Calcutta, July 6: A technical snag returned to haunt Haldia Petrochemicals Ltd after a hiatus of two-and-a-half years, hitting a blow to Bengal’s showcase project at a time the company is gasping for survival because of a severe financial crunch.
The Haldia-based petrochemical major undertook an emergency shutdown this morning following a glitch at the naphtha cracker unit, the most critical part in the chain of operation.
HPL officials said the extent of the problem could not be assessed today as inspection would take place tomorrow. The snag has been located in the charge gas compressor, a critical part of the naphtha cracker unit.
“It is like the heart of the plant. We could just not take any chance with it,” U.K. Basu, managing director of HPL, said this evening.
The compressor is of Japanese make. There is a possibility that an expert from Mitsubishi Corporation, maker of the compressor, will be flown in to address the problem, making the process time consuming.
Basu allayed speculation that the shutdown was because of a cash crunch, stressing the company had the money to sustain operations at the current level. HPL was using only 50 per cent of capacity for want of working capital.
However, industry veterans said the company might find it difficult to restart operations since it would require no less than Rs 50 crore.
This would not have been a problem had HPL run at its full potential. However, the company has nearly wiped out its net worth because of continuing losses. Moreover, promoters have failed to infuse any equity in the past 10 years (except the conversion of Rs 127 crore of debt to equity by the lenders last fiscal.)
On a ballpark basis, HPL earns Rs 19 crore a day from selling polymer and chemical and spends Rs 20 crore to produce them, while operating at 50 per cent capacity.
Hence, one day’s production is critical to buy naphtha, the main raw material, for the next day. Now that the plant will remain closed for 10-15 days, it will be hard to generate the cash to restart the plant.
However, a senior Bengal government functionary said there would not be any difficulty to get the plant going again. “It is a minor thing. The plant will start again. Nobody will lose jobs,” he said.
The Bengal government has a 39.9 per cent stake in HPL, where private promoter The Chatterjee Group is the single-largest shareholder. The former had in-principle decided to hand over management control of the company to TCG after cancelling the stake sale to PSU Indian Oil Corporation.
While the final contour of the deal between TCG and Bengal is being worked out, time is running out fast for HPL. Lenders have turned down fresh loans unless promoters bring in equity.
Sources said TCG was busy arranging funds to buy out the government’s stake, but there was no clarity on how the fresh funds would flow into HPL’s book to improve its financials.
Industry veterans said the truce between the two warring promoters would not make any material difference to the long-term well being of HPL unless fresh equity is infused to increase liquidity, retire debt and set up value-added projects.