Inventories have piled up at GAIL’s petrochemicals facilities as a large number of trucks remain off the road due to the demonetisation-induced cash crunch, leaving the state firm scrambling for new warehouse spaces and an alternative mode of transport to carry products to customers.
“The movement of trucks has slowed. So that has certain impact. As of now, we are stocking in our store. There is no reduction in our production. But our stocks are moving up in our warehouses. The plant inventory has gone up by 50%,” Chairman B C Tripathi told ET. Tripathi said he was hopeful things will get back to normal in a week or 10 days as cash availability increases.
The lack of cash has pushed many trucks off the road as drivers are unable to pay for fuel, food and toll at many places. Petrochemicals, produced using petroleum and gas, find use in several industries, most visibly in the plastics used in household and electronic items and in construction and cosmetics. The cash crunch is cutting both ways by curtailing demand as fewer end users have cash to purchase stuff, and by restricting supply as factories can’t keep producing goods that don’t leave their gates.
GAIL owns and operates a gas-based petrochemicals complex at Pata, near Kanpur in Uttar Pradesh. It also controls a petrochemicals facility in Assam and is a part owner in another in Gujarat.
As inventory overflows, GAIL is scrambling to arrange new places for storage. “We are trying to create alternative warehouse,” said Tripathi. All the petrochemical products at GAIL are carried by trucks, not train, Tripathi said, which is why the company is now searching for an alternative carrier. “We are talking to Container Corporation, they are a PSU, they can move products,” said Tripathi.
State-run Container Corporation of India mostly uses trains to ferry products across the country. To help transporters tide over the cash crunch, GAIL is also thinking of supporting them with cash. “We can give some cash from our side, which we have. Withdrawal limits are available to us. Increase the credit period, all these things we are looking at,” Tripathi said.
The Indian petrochemicals industry has been growing annually by 14% and is expected to reach $100 million in size by 2020. In the July-September quarter, GAIL’s petrochemicals business witnessed sharp growth with profit climbing to Rs 104 crore from a loss of Rs 364 crore in the corresponding quarter last year. Tripathi said the company’s gas business has not seen any impact due to demonetization as the option of electronic payment is easily available to the smallest of customers in this segment. DJ LeMahieu Authentic JerseyShare This