Thrust on infrastructure to boost phthalic anhydride demand: Nikunj Dhanuka

Phthalic anhydride (PAN), a downstream product of orthoxylene (o-xylene), is used in a variety of application in both consumer durables to non-consumer durables. With the government increasing spend on infrastructure, Nikunj Dhanuka, managing director & CEO, IG Petrochemicals Ltd, expects the demand for this versatile intermediate to rise manifold.

In conversation with Rakesh Rao, Dhanuka discusses the changing dynamics of PAN market and IGPL’s growth strategy for future.

For Q3 2016-17, IG Petrochemicals reported robust performance in revenue as well as PAT. What are the reasons for this?

We have achieved better margins/revenues due to consistent good demand coupled with operational efficiency and economy of scale. IG Petrochemicals is the largest manufacturer of phthalic anhydride (PAN) in India and globally. We are also the lowest cost producer in the world.

Are you seeing any impact of demonetisation on the downstream petrochemical industry?

As we are catering to the organised sector and multinational companies, demonetisation has not affected us directly. However, some of our customers are exposed to unorganised sectors where some sluggishness was witnessed, but that too for a short period of time.

Indian petrochemicals industry has been facing the problem of dumping. How is the situation now?

There is dumping happening; but due to safeguard duty and anti-dumping duty imposed by the government, cheap imports have been restricted. Besides, with the Make in India initiative, we can become very competitive so that we need not depend on cheap imports.

Crude oil prices, after remaining low, have started to ascent. Will this put pressure on Indian petrochemicals industry?

As per the market report, the crude will be in the range of $ 55 to $ 65 per barrel. Moreover the government has also taken crude at $ 65 per barrel in its estimations. As long as, it is in that range it is good for the industry and the country as well.

How is the market of phthalic anhydride in India?

PAN has wide range of applications. It is being used in plasticisers, paints, unsaturated polyester resins, pigments, CPC etc. The market size in India is around 325,000 tonnes per annum and is growing at 7 percent annually. With the Government of India’s thrust on infrastructure, the consumption of phthalic anhydride is expected to rise going forward. Moreover, our customers are increasing their existing capacities, which in turn will push the demand for PAN.

Is there anything to cheer for petrochemicals industry in the Budget 2017-18?

There has been a basic duty cut for o-xylene from 2.5 percent to nil which is a huge positive for the company.

Government is planning to create an integrated company, which will have presence in exploration, refining & petrochemicals. Will it benefit the downstream industry?

It will be a huge boost to the sector. It will give the economy of scale in operation and also facilitate the integrated entity to diversify into various downstream products in their chain of products.

With demand for PAN rising in India, do you see a scope of putting up addition capacity? 

At present, we are working at various options for growth. We will take our further course of action after analysing the various growth options. We may add some capacity by de-bottlenecking the existing plant.

Global economy has been showing sluggish growth. How is this impacting downstream petrochemicals companies?

As far as PAN is concerned, growth is driven by consumption in India. There is no new capacity addition in India nor elsewhere which will have an adverse impact on India. With the government announcing huge allocation of resources to infrastructure, the demand for phthalic anhydride will increase in the years to come.

How has been the performance of your maleic anhydride (MA) business? How is the JV with UAE-based DUGAS (to set up MA plant) shaping up? 

The maleic anhydride business being carried out in Mysore Petro Chemicals Ltd (MPCL) has been taken over by IG Petrochemicals with effect from April 1, 2017. Maleic anhydride is produced from the wash water (a raw material required for the production of MA) generated by IG Petrochemicals.

As far as Dubai JV is concerned, estimation of the project cost is being worked out by Larsen & Toubro (L&T). We intend to get the final approval of the respective boards during April 2017. It will take 30 months to commence production.