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Duty on naphtha will hit HPL

KOLKATA: Haldia Petrochemicals Ltd. (HPL), the three-way joint venture company in which the West Bengal Government has a majority stake, will be hit by the budgetary announcement on re-imposition of import duty on naphtha, its main raw material.

The 2008-09 Union Budget has proposed to re-impose import duty of 5 per cent on naphtha.

A company spokesperson said that this was a reversal of a reduction that was given two years ago, when it was brought down from five per cent to zero, alongside a reduction in polymer import duty to 5 per cent. “This new proposal is a major setback for Haldia Petrochemicals where the West Bengal Government has a major shareholding,” the company said.

HPL is the only petrochemical unit which needs to necessarily import naphtha as other petrochemical producers are either gas-based or produce naphtha in their own refinery.

Hence, this budget measure will mainly hit HPL.

Now, import duty on its raw material and product was the same and hence duty differential stood totally withdrawn, the company said.

HPL, in which the Tatas still have an equity holding, has anyway been impacted hard by the increase in naphtha price.

The company closed 2006-07 with a turnover of Rs. 8,300 crore and a net profit of Rs. 584 crore.

The re-imposition of import duty on naphtha will be a crushing blow to the development of petrochemical industries whereas import duty in major petrochemical producing countries in Southeast Asia and China is nil.

HPL’s sole raw material naphtha has already seen 36 per cent price rise this year due to spurt in global prices. This will have a major adverse impact on the bottomline of the company.

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