Haldia Petrochemicals, a joint venture of The Chattterjee Group (TCG) and West Bengal government, has started talks with the state government on de-notifying HPL as an oil company, which has resulted in an annual loss of R300 crore since 2006. The company is also lobbying with the Union government for zero duty on naphtha imports, while also waiting for the Supreme Court (SC) verdict on the ownership issue.
HPL managing director Partha S Bhattacharyya, in an interactive session, organised by the Merchants’ Chamber of Commerce, said HPL is a near sick company with debt burden of R3,300 crore. For every R100 cash flow the company has to fork out R166 for debt servicing, which if continues for long, would lead to HPL’s closure.
He said HPL under the West Bengal incentive scheme of 1996 was supposed to get tax exemption accumulating up to R6,000 crore or for a period of 12 years, whichever was earlier. But the government in 2006 withdrew the sales tax exemption on motor spirit (MS) issuing a sales tax notification, that HPL was treated as an oil company since it was producing MS oil, which was a petroleum product and not petrochemical product.
But HPL did not sell MS oil to the open market and supplied it only to oil companies, which were sales tax negative. Therefore, an additional burden of R300 crore came on it.
?We have asked the state government to de-notify HPL as an oil company and the sooner the government takes its decision, the better it is for the company,? Bhattacharyya said.
He said the Centre in 2008 imposed 5% duty on naphtha imports, while continuing with the 5% duty on the exports of naphtha products. This brought down the duty differentiation to zero ultimately squeezing HPL’s margins. “We are talking to the Centre on imposing zero duty on naphtha imports,” Bhattacharyya said.
He said unless there is a clarity on ownership issue banks would not be interested to provide debt with which HPL could go for further forward integration to increase profitability. He said the issue of ownership was pending with the courts for over six years now and whatever judgement the SC gives was welcome.