AFFLUENCE

DIRECTORS’ REPORT TO THE SHAREHOLDERS 

Your Directors are happy to present the 30th Directors Report of your Company together with their Audited accounts for the year ended March 31, 2016.

HPL at a glance

Your company has produced the best operating performance during the year since its inception and achieved highest capacity utilization for the revamped capacity after implementation of Supermax. The average plant capacity utilization was 94% of the revamped capacity and the Earning Before Interest, Depreciation, Tax and Amortization (EBITDA) for the year 2015-16 was Rs 2,406 Cr. Your company also produced the highest ever Profit After Tax (PAT) of Rs.1,308 Cr. for the year 2015-16 even after recognizing one time charge of Rs 240 Cr being recompense amount payable to lenders following exit from CDR.

In a very short span of time, your company regained the trust of customers and suppliers and ensured that products were placed in market with little inventory build-up. In feedstock management too, HPL managed to win the trust of suppliers and secured a term supply contract with ADNOC apart from IOCL and HPCL.

Your company also resolved the long pending dispute with DGFT regarding the export obligations against duty free naphtha imports made prior to Jul 2011. Based on the representation made by the Company, the Union Cabinet granted an extension of 4 years to meet pending export obligations by asking the company to provide a bank guarantee of Rs 3,171Cr, which has been duly submitted. Company has made a proper plan for ensuring fulfillment of the pending export obligation within the specified time period.

During the year, the management control of your company was also secured by The Chatterjee Group (TCG) after acquisition of 260 million shares from WBIDC to get over 55% control of the Company. Upon change in management control, the refinancing scheme was also made effective.

During the year, your company took several measures to address the concerns of contractual employees as well as its own employees. Memorandum of Settlement (MOS) for Contract workers at Haldia was signed after an amicable understanding was reached with the workmen on their Charter of Demand. The company also paid the past dues to management and non-management staff and initiated the process of gradual compensation revision of management staff.

The business environment remains favorable for your company in low crude price scenario. Your company has initiated detailed studies and action plans to debottleneck production capacity which may yield results in next 12-18 months.

SCHEME OF AMALGAMATION BETWEEN HCCL, HPL AND BCCL

During the year a Scheme of Amalgamation has been conceptualized by your Company between HPL, Haldia Cracker Complex Limited (HCCL) and Bengal Cracker Complex Limited (BCCL). Through the Scheme of Amalgamation, Haldia Cracker Complex Limited will first get merged with HPL under purchase method at Fair Value with appointed date being March 01, 2015. In the 2nd stage, HPL will merge into BCCL under purchase method at Fair Market value with effect from 1st March 2015, the appointed date. BCCL shall discharge consideration by issue of its own Equity and Preference Shares to the respective shareholders of HPL in the Swap Ratio of 1:1. The resultant Company BCCL will then change its name to Haldia Petrochemicals Ltd again as a part of the Scheme.

The rationale for the proposed Scheme is as follows:

·            Consolidation of the business and simplification of the group structure. Further, the amalgamation will provide a high level of synergistic integration of operations and better operational management.

·            Enhancement of net worth of the combined business leading to improved alignment of debt and enhancement in earnings and cash flow.

·            The amalgamated company would be able to better leverage on its large net worth base and have enhanced business potential and increased capability to offer a wider portfolio of products and services with a diversified resource base and deeper client relationships.

·            It will improve and consolidate internal controls and functional integration at various levels of the organisation such as information technology, human resources, finance, legal and general management leading to an efficient organisation capable of responding swiftly to volatile and rapidly changing market scenarios.

·            It will facilitate consolidation and rationalisation of all borrowings, which will improve the debt servicing abilities through improved cash flows and simplified administration of debt for Companies. The Scheme has been filed with the Hon’ble High Court on 7th June 2016.

Financial Performance

The summarized standalone and consolidated results of your Company and its subsidiaries are given in the table below.

                                                                                                                           Rs in million

*previous year figures have been regrouped/rearranged wherever necessary.

Summary of Operations

During the year, total revenue of your Company increased by 228%, from Rs.30,961.50 million to Rs 101,713.80 million. Your Company recorded Earnings before Interest, Tax and Depreciation & Amortization and Exceptional Items (EBITDA) of Rs 24,057.30 million in FY 15-16 as against Rs (1,324.35) million for the corresponding previous period. The turnaround is attributable to:Consistent uninterrupted operation of the plant at average 94% capacity utilization during the year as against seven months shutdown during the previous year and sub optimal capacity utilization during the remaining five months; Polymer spread improved to $ 731 / MT in 2015-16 as against $ 717 / MT in 2014-15 Low Naphtha (feed stock)  Price (MOPAG) of $ 420/MT in 2015-16 as against$716/MT in 2014-15 with corresponding average Crude price of $ 48 / bbl & $ 86/bbl in 2015-16 and 2014-15 respectively; Lower fuel cost for energy generation due to (i) better efficiency at high operating rate of the plant and (ii) sharp fall in Crude & its derivative;

For FY2015-16, your Company’s PBT for 15-16 stood at Rs.15,127.41 million. (vis-à-vis Rs 4,985.84 million for the previous year). This is attributable to increased EBITDA as mentioned above and lower depreciation charge for the financial year 2015-2016 amounting to Rs 1,397.56 million as against Rs 2,435.43 million recorded in the previous year is due to sale of NCU business undertaking to BCCL.

-      Finance cost during 2015-2016 has been significantly lower than that of the previous year mainly due to the effect of restructuring of term loans as contemplated by the Rupee Term Loan Financing Agreement and also transfer of loan balances of Rs 8,750 million to BCCL as part of sale of business undertaking.

-      Exceptional Item of Rs 2,400 million represent amount payable to lenders for exercising the option of exiting from CDR package.

DIVIDEND

The Directors are not recommending any dividend for the year since the Company does not have free reserves statutorily required for declaration of dividend.

Financial / Liquidity Position of the Company

We are pleased to inform you that with the conviction and support of all stake holders including Government bodies coupled with favourable macro-economic factors, your Company has scaled new heights and dimensions in its performance in the year under review across all directions and parameters.

Your company has exhibited a substantial increase in the Turnover with over 250% jump in the volume of polymer sales as compared to the previous financial year, when it was shutdown from July 2014 for seven months. Backed by uninterrupted plant operations and conducive market condition, HPL achieved highest ever bottom-line with a PAT of Rs.1,308 Cr. This has resulted in a substantial improvement in the liquidity and cash position of the company.

Your company has also successfully implemented the Refinancing cum Additional Funding Package formulated for the revival of the company and all the stipulations of lenders and RBI have been met successfully to ensure that the company does not suffer for the want of liquidity and working capital facilities.

The acquisition of majority stake in the Company by the Chatterjee Group paved the way for a new growth story for HPL.

The resolution of the DGFT issue by extension of time for fulfillment of pending Export Obligations (EO) by DGFT has also been a great respite for the Company. The approval of the DGFT however, required the Company to furnish a Bank Guarantee for  Rs.3,171 Cr. which was duly provided to the authorities within March 2016 for recommencement of exports under Advance License scheme.

On the other hand the pending unutilized portion of West Bengal Incentive Schemes was also revived by the Government in terms of the promoters’ bilateral arrangements with effect from January 2016. This will help the Company recover its unutilized (substantial) portion of the incentive which could not be recovered in full in past years. This has also led to increased focus on further improvement and development of West Bengal market and downstream industries, thus allowing further employment opportunities and growth for the state and the surrounding areas.

This reemergence of the Company as a growth driver for the East will strengthen the base and help HPL grow in a long term sustainable manner and in turn will create an impetus for HPL to strive for further improvement of margin by way of synergy and integration projects, various cost optimization processes and possible business restructuring, one such project being in house manufacture of Butene-1, one of the raw materials used by HPL. Besides meeting HPL’s own requirements through this project, HPL will be able to enhance its top/bottom line by selling the surplus volume of Butene-1 and MTBE as value-added products.

Furthermore, HPL in order to unlock its intrinsic value has initiated a business restructuring scheme in terms of the Companies Act wherein with the merger of HPL’s business/entities, the true net worth of the conglomerate comprising its tangible and intangible assets will get reflected. Needless to mention that with successful exit from CDR, and moving forward with self confidence. HPL is looking into various options and tools to optimize its overall debt and associate cost, which will surely bring fruitful results in the long run for the benefit of all the stakeholders.

Risk Management Policy

HPL has adopted two Policies, namely, Commodity Risk management Policy and Foreign Exchange Risk Management Policy as approved by HPL Board. Currently HPL is following the Foreign Exchange Risk Management Policy for day to day functioning and decision making. Risks related to various Business Functions are being mitigated through adherence to those SOPs and by taking precautionary measures to arrest the business risks. Major risks identified by the Business Functions are systematically addressed through mitigation actions on a continuous basis. The all-pervasive principle that underlines every activity in HPL, from cost minimization to revenue maximization, is that risks must be mitigated to the maximum possible extent. An effort to document this policy is underway

Internal Financial Controls and their Adequacy

HPL’s Internal Financial Controls are commensurate with its size and nature of its operations. The Company’s Internal Financial Controls are in line with the requirements of Companies Act’2013.

HPL is having a proper and adequate system of Internal Controls to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use, executing transactions with proper authorizations and ensuring compliance with laid down policies.

HPL is having a detailed Delegation of Authority (DOA) with authority limits for approving different expenditures, both capital and revenue, as well as product pricing to earn revenue. All the business

transactions are governed by this DOA. Strong internal financial controls haven been established across the organization through adherence to this DOA.

