Guruprasad Mohapatra
Managing Director,
Gujarat Alkalies & Chemicals Limited

Q. Kindly comment on the present status of the caustic soda industry in India?

A. Caustic soda is a very basic chemical and is used in many manufacturing activities, which is why there is never a demand problem for caustic soda in India. The industry grows at an average rate of around 9%-10% per annum. In fact, even during the worst recessionary trend, the caustic soda demand did not decline, because it is a key ingredient in many manufacturing industries.

Q. Can you state the pressing issues that affect the competitiveness of the Indian chlor-alkali industry in general and the caustic soda industry in particular?

A. High energy cost is the most pressing issue that the chlor-alkali industry faces. The energy costs in India are very high as compared with the prices in the Middle East, US, Europe and China that are the major manufactures of chlor-alkali chemicals like caustic chlorine. The power cost is approximately Rs 5-6 in different states of India and unless players have a captive power production facility, they cannot compete in the Indian industry. Even the players who generate captive power incur power cost close to Rs 4 or more due to the high gas prices, which affects the players' competitiveness. With respect to the caustic soda industry, since the last three months, we have been experiencing problems related to pricing. The major caustic chlorine manufacturing countries, which include Europe, America, and North America, have recorded excess production of caustic soda due to lack of demand; as a result, the caustic prices hit their rock bottom at US$ 30 to US$ 50 per tonne as compared with an average price of around US$ 400 per tonne. Due to this trend, these countries dumped large amounts of caustic soda into India, which had high demand for caustic soda. Since October 2009, however, prices in the domestic and international markets have started improving, indicating that the worst period is over.

Q. In terms of scope for development, what do you think is caustic soda's scope for development?

A. The scope for caustic soda is very good; in fact, we are adding 900 tonnes to the caustic soda capacity at our Dahej Plant, which will be commissioned by end of 2011 or mid of 2012. We are expanding the capacity primarily because we are certain there will be demand.

Q. According to you what efforts should the government take to develop the Indian caustic soda industry?

A. The government should ensure that there is no illegal dumping of caustic soda Nonetheless, we do not mind imports because we live in a globalised world and the Indian industry is very competitive. Normally domestic industries complain about imports because these industries may not be very competitive and efficient. However, the Indian caustic soda industry especially the four to five big players are as efficient and as competitive as their counterparts in any other country in the world. So, the government should ensure that an anti-dumping mechanism remains firmly in place. We also expect the government to help us in terms of ensuring gas availability at reasonable prices.

Q. What are the factors that you think will drive the overall growth in your business and which segments do you think will achieve a faster growth rate?

A. I think caustic soda itself will drive the overall growth of our business as it is our core product. We have around 25 products in GACL and the caustic soda group alone constitutes around 60% of our sales and profit. Another good product is hydrogen peroxide, as it is a very good bleaching agent. We already have 80 tonnes of hydrogen peroxide manufacturing facility in both our complexes at Baroda and Dahej and we are adding another 100 tonnes of capacity. We will become a market leader once this new unit is commissioned.

Q. GACL plans to set up a 100 megawatts gas-based power plant. Kindly comment on the rationale behind this investment?

A. Currently we produce close to around 1200 tonnes of caustic soda a day at both Baroda and Dahej plants. Caustic soda is a very power-intensive industry and close to 2500 units (KWH) of power is needed to produce one tonne of caustic soda. Further, we are adding 900 tonnes of caustic soda capacity at Dahej and to cater to the power requirement of these 900 tonnes, we require a 100 megawatt gas-based power plant at Dahej. This will also keep our production costs down, as it will give us an access to uninterrupted quality power.

Q. What were the strategies adopted by the company to combat the global slowdown? Has it affected the company's business?

A. Though we were affected by recession to some extent, we have been much better off as we have been able to continue with the normal operations without cutting down the production or shelving the expansion and diversification plans. Also, we have not made any loss. However, the profits we made were not at par with our previous profits. To combat the recessionary pressure, we undertook a very intensive cost-cutting exercise and kept the cost of production down to remain competitive.

Q. What are the future plans of the company? Are there any new growth avenues that the company is looking at?

A. GACL has embarked on a very ambitious future expansion plan. We are expanding our caustic facility at Dahej by 900 tonnes (around Rs 6 bn of investment) and with that we'll maintain close to 35% of the market share. Further, we are launching two new products, hydrazine and polyol, for which India does not have a substantial manufacturing capacity and almost the entire demand is met through imports. We plan to make a total investment of around Rs 26 bn, which will ensure that our present turnover of Rs 14 bn reaches close to Rs 50 bn by 2012 or 2013. According to our plans, the contribution of caustic soda will come down to around one-third of our business from 60% currently, while the other existing products will account for one-third and the new products will account for another one-third; thus we will get a more balanced portfolio, which will reduce the risks of market fluctuations. GACL has three main strategies to move ahead; firstly, it has to diversify product portfolio, secondly it has to have more integrations of chlorine, so that less chlorine is released into the market, and thirdly, it has to maintain leadership status in products like caustic chlorine, hydrogen peroxide, calcium chloride, aluminium chloride, poly aluminium chloride and increase exports in strategic products that give us more value.