Companies

Chemplast @ 50: A journey of innovation and reputation

N Ramakrishnan Chennai | Updated on January 11, 2018

N Sankar, Chairman, Sanmar group   -  N. Ramakrishnan

(Right) The Mettur plant, built with foreign collaboration, as seen today.   -  supplied pic

A present-day view of Mettur plant

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Tracing the tribulations and triumphs of the Sanmar group’s flagship company, which celebrates its golden jubilee today

For 71-year-old N Sankar, Chairman of the Chennai-based Sanmar group, the golden jubilee celebrations of group flagship company Chemplast Sanmar on Thursday mark a personal milestone too. It was 50 years ago that he joined Chemplast as, in his own words, an unpaid apprentice.

“Actually, the first day I saw the company was on May 4, 1967, the day of the inauguration,” he recalls, seated in his eighth-floor office on Cathedral Road. It is a searing summer day, but his office is comfortably cool — and markedly quiet, except for the hum of the air-conditioners: the sound-proof glass does an admirable job of shutting out the blare of vehicles speeding below on the busy road.

In that oasis of calm, Sankar recollects the challenges, the triumphs and tribulations of the 50-year journey of Chemplast.

Sankar had just returned from the US in early 1967 after completing a Master’s degree in chemical engineering when his father, KS Narayanan, asked him to come for the Chemplast plant inauguration in Mettur, Tamil Nadu. A galaxy of dignitaries participated in the event, including the then Union Minister for Planning, Petroleum and Chemicals Asoka Mehta, and the newly elected Tamil Nadu Chief Minister CN Annadurai, with some of his Cabinet colleagues. “They had a special train going from Chennai. Those days that was a big thing,” recalls Sankar.

The company, Chemicals and Plastics India Ltd, known to most as Chemplast, was to make PVC from ethylene. Chemplast was a joint venture with equity participation from BF Goodrich of the US, a major PVC manufacturer. It was also one of the earliest instances in South India, known for its conservative business outlook, of a joint venture between an Indian company and a foreign collaborator. In fact, joint ventures are a defining feature of the Sanmar group; it has at least half a dozen of them.

The ethylene for the plant would be generated from alcohol and chlorine; Chemplast’s plant in Mettur was close to Mettur Chemical and Industrial Corporation, which made caustic soda and generated chlorine as a by-product. Alcohol was sourced from Trichy Distilleries and Chemicals, which set up a distillery to convert molasses from the sugar operations of a group company into alcohol.

A little over a fortnight after the inauguration, Sankar joined Chemplast as an unpaid apprentice. “The idea was just to learn,” he says. The initial years were a good learning experience, says Sankar, especially since he reported directly to S Ramaswamy, who was General Manager at that time, in a role that would now fit the profile of an executive assistant. “He gave me a lot of authority and freedom and had tremendous confidence in me,” says Sankar of his training under Ramaswamy.

Challenging phase

The early period was quite tumultuous for the company. Shortly after it started, PVC prices collapsed; then one of the equipment failed, creating a major problem. Thanks to BHEL, as a special case, the equipment was replaced. “Chemplast went through some very difficult times for two-three years,” says Sankar. “But they were interesting times. I learnt a lot.”

Chemplast itself was a result of the industrialisation drive under R Venkataraman, Industries Minister in the erstwhile Madras Government, under which various industries were identified and special incentives given. KS Narayanan had taken the group’s first steps into the chemicals business when he acquired an ailing facility in Coimbatore that was making calcium carbide and turned it around.

When Chemplast launched its 6,000-tonnes-a-year plant, PVC as a product was just taking off. There were two other manufacturers in the country: DCM and Calico. About six months after Chemplast started operations, Nocil entered the sector, leading to a supply glut, and a price collapse. But, says Sankar, the availability of a commodity spawned a huge downstream industry. The annual consumption of PVC then, according to Sankar, was 7,000-10,000 tonnes. Today, it is 2.5-3 million tonnes, a bulk of which is imported.