HPL has laid down Standard Operating Procedures and Policies for different business activities like Procurement, Marketing, Finance etc. Activities are carried out as per these SOPs and Policies. Compliance with these laid down policies is ensured through the Internal Audit Functions. These Operating Procedures and Policies are reviewed periodically to cater to the requirements of prevalent business practices of the time.

The Company is also having a laid down process of preparing and reviewing annual and long term business plans. Preparation of annual business plan (Budget) is a detailed and rigorous process where all the physical and financial parameters become the benchmark activities of respective Business Processes. Actual performance is always reviewed against the approved Budget on monthly basis. Variances are analyzed with minute details and corrective actions are initiated to arrest any leakage.    

HPL uses SAP, a state of the art enterprise resource planning (ERP) system to record data for any kind of transactions from procurement, productions to sales with corresponding accounting entries. SAP has put a huge amount of checks and balance across the organization. Haldia Plant, Corporate Office, ARDC Office, Regional Offices and even Customers are connected through this ERP System. Exchange of information and flow of data are all integrated across India. HPL has continued its efforts to align all its processes and controls with global best practices and to reach them to the ultimate Customers.

HPL has a strong Internal Audit Department. Internal Audit Work Plans are framed in consultation with the Management and the Audit Committee. Internal Audit activities are oriented towards the review of internal financial controls and related risks. The Audit Committee reviews the reports submitted by the Internal Audit Department. Suggestions for improvements are considered and corrective actions are followed up for implementation. Many a time Audit Committee assigns special tasks to the Internal Audit Department to ensure checks and balances. Audit Committee also meets the Statutory Auditors to ascertain, inter alia, their views on the adequacy of the internal control systems.

BUSINESS ENVIRONMENT IN FY 15-16

The petrochemical industry witnessed healthy product spreads despite volatility in crude and naphtha prices during the year.

Brent crude prices remained volatile during the year and touched a peak of 66.6 $/bbl in May-15 and bottomed out to 26 $/bbl in Jan-16. Naphtha prices also tracked crude prices and touched a peak of 559 $/T in May-15 and a low of 259 $/T in Feb-16. While there have been lower drilling activities in US for shale oil, the output remained fairly large and consistent. There has been increased supply from Iran after the restrictions by US and Europe were withdrawn after the nuclear deal. Global oil supplies were estimated to be ~95 mb/d in 2015, whereas, demand was estimated to increase by 1.54 mb/d yoy to 92.98 mb/d in 2015. Excess supplies continued to keep crude prices softer and benign to naphtha based petrochemical producers helping them regain their competitiveness. The trend is expected to continue for next two years till crude demand picks up, while, supplies decline due to lower drilling activities.

Polymer –Naphtha Spreads

In petrochemical market, there have been diverging trends for PE and PP. Due to huge additions of Propylene capacity based on Propane Dehydrogenation Technology in China, propylene prices corrected more vis-à-vis ethylene. The overall PP – Naphtha spreads in 2015-16 also declined by 5% wrt to 2014-15. In PE, the new capacity additions were estimated to be rather low vis-à-vis increase in global demand. Several coal based plants were delayed from their schedule. Moreover, there has been a long shutdown of Shell Singapore and Petrorabigh, Saudi Arabia which also led to tightening of the market. HDPE and LLDPE spreads over naphtha increased by 6% and 5% respectively.

The competitiveness of naphtha based producers in SEA also improved significantly in last 2 years in low crude oil price scenario. The significant cost advantage of Methanol/Coal based facilities in China over Naphtha based facilities during high crude price environment has been erased in the current price environment. Ethylene cost curve for all feedstock have flattened significantly leading to increased competition amongst the different producers. The coal/methanol based capacities in China and small naphtha based capacities in Europe and NEA are amongst the highest cost producers to determine the polymer prices. Naphtha based facilities in SEA are enjoying healthy product margins and are operating at high run rates.

In domestic market, there has not been any incremental capacity addition in 2015-16 for polymers. PE and PP demand were strong and grew by 13% and 18-19%% respectively leading to smooth placement of products produced by domestic producers. In 2016-17, domestic production capacity is expected to increase after commissioning and stabilization of GAIL, BCPL and OPAL plants, which may lead to increased competition and may cap the bullishness of prices in domestic market.

While polymer spreads remained strong, there has not been any improvement in chemical spreads except MS. Due to strong demand, MS spread over naphtha in 2015-16 remained healthy at 87 $/T compared to 66 $/T in 2014-15. There has been marginal improvement in Butadiene spread also after the shutdown of Shell Singapore. Average Butadiene-Naphtha spread in 2015-16 were 504 $/T compared to 408 $/T in 2014-15. However, these spreads were still significantly lower compared to the peak spread of 2,267 $/T and the 5-year average spreads of 955 $/T due to subdued downstream demand. Benzene-Naphtha spreads in 2015-16 were also low compared to 2014-15 due to supply overhang and subdued derivative demand.

The industry environment is expected to remain favorable in 2016-17 too. Planned capacity additions are not huge. In China, most of the new capacity additions are expected to be based on coal/methanol which has lower competitiveness vis-à-vis naphtha.

MANUFACTURING PERFORMANCE

Operational Highlights

Plant operations were uninterrupted and stable during FY 15.16. Overall Capacity Utilization of the plant was 94%.

Production summary of NCU and polymers for last four years at a glance:

AU

All the associated plants operated with highest recovery of all value added products and also matched with the liquids produced from the mother plant NCU, operated by the HPL subsidiary, BCCL with desired quality and energy efficiency. On-stream efficiency of all the four units matched with mother plant.

High Density Polyethylene (HDPE)

Plant operation was stable and production achieved as per targets set in monthly production planning meetings (PPMs) considering demand outlook and plant availability. All types of HDPE grades like Film/Blow Molding/Pipe and Raffia were produced. Plant has achieved highest production since inception (Previous best was 266 KT in FY 10-11). Product-wise 66% series grade and 34% parallel grade have been produced in the plant.

Continuous optimization of process parameters resulted in best ever production of Prime product (97.47 %). Various optimizations in process and energy front have been implemented during this year to achieve minimum downtime.

Due to high throughput plant operation and continual optimization of the process, significant reduction in specific consumption of steam, power and  other utilities have been achieved.

In-spite of large number of grade transitions, optimization of grade transition procedure resulted slightly better specific consumption of catalyst than the design figures.

Successful modification of Mother liquor vessel vent line carried out by changing its rerouting in both Trains which improves Dryer performance as well as Process run length.

Significant savings in terms of Energy have been achieved by implementing modification in the reflux feed of Low polymer distillation column. This also helps to improve process operation.

Improvement projects related to Reactor cooling system, Centrifuge, Capacity augmentation of Extruder to achieve sustainable production consistently have been taken. Low cost solution to be implemented after getting recommendation from Technology owner Mitsui and respective equipment vendor like Andritz, JSW etc.

Linear Low Density Polyethylene (LLDPE)

Plant operation was stable during the year. In this year plant has achieved highest production since inception (Previous best was 313.7 kT in FY 10-11). Average Plant throughput was @ 41.1 TPH. Continuous optimization of process parameters resulted in best ever production of Prime products (97.64% against previous best 97.19% in FY 2013-14). Various optimizations in process and energy front have been implemented during this year to achieve minimum downtime of 287 hrs against previous best of 341 hrs in FY 06-07.

Product-wise 47.7% LLDPE and 52.3% HDPE has been produced in this plant having Swing capability. Due to high throughput plant operation and continual optimization of the process, significant reduction in specific consumption of steam, power and other utilities have been achieved. In-spite of large number of grade transitions, optimization of grade transition procedure resulted slightly better specific consumption of catalyst than the design figures.

A scheme suggested by technology supplier M/s LyondellBasell will be implemented during Apr’17 turnaround to enhance throughput of 1st Gas Phase Reactor.Extruder supplier JSW is working on capacity expansion to debottleneck Extruder capacity in 1 MI HDPE grades (HD T9& HD T10)

Polypropylene (PP)

PP plant operation was stable and plant operated at high load in FY 15-16. Capacity utilization achieved 103%.  All types of PP Homo polymer and Copolymer grades were produced as per business plan and with maintaining product quality. Out of total PP grades production, 75% of PP Homo polymers and 25% PP Co Polymer grade production achieved.  Prime grades production achieved 98.5%.

New Grades developed in PP product family were PPRCP grade M212S - high clarity product and PPICP nucleated grade with better mechanical property. Both grades were well accepted in marketplace.

Development of alternate anti bloc agent in PP film grade (Halene P F110) and   improved nucleating agent used in PP Thermoforming grade (Halene P T103) - a few trials conducted and products were established. It helped   to increase additive vendor base and cost reduction.

Energy consumption - significant   improvement achieved in Thermal and Electrical Energy Index in FY 15-16. Thermal energy index achieved 0.162 mKcal/MT and Electrical Energy Index 288 KWh/MT.

Small improvement projects initiated to improve equipment reliability as well as to achieve operational benefits.

IOP

RO-1 is plant running continuously at full capacity. It has resulted in lower usage of sweet water from WestPond and providing better flexibility during summer months for DM plant operation. C4 Raffinate sphere B, Hydrogen bullet A & B statutory inspection completed.

PROCUREMENT PERFORMANCE

In FY 15-16 HPL purchased a total of 2,137 thousand tonnes of feed naphtha from import and domestic sources. Out of this a total of 842 thousand tonnes (39%) was purchased on term basis from Middle East as well as Domestic National Oil companies and remaining 1,295 thousand tonnes (61%) were covered through spot purchase. Import to Domestic ratio was 76:24.

