With the Union cabinet clearing the Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs) in March, two states—Andhra Pradesh and Gujarat—have already made their formal proposals for the setting up of these specialized regions.
Elaborate presentations were made by representatives of the two states at a round-table organized by industry lobby group, the Federation of India Chambers of Commerce and Industry (Ficci), on 8 May.
The investment regions, identified mostly in coastal India, span over 250sq. km and is aimed at generating both direct and indirect jobs. The purpose is to encourage investments of a global scale in the petroleum, chemical and petrochemical sectors in order to accelerate economic growth. However, unlike the special economic zone concept, these regions do not have the benefit of fiscal incentives.
Andhra Pradesh is already committing an area of 130sq. km with one region in Kakinada and one in Visakhapatnam. The Oil and Natural Gas Corp. and Hindustan Petroleum Corp. Ltd will act as anchor or lead investors. Gujarat has proposed Dahej in Bharuch district, which can link the industrial belt from Vapi to Ahmedabad.
Addressing the gathering, Union minister for chemicals and fertilizers Ram Vilas Paswan said the regions will provide excellent infrastructure for the sector to be globally competitive. “Foreign investors have evinced keen interest in investing in these regions. We are expecting each PCPIR to attract an investment of $15 billion to $20 billion (Rs61,500 crore to Rs82,000 crore) coming both from foreign and domestic companies,” predicted Paswan.
He said his ministry will now invite proposals from other interested states such as Maharashtra, Tamil Nadu and Orissa. These proposals will then have to be cleared by the cabinet committee on economic affairs. Paswan added the first such region is expected to be set up in a year’s time.
“The Centre is expected to spend Rs10,000 crore on development of infrastructure such as road, rail link and additional port facilities and the state government will invest in areas like power, water supply, sanitation and development of hospitals, and so on,” said Paswan. He also clarified that land acquisition will be done by developers and that there will be direct negotiation between the land owners and developers. “We have worked out a formula by which the government’s involvement in land acquisition is not there. Besides, PCPIRs are largely being developed on land that are not cultivated,” he said.
Habil Khorakiwala, president, Ficci, said a recent delegation to the US led by Satwant Reddy, secretary, department of chemicals and petrochemicals, was very encouraging. “More than 70% of US-based chemical and petrochemical companies wanted to do business in India,” he said. Petro and chemical majors such as DuPont, Dow Chemicals, Exxon, Mitsubishi, BASF and BP have shown interest in these regions, he said.
According to a recent McKinsey report, it is not only the tax advantage that is making foreign investors do business in India, but its growth potential and cost competitiveness, which are proving more attractive. According to a recent report, the Indian chemical, petrochemical and pharmaceutical industry is one of the fastest growing sectors, with annual growth rates of 12%. Estimated at $40 billion, it contributes 14% to total exports from the manufacturing sector.
The idea of setting up such regions was floated in January 2006 when a group of non-resident Indians, comprising Pepsico chief executive Indira Nooyi, Citigroup senior vice-chairman Victor Menezes, former McKinsey & Co. managing director Rajat Gupta, Romesh Wadhwani, chairman and CEO, Symphony Technology group, Raj Gupta, president, Rohm & Haas, and venture capitalists Vinod Khosla and Parag Saxena led a delegation to India and had discussions with various state governments on setting up of these regions. It was then referred to a group of ministers headed by Paswan.