Upon acquiring the unit TPL, which is currently finding it difficult to reduce production costs, will be able to source chlorine more cheaply with savings on sales tax. SHC has enough capacity to supply chlorine for all of TPL's requirements.

TPL is also talking to Chennai Petroleum Corporation (CPCL) for supplying raw material propylene, the other product required for production of EPH. Currently propylene is being bought from Gail and Indian Oil, and the prices were not competitive enough for TPL to bring down its production costs.

According to TPL managing director D Arunachalam, who spoke to The Financial Express after the AGM of TPL, costs of propylene could be far cheaper if CPCL stepped up its production and supplied the same to TPL and Manali Petro.

Though CPCL made chemical grade and TPL required polymer grade of propylene, the latter had set up the required plant and process which would convert one to the other. A decision to increase production of propylene by CPCL is expected in six months, though actual supplies would take at least one and a half years, he said.

If TPL could cut costs in thus sourcing raw materials, "We would be able to sell even 10,000 tonnes of ECH under existing industry conditions of heavy Chinese imports of epoxy resin (ECH is the feedstock for epoxy resins). Meanwhile, international prices of ECH is looking up moving from $1,100 to $1,400 easing the situation a bit for TPL. Last year the company had sold 2,500 tonnes of ECH and this year expects to sell 3,000 tonnes."

In view of recent developments of Ciba Geigy worldwide to divest their polymer businesses, there is still some uncertainty prevailing over the future of Petro Araldite Pvt Ltd a major buyer of ECH and located next door to TPL. TPL, which has got 24 per cent stake in the company, is discussing with Ciba about the future plan of action to protect everybody's interest in the matter. Though Arunachalam did not divulge details he commented "that an active strategy was on."

TPL had a net sales of Rs 142.49 crore for the first quarter ended June 30, an increase of 15 per cent over the previous corresponding quarter figure of Rs 123.57 crore.

Profit before tax stood at Rs 22.30 crore (Rs 21.34 crore) while profit after tax stood at Rs 17.08 crore (Rs 17.04 crore) a marginal increase of 0.23 per cent.