FY 15-16 saw substantial effort to get back HPL’s naphtha Term and Spot vendors after a prolonged period of low throughput operation and plant shut down. Quick revival of supplier base helped   HPL purchased historically highest annual volume of naphtha since inception to support plant operating at 100% of capacity. During this period Term contracts with IOC- Haldia, HPCL, Abu Dhabi National Oil Company (ADNOC) could be reinstated, which provided supply stability and reduce dependence on traders to some extent.

Market Movements 2015-16

Crude and naphtha market continued its falling trend during the better part of 2015- 2016.

Dated Brent began the year at USD 56 per bbl and remained for a short period around USD 67 per bbl peeking in mid May’15. Thereafter owing primarily to global oversupply amid US shale boom and OPEC’s refusal to cut output coupled with concerns about global supply glut with Iran’s return to the market after lifting of international sanction, crude prices moved down and touched its lowers level (USD 26 per bbl) in Jan’16. 

However towards the year end, crude prices revived to USD 40 a bbl on speculation of oil production cut through collaboration between Russia & OPEC and falling U.S oil output, with Shale gas exploration being hit by low oil prices.

MOPAG (Mean of Platts Arab Gulf)– Naphtha also followed the crude price trend. Beginning the year at $470/MT, the first quarter of the year between April-June, 2015 saw market rising mainly due to strong gasoline demand and MOPAG touched peak $559/MT. However ample supply of arbitrage volume from West, lower demand on poor economic growth in Asia and cracker maintenance season during second quarter contributed in market softening with MOPAG revolving around USD 400 PMT. In the third quarter, with fall in crude, Naphtha price further plummeted to a 12 years’ low of USD 259 PMT in mid Feb’16.  Although the year-end saw some improvement in prices following crude but improved availability, cracker shutdown and falling LPG prices still kept MOPAG low around USD 350 PMT.

Market Outlook 2016-2017

Market analyst IHS(previously Purvin and Gertz) is  projecting that Brent Crude price for 2016 – 2017 would remain near USD 50 per barrel and Naphtha MOPAG at  USD  418 per tonne against Brent Crude at USD 47 per barrel and MOPAG of USD 420 per tonne in 2015- 2016.

Opportunities

Introduction of Modvatable GST in place of CST for out of state domestic naphtha purchase, puts forward the opportunity of cost effective purchase from Domestic refineries. This could substantially reduce the long voyage time for naphtha cargos thereby helping in better inventory management.

Improvement in cash flow and increased presence in the International market , provide scope to HPL to revive its term Supply relationship with Middle Eastern National oil Companies as well as Global Oil Majors and traders. With no constraint regarding availability of finance, development of new supply source and flexibility in naphtha sourcing provides future areas of supply stability and cost optimization.

High throughput operation has provided Logistics cost reduction opportunity using COA and/ or Time Charter route, provided the operation remains stable. With an experience of over 15 years in naphtha buying, HPL has been able to develop a strong base in International and Domestic market which could be leveraged for additional profit earning through a full-fledged Trading Desk.

Threat

Re-imposition of Customs duty on HPL: Custom’s duty on Naphtha has been re imposed in 2016 Budget. As a result, currently HPL is bearing customs duty of 5% on Import naphtha, which along with Non- Modvatable Cess equates to cost of USD 22 PMT app. thereby raising Naphtha cost. , the introduction of GST and increase in domestic purchase would help in reducing this negative impact to some extent.

Volatility in Naphtha International prices: Naphtha market saw a high degree of volatility in 2015- 2016, particularly during sharp market fall.As HPL’s naphtha price is based on price around loading date, any fall in price thereafter results in higher cost of naphtha in HPL’s tanks vis a vis market. Such market volatility threatens erosion of margin as polymer prices too closely follow the naphtha falling trend.  Improvement in HPL’s financials also gives HPL the opportunity to develop and execute a price hedging strategy to reduce the effect of price volatility.

Industry Structure and Developments

The domestic Polyolefin Industry consists of the following manufacturers - Haldia Petrochemicals Ltd. (HPL), Indian Oil Corporation (IOC), Reliance Industries Ltd. (RIL), Gas Authority of India Ltd. (GAIL), HPCL-Mittal Energy Ltd. (HMEL), MRPL and Brahmaputra Cracker &Polymer Ltd. (BCPL) with RIL being the largest manufacturer amongst the domestic suppliers.

The commencement of production of BCPL and GAIL PATA II is expected to affect HPL to some extent in the preferred territories of East and North India and exert pressure on domestic markets once their production stabilizes.IOC has already commissioned its 15 mMTPA refinery in Paradeep, Orissa and is expected to bring online its PP capacity in 2017.

Proposed capacity additions in near future are: 

Source:CPMA Country Report APIC 2016

Industry Performance 2015-16

Domestic demand and industry growth rate estimated by CPMA are:   

Product margins fell in third quarter of the year on falling polymer prices. Average spread remained healthy with margins pricking up by the end of the fourth quarter.

Polypropylene spread levels were down due to lower price levels across Asia, primarily on abundant supply from CTO/MTO projects as well as Propane Dehydrogenation Plants in China.

Polyolefin Prices & Spread over Naphtha (2015-16)

Source: Platts

PE & PP Spreads over Naphtha (2015-16)

Performance in FY 15-16

·      In 2015-16, your company sold ~ 980 KT polyolefins, the highest annual volume in its history:

HPL Polymer Sales Performance

         In KT

·      HPL exported about 83 KT of Polymer in FY 2015-16 to 22 countries. Major destinations were China, Vietnam and Turkey.

·      Export volume, at 83 KT in 2015-16 was nearly 10 times that (8) KT in 2014-15.

·      Even with such higher export volume in 2015-16, HPL succeeded in obtaining prices higher than the prevailing international price benchmark of Platts.

Opportunities

Naphtha-Polyolefin (PO) spread level remained healthy in 2015-16. Average spread level was approximately US$ 737/MT for the year. PE exhibited better spread figures than PP, with average PE spread at ~ US$ 778/MT and PP at US$ 655/MT.

Estimated average growth forecast of more than 18% in PP, 11% in HDPE and 16% in LLDPE by CPMA, provides tremendous opportunities for Polymer manufacturers in the country. Various infrastructure and irrigation projects in states like Telengana indicate significant scope of increased polymer consumption.
Threats

In addition to the increased supply from the newly commissioned domestic sources, import continues to remain a threat. Ever increasing import volumes from countries like Singapore, South Korea and the Middle East, continue to flood the domestic market. Huge PP capacity expansion through CTO/ MTO plants in China is already affecting the regional price sentiment.

With lifting of sanctions on Iran, the domestic polymer market may witness steady and heavy flow of material from Iran apart from other Middle Eastern countries.

Such big volumes of import supported by lengthy credit periods can trigger a price war creating a downward pressure on the import parity.
Outlook

Crude Oil has shown a steady rise in prices from beginning of this year. Crude price rose from below US$30/bbl levels in Mid January 2016 to ~US$ 50/bbl in June. The World Bank has raised the 2016 forecast of Crude Oil to US$41 per barrel in its Q2 2016 Commodity Markets Outlook, from an earlier forecast of US$ 37/bbl.

The biggest market for Polymers, China is slowly moving towards self sufficiency in commodity polymers. China’s imports of polymers particularly in PP is falling due to local coal based production and propane dehydrogenation based plants. As OECD has mentioned in their Economic Outlook, June 2016, India remains one of the fastest growing countries in the world and economic growth is projected to remain strong at ~7.5%.

The Indian polymer market which accounts for approximately 12% of Asian demand is expected to maintain a steady growth rate for 2016-17. In its APIC 2016 country paper, CPMA expects a robust growth in the next two years and has estimated that LLDPE will grow by 15%, HDPE by 8% and PP by 12% for 2016-17.

CPMA also expects a reduction in import in PP and PE in 2016-17 from previous levels. Overall, demand growth may be balanced by supply pressures both from domestic and indigenous, which may lead to slightly reduced profitability as compared to last year.

However, the Company is taking the necessary steps to consolidate its market share in East and North, where the netbacks are better and maintain

Business Environment in FY 15 - 16

Basic Chemical Prices:

Basic chemical product basket consists of four products namely Benzene, Butadiene, C4Raffinate and Cyclopentane.

Benzene prices (FOB SEA & FOB Korea) tracked crude and Naphtha prices closely and registered steep drop during Q2. The excellent spread with Naphtha witnessed during FY2013-14 (~ $ 400/MT) and FY 2014-15 (~ $ 340/MT) has reduced to ~ $ 240/MT level during the current year due to slowdown of downstream Styrene monomer and Phenol sectors along with seasonal swings.

Butadiene prices (CFR SEA), which has crashed during end FY 2014-15 strengthened during Q1 but remained subdued for most part of FY 2015-16 failing to convincingly break the ceiling of $ 1000/MT, barring the occasional price spike due to shortages on account of unplanned Plant outage. Due to increased supply of Natural Rubber and the depressed automobile market, the demand for synthetic rubber had been subdued throughout the year resisting Butadiene price increase.

Though the average Butadiene price in FY 15-16 (~ $ 930/MT) decreased by 16 % over FY 14-15 levels (~ $ 1120/MT), the average spread of Butadiene over Naphtha has improved considerably to ~ $ 510/MT from FY 2014-15 average spread of ~ $ 400/MT due to lower availability of Butadiene on account of increased Gas based cracking along with steep fall in Naphtha prices from Sept’14 onwards.

C4 Raffinate prices, being linked to Naphtha price (MOPAG) provided steady margin from sale of 21.7 KT during FY 15-16. This stream catering to PIB manufacturers as feedstock is a better value added option, compared to conventional LPG sale for fuel application. However, with influx of cheaper Poly Isobutylene from China other two domestic producers have temporarily shut down operations during 2014-15.

