Gas Authority of India Ltd is embarking on a Rs 400 crore (Rs 4 billion) expansion to increase polymer production capacity at its Pata plant in Uttar Pradesh from 300,000 tonne to 440,000 tonne over the next three years.

The company will invest Rs 60 crore (Rs 600 million) in the first phase to raise the capacity by 50,000 tonne. The first phase is likely to be completed by the end of 2004.

The company has also initiated talks with the National Iranian Petrochemical Company for the joint marketing of its products overseas.

"We are looking for a strategic alliance to market our products outside India. We are in talks with NIPC, and are hopeful that we would be able to strike a deal," Proshanto Banerjee, chairman and managing director, said.

Funds for both the phases will be primarily raised from internal accruals.

Meanwhile, IDBI is studying GAIL's proposal for picking up a 10 per cent stake in Haldia Petrochemicals Ltd for around Rs 200 crore (Rs 2 billion). Banerjee said a final decision would be taken by the year end. GAIL will be the fourth equity partner in HPL along with The Chatterjee Group, the government of West Bengal and Tata Sons.

The acquisition will give GAIL access to a range of petrochemical products. The expansions will also enable the company to increase its market share.

As per an Icra report, most players in the petrochemicals sector have proposed to increase their capacities.

"The domestic market has a huge potential, as the per capita consumption of plastic here is merely 3.8 kg, while the global average is 19 kg. Therefore, we will concentrate on the domestic market," Banerjee said.

An estimate by the Chemicals and Petrochemicals Manufacturers Association highlighted that plastic consumption in the country is likely touch 6.4 mmt by 2005-06.