| HPL has indicated that it would not be possible to supply 35,000 tonne polypropylene (PP) which the PSU major was marketing. The product swapping agreement for polyethylene (PE) has also come to standstill. |
| HPL management has communicated that its auditor has raised question on the marketing margin company was paying to GAIL. HPL offers Rs 800 commission per tonne to GAIL for selling PP. |
| Moreover, the product swap arrangement has not taken off. The two companies were to exchange nearly 40,000 tonne of PE to cater to both domestic and export markets to cut logistics cost. |
| According to the plan, GAIL would produce PE at its Pata plant in Uttar Pradesh and sell in northern market on behalf of HPL. On the other hand, HPL was to produce and sell PE in the eastern markets on behalf of GAIL. |
| The companies could pare off nearly Rs 1,000 a tonne as transport costs by taking advantage of each other's production units. HPL has contested that GAIL's price in the northen region was lower than HPL product and thus it was not remunerative for the company. GAIL said its price would be lower than HPL as the later paying the logistic cost. |
| Corporate observers said the unwillingness stemmed from that HPL has scripted a remarkable turnaround and it can go ahead alone with its strong marketing team. "The requirement for GAIL as a partner seemed to have waned following the corporate debt restructuring (CDR) package and upswing in the petrochemical cycle," they said. |
| The arrangement was beneficial to GAIL to the extent it did not have PP in its petrochemical product portfolio. With HPL's product, it could have offered a complete basket to its customers. |
| On the other hand, HPL in its trying financial condition, had considered to securitise the deal and raise Rs 300 crore to retire high cost debt. The proposal fell through since financial institutions rejected the idea. |
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