Haldia initiates talks with the state government to de-notify HPL as an oil company

16-Jun-11

Haldia Petrochemicals, a joint venture of The Chattterjee Group (TCG) and West Bengal government, has started talks with the state government on de-notifying HPL as an oil company, which has resulted in an annual loss of Rs 300 crore since 2006. The company is also lobbying with the Union government for zero duty on naphtha imports, while also waiting for the Supreme Court (SC) verdict on the ownership issue, as per Financial Express. HPL Managing Director Partha S Bhattacharyya, in an interactive session, organised by the Merchants' Chamber of Commerce, said HPL is a near sick company with debt burden of Rs 3,300 crore. For every Rs 100 cash flow the company has to fork out R166 for debt servicing, which if continues for long, would lead to HPL's closure. He said HPL under the West Bengal incentive scheme of 1996 was supposed to get tax exemption accumulating up to R6,000 crore or for a period of 12 years, whichever was earlier. But the government in 2006 withdrew the sales tax exemption on motor spirit (MS) issuing a sales tax notification, that HPL was treated as an oil company since it was producing MS oil, which was a petroleum product and not petrochemical product. But HPL did not sell MS oil to the open market and supplied it only to oil companies, which were sales tax negative. Therefore, an additional burden of Rs 300 crore came on it. The Centre in 2008 imposed 5% duty on naphtha imports, while continuing with the 5% duty on the exports of naphtha products. This brought down the duty differentiation to zero ultimately squeezing HPL's margins.