ONGC PetroAdditions Ltd (OPaL), a subsidiary of the state-owned Oil and Natural Gas Corporation (ONGC), has officially exited the Dahej Special Economic Zone (SEZ) as it shifts focus toward the domestic petrochemical market. This strategic move aims to enhance profitability and competitiveness.
In a stock exchange filing, ONGC confirmed that OPaL has received final approval for its SEZ exit. “Accordingly, OPaL shall operate as a Domestic Tariff Area (DTA) unit with effect from March 8, 2025,” the company stated. “This exit from SEZ will improve OPaL’s competitiveness for supplies to be made to the DTA.”
By transitioning from an SEZ unit to a DTA unit, OPaL will primarily cater to the Indian market rather than focusing on exports. Additionally, it will no longer be required to pay customs duties on products sold within India, which is expected to improve profit margins.
Strategic Shift to Domestic Market
The move is driven by OPaL’s need to access a broader domestic market and benefit from a lower corporate tax regime. ONGC’s C2C3 project, which extracts ethane (C2) and propane (C3) from imported liquefied natural gas (LNG), supplies these raw materials to OPaL for producing polymers and chemicals such as benzene and butadiene.
OPaL has been struggling with high debt and unprofitable exports. The company reported a loss of Rs 3,546 crore in the 2023-24 fiscal year and an additional Rs 2,392 crore in the first nine months of the current financial year.
ONGC provided financial support to stabilize the situation by infusing additional equity capital of up to Rs 10,501 crore. It also converted back-stopped compulsorily convertible debentures (CCDs) worth Rs 7,778 crore and paid Rs 86 crore for share warrants, bringing the total financial infusion to Rs 18,365 crore. As a result, ONGC’s stake in OPaL increased from 49.36% to 95.69%.
Challenges and Market Dynamics
Despite global geopolitical uncertainties, OPaL focused on cost-efficiency programs, innovation, brand building, and distribution strategies to sustain growth and profitability. In the financial year 2023-24, OPaL achieved total sales of 1.771 million tonnes, including 1.237 million tonnes of polymer sales. However, its domestic polymer sales share declined to 86% in FY 2023-24 from 91% in FY 2022-23 due to an oversupply in the market, driven by the entry of new polymer producers and competitive import pricing.
OPaL’s overall market share for polymers stood at 11% in FY 2023-24, reflecting a 1% decline compared to the previous year. The decrease was attributed to feedstock shortages, new capacity additions in the sector, and rising domestic competition.
In terms of chemicals, OPaL recorded total sales of 0.534 million tonnes in FY 2023-24, with 64% sold in the domestic market and 36% exported.
Future Outlook
By exiting the SEZ and focusing on the local market, OPaL aims to improve financial stability and expand its market footprint. The shift is expected to provide cost benefits and allow the company to navigate challenges in the highly competitive petrochemical industry. The success of this transition will depend on OPaL’s ability to enhance production efficiency, optimize costs, and strengthen its distribution network within India.
