The Hindu Business Line : GAIL makes counter offer for Haldia Petro

GAIL (India) Ltd has made an offer to acquire management control in the beleaguered Haldia Petrochemicals Ltd (HPL). In a meeting held late last week, GAIL countered Indian Oil Corporation's (IOC) offer to acquire 26 per cent stake in HPL and take charge of the company, according to company officials.

The Chatterjee group and West Bengal Industrial Development Corporation (WBIDC) hold 26 per cent apiece with the rest held by the Tatas.

In July 2002, GAIL had decided to take a 10 per cent stake in HPL involving an investment of Rs 200 crore. This was contingent upon the financial institutions agreeing to restructure the debt, which had reached unmanageable levels. Recently, the FIs made it clear that any debt restructuring would be contingent upon the induction of a strategic partner with management control.

This revived negotiations between HPL management and IOC. Talks between the two companies broke down early last year when IOC had proposed an equity structure wherein it would hold 26 per cent, WBIDC 24 per cent and Chatterjee Petrochem (Mauritius) 24 per cent.

However, the Chatterjee group was not willing to reduce its stake below 26 per cent. IOC was apprehensive that it would be ousted once the project turns around in a few years and hence was not willing to budge on the equity holding structure.

Recently, GAIL entered into marketing alliance and product exchange arrangement with HPL. While GAIL would market 35,000 tonne of HPL's polypropylene in northern and western parts of the country, HPL would take 35,000 tonne of pentane that could be used as alternate fuel feedstock for its petrochemical unit.

Further, the two have signed a product swap agreement for 40,000 tonne of polyethylene. The tie-up would help GAIL source its planned quantity for exports as well as domestic markets in eastern and southern regions from HPL. On the other hand, it would offer the same quantity to HPL in return to cater to the latter's customers located in the northern and western markets. GAIL also views Haldia as the landfall point of natural gas to be imported from Bangladesh and Myanmar as also the deepwater gas in the eastern offshore. Hence, HPL would be very well placed if its expansion projects were based on natural gas.

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