The Chinese government has asked many polluting industries to either down their shutters or shift from the northern region to central China. Hence, these companies are now looking at India to set up their units and Gujarat has emerged as the favoured destination.
The good news is that raw material import from China may become cheaper or may not be necessary.
Also technological inputs from China could be forthcoming for the local units. The bad news, as always, is the Chinese threat because of their scale of operations.
"The Chinese chemical and dyestuff units are faced with a peculiar problem. Infrastructure is not developed in central China and moreover the region is arid. Also, due to privatisation the industry is no longer enjoying incentives. Earlier the government financed the industry from the central pool and now they have to get loan at 12-14 per cent interest rates," said Natubhai Patel, director, Meghmani Organics and member of the Gujarat Chemical Association.
Meghmani imports raw material from China. The government is also not very forthcoming in promoting chemical exports, Patel added. China-based Zhejijang Lonsen Company has tied-up with Ahmedabad-based Kiri Dyestuff for setting up a 180,000-tonne chemical intermediates plant in the state.
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Also, Hubei Wale Dyestuff Industries' Chairman Leu Webil visited Gujarat some time ago for setting up a dyestuff plant with an installed capacity of 3,000 tonnes per month.
"The restrictions on the polluting industries of China due to the Olympic games is benefiting the chemical and dyestuff industry in Gujarat," said Jaimin Vasa, chairman, Gujarat Chemical Association.
However, there is a flip side also. If large Chinese players with huge production capacities move to Gujarat, the SME industry will be left in lurch.
"The Chinese players produce in bulk and their minimum capacity is about 3,000 tonnes a month. The SMEs, which are already facing competition in the home turf from big Indian players, will now also see Chinese competition," said Sailesh Patwari, chairman, Gujarat Environment Project.