Cyclopentane with limited volume has pricing linked to Naphtha MOPAG. Your Company continued its export focus to EU and SEA, and could manage ~ 1.7 KT sales, lower by 15% than the previous year due to strong competition from Local European and North East Asian (NEA) producers.

Energy Prices The Company’s energy product basket consists of Liquefied Petroleum Gas (LPG), Hydrogenated Pyrolysis Gasoline (Pygas), Motor Spirit (MS) and Carbon Black Feed Stock (CBFS) for fuel application.

LPG prices (SACP Butane) movement saw starting the year at $ 470/MT in Apr’15 and finishing at $ 320/MT in Mar’16. Average price in FY15-16 ($ 405/MT) decreased by $286/MT over FY14-15 ($ 690/MT). LPG prices touched a low of $ 315/MT in Feb’16 following fall in crude and Naphtha prices. However, your Company was not affected as captive LPG had been recycled to Naphtha Cracker as feed instead of sale to support plant operating rate. Due to restrictions in LPG sale as per MoPNG, GOI directive (Control order 2000), LPG sale to commercial sector was not undertaken in FY 15-16 barring one solitary sale of ~18 MT in Apr’15.

PyGas prices were linked to Naphtha MOPAG for export and domestic sale. With an increase in Pygas demand due to pull from the Gasoline pool, your Company entered into annual term sale agreement with a domestic refinery and supplies resumed from June’15 after a hiatus of 3 years. During FY 15-16, domestic sale of 30.8 KT Pygas was achieved at an average realization of MOPAG Naphtha plus $163/MT and 109 KT was exported at average realization of MOPAG Naphtha plus $ 110/MT.

MS prices (MOPS MOGAS 92) followed Crude Oil prices and more or less remained steady. Average prices in FY15-16 ($ 62/bbl) decreased by 34% over FY14-15 ($ 95/bbl) in tandem with fall in crude prices. However steady fall of Naphtha prices ensured that spread between MOPS MOGAS 92 with MOPAG Naphtha increased from USD 65/MT in FY 14-15 to USD 86/MT in FY 15-16.

CBFS was mostly consumed internally as fuel to power plant replacing Fuel Grade Naphtha as it fetches the highest realization as compared to sale. Inconsistent & reduced availability due to fluctuating plant load and stoppage of plant resulted in your Company gradually withdrawing the product from market ending with miniscule sale of 1.2 KT in FY 14-15. However, with increased product availability in FY 15- 16, your Company could regain the market share in West Bengal in Carbon Black sector as well as energy sector in North thereby selling 23.4 KT CBFS in domestic market after maximizing internal consumption of CBFS in CPP. As with other energy linked prices, CBFS marker MOPS HSFO 180 CST 2% followed crude prices.

Performance

Your Company registered an increase of 397% in chemicals sales volume to 507 KT in FY15-16 as compared to 102 KT in FY14-15 mainly due to higher Plant operating rate increasing product availability for sale.

Chemical sales accounted for 34% of the overall sales volume and contributed 19% to overall GSV (Gross Sales Value) of your Company in FY 15-16.

Benzene sales volume reported a increase of 375% to 152 KT in FY15-16 as compared to 32 KT in FY14-15.

Butadiene sales volume also increased by 260% to 83 KT in FY15-16 from 23 KT in FY14-15.

Price fall in Chemicals was caused by steep slide in energy price and weak demand from downstream chemicals due to uncertainty in the overall world economy.

Outlook

With the beginning of this financial year (2016-17), Crude and Naphtha prices have slowly begun to rise due to geopolitical flare-up in different regions in Middle East. OPEC’s decision to maintain crude output in the face of rising shale oil production and fall in crude price seems to have had some desired effect in restricting new drilling of shale oil. Though drawdown in US crude inventory has bolstered crude prices, geopolitical developments, particularly total removal of economic sanctions on Iran, will determine the direction and limit to crude prices in the short to medium term. Overall Chemical pool - Naphtha spread is expected to remain positive supplementing the positive margins of Polymer.

Benzene

Benzene is a co-product from steam cracking or aromatic plants. New investments in aromatics capacities will be limited to growing Asian and Middle East markets as stagnant Western markets are not witnessing massive expansions in upstream refineries.

European and Asian petrochemical markets are expected to witness a drop in pygas production due to use of lighter feedstocks. Pygas and toluene consumption in gasoline blending is increasing; thereby reducing their availability for benzene extraction. Lack of new benzene supply in Europe and US continues to increase their benzene trade deficits and Benzene trade to flow from East of Suez to West of Suez.

Benzene price collapsed mainly due to sharp drop of oil and naphtha prices and margin threats to two largest benzene derivatives – Styrene Monomer (SM) and phenol [accounting for close to 70% of total benzene demand]. Large volume moved from Asia to US acting as a sink. Benzene-Naphtha spread has been gradually narrowing from USD 400 per MT in 2013-14 to USD 340/MT in FY 2014-15 to USD 240 per MT in FY 15-16.

Asia's benzene prices are expected to remain under pressure in the first half of 2016 as a result of excessive supply because of new capacities in the region. This was partly attributed to the lower-priced alternative coal-based benzene in the Chinese domestic market, adding on to the already abundant supplies of crude-based benzene. With higher feedstock Ethylene prices impacting SM margins thereby reducing operating rates, which in turn will reduce Benzene demand keeping prices in check. However, turnaround of crackers and recovering crude is expected to improve sentiments in 2nd half of 2016.

Butadiene

Butadiene prices collapsed due to the plunge in the crude and naphtha prices and weak macroeconomic conditions. Weak demand from downstream synthetic rubber sector owing to oversupply in natural rubber coupled with bearish growth forecasts, kept a lid on key Asian demand and pricing.

North East Asia (NEA) being short of butadiene (BD) requires imports to balance demand. Even after high cracker rates, the net import to NEA sets the pace for the global BD prices.  China accounts for 28% of global BD consumption thereby recovery of Butadiene price is dependent on Chinese business scenario. Huge downstream capacity additions in China from 2011 based on the exponential double digit growth of car sales are also a factor for suppressed BD price as the current projections indicate 4 – 5 % Y-O-Y growth of car sales in China, thereby limiting the demand for synthetic rubber. 13% reduction in tyre production and 6.5% reduction in tyre exports by China due to anti-dumping duties by US have also reduced BD consumption of China.

The overall butadiene demand is estimated to be lower than tire demand growth rate because of rise in natural rubber production. Natural rubber production is expected to be increasing till 2015, which will keep putting pressure on BD/Synthetic rubber price. On the other hand, supply of butadiene is expected to be plenty as higher spread between Naphtha and polymers will ensure high operating rate of the crackers. As a result, the spread between Naphtha and butadiene prices is expected to remain narrow during 2016 (in the range of $ 250/MT to $ 400/MT) and earlier days of large spreads of $1100/MT during FY12-13 are not expected in next couple of years.

Considering planned maintenance outage of nearly 4.6% of Asian Cracker capacity during Q2 ’16, there is a possibility of BD price improvement to some extent during Q2’16.

Energy Products

Prices of Energy products like LPG, PyGas, MS & CBFS will mostly track Naphtha price. CBFS internal usage as CPP fuel will be continued as value addition initiative replacing Fuel Grade Naphtha fetching highest realization as compared to sale. With higher plant throughput, maximization of Motor Spirit production is being pursued by recycling of the available C5 & C6 Raffinate streams.  The U.S. oil boom was driven by a combination of horizontal
drilling and hydraulic fracturing, or fracking, of shale formations including the Eagle Ford and Permian in Texas and the Bakken in North Dakota. That boosted the country’s crude production to 9.6 million barrels a day last year, the highest level in more than three decades, from as low as 3.8 million barrels in September 2008, EIA data show. The jump in output has meant the nation’s need for crude from overseas has dropped, while the quality mismatch of the gasoline produced has boosted dependence on foreign additives. Demand for blending components could rise further next year as new regulations requiring the reduction of sulfur content in fuels are implemented in the U.S. The process used by refiners to remove the impurity has the effect of also reducing octane levels, potentially boosting the need for additives. Demand for blending components could rise further next year

Further with mandate of total introduction of  BS IV grade fuel throughout India from April’2017, demand for BS IV grade MS and Pygas for upgradation of lower specification MS is likely to remain.

Cyclopentane domestic sale is expected to rise with more domestic refrigerator manufacturers switching from import to HPL’s product as they have adopted Cyclopentane complying with environmental mandate to replace ozone depleting HCFCs as a blowing agent for Polyurethane foam. However export of Cyclopentane to Europe is expected to face stiff competition in coming days, with aggressive pricing from European and Korean producers.

The focus of Product Development and Technical Support (PDTS) group was in providing customer support to resolve technical issue and help regain market share & customer loyalty, reduce compensation claims from customer complaints, evaluation of new and alternative additives for wider procurement options and benchmarking with competitor products to remain competitive in terms of product quality.   

The PDTS group was actively engaged in the development of new grade recipes, re-introduction of grades that were discontinued due to low production volumes in the past years, modification of existing products to meet the changing demands of the Indian plastics processors and end- use industries.

The product development activities which were initiated and mentioned in last year’s report were also carried forward and some were implemented in regular production.

The work related to development of new PPICP injection molding grade for the high stiffness paint pail market initiated last year, was implemented as a commercial grade that has been well established in the market and has gained market share. The clarified PPRCP market from which HPL had exited is being regained with a new grade designed to match and exceed the competitor product performance.

The BOPP grade design has been finalized by PDTS in coordination with Manufacturing and Technology for possible re-introduction in a market that has changed significantly since HPL has exited from the same. The productivity and line speeds of BOPP Film machines in the industry today require a cleaner and higher stretchable grade.

