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A top company official has cited increased import of cheap PTA from China as the primary reason behind the mounting losses. PTA is the primary raw material used to manufacture various polyester products.
According to him, when commercial production of the plant started in 2000, emphasis was laid on producing higher quality of product in order to gain market share in the ASEAN countries. But with the Chinese products being cheaper, the company gradually lost out and decided to concentrate in the domestic market.
"In order to boost production, the company set up a new unit in 2010 which increased annual production from 470,000 tonne to 800,000 tonne," said the official. But it did not pay off.
For the last three years, there was a radical change in the domestic market scenario as import of Chinese products increased manifold and led to oversupply. " By 2012 we were forced to sell products at below market price which led to extreme high share of input costs in terms of volume," he said.
Adding to this, was the steep increase of raw material and operating cost. "The market price of paraxylene and acetic acid rose over the last few years, also not having a dedicated jetty at the Haldia port added to the logistics cost," he said. Expenditure of the company increased from Rs 5,757 crore in 2013 to Rs 7,555 crore last year.
Recovery path
Besides requesting the central government to increase the anti-dumping duty, the company has taken various steps to cut input costs, said Debi Prasad Patra, executive chairman
of the company. "Instead of using furnace oil for our generators we have requested the state government to supply us with grid power and it has been sanctioned," he said.
He added that talks were on so that the company gets permission to build its own jetty at the Haldia port which would lead to savings in logistics costs. " There have been discussions about this at the Prime Minister level," he said.
With the impasse over Haldia Petrochemicals showing no sign to end, if Mitsubishi fails to revive, it would be an ominous sign for the industrial sector of the state. The Haldia-based arm of the Japanese giant Mitsubishi Chemicals Corporation has been recipient of highest FDI in West Bengal.
