HPL's forced shutdown adds to its woes

A technical sang has forced Haldia Petrochemicals Limited (HPL) to shutdown its naphtha cracker unit.

Managing director of HPL U K Basu said he was hoping to assess the situation in a day or two, after which the reopening of the plant would be considered.

According to sources, the plant has been running at less than 50% of its capacity for the past one year. This has caused considerable damage to the plant. HPL has had to incur significant loss. For a plant of HPL's magnitude, running below 70% capacity was not favourable, company insiders said.

Although the plant is struggling to survive, lenders are yet to loosen their purse strings. Despite the Bengal government's decision to hand over control to Purnendu Chatterjee-led TCG, the bankers are yet to infuse any further loan into the loss-making company. HPL's net worth has been eroded due to continuous losses. It has been struggling to secure adequate naphtha to run the plant at full capacity

After the last board meeting here in mid-June, Chatterjee had told reporters that securing further funds from bankers was a complex process and would take time. It was learnt that bankers had backed the proposal to bury the hatchet between both promoters of HPL-TCG and the West Bengal government-but had not granted fresh funds for the ailing petrochem company. For the second time in successive years, the company somehow managed to stay from the BIFR (Board for Industrial & Financial Reconstruction).

Even though Basu was hopeful of reopening the plant soon, delay could cause further damage to the flagship project of the state. The inability to handle the planned stake sale has already caused embarrassment to the state government. After submission of expressions of interest by the sector majors in a reply to the government's invite for the stake sale, IOC had emerged as the sole valid bidder for Bengal's stake earlier this year and offered to buy the shares at Rs 25.10 each. The government kept mum and delayed the stake sale process. Before the general elections, an in-principal agreement was arrived at between both promoters, according to sources. The announcement was kept on hold due to the election code of conduct.

The government, however, has decided to sell that stake (about 40%) to TCG at the same price. After the last board meeting, Chatterjee said he was expecting TCG to take control of HPL soon. That was the official word on TCG's new role in HPL.