Calcutta, June 7: The ambitious expansion project of ITC Bhadrachalam Ltd, which was scheduled for commercial operation in January 1997, is now likely to take off only in late September or early October this year, according to managing director MP Malliwal.

Latest calculations suggest that the no-load trial will be done in July while the pulp-based trial will follow in August. Once the plant and machinery is stabilised, commercial production should start by end September or early October, Malliwal said.

The original cost of Rs 524 crore for the 120,000 tonnes per annum (tpa) expansion project for making coated packaging boards was revised in November last year to Rs 624 crore. The final cost is now expected to be about Rs 635 crore, because of interest costs in the pre-commissioning stage, according to company sources.

The company said the first revision was done following currency fluctuations, higher provision for automation, higher cost of civil construction and investment in Andhra Pradesh Gas Power Corporation Ltd for power supply.

The status of the expansion project was reviewed at a board meeting on Friday in Hyderabad. Company sources revealed that a three-year business plan has been chalked out. The plan includes a diversification of the customer base, repositioning of the existing products and reduction of costs and energy consumption in particular.

Capacity for coated packaging boards will go up from 90,000 tpa now to 200,000 tpa in 1998-99 after the expansion. As part of the project, the company is installing a 21mw co-generation power plant to meet the increased energy requirement. The cost of the captive power project has also been revised to Rs 56 crore from Rs 52 crore estimated earlier.

The downturn in the paper industry which started in the last quarter of 1995 is continuing and its impact on the company's working is clear from the fact that capacity use has dropped to 140 per cent in 1996-97 from 142 per cent in the previous year. Volume sales would be about 200 tonnes lower than the 86,904 tonnes achieved in 1995-96.

Malliwal was emphatic that only the efficient players would survive in a scenario where there are no immediate signs of revival of demand.

On the raw material side, the situation continues to be grim and there are no readymade solutions, he added.

Following a steep hike in royalty rates on bamboo and availability constraints, the company is now considering use of wood as a substitute without compromising on pulp quality. It is also considering introduction of speciality process chemicals to improve paper quality at a lower cost.

Regarding funding of working capital, the company is exploring all options to raise low cost funds to the extent of Rs 50 crore, Malliwal said. It had raised $18 million from State Bank of India's overseas branches a year back at attractive rates to meet its long-term working capital needs. The company's paid-up capital has increased to Rs 68.48 crore following the rights equity issue at a premium of Rs 90 per share last year. The increase in reserves on account of share premium is Rs 143.10 crore.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.