IPCL CLOSED VADODARA LAB PLANT: SHORT SIGHTED DECISION

Just a few weeks before the merger of Indian Petrochemicals Corporation (IPCL) with Reliance Industries (RIL), the IPCL management has closed its 43,500 tonnes per annum linear alkyl benzene (LAB) plant at the Vadodara complex, Gujarat, India. The plant is reported to have been closed mainly because of its so called small size relative to world scale LAB plants operating elsewhere.

This is the fourth IPCL plant which has been closed in recent times. All of these were part of the Vadodara complex, which was set up in the early 70s, when IPCL was first constituted. The plants which have been shut include a dry spun acrylic fibre plant of 12,000 tonnes per annum capacity, the wet spun acrylic fibre plant with 12,000 tonnes per annum capacity and the acrylates plant with 10,000 tonnes per annum capacity. Much earlier, the company had shut down the petroleum resins plant (5,000 tonnes per annum) and an old poly propylene plant (30,000 tonnes per annum).

The Vadodara complex of IPCL is built around a 150,000 tonnes per annum ethylene cracker, which receives feed stock from RIL’s Jamnagar refinery.

The plants currently running include for polypropylene (25,000 tonnes per annum), polyvinyl chloride (55,000 tonnes per annum), polybutadiene rubber (20,000 tonnes per annum), ethylene oxide/ethylene glycol (20,000 tonnes per annum) and acrylonitrile (36,000 tonnes per annum).


Anyone who had worked in IPCL particularly in the LAB plant or who knows about the glorious past performance of IPCL would have been deeply disappointed to know about the decision to close the LAB plant.

Such decision would not have been taken, if IPCL would have continued to remain as Government of India undertaking. While the money making is legitimate objective of setting up and operating projects, closing the projects without justifiable reasons would amount to wastage of the national resources setup at the cost of scarce capital.

LAB project of IPCL was not losing money though it may not be earning the type of money that the Reliance Industries would target for itself.

We often come across such situation in developed countries where plants are closed for short or long time due to severe market competitive conditions which would force the units to be operated at less profitable conditions . But there is no reason for the projects in developing countries to adopt such practice. One wonders as to whether the present management of IPCL has cared to think carefully about alternative ways of improving the economics of the LAB project. Certainly, there would be ways to expand the capacity by installing balancing equipment that can contribute to better economics.

One may not be surprised if India would become net importer of LAB in the near future, due to this untimely decision of the present management of IPCL. By importing LAB, the country would lose foreign exchange about which perhaps the IPCL management is not concerned.

There are economic and social objectives of setting up and managing industrial projects.

Government of India should certainly demand an explanation from IPCL management as to why it thought fit to close down the unit . If IPCL would refrain from giving suitable explanation, the government should not hesitate to examine the methodology of forcing the IPCL management to restart the plant or selling the plant to others more interested in the project.

We talk about social responsibility of business and terms such as .responsible care. are becoming popular.

One wonders as to how the decision of Reliance Industries to close down the LAB plant of IPCL would fall under the concept of responsible corporate management .