Calcutta, Dec. 23: Haldia Petrochemicals Ltd (HPL) has chalked out plans to develop its downstream chemicals business and tap into opportunities that are expected to be thrown up by the proposed chemical hub at Nayachar.
Initial estimates indicate that the foray into this area will entail an investment of Rs 600 crore.
The company will shortly appoint external consultants to carry out a detailed feasibility study on the new product line, which is expected to find many users at the new chemical hub.
The report will be ready in about six months.
The Bengal government, which is pushing for the Nayachar project, is the biggest shareholder of HPL.
After the consultants submit the report, it will be placed before the HPL board for approval.
Last week, the board met to discuss the business opportunities that the new product line would throw up.
The product line will improve HPLs margins and trim costs as it helps create a robust downstream chemicals industry in the state.
HPL is the second largest manufacturer of polymers such as polypropylene and polyethylene. It also produces chemicals such as benzene and butadiene.
Petrochemical industry observers said it would be natural for HPL to make new products such as styrene and 1-butene as they offer higher margins.
The units established at the Nayachar hub will buy these intermediate products.
A sharp rise in naphtha prices, which shot up in tandem with international crude prices, has sharply eroded HPLs margins.
It is now hoping to make a profit of Rs 350 crore for the full year ended March 2008 compared with Rs 582 crore in the previous year.
Industry doesnt expect naphtha prices currently hovering at $ 850 a tonne to ease soon. Back in April, naphtha was available at $550 a tonne.
The company has to increase its range of high margin products while tightening costs to retain profitability, sources said.
While the new downstream chemicals business would ensure higher margins, HPL hopes to make substantial savings by using waste gas for power generation.
HPL uses 65 to 70MW of power by burning costly naphtha, which has seen a three-fold rises in prices in the past three years.
It has a joint venture with Larsen & Toubro for power generation. Once the ongoing expansion is complete, it will need 90MW.
If HPL switches to a new power production system using gas generated internally, savings could be as high as Rs 150 crore to Rs 200 crore a year.
The power plant has a rated capacity of 116MW. HPLs move to ensure long-term profitability comes at a time when the management is under pressure to execute Project Supermax, which will raise its existing capacity by 28 per cent.
The company hopes to complete the project by October next year.