Nayachar chemical hub unprofitable: NKID chief

Nayachar chemical hub unprofitable: NKID chief
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First Published: Fri, Aug 21 2009. 09 28 PM IST

Costly proposition: Prasoon Mukherjee, director of New Kolkata International Development says selling the hub wouldn’t be easy because of its remote location and thus prove to be expensive for the fir
Costly proposition: Prasoon Mukherjee, director of New Kolkata International Development says selling the hub wouldn’t be easy because of its remote location and thus prove to be expensive for the fir
Updated: Fri, Aug 21 2009. 09 28 PM IST
Kolkata: The West Bengal government’s proposed chemical hub at Nayachar—a 64 sq. km island on the Hooghly river in East Midnapore district—is a “loss (making) proposition”, according to Prasoon Mukherjee, director of New Kolkata International Development Pvt. Ltd (NKID), which through a joint venture with the West Bengal Industrial Development Corp. Ltd (WBIDC) is to develop the infrastructure on the island. “For NKID, it is an expense account,” Mukherjee told Mint.
NKID is a 50:50 joint venture between Mukherjee’s Universal Success Enterprises Ltd—a company registered in Singapore—and Indonesia’s Salim Group. Real estate developer Unitech Ltd also had minority equity interest in NKID, but it has recently sold its stake in the firm.
Costly proposition: Prasoon Mukherjee, director of New Kolkata International Development says selling the hub wouldn’t be easy because of its remote location and thus prove to be expensive for the firm. Indranil Bhoumik / Mint
Jurong Consultants Pte Ltd of Singapore has in its feasibility study indicated that the total cost of building the infrastructure on the island would be $3 billion (Rs14,610 crore). This includes a 2,000MW power plant.
“Even if you exclude the power plant, we will be spending some Rs11,000 crore on building the infrastructure, whereas the maximum we can recover by selling the infrastructure is Rs1,000 crore,” Mukherjee said, adding that because it is far off, selling Nayachar wouldn’t be easy and the infrastructure there was likely going to be used by “downstream players only”.
It is obvious that building the chemical hub at Nayachar would not be profitable, said Balbir Ram, principal secretary of the state’s land and land reforms department, who is a member of a recently formed committee of secretaries that is reviewing the chemical hub project. “We are abreast of his (Mukherjee’s) concerns,” he said.
Nandini Chakravorty, executive director of WBIDC, however, said, “The state government is committed to ensure viability of the chemical hub project.” She refused further comments on this issue.
When the plan to build the chemical hub was conceived it wasn’t a “loss (making) proposition”. “Had it been Nandigram, we would have profited… The agreement (with the state government) was we would build a 100km road and a bridge in return for securing land there (at Nandigram),” Mukherjee said.
The project had to be moved from Nandigram because of protests from local farmers. Soon after the state government announced plans to acquire land in Nandigram in January 2007, locals led by the Trinamool Congress—the state’s main opposition party—laid siege to the area.
When things came to head, the state government tried to forcibly regain control over Nandigram. In the process, on 14 March 2007, 14 people were killed, following which West Bengal’s chief minister Buddhadeb Bhattacharjee announced that the project would be moved elsewhere.
The costs of building the infrastructure have gone up substantially because Nayachar has to be “connected with various pipelines”, the whole island needs land filling because it is low lying and an embankment would have to be built around it to secure it from the river, explained Mukherjee.
“Yet, we could commercially exploit only 21 sq. km of the island at the most because of various environmental restrictions on the rest of it,” headded.
NKID had estimated development cost at Nandigram at Rs5 lakh an acre, whereas at Nayachar it’s going to be at least Rs2 crore an acre, according to Mukherjee. Also, at Nandigram, the infrastructure could have been sold at a much better price.
The West Bengal government had on 15 February transferred 54 sq. km of land on the island to PC Ray Chemicals Pvt. Ltd—the joint venture between NKID and WBIDC, which was given the mandate to build the infrastructure.
To recoup the losses of building the chemical hub at Nayachar, NKID has demanded from the state government “at least 5,000 acres of land with good development potential near Kolkata”. NKID has said it would pay “market rate” for the land, but the state government would have to acquire it, according to Mukherjee.
“The state government could give it to us in instalments, but we won’t start work at Nayachar unless we receive at least 1,000 acres,” Mukherjee said. “NKID’s targets are modest. We want only 8% internal rate of return from the projects, but we need some security to start work at Nayachar. Hence, we are asking for at least 1,000 acres immediately.”
Securing 5,000 acres of land near Kolkata is impossible, said Ram. “Getting even 1,000 acres of fallow land near Kolkata is difficult, and our minister (Abdur Rezzak Mollah) has clearly said that the state government wont touch multicrop land,” he added.
This effectively means that the chemical hub project could be shelved though Mukherjee claims, “it’s still possible to build it if the administration appreciates what it could do to the state’s economy”.
aniek.p@livemint.com
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First Published: Fri, Aug 21 2009. 09 28 PM IST