Cabinet approves closure of Hindustan Fluorocarbons Limited

The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi on Wednesday gave its approval for shutting down operations of the plant/unit of HFL and closure of the company.

The CCEA also approved a proposal for separating the employees rendered surplus through VRS/VSS, after payment of all their outstanding salary/wages and statutory dues. Only a skeletal staff required to implement the closure of the company will remain. 

The closure of HFL is a corollary of India announcing complete phase out of hydrochlorofluorocarbon (HCFC)-141 b, which is a chemical used by foam manufacturers and one of the most potent ozone depleting chemical after Chlorofluorocarbons (CFCs).

Employees not opting for VRS will be retrenched as per Industrial Disputes Act, an official release stated.

The government has extended an interest free loan of Rs77.20 crore to HFL for expenditure exclusively on closure of HFL, viz, implementation of VRS/VSS, payment of outstanding salary and statutory dues, etc and salary/wages and administrative expenses of HFL's skeletal staff to be retained for implementing the closure of HFL.

The interest free loan of Rs77.20 crore is to be repaid to the government from the proceedings from the disposal of land and other assets of HFL after settling all closure related liabilities. If the land/assets sale proceeds are not sufficient to repay the loan amount, then the balance loan amount will be written off.

After repayment of the loan of Rs77.20 crore and settlement of all other closure related liabilities of HFL, surplus proceeds from disposal of land and assets if any will be used for repayment of HFL's outstanding loans (Rs15.80 crore) and interest, with freezing of interest up to 31 march 2019. Full or part of the principal loan amount and interest thereon remaining unpaid due to insufficient sale proceeds is to be written off/waived.

The government has ppointed NBCC (India) Ltd as land management agency (LMA) for facilitating disposal of HFL's land assets, subject to outcome of the decision of Telangana government/TSIIC on purchasing land of HFL.

Disposal of plant/machinery and movable assets will be done by HFL through e-auction by MSTC Ltd.

HFL has only one plant/unit located at Rudraram, in Sangareddy district of Telangana.

Hindustan Fluorocarbons Limited (HFL) is a subsidiary of Hindustan Organic Chemicals Ltd (HOCL), a central public sector enterprise (CPSE) under the administrative control of the Department of Chemicals and Petrochemicals. HFL is engaged in the manufacture of Poly Tetra Fluoro Ethylene (PTFF) and Chloro Di Fluoro Methane (HCFC-22 or CFM-22). The company has been making losses since 2013-14 and has negative net worth. As on 31 March 2019, it had accumulated losses of Rs62.81 crore and negative net worth of Rs43.20 crore. It was also registered with the erstwhile Board for Industrial and Financial Reconstruction (BIFR) as a sick company.

HFL manufactures HCFC-22 and also uses it for conversion to PTFE. Due to uneconomic plant capacity and old technology, conversion of HCFC-22 to PTFE is not financially viable and the company is constrained to sell higher quantity of HCFC- 22 directly as refrigerant gas. Under the provisions of Montreal Protocol on phasing out of ozone depleting substances, HFL's HCFC-22 non-feedstock production quota is only about 392 tonnes per calendar year which was enhanced to 1,100 tonnes during the last 3 years by the ministry of environment, forest and climate change (MoEFCC) based on the exemption request of this department. The HCFC-22 quota is to be reduced further by 25 per cent from calendar year 2020 and the MoEFCC is not likely to agree to any further exemptions for HFL. The reduced HCFC-22 quota of about 282 tonnes would be sufficient for plant operations only up to March / April 2020, and, thereafter, HFL would be forced to shut down its plant for the remaining months of the year. Since HFL's operations are not likely to be sustainable after March 2020 onwards, it is necessary to expeditiously close down the operations of the company and separate its employees through VRS/VSS.