The Hindu Business Line : Polymer duty cut not to hit Haldia Petro IPO plans

THE Union Government's decision to reduce import duties on polymer products will affect the profitability of Haldia Petrochemicals, despite a corresponding reduction in the import duty of naphtha.

However, Haldia Petrochemicals is firm on its financial plans and will go ahead with its proposed initial public offer as scheduled. The IPO is likely to hit the market by the end of this year.

Senior executives of Haldia Petrochemicals were busy during the day trying to study the impact of the changes in duty structure on the finances of Haldia Petrochemicals, which has just come out of the red.

According to an executive, a 20 per cent value addition generally takes place as naphtha is being processed to make polymer.

Though the Union Government made similar reductions of five percentage points on both the raw material naphtha and the final product (the polymer items), their effect on the petrochemical companies will be different.

"First, the value and volume of naphtha that a petrochemical company deals with is lower than the polymers. Moreover, we have already purchased one month's stock of naphtha at a higher price," the executive said.

In this context, he said polymer processors were seeking a similar reduction in import duty. It will be a breather for them, but not a relief.

"After all, domestic polymer prices are still lower than the international prices. We are still competitive even when we consider the landed prices of imported polymer," he said.

Asked to what extent the profitability of the company will be affected, the official said, "It is too early to say anything. We are still working out the mathematics. It would take us a couple of days to find the real impact."

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