How West Asia Conflict Could Reshape India's Petrochemical Future

Petrochemicals, made from fossil fuels, are used across multiple industries - plastics, fertilisers, pharmaceuticals and others. This is a global industry dependent on the trade of fossil fuel feedstocks like oil and gas, building-blocks like ethylene, propylene, ammonia and others, and intermediary chemicals like purified terephthalic acid, ethylene glycols and others.  

The West Asia conflict has exposed the fragility of the petrochemical supply chain, sparking a debate on alternatives to plastics and fertilisers, the largest downstream segments of the industry. However, while access to raw materials drives policymaking, two other crucial aspects need consideration: the climate implications of emissions and their toxic impact on both producing communities and end consumers. 

Managing Plastics 

Existing alternatives, bio-based plastics, recycling and a circular economy, fall short of addressing all three concerns. Bio-based plastics source their raw materials from plants like corn, sugarcane, vegetable oils and agricultural residue. But India’s agricultural priority is producing foodgrains for its large population. We are already an importer of foodgrains due to shortages we face because of supply chain inefficiencies. Despite this, India ranked 102 out of 123 countries in the Global Hunger Index in 2025; Diverting  farmland to bioplastics feedstock is  not feasible. Bioplastics also leave toxicity unaddressed, as hazardous chemicals continue to be used. Further, bio-based plastics cost 1.5-2 times more to produce than conventional plastics.  

Recycling is also not a viable solution. According to OECD’s, 'Global Plastics Outlook' (2022), only 9% of plastic waste is recycled globally. Manufacturers often do not reveal the chemicals used, making transparency and traceability an issue. Without knowing what plastics contain, recycling them poses serious health risks and can make recycled products hazardous. Plastics are also not designed for recyclability - Tetra Paks, for example, are multilayered composites of plastic, metal and paper that cannot be separated. The circular economy approach focuses on product design to reduce waste and keep the high-value materials in circulation.  

Instead, a three-pronged approach to reduce polymer dependence is necessary.  

First, applying the Essential Use Concept, established under the Montreal Protocol, which  phased out ozone-depleting chlorofluorocarbons except for essential use. This could be adapted to identify and eliminate hazardous polymers and plastics, except those essential for health and safety.  

Second, tackling plastic packaging and single use plastics. 70% of consumer packaging in India is plastic; 43% of plastic waste in India comprises single-use items. A combination of combining alternate packaging materials with decentralised reuse-refill-repair systems would reduce plastic dependence, while shifting employment towards labour-intensive collection, sorting and redistribution – creating formal jobs for waste pickers and technicians currently in the informal sector, and new MSME opportunities in refill and reuse infrastructure.  

Third, regulating hazardous chemicals in plastic production. A study by PlastChem identified at least 16,000 chemicals are used in plastics, over 25% of which are hazardous. Globally, only 6% of all plastic chemicals are regulated. In India, endocrine-disrupting chemicals like phthalates and Perfluoroalkyl and Polyfluoroalkyl Substances (PFAs) are regulated only in the context of food safety. 

Cutting Fertiliser Subsidy 

The fertiliser sector accounts for 55% of India’s LNG demand. About 84% of ammonia goes to urea production, and India imports 86% of its ammonia – one of the highest shares globally. India’s fertiliser subsidy is among the world’s largest.  

In 2025-2026, the total fertiliser subsidy was $19.88bn, two-thirds of which went to urea. The urea subsidy alone has exceeded $10.9bn for six consecutive years. The current conflict is estimated to increase the subsidy bill by $2.7bn, potentially pushing it past the $21bn mark.       

In contrast, the FY26 Budget allocated just $16.20mn for organic fertilisers, a fraction of what fossil fertilisers attract. Even these minimal funds go unspent:  the 2024 - 2025 revised estimate was $4.86mn, against a budgeted $10.8mn.  

Further evidence of the government’s commitment to fossil fertilisers: between 2019-2025, six new urea plants were commissioned, adding 76.2LMT of production capacity.  

India’s heavy dependence on fossil fertilisers leaves it vulnerable to feedstock shortages and price volatility. Chemical fertilisers also harm soil health and endanger farmers and sprayers. It is time for the government’s fertiliser policy to plan a systematic shift from fossil-based to organic fertilisers, backed by adequate budgetary support. 

The current crisis in West Asia presents an opportunity to transform both the plastic and fertiliser industries. The government should seize this moment to chart alternative pathways – away from greenhouse gas-emitting, away from toxic petrochemicals and towards a regenerative economy.  

(Swathi Seshadri is Energy Specialist, Petrochemicals, South Asia at Institute for Energy Economics and Financial Analysis. The views expressed are personal.)