NEW DELHI: ONGC PetroAdditions Limited, a subsidiary of the state-owned Oil and Natural Gas Corporation (ONGC), has relinquished its ‘only-for-export’ unit status as it aims to tap into the booming local petrochemical market to drive a turnaround.
In a stock exchange filing, ONGC said OPaL has received the final approval for its exit from the Dahej Special Economic Zone (SEZ).
“Accordingly, OPaL shall operate as a Domestic Tariff Area (DTA) unit with effect from March 8, 2025,” ONGC said. “Further, this exit from SEZ will improve the competitiveness of OPaL for supplies to be made to the DTA”.
This essentially means primarily catering to the domestic Indian market instead of focusing on exports, which is the primary purpose of an SEZ unit. It will now not have to pay customs duty on products sold within India, helping improve margins.
The move is primarily to gain access to the wider domestic market and potentially benefit from the lower corporate tax regime. ONGC’s C2C3 project extracts ethane (C2) and propane (C3) from the liquefied natural gas (LNG) imported from Qatar. C2 and C3 – the basic building blocks of petrochemicals – are provided to OPaL which uses them to make polymers and chemicals like benzene and butadiene.
High debt and unlucractive exports had pushed OPaL into the red. It made a loss of `3,546 Crore in the 2023-24 fiscal year and `2,392 Crore loss in the first nine months of the current year. To mitigate the situation, ONGC extended financial support. It infused additional equity capital upto `10,501 Crore, converted back stopped compulsorily convertible debentures (CCDs) amounting to `7,778 Crore and paid `86 Crore with respect to share warrants, totaling `18,365 Crore. This has led to its stake in the company rising from 49.36 per cent to 95.69 per cent. OPaL dealt with global geopolitical uncertainties “by focusing on the strategic pillars of cost-efficiency programs, innovation, brand building, and distribution in order to sustain growth and profitability and a judicious improvement in the petrochemical export market share,” according to its latest annual report.
With inputs from PTI
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