Sankar rues the excessive dependence on imports today. Even 10 years back, domestic production accounted for almost 90 per cent of consumption, but there has been no fresh investment in capacity creation for almost a decade. Chemplast’s own greenfield plant at Cuddalore, which went on-stream after a lot of hiccoughs, was the last major investment in PVC. “The situation is not conducive for local manufacture. It is easier to import and sell. People are setting up capacities all over the world to sell to India. The market is here,” emphasises Sankar.

A number of reasons, primarily infrastructure bottlenecks and an unfavourable duty structure, make domestic manufacture unattractive. That is something that Sankar would like the government to address in all seriousness.

Looking ahead

What needs to be done? Sankar favours going back to the old system of having specialised cells in the government looking at and addressing issues relating to industry, not just the PVC sector. First, he says, “stop considering all businessmen as crooks.”

Instead, work with them and find out what is required for each sector. Nearly half the three million tonnes a year of PVC used in the country is imported, and most of it is done by traders, who bring no value addition, he points out. Give proper infrastructure and some duty protection for domestic manufacture to take off.

He also makes a persuasive case for duty protection for the PVC industry.

Almost 95 per cent of PVC goes into making water pipes. The entire water distribution in the country is dependent on the availability of PVC pipes. If, for some reason, PVC imports are hit, the country’s water system will go for a toss. Sankar refers to US President Donald Trump’s observation that America’s armaments industry cannot be dependent on steel imported from Korea and Japan, as there is a security implication.

India too, says Sankar, faces the same predicament with PVC. Therefore, it is time the government took a look at this issue and outlined policy initiatives, including some protection for a specified number of years. The industry will respond positively.

“Allow us to make some reasonable money, then we will put it back,” he says.

In expansion mode

In the past 50 years, Chemplast has expanded its PVC capacity in India to about 3.66 lakh tonnes, including about 300,000 tonnes at Cuddalore, making it one of the leading producers of PVC in the country. It can expand to about a million tonnes, but getting assured raw material supply is the hitch.

The Sanmar group forayed into Egypt when it bought over a company at Port Said, where it planned to make 400,000 tonnes of monomer, half of which will be shipped to Cuddalore for use in the plant there. This plan suffered from the unrest in Egypt, and the Suez Canal authorities refused permission for moving the commodity. The Sanmar group is now expanding the Egypt plant.

Chemplast now has plants in Mettur, Cuddalore, Vedaranyam and Panruti in Tamil Nadu and Karaikal in Puducherry, and makes PVC resins, caustic soda/chlorine, chlorinated solvents and refrigerant gases. It has its own captive power plants and two marine terminals to handle the raw material imports.

Sankar says he is proud of two things as far as Chemplast is concerned. One is innovation. Long before it became the norm, Chemplast decided to have zero liquid discharge at its plants. To mark its golden jubilee, Chemplast has sponsored a laboratory at the IIT-Madras to carry out research on zero liquid discharge.

The other aspect that Sankar is proud of is the group’s reputation. “That is something we have worked very hard at. We have a very strong ethical code of doing business. We are very strict about it. We have never defaulted on a commitment, not just to our lenders, but to all our constituents,” he says.

If he had one request of the government, what would it be? “Pick industry by industry, see what we need and give something special to incentivise local production, like there used to be in the old days,” says Sankar. He is in favour of a wholesale bank, what was known as a development bank a couple of decades back.

“Whatever name you call it, we need one in India now. Commercial banks are not cut out for promoting industry. They are not going to be able to lend long term. You need flexibility in dealing with problems that arise from industry,” he says. The RBI has circulated a position paper on a wholesale bank, which needs to be supported. The government should give cheap funds to that bank so that it can promote industry by providing softer, long-term loans. “This is very critical,” says Sankar.

Looking back on his career, are there any regrets? Would he have liked to do things differently?

“(There are) millions of things I would have done different. But overall, I am quite happy with the way things have gone… This is where I cut my teeth. I have no regrets looking back,” he says.

Published on May 03, 2017

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