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Applying the BCCL model to revive Haldia Petrochem

Even the mere thought of applying the template of a coal company onto a petrochemical outfit is sure to raise more than a few eyebrows. But that is just what is playing on the mind of the new Managing Director of Haldia Petrochemicals (HPL), Partha Sarathi Bhattacharyya, who is planning to try out the Bharat Coking Coal (BCCL) model of reviving a company on HPL, his present job. That is hardly surprising since his two immediate past assignments included the chairmanship of BCCL and its parent outfit, the Maharatna Coal India Ltd. (CIL).

Commonalities

A month into his present charge, he thinks that there are more than a few commonalities between these two companies however unrelated the segments may be.

Located at the port-town of Haldia in West Bengal, HPL operates as a naphtha-based petrochemical company, making polymers and energy chemicals, such as motor-spirit, liquefied petroleum gas, pyrolysis gasoline, carbon black feedstock/fuel oil, and industrial products. It also exports its products to Europe and to West and Southeast Asia.

It enjoys a second position among the petrochemical companies in India in terms of capacity, after Reliance. However, it is the eastern region’s only petrochem plant. Its markets are pan-Indian with an eastern bias.

For West Bengal, its commissioning marked the State’s single-largest industrial milestone in recent times and HPL was hailed as an icon of industrial resurgence since its founding in 1994 and its going commercial in 2001. However, HPL is now in a bit of a doldrum with high debts and low earnings from an expansion project completed last year, gnawing away its margins.

Areas of concern

Bhattacharyya says that compared to the Rs. 5,000-crore accumulated losses of BCCL, when he took over in 2003-04, HPL is undoubtedly better-off since it has no accumulated losses. The company had a problematic phase earlier but after a corporate debt restructuring (CDR) it has had uninterrupted profit-runs till 2007-08. Its loss-making phase began in 2008-09.

The Rs. 2,000-crore debt of the joint venture company in which fund manager Purnendu Chatterjee (through The Chatterjee Group) and the State government are the major equity stake holders (with the Tatas and the IOC having smaller holdings) is mounting, amid low debt service coverage. The company now operates on wafer-thin margins.

Human resource is another area of concern and for reasons different from BCCL which carried a mammoth manpower. The thorn in HPL’s flesh is its contract manpower on which issue a strike had crippled operations resulting in time and cost overruns. That expansion plan named project Supermax boosted capacity by around 28 per cent but is yet to yield adequate returns as the industry is passing through a trough.

According to Bhattacharyya, having a clearly laid out plan, a motivated team and consensus approach to improve things are crucial to any revival process.
“Consensus can move mountains”, he said during an interview. “While in the case of BCCL one had to motivate a one-lakh strong manpower to achieve certain goals, in this company the team is fairly motivated. I am just exhorting them to aim higher. What we need is a strategic plan which is now being prepared in-house as there is sufficient talent to do so.”

He said HPL needs some support from its promoter, the State government. It has approached the State government for an extension of the 12-year sales tax remission plan that expires in July 2013. For quick results, he is also favouring an investment plan involving projects that yield fast returns.

Seen as the chief architect of turning around a perennially sick BCCL and transforming perceptions about a State monopoly like Coal India through an IPO which created history, Bhattacharyya is confident of an encore performance at his present charge, notwithstanding the present face-off between the two main promoters who are locked in a tussle over company ownership.

“Both main promoters agree that the company should run professionally and on that there is total consensus,” he said.

As the State itself stands at the threshold of turning a new page in governance, it remains to be seen what proactive steps are taken to resuscitate a company and how Bhattacharyya’s BCCL model of corporate governance through consensus works at HPL.

One of the main promoters of HPL had once said: “It is a great project — one will now have to ensure that it does not become another Victoria Memorial,” referring to the marble city icon, built by the British in the memory of their Queen. Bhattacharyya, thus, has his work cut out.

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