In an exclusive interview with Pravin Prashant, Executive Editor, Indian Chemical News, Navanit Narayan, Whole Time Director and Chief Executive Officer, Haldia Petrochemicals Ltd. talks about petrochemicals market, policy measures, challenges, specialty chemicals, market share increase, Capex investment, R&D, automation, Net carbon zero, and CSR plans.
How do you see the Indian Petrochemicals market in 2024?
While remaining cautious, I see, Petrochemicals industry delivering a comparatively better performance in 2024 on account of gradual softening of feedstock prices and global demand-supply outlook. After three years of successive large capacity additions exceeding demand growth, 2024 is the first year when project demand growth exceeds capacity growth. To that extent, there would be an improvement in business sentiments globally.
In the domestic market, we have seen robust performance in terms of demand, which is further likely to continue in 2024. We expect gradual easing of interest rates, which are likely to further drive consumer demand.
However, there is still a large capacity overhang which needs to be absorbed in global supply-demand balance. Margins are likely to remain subdued till it is fully accommodated either through demand growth and/or closure of inefficient plants. There is also the risk of geopolitical issues jeopardising Petrochemicals business through extreme volatility in feedstock prices.
Major challenges faced by the Indian Petrochemicals sector and the suggested solutions?
In 2023, India was the brightest spot on the global Petrochemicals scene and thus had been on the radar of all major global producers to place their surplus products. Many of these players in the US and Middle East have significant feedstock cost advantage which provides them additional strength to compete with domestic players in terms of product pricing. Cheaper imports from these regions adversely impacted the pricing sentiment and margins of Indian players, which are also reflected clearly in their financial reports.
India is not endowed with large hydrocarbon resources and thus has heavy dependence on crude and its derivatives to meet the feedstock requirements of Petrochemicals. Considering that the industry supports large scale value creations and direct/indirect employment creation.
It is pertinent to provide a policy framework to incentivise growth of petrochemicals in India. Feedstock cost disadvantages need to be compensated through adequate duty protections and government incentives, failing which it would be difficult for industry to sustain business and invest in new capacity creations. In this context, we also need to protect industry interests in various FTAs or CEPA (Comprehensive Economic Partnership Agreements) agreements being entered as in some cases it can lower the competitive strength of Indian producers.
Policy measures which will help make India self-reliant in Petrochemicals?
India is dependent on imports for almost most of the product segments. Apart from capital intensity and feedstock availability, restrictive availability of technology is another major challenge in achieving self-reliance. To make the country self-reliant, we need to encourage investment by Indian and global players directly or through JVs and need to promote early adoption of new technologies which are specifically suited to Indian conditions like new thermal crude to chemical technologies.
Some of the potential policy push helpful to achieve self-sufficiency goals can be presented as: Ensuring stable policy framework for long period – e.g. Guaranteeing duty protection for fixed number of years; Reducing customs duty on feedstock Naphtha used by Indian producers; Declaring Income Tax Holiday/PLI for Petrochemicals; Waiver of GST/CGST on project procurements to minimize capital investment; Simplifying statutory clearance processes; Facilitating/developing large industrial tracts for promoting investment; and
Specialty Chemicals contributed Rs. 999 crore revenue in FY23. HPL has been exploring the possibility of becoming a leader in the niche segment of Specialty Chemicals. What's your strategy to make this happen?
We are working in a very focused manner to become a leading player in Specialty Chemical segments and results would be visible in the next 12-18 months. In FY 2023-24, we expect revenue to remain largely unchanged.
What is HPL’s refining/processing capacity per annum and what is your share nationally in the Indian Petrochemicals market? How do you plan to increase market share?
Our capacity is 700,000 TPA of Ethylene. We produce about 1.5+ million TPA of Polymers and Chemicals and command 8-9% of polymer market share in India. We are focusing on diversifying the product basket in medium terms and becoming the market leader in those segments. We are also working on a long-term plan to improve our market share in terms of Ethylene capacity.
What is HPL’s Capex for FY 2023-24? Projects where you are investing?
We are currently undertaking an investment of about Rs. 3,000 crore in an Integrated Phenol/Acetone Plant.
HPL is setting up the first on-purpose Propylene plant in India based on Olefin Conversion Technology (OCT) and the largest Phenol plant in India at Haldia with a capacity of 300 KTPA Phenol and 185 KTPA Acetone becoming India's first integrated player in the Phenolics chain. Completion and Capex investment in these projects?
