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The petrochemical industry in India has been one of the fastest growing

industries in the country. Since the beginning, the Indian petrochemical industry
has shown an enviable rate of growth. This industry also has immense
importance in the growth of economy of the country and the growth and
development of manufacturing industry as well. It provides the foundation for
manufacturing industries like construction, packaging, pharmaceuticals,
agriculture, textiles etc.
The Indian petrochemical industry is a highly concentrated one and is
oligopolistic in nature. Even a few days back, only four major companies viz.
Reliance Industries Ltd (RIL), Indian Petrochemicals Corporation Ltd. (IPCL),
Gas Authority of India Ltd. (GAIL) and Haldia Petrochemicals Ltd. (HPL) used to
dominate the industry at a large extent. The recent amalgamation of IPCL with
RIL has made the industry more concentrated further, as they jointly account for
over 70% of country's total petrochemical capacity. However, the scene is a bit
different for the downstream petrochemical sector, which is highly fragmented in
nature with over 40 companies exist in the market.
Petrochemical Industry in India is a cyclical industry. This industry, not only in
India but also across the world, is dominated by volatile feedstock prices and
sulky demand. India has one of the lowest per capita consumptions of
petrochemical products in the world. For example, the per capita consumption of
polyester in India lies at 1.4 kg only comparing to 6.6 kg for China and 3.3 kg for
the whole world. Similarly, the per capita consumption of polymers is 4 kg in
India, whereas the per capita consumption is around 20 kg for the whole world.

The Growth

The petrochemical industry in India came into existence during 1970s. The 1980s
and 1990s saw some rapid growths for Indian petrochemical industry. The
biggest reason for this growth was the high demand for petrochemicals in India,
which grew at an annual rate of 13 to 14% since late 90s. It also called for rapid
expansion of capacity. The BMI forecast of average annual growth in India over
2007-2011 is 14 to 16%. However, the industry suffered setbacks during 2008
due to surge in the price of crude oil. It will be tough for Indian petrochemical
industry to plug the deficit of 5mn TPA of ethylene and 4mn TPA of polymer by
2012 (according to the predictions of the government).

The Present Scenario Presently India has three gas-based and three naphtha-
based cracker complexes with a combined annual capacity of 2.9 MMT of
ethylene. Besides this, there are also 4 aromatic complexes with a capacity of
2.9 MMT of Xylenes.

The production of 5.06 MMT polymers during FY09 accounted for around 62% of
the total production of key petrochemicals. It also achieved 88.5% capacity
utilization. The industry also produced 2.52 MMT of synthetic fibres during FY09
with a 73% of capacity utilization.
Top Petrochemical Companies in India.

PetroleumReliance Industries Ltd.


Haldia Petrochemicals Ltd.
Indian Oil Corporation
Gas Authority of India Limited
National Organic Chemical Industry Ltd.
Bongaigaon Refinery and Petrochemicals Ltd.
Manali Petrochemical Limited
I G Petrochemicals Limited
The Andhra Petrochemicals Limited
Tamilnadu Petroproducts Limited

Strategic Profile
ONGC is not only the number one Exploration and Production Company in Asia today,
but is also the number 3 E&P Company in the world .It is in the Oil and Gas Drilling and
Exploration Industry .In the oil and gas industry ONGC does a lot of research and
development as well as refining and marketing .In 2007 they entered the energy field
researching and developing alternative fuels.
The company is currently recognized as the “Best Oil and Gas Company I n Asia”, by
the ‘Global Finance’ magazine .In 2007 it was ranked 369th by the .Fortune Global 500
list of largest corporations by turnover. This is only a small measure of their performance
thus far. By looking at this and many other
achievements it is obvious that ONGC is not slowing down any time soon. When
taking into account that it is doing business in what will soon be the most
populated country in the world, they will only be growing from here .Our analysis
will look at the internal and external factors that affect the business. It will show
how strong they are in the Oil Industry but also focus on what they need to do to stay

Brief History
In 1955 the Government of India created the Oil and Natural Gas
Directorate.Due to lack of financial and administrative power it was raised to the
Oil and Natural Gas Commission.The original goals of the company were to“to
plan, promote, organize and implement programmes for development of
Petroleum Resources and the production and sale of petroleum and petroleum
products produced by it, and to perform such other functions as the Central
Government may, from time to time, assign to it”.
Due to a liberalized economic policy in the early 90’s, the ONGC was re-organized
as a limited company in February of 1994. Since then the Government of India has
sold some of its share in the company to become the Indian Oil Company OIC and
Gas Authority of India Limited GAIL.These companies all agreed to have cross
holding in each other’s stock which gave ONGC a long term strategic alliance in
foreign business markets supply chain.
ONGC has an 84 percent market share of crude oil and gas production in India.
This is a staggering lead over any competitor in India, but on a global market
ONGC is not the largest oil and gas producer.
In 2002, ONGC purchased 37.39 percent equity of Mangalore Refineries and
Petrochemicals Limited (MRPL) to diversify into the downstream business of
refining and retailing. Then in 2003, ONGC purchased more shares and now has
71.5 percent equity of the company.

