Haldia Petrochemicals Ltd (HPL), one of the country?s largest naphtha-based petrochemical projects, has decided to shut down operations from October 26 to synchronise its ambitious supermax project, which will raise the plant?s capacity from 5.2 lakh tonne per annum (tpa) to 6.7 lakh tpa.
The project, which is already running behind schedule by over two years, has already seen estimated costs rising from Rs 675 crore to Rs 1,230 crore.
The shutdown, bound to put pressure on the company?s balancesheet, as the closure, expected to last at least four months, will adversely affect sales.
Officials told FE that the decision to set up the supermax project was taken in 2006 with a target to commission it by October 2007. But the company shelved the plan as it did not want to stop production when market conditions were buoyant.
As per officials, HPL has operated all its three units since 2002?the high-density polyethylene (HDP) unit, linear low-density polyethylene (LLDP) unit and polypropylene unit at a 120% capacity.
But with the advent of an economic slowdown in India last September, HPL brought down its capacity utilisation to 80%. Officials said 20 major plastic goods manufacturers of eastern India and all HPL polymer users closed down their units due to the downturn, forcing HPL to operate at a lower capacity.
While market observers feel prices will remain stable for sometime now, a section of HPL officials said the shutdown would be a loss of opportunity for HPL to recover its losses.
?The company could have gone for a shutdown just when the slowdown started, but it took a year to finalise the decision,? officials said. HPL managing director SK Bhowmick declined to comment.
Though Mott MacDonald, after a study, recommended that the supermax project, even after a 48% cost escalation, would remain viable, there are issues relating to returns on investment.
Officials said after the Mott MacDonald study, it became easy for the company to secure a debt funding of Rs 850 crore for the project, but there has been no change in the estimated costs even during a downturn situation.