Indo Rama to double capacity of Butibori unit

To cash in on the increasing demand for polyester in the market, Indo Rama Synthetics is planning to double the capacity of its Butibori plant.

The capacity of the plant would be raised from the current 3 lakh tonne per annum to 6 lakh tonne per annum, making it the largest single point plant in the country, in terms of capacity.The company said the project would be completed by December-end.

Chairman and MD of the company, O P Lohia said initial runs of the new continuous polymerisation (CP) plant had commenced and this would add capacity of 400 tonne per day (TPD) to the existing 660 TPD. Another CP plant of 400 TPD would begin operations by the end of December.

He said the plant was presently running at over capacity utilisation and though the final installed capacity would be 1460 TPD, a full run should produce 1750 TPD. In addition to its 57 MW captive power plant, the company is also planning to set up a 30 MW captive coal-fired power plant. The firm is also planning to increase the production of oriented yarn (POY) and polyester staple fibre (PSF).

Lohia said Indo Rama would have surplus power of around 25 MW after the new unit come on line by December.

"If it is commercially feasible, we will consider selling surplus power," said Lohia. The per unit cost of coal-based generation has been estimated at Rs 2.95, while that of furnace oil generation is at Rs 4.

The company would in all probability utilise power from coal- based generation while the furnace oil units will be kept as back-up for emergencies.

Lohia admitted the work on the new continuous polymerisation units had been delayed by six to eight months but said there had been no additional expenses.

"Our target cost was of Rs 858 crore and we could do it well within what had been committed for the project," he said. Finding a new technology partner, negotiating a good price, and tying up finances took more time than what the company assumed, he said.

He said the expansion plans had been timed to coincide with beginning of commercial operations of Indian Oil Corporation's PTA plant at its Panipat refinery in Haryana.

Purified terephthalic acid or PTA is a raw material for manufacturing polyester staple fibre and polyester filament yarn. Another raw material used is mono-ethylene glycol or MEG.

Lohia said PTA prices had gone up but they would ease now once IOC's PTA plant starts operations. World-wide, MEG capacities are being increased with Saudi Arabia setting up a 6 lakh tonne plant, Thailand planning a 3 lakh tonne plant, and Iran building a 3.2 lakh tonne plant. China too is in the race to raise the production of MEG, he said.

Lohia said after the expansion, Indo Rama's total investment at Butibori would stand at Rs 2,500 crore.

He said the expansion had been totally funded through debt but added that finances were under control.

"We had a debt of Rs 1400 crore in 1998-99 with peak interest costing Rs 150 crore and required Rs 200 to 250 crore annually to meet it. We needed to generate Rs 350 to 400 crore for survival. Now the total debt is Rs 800 crore including that raised for the new plant," he said.

Lohia said the peak interest outgo would not be more than Rs 60 crore which translates to Re 1 per tonne on a capacity of 6 lakh tonne per year. "There is no pressure on financials," he said.

Lohia was upbeat on market demand too and said that Indo Rama was "struggling to meet domestic demand." He said the company's output cannot meet export demands.

On the employment front, Lohia said the expansion project would generate 500 to 600 new direct jobs but more will be generated indirectly such as in transportation, labour etc. Indo Rama Synthetics presently hires a workforce of around 3,000.