West Bengal earns HPL 350 cr-a-year bonus

The west Bengal government has scored a brownie point by getting the Centre to scrap the import duty on naphtha, a move that will help Haldia Petrochemicals and one that the previous Left Front government had been demanding for a long time. Bengal industries minister Mr. Partha Chatterjee had written to the Centre earlier this month seeking removal of the duty, which is expected to save Haldia Petrochemicals (HPL) Rs 350 crore annually. HPL, Bengal’s largest industrial venture, will be the biggest gainer from the Centre’s decision to eliminate the five per cent import duty on crude oil and petro products including naphtha, the main ingredient for making polymer used in the plastics industry. This financial year, HPL is expected to gain only around Rs 250 crore from the move since the first three months have gone. But even this may not help the company break even this year if the trend of the first quarter continues. HPL’s losses in the first three months may come to Rs 150-200 crore because of the slowdown in China. The price of naphtha, the main raw material for the company, has risen by 39 per cent in the past 12 months whereas the net realisation from its products, polymer and chemicals, has gone up by only 18 per cent. The last two months have been especially bad, with HPL selling at prices lower than the cost price. However, HPL managing director Mr. Partha S. Bhattacharyya said he was yet to hear about the duty cut but added that it would bring some relief to the company. “We hope the state government also withdraws sales tax on motor spirit. Then the company will be on its feet and plan for bigger things,” he said. “The slowdown in China is playing havoc. Plastic manufacturers are not buying, hoping a further price cut will force polymer producers to sell at lower prices. Everyone is suffering but HPL is suffering more because it could not make a handsome profit when the market was good before, because of various reasons.” The duty cut impacts HPL the most as it is the only manufacturer that imports naphtha. Other players such as Reliance, GAIL (India) Ltd and Indian Oil Corporation are fully integrated and manufacture naphtha internally. As per, Oil minister Mr. Jaipal Reddy  the duty cuts would entail a loss of about Rs 26,000 crore to the government for the full year. But the empowered group of ministers that recommended the cuts found that most of the revenue loss would come from crude imports and only a negligible proportion from naphtha, sources said. The GoM, headed by finance minister Mr.Pranab Mukherjee, decided that removing the duty would boost naphtha imports and the revenue loss could be offset by the excise duty from higher production.