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Vizag gas leak: LG Polymers' India journey is riddled with controversy

Set up in December 1996, weeks before Korean major LG Electronics entered India, the plant has been at the centre of legal battles since its association with the $23 billion LG Chem.

Topics
LG | Chemical spills | Gas leakage

Arnab Dutta  |  New Delhi 

An affected man being taken for treatment at King George Hospital after a major chemical gas leakage at LG Polymers industry in RR Venkatapuram village, Visakhapatnam. Photo: PTI
An affected man being taken for treatment at King George Hospital after a major chemical gas leakage at LG Polymers industry in RR Venkatapuram village, Visakhapatnam. Photo: PTI

Polymers India, the company that owns and operates the chemical plant in Visakhapatnam (Andhra Pradesh) from where poisonous gas leaked on Thursday killing several locals, is no stranger to controversies.

Set up in December 1996, weeks before Korean major Electronics entered India, the plant has been at the centre of legal battles since its association with the $23 billion Chem.

Originally set up as Hindustan Polymers in 1961, the manufacturing unit landed up in liquor major UB Group’s McDowell’s lap in 1978. As South Korea’s LG Group geared up to establish its footprint in India’s consumer durables space in the mid-1990, it acquired the plant under a share transfer deal against its Rs 100 crore investment in the plant.

Acquiring the polymer business was crucial for LG. The brand that became the leading consumer appliances player in the country had to keep costs in check and protect its technology. A lack of adequately skilled workforce at the time forced new entrants like LG to keep all key component manufacturing in-house.

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“While LG decided to import large components like compressors from Korea, importing cheaper components like body parts was not economically feasible. However, no major manufacturer in India at that time was technologically, or otherwise, capable of producing such components. Thus, many such plants were acquired by the technologically superior new entrants like LG and Samsung,” said a senior industry executive, who began his career at one such LG plant in the mid-1990s.

Controversy broke out soon after it formed the subsidiary LG Polymers India to operate the unit in Visakhapatnam. A land transfer and use agreement between its previous owner and the Andhra Pradesh government dragged both LG and the state to court. Unauthorised use of land, like setting up a luxury resort on land offered for industrial purposes, and breaching the state’s land ceiling norms continue to remain bones of contention between the parties.

According to ESA Sarma, a former secretary to the central government, the firm received approval for its controversial expansion plan last year. “Such clearances should have come from the Union environment ministry, but the local pollution control board allowed it to expand despite it being in the hazardous industry category,” he told Business Standard.

ALSO READ: Explained in pictures: All you need to know about Vizag gas disaster

LG Polymers’ legal fight involving its own parents, however, is quite unique. A deal for using the LG trademark, with its Korean parent LG Chem, led to a litigation involving all key — from LG International Corporation and LG Corporation (both from Korea) to its direct parent here, LG Chemical India.

A murky internal trademark deal, violating rules for distribution of royalty collected from LG Polymers between its Korean parents and global associates haunted the firm in early 2010s.

A detailed questionnaire sent to LG Chem remained unanswered.

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The plant primarily produces styrene, a known carcinogen, and its derivatives like polystyrene and expandable polystyrene. These in turn are extensively used in manufacturing several key body parts for large appliances — like inner parts for indoor units of ACs, inner buckets and racks for refrigerators, and outer body parts for washing machines that are consumed by LG Electronics’ two plants at Noida and Pune. Further, it also supplies to firms like Kent RO and air cooler makers.

In 2019, LG Polymers raked in Rs 142 crore in revenue, while its net income stood at about Rs 4 crore. Filings with the Registrar of show that it has Rs 126.33 crore paid-up share capital and a bunch of group veterans run the show. Sunkey Jeong, its managing director, also heads the board of LG Chemicals. While LG’s Hyun Seok Jang sits on the board of all key LG Chem firms in India, including Polymers’.

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LG Polymers is a string in the chain of through which LG Chem operates here. At least two other subsidiaries — LGC Petrochemical India in Mumbai and LG Chem Life Sciences in Gurugram — are operational and offer products and services like consultancy and advocacy in the fields of petrochemicals and pharma.

With three subsidiaries, LG Chem’s India presence is sizable, lesser only than in South Korea, China, the USA and Vietnam.

Share slips 2% on Korean bourse

LG Chem, the parent company of LG Polymers, said it was cooperating with Indian authorities to help residents and employees. The parent company, which is listed in South Korea, saw its stock slip 1.94 per cent. "The is now under control, but the leaked gas can cause nausea and dizziness, so we are investing every effort to ensure proper treatment is provided swiftly," LG Chem said in a statement. The firm is looking into what caused the leak of styrene monomer gas, which is used for producing plastic.Agencies

First Published: Thu, May 07 2020. 22:12 IST
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