During the year, PDTS group worked closely with Manufacturing, Technology and Quality Team to resolve product quality issues in some high volume PE & PP grades like PPTQ Film and HDPE Pipes.

224 Customer complaints were attended by PDTS representatives from ER and NR sales office as well as by the PDTS personnel in Kolkata to keep compensation cases (12 Nos) at minimum levels.

Key achievements during the year under review:

1.    Optimization of additive recipe & Product Modifications were carried out to remain technically competitive.                 A total of 12 product (PE & PP) development activities were done in this FY.

2.    Development of alternative and new sources of polymer additives has widened the vendor base for sourcing.                                                                                        

3.    13 New / alternative additives were and evaluated. One has been implemented for         regular use and six have been taken for plant trials.

4.    PDTS along with Regional Technical Services, engaged with customers in a continuous manner to track the performance feedback of competitor products. This provided insight into competitor product performances and trends in the market which helped in re-establishment of HPL grades with customers in the current FY.

5.    455 Customers were provided technical support for grade selection, on-site machine trialsto optimize processing of HPL grades, technical inputs and various regulatory compliance support.                                                                           

              Special Focus was given on providing Technical Support to customers in the Eastern Region to achieve and retain high market share.

6.    Majority of customer complaints were redressed to customer’s satisfaction and retain customer loyalty. Total customer compensation paid due to Quality issues was Rs 1.65 lakhs out of which Rs 1.29 lakhs was freight cost for return of material.

7.    The PDTS group has worked collaboratively with Technology and Manufacturing teams to identify alternative sources of catalysts for the polymer plants, resolve process related issues in additive dosage (e.g peroxide master-batch from Akzo & Clarifying agent from Milliken) and identify options for elimination of contamination (Angel Hairs & Fines) during conveying and bagging of polymers.

8.    Technical support was also provided to:

       Business Development group in Relief Film vendors’ capacity assessment & inspection of relief tarpaulins for supplies to GoWB

       Materials Department in developing vendor for HPL’s polymer packaging bags & in identification & technical qualification of new sources of additives & chemicals

       Technology Department in assessing options in Catalyst & Chemicals and Technical Service Agreement with Licensors

       Strategic Business Development with Technical Inputs in BOPP & Geo Textiles

9.    An extensive benchmarking exercise was undertaken to test & analyze different grades of polyethylene and polypropylene products that were being used by customers in different application segments.                                                                                                2606 tests, involving analysis of over 13000 specimens, were conducted on HPL grades & competitive products in the PDTS laboratory at ARDC.                                                           

The data generated along with the customers’ shared experiences have been shared with the plant functions and improvement projects undertaken to further improve HPL’s grades. The information has been disseminated among the marketing staffs in the Head Office & the Regional Offices highlighting the core strengths of HPL products.

Industry Structure and Developments

The main focus of HPL’s Business Development Group has been expansion of consumption base of polymer products in Eastern India with special focus on West Bengal.

In the last ten years, the Business Development Group has assisted and facilitated setting up of large number of industrial units which consume products manufactured by HPL and sizeable production capacities have been added, with collateral benefits of generating direct and indirect employment for the State.

As HPL had gone through very difficult times in the last four years culminating in complete closure and non-supplies from July, 2014 to January, 2015, the Business Development Group activities had also been restricted due to constraints both in terms of manpower as well as resources.

Also, in order to fill up the gaps created by large scale attrition in the last few years, the personnel in the Business Development Group had been redeployed elsewhere or had resigned.

In order to maximize returns on the available resources, a few key areas were focused upon.

Downstream Capacity Addition

356 new plastic processing machines were added in Eastern India by 196 units having a nameplate processing capacity of around 117 KT per annum.

The addition of processing capacities in West Bengal was 45 KT per annum through 189 new machines and in 77 units.

The largest capacity addition was in the extrusion sectors, comprising of HDPE / LLDPE films, liners as well as lamination, pipes which has been estimated at 25 KT per annum.

Trading of Processed Plastics

HPL supplied 13.43 lakh pieces of Fabricated Polyethylene Tarpaulins to the Directorate of Disaster Management, Government of West Bengal during the year.

These fabricated tarpaulins are distributed by the Government during natural calamities like floods / earthquakes etc. for providing temporary shelters to the people affected by such calamities.

The turnover from this activity was Rs.94.7 Crores during the year under review, and the Company earned a profit of Rs.17.8 Crores approximately.

Identification of New Focus Areas

The following areas were identified as focus areas of HPL’s developmental activities:

BOPP Films

BOPP Film is one of the highest growing finished products being manufactured in India.

With the increased focus on packaging of FMCG as well as food products, the usage of BOPP films has increased significantly over the last few years.

While the consumption of BOPP films in Eastern India is estimated to be above 2000 MT per month and growing at the rate of 7 to 8% per annum, there is no major BOPP film producer in Eastern India and entire requirement is met from supplies from Western and Northern India.

As HPL’s Polypropylene technology is capable of producing very good BOPP raw materials, the setting up of BOPP film unit in West Bengal (assuming that HPL gets the predominant market share in this unit) was identified as a growth area, which would  maximize HPL’s Polypropylene in West Bengal significantly.

In order to understand this business all the major machinery suppliers including Brückner GmbH were met and feedback / data / quotations were collected.  Large numbers of end user as well as processors using BOPP films as major inputs were also contacted.

Based on this, a pre-feasibility report has been prepared by the Business Development Group.

For the preparation of final report, a Consulting Firm would be appointed in order to prepare a detailed project report for the prospective entrepreneurs who are willing to invest in this project.

Geo-Synthetics

Geo-synthetics is an emerging polymer product having diverse applications in various fields such as road building, embankment, protection of land, canal lining etc.

However, the use of this product in West Bengal is limited and there are also no major processors for manufacture of this product.

In order to promote the usage of this product, HPL has taken a lead in order to propagate the adoption and usage of this product leading to mandating in the Government projects.

HPL has already made number of presentations to the various purchasers / opinion leaders and has made detailed presentation to the Department of Irrigation, Government of West Bengal.

HPL has also conducted, along with renowned professors from Civil Engineering Department, Jadavpur University, major reputed Western India based manufacturers of geo synthetics, a workshop for Senior Engineers of the Irrigation Department, which was very well attended.

Others

The other focus areas which have been identified for propagation and usage are the HDPE pipes, especially for water carrying systems and also products required for Agri Marketing Department, Government of West Bengal, like Vermipit for producing compost, etc.

HPL is also taking necessary steps for augmenting the manpower resources which is required for carrying on these activities in 2016-17.

Project Super-Max:

Your company has settled major pending claims and also paid the outstanding dues for service contracts. All efforts are being made for payment, disbursement of other outstanding dues to remaining contractors /material suppliers.

New Improvement Projects:

Your Company has conceptualized and is implementing various New Improvement Projects in order to maintain sustainable high throughput of the complex, value addition to get better return in the business process and also for improved reliability of the plant & processes

Butene-1

Butene-1 is a co-monomer majorly used in manufacturing of Linear Low Density Polyethylene (LLDPE). It can be manufactured from one of the intermediate product stream of HPL, C4 Raffinate, bulk of which is converted into LPG and recycled as feedstock in Naphtha Cracker Unit. Considering the good market demand of Butene-1, your company has decided to implement the Butene-1 project from C4 raffinate. The Project is due to start in the current financial year and expected to be completed in FY18-19.

Butene-1 project will help your company in reducing its import burden and reduce the vulnerability of production of LLDPE grades to short supply of Butene-1 in the international market. The major portion of the product Butene-1 will be utilized in-house as co-monomer of LLDPE plant, balance will be sold either in domestic or export market. The co-product MTBE will be partly used as blend in HPL’s Motor spirit business and balance will be sold in export market.

Your Company recognizes the efforts and contribution of all employees in re-commissioning the Plant and resuming all other business functions which has resulted in operational efficiency of the Plant reaching its highest level.

During difficult years when your Company went through partial Plant operations including seven months shutdown and also adverse market conditions, our Company maintained all regular payments to all segments of employees. However, certain HR initiatives for employees were postponed due to heavy financial loss incurred by your Company during those challenging years which were implemented in the year under consideration.

Human Resource (HR) Initiatives

Major HR initiatives for employees which were implemented are as follows:-  

·      Memorandum of Settlement (MOS) for Contractors’ workers at Haldia was signed on 29.02.2016 thereby increasing wage of  the Contract Employees after amicable understanding reached with the workmen, on their Charter of Demands.

·      Memorandum of Understanding (MoU) related to 100% neutralization of AICPI for the period from January 2011 to December 2014 for Non- Management Staff was signed on 17.03.2016.

·         Compensation Revision for Management Grade was last done in 2008. In order to bring parity with current industry salary level, M/s  Aon Hewitt Consulting was engaged by the Company to do a market survey on compensation and benefits for competitive industries. Based on their recommendation,  a phase wise compensation rationalization has been adopted and the first phase of compensation revision has been implemented.

·         Performance Linked Pay (PLP) for management grade for the years 2013-14 & 2014-15 were released.

·         HR Consultant M/s Gray Matters  was hired by your Company to provide assistance to HPL in implementing a robust Talent Management System and other HR interventions.

