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Haldia demands withdrawal of naphtha import duty
18
Jun '11
Haldia Petrochemicals Ltd. (HPL) is facing three major issues that need to be resolved for it to become a zero-debt company, according to the company's Managing Director, Mr. Partha S. Bhattacharyya.

Speaking on the sidelines of a seminar, Mr. Bhattacharyya said, the first problem faced by HPL is the existing 5 percent duty on the import of naphtha. Unlike GAIL, IOC, Reliance and other companies, who have in-house naphtha manufacturing facility, HPL imports naphtha, its key raw material. Hence, HPL is the only company that pays this duty. The withdrawal of this duty would save at least Rs. 3 billion a year for the company.

The second problem faced by HPL, according to Mr. Bhattacharyya, is a regulation passed by the West Bengal government in 2006, under which HPL is classified as an oil marketing company. This law stopped the sales tax benefits enjoyed by the company earlier. Due to this, the company is losing about Rs. 3.6 billion every year.

Mr. Bhattacharyya added, “Lastly, there are issues regarding the restructuring of the management that includes the appointment of a new chairman.” “There is no future for HPL, if these problems are not resolved,” he said.

At present, on account of the first two problems, HPL is losing about Rs. 6.6 billion a year. The total debt of the company is Rs. 32 billion, out of which Rs. 19 billion is in long-term borrowings, and the remaining Rs. 19 billion is in the form of working capital loans. To repay its long-term loans, the company is taking fresh short-term loans.

The severe financial crunch had made the company to cut down its production by nearly 20 percent of the installed capacity. Mr. Bhattacharyya said that the problems faced by HPL have been put before appropriate authority at all levels and he hopes that a solution to the existing problems will be soon worked out.

However, a solution to the first problem was suggested by Mr. Bhattacharyya. He said that either the 5 percent import duty on naphtha can be withdrawn or the import duty on polymer can be increased to 10 percent from the present 5 percent.

He explained that in March 2006, import duty on naphtha was removed and the levy on the polymer (finished good) was reduced to 5 percent. However, when the 5 percent import duty on naphtha was reintroduced in 2008, the duty on polymer was kept intact. It meant that the difference between the duty on naphtha and polymer was essentially zero.

Fibre2fashion News Desk - India


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