The Bhutanese Leading the way.
India is facing a major petrochemical shortage following the escalation of conflict in the Middle East, with industries dependent on oil and gas feeling the impact. The hardest hit are petrochemical sectors, particularly downstream industries such as plastics and agrochemicals.
According to The Economic Times, major petrochemical companies and producers, including Indian Oil Corporation’s (IOCL) propylene unit in Odisha, Mangalore Refinery and Petrochemicals’ secondary units, GAIL (India) Ltd’s polyethylene unit, and Bharat Petroleum Corporation Limited’s (BPCL) acrylic acid unit, have temporarily shut down operations.
The report further states that downstream industries have halted operations due to shortages of upstream petrochemical feedstocks. For instance, the supply of polymers (propylene) from Andhra Petrochemicals Limited was halted due to disruptions linked to Hindustan Petroleum Corporation Limited (HPCL).
Another Indian newspaper, Madhyamam, reported that the Government of India (GoI) has diverted butane and propane supplies toward cooking gas production, while liquefied natural gas (LNG) supplies to petrochemical plants and refineries have been restricted.
Over 90 percent of liquefied petroleum gas (LPG) and around 60 percent of LNG come from West Asia through the Strait of Hormuz, making India highly vulnerable to supply disruptions.
Prices for plastic pellets have also increased, affecting the plastic manufacturing industry. Over 70 percent of consumer packaging in India is made from flexible plastics. This situation is expected to affect the food and beverage industry, the fast-moving consumer goods (FMCG) sector, and micro, small, and medium enterprises (MSMEs), which make up a significant portion of the plastic manufacturing industry.
The shortfall in oil and gas, along with the temporary shutdown of key petrochemical units, may affect production across sectors such as plastics, packaging, pharmaceuticals, textiles, chemicals, construction materials, fertilizers, and automotive components.
To ease the situation, the GoI has granted a full customs duty exemption on 40 critical petrochemical products until 30 June 2026. This is intended as a temporary relief measure to reduce import costs for manufacturers and maintain supply stability, according to Madhyamam.
India’s pharmaceutical industry has also been affected by the shortage.
According to a recent article published by Chemical Industry Digest, the Pharmaceuticals Export Promotion Council of India (Pharmexcil) has urged the government to allocate critical petrochemical feedstocks such as propylene, methanol, ammonia, and butane to solvent manufacturers and active pharmaceutical ingredient (API) producers.
Inventories of these essential raw materials have fallen to critically low levels due to supply disruptions in the Strait of Hormuz, raising concerns about potential pharmaceutical production shortages.
This situation in India could have a ripple effect on Bhutan, as petrochemicals are essential raw materials for Bhutanese industries and production sectors.
Plastic manufacturing industries may experience price increases due to rising costs of plastics and polymers. Food and beverages, FMCGs, and MSME products may also see price hikes.
As Bhutan imports a wide range of packaged consumer goods, the coming months could see higher prices for goods imported from India if the conflict does not de-escalate soon.
MoICE Lyonpo Namgyal Dorji said that there are currently no supply disruptions from India in terms of petrochemicals and consumer goods.
However, it remains unclear whether the government is in communication with the GoI regarding supply quotas and subsidies for essential petrochemical materials. The government has yet to respond to The Bhutanese on this matter.
The government also reassured the public during a recent Meet-the-Press session that it has a stock of over 600 MT of urea, a key fertilizer used for crops, with an additional 330 MT in transit.
MoAL Lyonpo Younten Phuntsho said, “We have stocks that will last this cropping season. The stock will last till November 2026.”
As Bhutan imports most of its fertilizers from India, this remains a key concern for the agriculture sector in fiscal year 2026, as any disruption could impact crop yields and food security.
It is, however, reassuring that the government has stocked sufficient fertilizers for the upcoming cropping season.
If the conflict continues without signs of easing, Bhutan could face inflation in essential consumer goods, especially as most packaged food, detergents, and household plastics are imported from India.
Infrastructure and road construction costs are also likely to rise due to increasing prices of diesel and bitumen, a heavy petrochemical derivative.
For now, businesses such as hardware stores and pharmacies have yet to feel the full impact of India’s petrochemical shortage, as they continue to sell existing stock purchased earlier.
Questions remain about potential disruptions to essential supplies such as fuel, LPG, medicines, and construction materials, as well as ongoing communication with the GoI. The paper will be following up for more information in the upcoming issues with more detailed insights.