Recruitment

·         One of the major focus areas of HR remains Recruitment on a continuous basis to maintain human resource count as well skill set to support company operation and growth. During the year the Company has focused on hiring Management and non-management Trainees through campus interviews, lateral hires with industry experience and also recruiting back ex-employees who are coming back and rejoining expressing their confidence in the Company. Proactive Industrial Relations (IR) Management

·         The major challenge was to manage the high expectations of the direct employees and contractors’ workers in respect of the enhancement of salary / wages which were pending for sometime. However with timely HR intervention and support of concerned external authorities, the situation was kept under control and a congenial working atmosphere was maintained and desired level of productivity was achieved.As a proactive process of IR management, constant communication and discussion at individual levels and group levels were conducted to minimize discontent and maintain motivation and discipline at all levels.Training Programs

·         As a part of the Employee Development Programme, during the year employees were nominated for various training programmes /seminars within India and abroad to enhance their knowledge and to enable them to network with their related professionals in the  industry.

During the year, the provisions relating to CSR in the Companies Act, 2013 were not applicable to the Company. However, in line with the previous years, the Company took several measures in the area of welfare for the community/ Corporate Social Responsibility:

Your Company continued its focus on Health, Safety & Environment Management practices meeting international standards – ISO 14001:2004 & OHSAS 18001: 2007. Several initiatives were taken up and continued during the year:

HEALTH

Your company took several measures to provide preventive healthcare to all employees including contract workers and spread awareness amongst the society. To prevent occupational diseases in employees Periodic Medical Examinations (PME) for 580 numbers of own employees continued at Occupational Health Center. Exposure check-up with personal samplers for workers exposed to noise and dust were continued. A total of 19 noise studies and 11 dust studies and 25 tests for Volatile Organic Compounds (VOCs) were completed. 77 numbers of urinary phenol tests were done to measure exposure to benzene. All the kitchen staff underwent bi annual health checkup and have been vaccinated against typhoid to prevent spread of typhoid disease.

Hypertension control program continued among contract employees of HPL. Twenty two new cases were detected and treated regularly with medicines and monitoring,free of cost. Diabetic control program continued for contract employees of HPL. Twelve new cases were detected and treated regularly with medicine and monitoring at free of cost. Health check-up for workers exposed to Hazardous chemicals in plants continued. Awareness session on Heart Diseases and bye-pass surgery was organized for HPL employees as a part of Quality Month celebrations.

SAFETY

It was during the year under report (FY 2015-16) that your Company has achieved longest interval in days (1960 days as on 31.03.2016) without lost time injury (LTI), compared to previous such longest period of 426 days, in its history to date.

17,076 man-hours of HSEF training were imparted to HPL and Contractors employees. It was ensured that no person without safety training can take up any job inside plant. In order to promote awareness of confined space hazards as well as working at height, no one is allowed to enter into Confined Space and to work at height without Safety training in plant.

Behavior based safety training is being provided to both HPL & contractor employees to reduce accidents to zero. Safety training is being imparted to drivers transporting hazardous chemicals. Safety promotional activities like safety slogan, safety poster competition, safety quiz & safety crossword puzzle contest is organized for motivation of employees of both HPL and Contractors towards safety awareness.

Safety videos related to major accidents were shown to HPL employees of Work level II, Work Level III, Work Level IV and Work Level V during Central Safety Committee and Plant Management HSE committee meeting.

172 internal safety inspection / cross functional audits were done to identify hazards and take control measures to prevent incident & accidents.  Job Hazard Analysis / Critical Task Analysis are carried out for all critical and high risk jobs to prevent accidents.

Work zone monitoring (Noise, Illumination & VOC) were carried out by competent persons for all plants as per WBFR’1958.

Road Safety Week and National Safety Day / Week campaigns were celebrated in January, 2016 & March, 2016 respectively with a number of safety programmes and contests arranged for the employees working at HPL as well as at the “Nearby unit” to promote safety awareness. Prizes were also distributed to all winners & runners who participated in various promotional activities.

ENVIRONMENT:

Your company maintained 100 % compliance level in environmental parameters as per statutory requirements.

Your company has got renewed its ‘Authorisation for Management ’&‘ Handling of Hazardous Wastes’ for the next 5 years, i.e till 31.12.2020.

Your company has also got renewed its ‘Consent to Operate’ for next 3 years, i.e till 31.03.2019.

Your company installed and commissioned the Online Effluent Monitoring System in Wastewater Treatment Plant for TSS, COD & BOD. Real-time data of TSS, COD & BOD along with pH & Flow (previously existing) were sent to the server of Central Pollution Control Board (CPCB) at New Delhi; Technical evaluation was complete for the Online Emission Monitoring System. However, HPL appealed to WBPCB & CPCB to extend the last date of installation & commissioning of the system by two years, i.e. till 31.03.17 due to severe financial crisis & shutdown in the plant for about 7 months in 2014-15.

Your company established the system of online data transfer from Ambient Air Quality Monitoring Station (AAQMS), installed inside the plant at South Control Room, to the servers of CPCB at New Delhi and WBPCB at Kolkata.

Your company celebrated World Environment Day 2015 with a great deal lots of greening & promotional activities throughout the week/month viz.

·   Plantation inside & outside the plant including 5000 saplings in the Greenbelt

·   Distribution of fruit saplings to local school through Haldia Vigyan Parishad.

·   Arrangement of Seminar/Lecture by (a) Mr. C. S Pradeep Kumar, MD & CEO, Symbio Greentech Pvt. Ltd, EKTA Incubation Centre, West Bengal University of Technology on “Integrated Sustainable Environment Management through Bio-Engineering Techniques”& (b)  Prof. (Dr.) Arunabha Majumder, Emeritus Fellow, School of Water Resources Engineering, Jadavpur University on “Water Quality & Health Challenges: Supply of Drinkable Water”

·         Documentary Film Show (Revolution - A Rob Stewart Film) for the employees

·   Inter-DQT Environment Quiz for the employees by professional Quiz Master, Mr. Rajib Sanyal

·   Environmental Presentation & Environmental Quiz in Bhavan’s NSCBV School, Haldia for their students of Eco Club (Class VIII to X)

·   Sit & Draw competition for HPL Kids (Class I to X) at HREL on relevant Environmental topics

1)   Your company became 2nd Runner-up in Corporate Green Biz Quiz 2015, conducted by Indian Chamber of Commerce at Kolkata.

2)   Your company participated & won 3 First prizes and 1 Second prize in the Annual Flower Show 2016 conducted by IOCL, Haldia and 1 First prize in  Haldia Mela 2016, organized by Haldia Municipality.

3)   Environmental monitoring as well as monitoring of various process control parameters of WWTP, RO Plant & CT in plant as well as STP & Swimming Pool in HREL including Drinking Water  was done through M/s Scientific Research Laboratory, duly approved by Ministry of Environment, Forest & Climate Change (MoEFCC) as well as West Bengal Pollution Control Board (WBPCB).

FIRE:

Your Company observed the National Fire Services Day (14th April) with several shop floor fire safety training programs spread throughout the year and ensured compliance of fire safety (OISD) guidelines/procedures during all critical jobs in plants.

Your Company is maintaining most modern Fixed Fire Protection System and Appliances viz. Fire Tenders, DCP tender; Foam Nurser, with a Hydraulic Platform of 42 meter high, regularly honed for instant attack by well qualified and trained emergency management team.

Process plants people training being conducted for all units; thereby reducing fear of usage of extinguisher during real fire and handling emergency.

Emergency Management Control Room (EMCR) is manned by trained Fire Crew persons, wherein Fire & Gas Leak detection alarm system is monitored on 24 hour basis by trained Fire professionals, there by any untoward incident viz.gas leak, equipment failure which may cause for Fire; would possible to identify and preventive measures would possible to execute with shortest possible time.

Rehearsal for the Process plants Mock Drill & ON-Site Emergency Management Plan (ONSEMP) drill was organized six times per year successfully. All improvement scopes which came up during post drill discussion session were/are also being followed up and implemented.

Your Company is maintaining a Mutual Aid Agreement for emergency management with three major neighboring industries viz. M/S- IOCL- Haldia Refinery, MCPI and PHBPL.

Your Company’s major business functions were mapped and integrated in SAP Enterprise Resource Planning system and Lotus Note office automation application tool. The business need of the Company is continuously assessed and IT system is continuously innovated and updated to enable the business changes. The system and platform is continuously being used to enable faster and informed decision making process.  A high level of Information Security policy, system and awareness is being ensured to protect Information Assets in your Company.

The major enhancement in Information Systems during the financial year wasNew SAP Server migration from Old IBM P5 server system to latest IBM Power 8 Servers and SAN storage V7000 with Virtualization Technology. Operating System and Database are also upgraded to latest versions. New Back –up system IBM Tivoli and DR system with Oracle Data guard technology are also implemented.

The “Swatch Bharat cess“ levied by GOI needed to be included in Pricing Procedure as per statutory requirement& it has been implemented within the stipulated time.

The SAP configuration for BCCL, the newly formed subsidiary, has been implemented. New Employee Attendance Policy has been mapped in SAP and Lotus Notes.

Biometrics attendance system for contract employee is implemented.

HPL TOWNSHIP

Haldia Riverside Estates Ltd (HREL)  Township is a model residential township for the HPL. It is the township for the management staff (SG 9 & onwards) and members (SG 5 and above) and it is around 12 Km away from the plant at south. The township is situated beside the river Haldi and amidst lush green surroundings.  The township was set-up in the year 2000 and subsequently expanded in 2010.