We are planning to commission the project in end 2025 or early 2026 and investment is approximately Rs. 3,000 crore.
What is the latest development on the R&D front at HPL?
HPL’s in-house application research activities in polymers are focussed at developing Polypropylene products for growth sectors like automotives and appliances. HPL also has collaborations in research for value addition in existing and future chemical products from its C3 and C6 streams.
HPL’s automation and digital roadmap for new and existing facilities?
Our vision for digital transformation is to build an ecosystem of trusted business stakeholders both internal and external which is agile, innovative and shifts business decisions from reactive to proactive, to predictive, and ideally to automated prescriptive.
Our digital transformation journey is people centric with digitized and optimized processes as the baseline. The integrated and collaborative digital platform will enable people with right cutting edge tools, tailored to their environment and with effective digital transformation objectives encouraging a digital culture. The integrated digital environment of having a 360-a degree view of the organization across all value chains will propel the teams to seek innovation and agility across the organization.
New key technology interventions as follows: Blockchain Technology on Ethereum/MCUBE platform deployment through Electronic Proof of Delivery E-POD solution; Advanced video analytics deployment through Jarvis CCTV Solution; IIOT sensor based predictive analytics deployment for Asset Monitoring through Machine Doctor Solution; and ISO Certification. We are an ISO 27001-2022 certified organization which signifies a strong and governance structure of information security towards digital transformation.
What sustainable measure HPL has adopted towards carbon neutrality? When are you planning to achieve Net Carbon Zero?
Following sustainable measures are adopted by HPL towards carbon neutrality: Use of Renewable Energy: Installation of 1 MWp solar power plant in township (December 21); Rainwater harvesting: Usage of more than 5.5 Lakh m3 of rainwater (FY 2022-23), thereby conserved the natural resources (fresh water); Development of Green Belt: Planted 7,100 casuarina saplings during February - March 23. Planned to plant another 5,000 saplings by December 23. There are a total 1.25 Lacs of trees in our greenbelt; and Clean Technology: Implementation of Pipe Coal Conveyor to transport coal from port to plant to replace transfer thru trucks.
The company is planning to utilize plastic waste? HPL plans in this direction?
HPL at present complies with the statutory requirements in plastics recycling as brand owners in collaboration with third party agencies who have necessary infrastructure for utilizing plastic wastes.
HPL acquired US based Lummus Technology at an enterprise value of US $2.73 billion from McDermott International in 2020. How are you planning to leverage it going forward?
Acquisition of Lummus has provided a unique platform of licensor-operator collaboration having potential to benefit both the parties. HPL is leveraging Lummus expertise to improve operating performance in terms of reliability, throughput improvement and yield besides ensuring quick troubleshooting of the plant when need arises.
With the commissioning of new plants, the overall chemical business portfolio is expected to increase by an additional Rs. 5,000 crore. So what's your future revenue expectations and its timeline?
We expect this incremental revenue potential to be realized by FY27. We are planning commissioning of the specialty LMW Polymer project in current financials which will increase the topline of the Specialty Chemical business by about Rs. 100 crore per annum.
What is your CSR plan for FY 2023-24?
The CSR plan for FY 2023-24 of HPL is focused on seven verticals in line with being along the SDGs and India’s position in strengthening SDG Goals. The verticals are: Education; Healthcare; Infrastructure; Sustainability; Women Empowerment and Equal status; Sports; and Environment.
HPL’s three primary thrust area verticals are promoting higher education including infrastructure and healthcare. Under the education category, the company has taken up of supporting in building of a new school in a remote village by an Education Trust, infrastructural development projects for schools, building of smart classrooms, upgradation, and construction of science laboratories for schools which were spread in and around Purba Midnapore District.
For healthcare, medical equipment donation to the Haldia sub divisional hospital, PG hospital Kolkata, and many more hospitals across West Bengal along with donation of ambulances. HPL is involved in bringing sports activities into the social fabric which is the need of the hour. With the present living style and the societal needs, HPL is getting self defence training imparted to school children of many Schools at Haldia to develop sports as an essential part of development of mind and body.
Also mangrove forestation in Sundarbans, women empowerment program through Jute product making training are the major projects considered this year to reiterate HPL’s commitment towards the society and the environment.
