India’s plastic packaging industry is likely to face margin pressure over the next year as rising crude oil prices push up input costs, according to a report by CareEdge Advisory.

The report estimates that operating margins of plastic packaging players could decline by 3–5% by H1FY27, particularly if crude prices rise further.

Crude-linked input costs drive margin pressure

“The plastic packaging industry remains sensitive to changes in crude oil prices because key raw materials are derived from oil-based polymers,” said Sagar Desai, Assistant Director at CareEdge Advisory.

“A sustained 5–10% increase in crude prices may lead to margin pressure of around 3–5% for highly exposed players by H1FY27, particularly in flexible packaging and PET-heavy segments,” he added.

The report highlights that higher crude prices directly impact the cost of key raw materials such as polypropylene (PP), polyethylene (PE), and polyethylene terephthalate (PET), which are widely used across packaging formats. Since these inputs are largely derived from oil-based feedstocks, any increase in crude prices feeds quickly into polymer costs, raising overall production expenses.

India’s packaging sector, where plastic accounts for nearly 46% of the material mix, remains particularly exposed due to its heavy reliance on imported polymers, especially from West Asia. This dependence not only amplifies price risks but also exposes the industry to supply chain disruptions, including higher freight, insurance costs and longer shipping routes.

CareEdge noted that the impact of rising costs is typically felt first by packaging manufacturers, as price revisions with end-users tend to lag.

“Packaging industry players are usually the first… to absorb the shock. Their raw material cost increases immediately, but customer price revisions happen later,” the report said, adding that this creates temporary pressure on operating margins.

Demand outlook steady despite near-term headwinds

Segments such as flexible packaging and PET bottles are expected to bear the brunt of the cost escalation due to their high resin usage. End-user industries including FMCG, food and beverages, and personal care may also face margin pressure as companies struggle to pass on higher costs quickly in a competitive pricing environment.

Despite the near-term cost headwinds, demand fundamentals remain intact. Growth in packaged food, organised retail, logistics and e-commerce is expected to continue supporting the sector. The plastic packaging market is projected to grow from Rs 3,558 billion in 2025 to Rs 5,169 billion by 2030, reflecting a CAGR of 7.5%, the report said.