Dhirubhai Ambani and Reliance

BACKWARD INTEGRATION

To strengthen his position further, Dhirubhai decided to integrate backwards and produce fibers. He planned to set up a polyester filament yarn (PFY) manufacturing plant at Patalganga^[3] . Dhirubhai started work on the plant in 1981. He wanted to make it a world-class plant equipped with the best machinery and having the best faculties. The technology for the production of PFY was sourced from USA's Du Pont De Nemours^[4]. However, Dhirubhai did not want to make Du Pont an equity partner. He felt that when technology was easily available in the international markets, it was not necessary to enter into a 51 % equity partnership with a foreign company.

In spite of the demand for PFY being 6000 tons per annum (tpa), Dhirubhai built a 10000 tpa plant with a built-in expansion provision of 15000 tpa. However, the demand for PFY declined considerably after the government's decision to reserve PFY for small-scale weavers. As a result, the bigger mills were compelled to use cotton.

By 1983, PYF had become a major revenue earner for Reliance. Dhirubhai continued to add new capacities and upgrade technology. All these efforts facilitated at making Reliance the lowest cost polyester producer in the world. In 1984, Dhirubhai got the license to manufacture purified terephthalic acid (PTA), one of the chemicals from which PFY and polyester staple fiber (PSF) can be manufactured.

He then integrated sideways manufacturing linear alkyl benzene (LAB) used by detergent manufacturers, thermoplastics like poly vinyl chloride (PVC), high density poly ethylene (HDPE) and low density poly ethylene (LDPE) used by plastic processors. Gradually, Reliance started manufacturing petrochemical intermediaries like paraxylene, n-paraffin and mono ethylene glycol (MEG), and ethylene, the basic raw material for all petrochemical bi-products and intermediaries. And finally it entered into production and extraction of oil (Refer Exhibit V for Backward Integration).

In 1991, Dhirubhai embarked on his most cherished project at Hazira (Gujarat)-to build the largest single multi-feed ethylene cracker plant in the world. The plant produces ethylene (imported so far), propylene to make PP, xylene to make PX, benzene to make LAB. The Jamnagar plant commissioned in 1999, the world's largest refinery with a capacity of 27 million tonnes per annum, was the single largest investment ever made at a single location in India. Besides the refinery, the plant included India's largest port terminal, fully automated rail-road loading and product dispatch terminal, a 3.5 million tonne tank farm, a 500MW power plant, a 12 mgd sea water desalination plant, a 1000-giga byte IT network, connecting 50 servers and 2,500 terminals with 200 km long optic fibre cables. This plant accounts for over 25% of India's total refining capacity.

^[3] Patalganga is a small village, 71 kilometers from Mumbai. It takes its name from the river on whose banks it is located.

^[4] Reliance at that time was buying fibers from Du Pont, and since the company knew Reliance, buying technology from them was easy.

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