ONGC’s OPaL exits from Dahej SEZ, eyes local market

New Delhi, ONGC PetroAdditions Ltd, a subsidiary of the state-owned Oil and Natural Gas Corporation , 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 .

“Accordingly, OPaL shall operate as a Domestic Tariff Area 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 and propane from the liquefied natural gas 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 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.

It achieved sales of 1.771 million tonnes during the financial year 2023-24. Of these, 1.237 million tonnes were polymer sales. Domestic share of polymer sales was down to 86 per cent in the financial year 2023-24 as compared to 91 per cent in financial year 2022-23 due to oversupply in the domestic market on account of entry of a new polymer producer and also regular imports at lower prices.

Overall market share of OPaL for polymers stood at 11 per cent in the financial year 2023-24; 1 per cent lower than last fiscal majorly on account of less production due to limited feedstock availability in some of the months, new capacity additions and intense competition in the domestic market, the annual report said.

During this FY 2023-24, total chemical sales was 0.534 million tonnes. OPaL sold around 64 per cent chemical products in the domestic market and 36 per cent in export markets.

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