Political Environment
The political environment in India is one of a federal republic. ONGC is state-
owned but this does not mean that the GoI is good for ONGC or doing things in the
best interest of ONGC right now. The proposed mergers of HPCL, BPCL with
ONGC, and Oil India with IOC were the GoI’s ideas. This produced an uproar and
the mergers we set aside, but not without the GoI stating that the government will
have to restrict the respective companies to their core businesses. ONGC is also
being made by the GoI to focus on exploration and production (E&P) of oil and
gas. ONGC had been starting to move downstream and diversify its business by
going into the refining and retailing business but the GoI put a halt to this. The
positive side of having the political backbone of ONGC is that it gives the
company stability and some security. When ONGC started they had multiply
protection policies in place that kept them safe from global competition. As the
years went by, the GoI deregulated the industry and took away the state protection
policy that kept ONGC safe. This has lead to new opportunities but it has also
opened the door to a lot more threats.
Policy that kept ONGC safe . This has lead to new opportunities but it has also
opened the door to a lot more threats .With the GoI focusing so much on oil and gas E&P
and forcing ONGC to focus on it as well, it is seemingly making E&P a core rigidity for
the company. September25, 2007 has found the GoI saying to ONGC that they need to
“produce or perish” and that they will become a marginal player in the industry if they
don’t comply .These are harsh words by the government and could be a fatal blow to
ONGC for future business ventures and success. The GoI also recently blocked ONGC
from bidding on a Nigerian oil field that would’ve helped increase their gas and oil assets
outside of India. The GoI did not feel this was a good choice and blocked the decision.
Through all this it shows a highly influential “owner” of ONGC who is commanding
them to do things and not do things and not really knowing what’s best for the
company .This is a huge hindrance to ONGC.
Economical Environment
India is one of the largest and fastest growing countries in the world right now.
India’s population has already reached over one billion people and continues to
grow rapidly. India is a part of the B.R.I.C., which stands for Brazil, Russia, India
and China, which are four of the fastest emerging and rapidly growing countries.
With all these economic developments have also brought about a huge demand for
energy, in which ONGC is the main player in India. This gives them a great
advantage because there is a huge economic demand for oil and gas.
Sociological Environment
Sociologically the environment in India is one of growth and advancing
intellectually. As mentioned before, the country has over one billion people and
continues to grow. This creates a huge pool to pull from. India has been a major
country for companies in other countries to outsource to. This is not only due to
cost advantage, but also to an education advantage. The Indian people are
emerging as a learning people and the potential for success in this kind of
environment creates a strong foothold for any company.
It’s interesting to note that ONGC employs approximately 40,000 workers in India.
Compared to the amount of people that India has this number is not staggering. But

this is still a large workforce under one company and could be used for leverage
when making decisions with the government. This does not mean the company has
been good to work for though. The company was recently scrutinized by the GoI
because “attrition over the last one year has been the highest in the past five years
and 328 professionals have left the organization.” And that “the main reason for
this was the inability of ONGC to meet compensation packages being offered by
the industry.” This is not a good spot for ONGC to be, not only because they are
losing valuable workers, but also because it is getting them into even more trouble
with the government.

Technological Environment
The technological environment in India is rapidly increasing. As the country
continues to grow, so also is the technology .With respect to the oil industry,
ONGC was behind technologically, but has since put much needed money and
focus on technology. ONGC realized that they were behind in the technological
environment and this was creating a huge weakness with respect to their
competitors. ONGC has turned what once was a weakness into a strength though.
One such example was the acquisition of technology to meet Euro II standards
through the purchasing of MRPL. ONGC also implemented advanced technologies
such as Increased Oil Recovery, Enhanced Oil Recovery and Supervisory Control
and Data Acquisition. Another great technology that they implemented, that really
gives them a competitive advantage is the Virtual Reality Interpretation Center,
which is regarded as “one of the ten best such systems in the world for applications
in exploration. ”This greatly enhances their ability for oil recovery and also for a
competitive advantage. Other great technological advances was the
implementation of an ERP, MIS and inventory control system. ONGC also
implemented a completely digitized magnetic media seismic library, which is
considered the one of the best in the world. This was a much needed improvement
in technology over all their previous years to help compete on the world market. It
cannot be emphasized enough how important technology is in a large corporation
like this battling in a market that is very tough and depleting.

Global Environment
The global environment is a very competitive environment with respect to oil and
gas exploration. With the continued depletion of these non-renewable fossil fuels
the competition to secure oil and gas reserves is very intense. In 2005, ONGC lost
a bid to the Chinese company China National Petroleum Corporation to secure oil
reserves in Canada and has since lost more battles such as this. On the world
market ONGC is not the biggest player. Globally, the giant oil companies have
seen an integration into other downstream elements of the oil industry to create a
competitive advantage. ONGC not only faces competition from the global market,
they also are in a race with each other with regards to integration and the way these
major oil companies are run.