of 5,457 KT. Out of this, 1500 KT is being planned by RIL. The increase in BCD will benefit the existing producers since a supply-deficit market will surely ensure that prices will remain high. This BCD will also improve the financial viability calculations of Adani’s coal-to-PVC project in Mundra, Gujarat.
Look climate – talk emissions
A key argument in Chapters 6 and 13 of the latest Economic Survey is around the unfair burden on developing countries to decouple emissions and development, when developed countries have already gained from highly emitting forms of development. It is indeed true that developed countries are first and foremost bound to reduce their emissions and support the adaptation and mitigation efforts of developing nations. However, it is crucial for developing countries like ours to not make the same mistakes that the developed nations have!
Instead, the Union government has repeatedly expressed its intention to expand its oil and gas footprint. About 79% of the MoPNG 2024 budget is allocated to the expansion of the public sector oil and gas companies. In the Exploration and Production Sector, Indian Oil Corporation Limited, Oil India Limited and ONGC Videsh Limited are the biggest gainers this year with an increase of 63.38%, 40.52% and 72.81% respectively.
Oil and Natural Gas Corporation, with a share of 25.80% of the total allocation to public sector oil and gas companies, continues to be a significant recipient of allocations to support its intention of exploration for oil and gas in the existing Krishna Godavari basin and other uncharted areas including the Mahanadi, Andaman Sea, Bengal, and Kerala-Konkan belt.
According to the minister of petroleum and natural gas, the government intends to increase the sedimentary basin under exploration from the current 10% to 16% in 2024. Importantly, much of the regions intended for exploration are eco-sensitive like the Andaman Sea and the Kerala-Konkan belt which forms the Western Ghats.
In the refining and marketing sector, Bharat Petroleum Corporation Limited (BPCL) has seen a 26% increase from last year’s allocations. Recently, there was news that the Prime Minister had granted Rs. 60,000 crore to set up BPCL’s refinery in Andhra Pradesh.
Representational image for petrochemical plant. Photo: Wikimedia Commons/Secl/CC BY 3.0
The biggest increase in budget allocation in 2024-25 in the petroleum sector has been to petrochemicals, which saw a 60% jump from the previous year’s allocation. While the total allocation forms only 9% of the current year’s sub-section budget, it is important to note that 80% of existing refineries are integrated to process crude oil for petrol/diesel and for petrochemicals and that all new refineries are similarly planned. The petrochemical industry in India is seeing massive expansion since the government has made its intention clear to contribute 10% of incremental global demand.
According to the International Energy Agency, emissions from chemicals and petrochemicals amount to around 1.5 gigatonnes of carbon dioxide equivalent per year (GtCO2e), which is 18% of all industrial-sector CO2 emissions, or 5% of total combustion-related CO2 emissions.
While industry argues that this sector emits less compared to steel and cement, what is overlooked is that the carbon contained in chemical feedstocks is mostly locked into final products (such as plastics), and is released only when the products are disposed of or burned.
A recent study by the Lawrence Berkeley National Laboratory (LBNL), on the issue of the production of primary polymers, concluded:
“Under a conservative growth scenario (2.5%/yr), Greenhouse Gas (GHG) emissions from primary plastic production would more than double to 4.75 GtCO2e by 2050, accounting for 21-26% of the remaining global carbon budget to keep average temperature increases below 1.5°C. At 4%/yr growth, emissions from primary plastic production would increase more than three times to 6.78 GtCO2e, accounting for 25-31% of the remaining global carbon budget for limiting global warming to 1.5°C.”
With India’s aggressive growth of the petrochemical industry, it appears that Common But Differentiated Responsibilities (CBDR) is invoked as an excuse to pollute, instead of a way to slow down emissions.
Polymers: The oil and gas industry’s Plan B
Chapter 13 of the 2024 Economic Survey intends to arrest overconsumption and revert to sustainable materials and practices like using reusable bags instead of plastic bags, plant-based plates instead of plastic plates in the case of use and throw purposes, metal water bottles which can be refilled instead of single-use plastic bottles etc.
However, a popular argument by the government is the low per capita consumption of polymers and plastics in India. In December 2022, the minister for petroleum and natural gas said, “Petrochemical market size is currently in India about USD 190 billion, whereas the per capita consumption of petrochemical segments is significantly lower, compared to that in developed economies. And this gap offers substantial space for demand growth and investment opportunities.”
About 99% of plastics are made from polymers produced by refining fossil fuels. In India, plastics are largely made from oil with a smaller percentage from gas. While the Chapter pitches reuse and refill mechanisms, the petrochemical and plastics policy adopted in India takes the country on a completely contrarian and unsustainable path.
According to a FICCI report, 59% of total plastics consumed in India are towards packaging (42% flexible and 17% rigid packaging), which are basically single-use plastics! While the Plastic Waste Management Rules, 2021 ban 19 Single Use Plastics (SUPs), according to industry reports, these form only 2-3% of total SUPs consumed and have no impact on the Fast Moving Consumer Goods (FMCG) industry, which are the largest consumers of these unsustainable and avoidable plastics.
It has been evident globally that the shift to renewable energy and electric transportation would not simply shut down the oil and gas industry. The crude oil to chemical business was always the industry’s Plan B and governments are colluding in this shift. Energy security is being peddled as the reason for an increase in refinery capacity in India.
The budget this year has made it crystal clear that India intends to scale up its petrochemical production rather than being responsible and allocate resources for the system change need to shift to alternate materials to replace polymers and to put in place reuse and refill mechanisms as a means to put an end to the unsustainable use-and-throw economy that is currently prevailing.
It is important to note that this push for petrochemicals goes against the basic tenet of “atma-nirbharta” or self-sufficiency. About 87% to 90% of the crude oil used in India is imported. That this will keep increasing our current account deficit, one of the main reasons for the falling value of the Indian Rupee, should be a matter of concern for the government, instead of going bullish on this sector.
Swathi Seshadri is associated with the Centre of Financial Accountability. She is a participant in ongoing international negotiations towards a legally binding Global Plastics Treaty to End Pollution Including in the Marine Environment.
