Polymers to offset gain on naphtha

Kohinoor Mandal

"There are some positive and negative aspects. What would be the final implication, we do not know. We are still calculating it."

Kolkata, March 2

Haldia Petrochemicals Ltd, the most significant industrial project in eastern India promoted jointly by the The Chatterjee Group and the West Bengal Government, is not sure of the impact of the Union Budget 2006 on its finances.

While the plant, which is a naphtha-based unit, would gain substantially from the abolition of import duty on naphtha, still it might be offset with the reduction of import duty on polymers.

A senior company official said that a team within the organisation is still studying the implication of the announcements made by the Union Finance Minister, Mr P. Chidambaram, on Tuesday.

"The company is still assessing the impact of the announcements on the company's finance in totality. There are some positive and negative aspects. What would be the final implication, we do not know. We are still calculating it," the official told

Business Line

.

Haldia Petrochemicals' total annual naphtha requirement is 1.775 million tonnes, of which 70 per cent is imported and the rest is procured from domestic players such as Indian Oil Corporation, Chennai Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd.

The positive and negative

The company is importing naphtha from Singapore and other several other sources based in West Asia. According to the official, the company would benefit approximately Rs 150-160 crore from the abolition of import duty on naphtha.

However, this financial advantage may be negated because the Union Finance Minister also reduced the import duty on polymer products and Haldia Petrochemicals predominantly sells its polymers in the domestic market.

"We would have to calculate the final price of imported polymer into India and accordingly we would have to calculate our polymer price in the domestic market because our final product price would ultimately depend on the import parity price," he said.

Import duty on polymers had been reduced to 5 per cent from 10 per cent but there is a CVD (countervailing duty). The company is not sure whether the CVD is in addition to the import or in lieu of it.

"Moreover, the recent volatility of the naphtha price in the global market, which is directly related the crude price, has made the whole aspect of financial advantage out of the Union Budget most uncertain," he said.

In fact, the finances of the company had suffered due to this fact in the third quarter of the current financial year 2005-06, when naphtha prices shot up drastically. This rise could not be corrected with a subsequent increase in the domestic polymer prices.

(This article was published in the Business Line print edition dated March 3, 2006)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.