What is Adani’s Mundra Petrochem project, why has work on it been suspended?

What is the Mundra Petrochemical project?

Adani group’s flagship Adani Enterprises Ltd (AEL) had in 2021 incorporated a wholly  owned subsidiary, Mundra Petrochem Ltd,  for setting up a greenfield coal-to-PVC plant at Adani Ports and Special Economic Zone (APSEZ) land in Kutch district of Gujarat.

The plant was to have a poly-vinyl-chloride (PVC) production capacity of 2,000 KTPA (kilo tonne per annum) requiring 3.1 million tonne per annum (MTPA) of coal that was to be imported from Australia, Russia and other countries, as per PTI.

PVC is the world’s third-most widely produced synthetic polymer of plastic, after polyethylene and polypropylene. It finds wide applications – from flooring, to making sewage pipes and other pipe applications, in insulation on electrical wires, and manufacture of aprons etc. It is also used in making plastic bottles, non-food packaging, food-covering sheets and plastic cards (such as bank or membership cards).

India produced roughly 1.45 million tonnes of PVC in 2022 and imported another 1.5 million tonnes as per data from the Alkali Manufacturers Association of India. The Mundra Petrochemicals project was planned to bridge the gap between domestic production and demand for PVC in India, turning India into a net exporter of PVC instead.

Why has the project been suspended?

The suspension of the Mundra project comes in the aftermath of the damaging Hindenburg report, which alleged accounting fraud, stock manipulations and other corporate governance lapses. While the Group has categorically denied all of Hindenburg’s allegations, roughly USD 140 billion has been wiped out from the market value of Gautam Adani’s empire, with investors “jittery”, PTI reported. To assuage fears and regain confidence of the markets, the Group has planned a “comeback strategy”, PTI reported.

The comeback strategy is based on addressing investor concerns around debt by repaying some loans, consolidating operations, and fighting off allegations. Suspending the Mundra Petrochemicals project “for the time being” is one of the many moves made by the Group to consolidate its operations.

“AEL will be evaluating the status of growth projects in the primary industry vertical over the coming months,” a Adani Group spokesperson told PTI.

The group has also cancelled a Rs 7,000 crore coal plant purchase as well as shelved plans to bid for stake in power trader PTC. Apart from that, it has repaid some debt and pre-paid some of the finances raised by pledging promoter stake in group companies.