The Township has the following features

LAND DETAILS

Total Area: 221.86 Acres

•       Area of  Lake: 46 Acres

•       Super built up area: 45 Acres

•       Graded open space: 55 Acres

•                                                                       Ungraded vacant land: 75.86 Acres

FACILITIES & SERVICES 

•       Recreation Club & Library

•       Swimming pool &Gymnasium

•       Restaurant and Bar

•       Canteen Facility

•       24 x 7 power supply

•       Civil /Electrical maintenance Services

•       Intercom & internet, Cable TVSecurity Services

•       24 x 7 drinking water supply

•       Door to door garbage collection

•       Guest House

•       Shopping Complex

•       Medical Centre and emergency

•       vehicle round the clock

•       Bus Service to Haldia township

ADDITIONAL ACCOMODATION UNDER HREL

HREL has 50 flats and 9 garages at Swati Housing Complex, Hatiberia, 2 Km away from HREL

•       Flat Type D of 32 nos. with covered area 1576 sq. ft of each unit

•       Flat Type C of 18 nos. with covered area 1307 sq. ft of each unit

•       Garage 9 nos. with covered area 150 sq. ft. of each. 

NEARBY FACILITIES

•     Nearest Railway Station Hatiberia : 2 Km

•     Nearest  Highway NH41                      : 8 Km

•     Bus stand                                                           : 3.5 Km

•     Main Market                                                        : 10 minutes drive

•     Educational institutions                       : within 3 Km

•     City center mall                                          : 7 Km

PRESENT REVENUE GENERATION  

•     Lake is under lease with aquaculture

•     Shopping complex under lease 

•     Lease with BSNL for their tower and installation 

BOARD OF DIRECTORS

HPL Board currently has 10Directors

HPL Board has recommended the appointments of two Directors, namely Mr Rudra Chatterjee and Mrs.Shanta Ghosh as Independent Directors in the forthcoming Annual General Meeting.

Details of Board Meetings

During the year, Nine Board meetings were held, details of which are given below:

Meetings of Board Committees

The details of composition of the Committees of the Board of Directors are as under:-

Details of Audit Committee Meetings

Details of Management  Committee Meetings

Details of HSE Committee Meetings

Details of Nomination & Remuneration Committee Meetings

Statutory Auditors, their Report and Notes to Financial Statements

The office of the Comptroller and Auditor General of India has vide its letter no.CA.V/COY/WEST BENGAL.HLDIAP(1)/ 1477 dated 02.09.2015appointed the following firms of Chartered Accountants as joint Statutory Auditors of the Company for the financial year 2015-16:

Nandy, Halder& Ganguli

18, NetajiSubhas Road, Top Floor

Kolkata – 700001

M C Bandari & Co

4 Synagogue Street Suite No 205

Facing Brabourne Road

Kolkata - 700001

While appointing the statutory auditors, CAG advised that the remuneration and

other allowances payable to the auditors may be regulated as per the provisions of the Companies Act, 2013 read with the Guidelines issued by the Ministry of Corporate Affairs.

During the year pursuant to change in management control, CAG has communicated that no supplementary Audit will be conducted by CAG as usually done under CAG Audit, since HPL is no longer a Govt. Controlled Company in light of majority equity share holding by Non-Govt. entities.

Cost Audit

As per the Cost Audit Orders, Cost Audit is applicable to the Company's Chemicals business for the FY 2015-16.M/s. M/s Mani & Co., Cost Accountants was appointed as Cost Auditors to conduct the audit of cost records of your Company for the financial year 2015-16. The remuneration proposed to be paid to them requires ratification of the shareholders of the Company. In view of this, your ratification for payment of remuneration to Cost Auditors is being sought at the ensuing AGM.

Your Company has submitted its Cost Audit Report with the Ministry of Corporate Affairs within the stipulated time period.

Directors’ Responsibility Statement

The Directors’ Responsibility Statement in terms of Section 134(3) and (5) of the Companies Act 2013 is given in Annexure I.

Extract of Annual Return

As on 31st March, 2016, the issued, subscribed and paid up share capital of your Company comprised of Rs.16,879,385,320 Equity share Capital

and Rs.27,10,818,180 Preference, aggregating to Rs.19,590,203,500/-. All shares are of Rs 10/- each.

Pursuant to section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014, extract of annual return is Annexed as Annexure II.

Statement containing salient features of financial statements of subsidiaries

Pursuant to sub-section (3) of section 129 of the Act, the statement containing the salient feature of the financial statement of a Company’s subsidiary or subsidiaries, associate Company or companies and joint venture or ventures is given as Annexure III.

Directors and Key Managerial Personnel – changes during the year

Directors

During the period under review, the following changes took place in the Board of Directors:

·      Dr.S.Kishore who was appointed a Director in the AGM held on 31.3.2015, resigned from the Board w.e.f.01.05.2016.

·      Ms.Sreoshi Palchoudhuri was appointed as Additional Director on 20.08.15 and thereafter as a Director in the AGM held on 31.03.2015.

·      Mr. K H Dwivedi who was appointed a Director in the AGM held on 31.12.2015, resigned from the Board w.e.f. 05.01.2016.

·      Mr. Ajay Kumar Pandey resigned from the Board w.e.f. 05.01.2016.

·         Dr. Krishna Gupta resigned from the Board w.e.f.05.01.2016.

·         Mr.Chandan Roy was appointed as an Independent Director by the shareholders in their meeting held on 29.04.3016.

·         Mr Chandan Roy passed away on 23.06.2016.

·         Mr. S K Arora, nominee IFCI, resigned from the Board on 27.04.2016.

Key Managerial Personnel (KMP)

·   MrAshutosh Bose was appointed as Chief Financial Officer and Company Secretary in the rank of Executive Vice President from 02.02.2015. His tenure extended to 31.12.2016.

Retirement by rotation

Mr S Chatterjee and Mr. Sumit Sanghai, Directors retire by rotation at the forthcoming Annual General Meeting and  being eligible, offer themselves for reappointment. 

The Board recorded its sincere appreciation for valuable contributions made by the directors who have resigned/ retired, during their tenure as HPL Director and expressed deep sense of satisfaction for their commendable support to the Company.

Directors liable to retire by rotation at the conclusion of the forthcoming Annual General Meeting and being eligible offer themselves for re-appointment

Particulars of Employees

A statement as required as per Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 read with latest amendment thereto w.r.t. employee details is Annexed as Annexure IV

Conservation of Energy,Technology Absorption,Foreign Exchange Earnings&Outgo

Statement on conservation of energy, Technology absorption, foreign exchange earnings and outgo under sec 143(3) of the Companies Act, 2013 is enclosed (Annexure – V and VI).

Explanation to Auditors’ Observations

Directors’ explanation to Auditors observations in terms of sec 134(3) of the Companies Act, 2013 is enclosed as Addendum to the Directors’ Report (Annexure VII).

Secretarial Auditor 

In terms of Section 204 of the Act and Rules made there under, M/s. S Sarkar& Associates, Practicing Company Secretary was appointed the Secretarial Auditor of the Company. The report of the Secretarial Auditor is enclosed as Annexure VIII to this report. The report is self-explanatory and does not call for any further comments
    Public Deposits


The Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.
  Details of significant & material orders passed by courts or tribunal

There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations. 

Acknowledgements          

The Directors of your Company take this opportunity to express their gratitude to all individuals and institutions that have helped and supported HPL.

Your Company is grateful to the Reserve Bank of India, Financial Institutions and Banks led by IDBI, and the Banks for their support in providing ‘Term Finance’. Your Company is also grateful to State Bank of India and other members of the Working Capital consortium who made Working Capital finance available to your Company.

Your Directors also place on record their sincere appreciation for the support your Company has received from the Government of West Bengal and Government of India. 

Your Directors also record deep appreciation for the HPL Team for their dedication and commitment towards the success and growth of your Company.

Your Company is thankful to customers, vendors and business associates for their support

Date: 10.08.2016

Place: Kolkata

Annexure-I

Directors’ Responsibility Statement

The directors accept the responsibility for the integrity and objectivity of the profit & loss account for the financial year ended 31stMarch 2016 and the balance sheet as at that date (“financial statements”) and confirm pursuant to section 134 (5) that:

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(a)  the directors had prepared the annual accounts on a going concern basis; and

(e) the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Date: 10.08.2016

Place: Kolkata

Annexure II

Form No. MGT-9

EXTRACT OF ANNUAL RETURN

as on the financial year ended on 31st March, 2015

of

HALDIA PETROCHEMICALS LIMITED

[Pursuant to Section 92(1) of the Companies Act, 2013 and rule 12(1) of the Companies

(Management and Administration) Rules, 2014]

I.         REGISTRATION AND OTHER DETAILS:

i)             CIN:U23209WB1985SGC039487

ii)            Registration Date: 16/09/1985

iii)           Name of the Company: Haldia Petrochemicals Limited

iv)          Category / Sub-Category of the Company: Petro Chemical

v)            Address of the Registered Office and contact details: 1 Auckland Place, Kolkata-700017

vi)          Whether listed Company               : No

vii) Name, Address and contact details of Registrar & Transfer Agents (RTA), if any: Karvy Computershare Pvt. Ltd, Karvy Selenium Tower B | Plot number 31 & 32 | Financial District |Nanakramguda | Serilingampally Mandal | Hyderabad - 500032 | India P : +91 040 67161603

II.       PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY

All the business activities contributing 10 % or more of the total turnover of the Company shall be stated:-

III.     PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANIES -

(v). Shareholding of Directors and Key Managerial Personnel:

REMUNERATION TO KEY MANAGERIAL PERSONNEL OTHER THANMD / MANAGER/WTD

B.        Remuneration to other directors: NA

Annexure  III

Statement containing salient features of the financial statement of subsidiaries

Rs in million

Annexure IV

Top Ten Employees in terms of Remuneration Drawn

ANNEXURE – VCONSERVATION OF ENERGY ENERGY CONSERVATION MEASURES TAKEN

CONSERVATION OF ENERGY
ENERGY CONSERVATION MEASURES TAKEN

Energy conservation activities in FY 2015-16 were primarily focused on monitoring of energy consumption pattern & variation w.r.t complex operating with high capacity utilization; also on identification of energy optimization / improvement areas. But prevention of losses was always taken with top priority.

