The Telegraph
Tuesday , October 9 , 2012
Since 1st March, 1999
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HPL stares at temporary shutdown

Calcutta, Oct. 8: Haldia Petrochemicals may shut down for at least two weeks to cut losses as the company faces an uncertain future in the absence of a firm direction from the principal promoters.

The company is now running at 60 per cent capacity, with banks and financial institutions refusing to lend further.

The HPL senior management has informed industries minister Partha Chatterjee, who is also the chairman of the company, of their decision.

The situation has worsened after the company was forced to shell out Rs 133 crore on loan repayment and insurance premium last week. Consequently, it is not left with much cash to buy raw material naphtha and operate at a higher capacity, which could have ensured that the company covers its basic operational cost.

A weak petrochemical market has added to HPL’s woes. The company is now saddled with 18,000 tonnes of polymer at the stockyard, valuing the inventory at Rs 200 crore.

One of the options is to close the plant for two weeks and sell the stockpile to unlock the money. When the plant restarts, HPL will be able to use the funds to operate at 80-90 per cent capacity.

HPL managing director Sumantra Choudhury, who is on leave, had last week said that operating the plant at low capacity was “suicidal”. He could not be contacted.

HPL is losing around Rs 1-2 crore every day. The shutdown may help it to save Rs 20 crore in October alone.

Sources said Chatterjee had asked the management to continue operations at any cost, fearing a shutdown could tarnish the image of the Mamata Banerjee government.

A temporary shutdown to adjust with the market conditions is not unusual in the manufacturing industry, which is cyclical in nature. HPL’s case, however, is different since the primary reason for the closure seems to be a cash crunch.

Government promoter West Bengal Industrial Development Corporation (WBIDC) and private promoter The Chatterjee Group (TCG) were hoping that lenders such as the State Bank of India and IDBI would bail HPL out like they had done many times over the last one decade.

However, the lenders seemed to have put their foot down this time and refused to release any more cash without the promoters bringing in fresh equity. Neither TCG nor WBIDC is willing to bring funds unless the issue of majority ownership between the promoters is sorted out.