Performance monitoring of power & steam generating units were started on daily basis resulting in optimization at various areas. Health of insulation / refractory across the complex was accessed by a third party survey to plan for future corrective actions towards reduction in heat loss. Regular review at various levels was also continued and all activities were documented to comply with ISO guidelines.

“Energy Celebration” at plant was organized during Dec’15-Jan’16. National Energy Conservation Day was celebrated on 14th Dec’15. Mr. Krishnakumar PG; Regional Product line leader - GE’s Power Services Business across South Asia was our Chief Guest. Energy Quiz among employees, Technical Seminars by external experts, Screening of documentary relevant to energy conservation etc. were also organized during almost a month long celebration.

We also participated at International Conference on Recent Trends in Energy Technologies (ICRTET-2016) held at HIT, Haldia and presented our achievements on Energy Management on 21st Jan’16.

Major Energy Conservation Schemes Implemented in 2015–16

·          Thermography survey carried out to access the health of insulation / refractory & to plan for necessary corrective actions to reduce heat loss. As a third party, Cholamandalam MS Risk Services, Chennai was appointed for the survey.

·   Optimization of excess air in Auxiliary Boilers at CPP by installing new O2 analyzer & operation control

·         Reduction in steam loss by attending leakages & steam trap management across the complex

Like previous years, continuous efforts are also being exercised in the following areas:

·      Optimization of grid import in view of operating philosophy of Gas Turbines (GTs) as well as Condensing Steam Turbine (CST) in CPP

·      Maximum utilization of RFG (Residual Fuel Gas) to have minimum liquid fuel consumption in CPP, particularly naphtha consumption

·        Efficient operation of furnaces & boilers

·        Maximum power generation from Back Pressure Steam Turbine (BPST) and optimization of steam let down through PRDSs

·        Steam trap management

·        Boiler blow down control and optimization

Major energy saving schemes / survey / training programme being planned and under various stages of development, are as follows:

·      Heat recovery from Drier regeneration effluent in NCU

·      Capacity enhancement and heat rate reduction in Gas Turbine#01 in CPP

·      Recovery of waste heat from flue gas at HRSGs in CPP

·      On-line compressor wash for Gas Turbines to improve efficiency

·      Training on Energy Conservation by external agency at plant

Annexure VI

(a) Conservation of energy

(b) Technology absorption

(c) Foreign exchange earnings and Outgo

During the year, the total foreign exchange used was Rs5742.26 Cr and the total foreign exchange earned was Rs  2,161.55Cr.

Annexure – VII

Addendum to the Directors Report 2015-16

Directors’ explanation to Auditors’ observation in terms of Sec 134(3)(f)of the Companies Act, 2013.

Management response to the Auditors’ Report/observation on the Standalone Balance Sheet as on 31stMarch, 2016and related Profit and Loss Account and Cash Flow Statement for the year ended 31st March, 2016.

Addendum to the Directors Report 2015-16

Directors’ explanation to Auditors’ observation in terms of Sec 134(3)(f) of the Companies Act, 2013.

Management response to the Auditors’ Report/observation on the Consolidated Balance Sheet as on 31stMarch, 2016and related Profit and Loss Account and Cash Flow Statement for the year ended 31st March, 2016.

Annexure VIII

Form No. MR-3

SECRETARIAL AUDIT REPORT

FOR THE FINANCIAL YEAR ENDED 31ST MARCH, 2016

[Pursuant to section 204(1) of the Companies Act, 2013 and rule No.9 of the Companies (Appointment and Remuneration Personnel) Rules, 2014]

To,

The Members,

HALDIA PETROCHEMICALS LIMITED

 1 AUCKLAND PLACE

KOLKATA-700017

We have conducted the Secretarial Audit in compliance with the applicable statutory provisions and adherence to good corporate practices by Haldia Petrochemicals Limited. (Hereinafter called “the Company”) Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing our opinion thereon.

Based on our verification of the  books, papers, minute books, forms and returns filed and other records maintained by the Company and also the information provided by the Company, its officers, agents and authorized representatives during the conduct of secretarial audit, We hereby report that in our opinion, the Company has, during the audit period covering the financial year ended on 31.03.2016 complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance-mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

We have examined the books, papers, minute books, forms and returns filed and other records maintained by Bengal Cracker Complex Limited (“the Company”) for the financial year ended on 31/03/2016 according to the provisions of:

(i)   The Companies Act, 2013 (the Act) and the rules made there under(As per Annexure)

(ii)  The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the rules made there under; (Not Applicable)

(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed there under;

(iv)Foreign Exchange Management Act, 1999 and the rules and regulations made there under to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings;(Not applicable)

(v)   The Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’):- (Not Applicable)

(vi) Payment of Gratuity Act 1972.However in substantial cases the payment has been made beyond thirty days from the date of relinquishment of service.

(vii) Factories Act 1948

     (viii)Provident Fund Act

(ix) Sexual Harassment (Prevention and Redressal) Act 2013 (Details are as per annexure)

(x) Petroleum Rules

(xi) West Bengal Fire Services Act 1950

(xii) The Environment Protection Act 1986

(xiii) The Hazardous Waste Rules 2008

(XIV) The Static and Mobile pressure Rules 1981

(XV) The Radiation and Protection Rules

(XVI) The Explosive Act 1884

(XVII) Industrial Disputes Act 1947

(XVIII) The payment of wages Act 1936

(XIX) The Employees State Insurance Act 1948

(XX) Secretarial Standard I and Secretarial Standard II has been complied with certain deviations.

During the period under review the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above subject to the following observations:

We further report that In respect of further issue of shares, the company has passed a special resolution before allotting shares to persons in accordance of companies Act 2013.

We further report that

The Board of Directors of the Company is duly constituted with proper balance of Executive Directors; Non-Executive Directors. However The Company did not appoint any Independent Director in terms of Section 149(5) of the Companies Act 2013 during the reporting period.

Adequate notice was given to all Directors to schedule the Board Meetings, agenda and detailed notes on agenda were sent at least seven days in advance. A system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.

Majority decision is carried through and recorded as part of the minutes.

We further report that, there are adequate systems and processes in the Company commensurate with the size and operations of the Company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.

We further report that the Board of the Company has approved a scheme on 30th March, 2016 at its meeting to merge the Company into its subsidiary company namely Bengal Cracker Complex Limited

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             For S.SARKAR & ASSOCIATES

                                                                                           Company Secretaries

                                                                                             SANDIP SARKAR

                                                                                                (Proprietor)

                                                                                    Membership No-FCS 7524

                                                                                                  CP No-9483

Date:

Place: Kolkata

Annexure

1.    In terms of the various provisions of the Companies Act, 2013,

(a) The Audit Committee and Nomination Remuneration Committee was constituted without any Independent Director

(b) The company has not appointed any KMP in the category of MD/WTD/Manager/CEO during the reporting period. Further the company has appointed a single individual to hold the position of Company Secretary and Chief Financial Officer.

(2) In terms of the various provisions the Sexual Harassment Of Women At The Workplace (Prevention, Prohibition & Redressal) Act, 2013,

The Company has not properly constituted any committee to prevent the sexual harassment at the work place as per Vishakha guidelines during the reporting period.

During the year, total revenue of your Company increased by 228%, from Rs.30,961.50 million to Rs 101,713.80 million. Your Company recorded Earnings before Interest, Tax and Depreciation & Amortization and Exceptional Items (EBITDA) of Rs 24,057.30 million in FY 15-16 as against Rs (1,324.35) million for the corresponding previous period. The turnaround is attributable to: Consistent uninterrupted operation of the plant at average 94% capacity utilization during the year as against seven months shutdown during the previous year and sub optimal capacity utilization during the remaining five months; Polymer spread improved to $ 731 / MT in 2015-16 as against $ 717 / MT in 2014-15 Low Naphtha (feed stock)  Price (MOPAG) of $ 420/MT in 2015-16 as against$716/MT in 2014-15 with corresponding average Crude price of $ 48 / bbl & $ 86/bbl in 2015-16 and 2014-15 respectively; Lower fuel cost for energy generation due to (i) better efficiency at high operating rate of the plant and (ii) sharp fall in Crude & its derivative; For FY2015-16, your Company’s PBT for 15-16 stood at Rs.15,127.41 million. (vis-à-vis Rs 4,985.84 million for the previous year). This is attributable to increased EBITDA as mentioned above and lower depreciation charge for the financial year 2015-2016 amounting to Rs 1,397.56 million as against Rs 2,435.43 million recorded in the previous year is due to sale of NCU business undertaking to BCCL.   -      Finance cost during 2015-2016 has been significantly lower than that of the previous year mainly due to the effect of restructuring of term loans as contemplated by the Rupee Term Loan Financing Agreement and also transfer of loan balances of Rs 8,750 million to BCCL as part of sale of business undertaking.     Exceptional Item of Rs 2,400 million represent amount payable to lenders for exercising the option of exiting from CDR package.   

Due to tabular data details given in text block data   

During the year, the total foreign exchange used was Rs5742.26 Cr and the total foreign exchange earned was Rs  2,161.55Cr.    

The directors accept the responsibility for the integrity and objectivity of the profit & loss account for the financial year ended 31stMarch 2016 and the balance sheet as at that date (“financial statements”) and confirm pursuant to section 134 (5) that: (a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period; (c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (a)  the directors had prepared the annual accounts on a going concern basis; and (e) the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively. (f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.