The $1-billion multinational, Indo Rama, has signed a memorandum of understanding (MoU) with the two Japanese majors, Itochu Corporation and Mitsui Petrochemical Industries Ltd, to set a Rs 1,200-crore PTA project at Visakhapatnam.
A new company, Indo Rama Petrochemicals Ltd, will be incorporated in Andhra Pradesh to set up the 3.50 lakh tonnes per annum project.
In the Rs 400-crore equity new company, Indo Rama will hold 60 per cent (Rs 240 crore) while the two Japanese companies will together hold the balance 40 per cent (Rs 160 crore).
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The MoU was signed on behalf of Indo Rama by O P Lohia, Managing Director, Indo Rama Synthetics (I) Ltd and by Harasawa, Director, Itochu Corporation and Kimura, Director, Mitsui Petrochemical Industries.
The chief minister of Andhra Pradesh, N Chandrababu Naidu, who has been instrumental in persuading Indo Rama to locate the project within the state by offering special incentives, was present. Indo Rama had shortlisted port-sites in Andhra Pradesh, Karnataka and Gujarat for location of the plant and had been negotiating with these state governments on a suitable incentive package for over a year now.
The Andhra Pradesh government formulated a special incentive package, including a sales tax exemption upto 135 per cent of the capital investment spread over a 14-year period, for the project which obviously clinched the mega project.
In the event of Indo Rama not being able to utilise the full sales tax exemption within the stipulated 14 years, it could extend the period further, but the exemption will, in that case, be limited to the capital cost and not 135 per cent of it. O P Lohia said, of the 40 per cent Japanese equity, it has been tentatively decided that Itochu will subscribe 35 per cent and the remaining 5 per cent by Mitsui. However, Mitsui was free to increase its share within the stipulated 40 per cent foreign holding. Lohia announced that the Rs 1,200-crore investment on the PTA project was the first phase of Indo Ramas Rs 4,000-crore investment plan for Andhra Pradesh.
After the 3.50 lakh tonnes per annum capacity was achieved by end of 1999, Indo Rama proposed to take up an expansion of capacity by injecting a further Rs 1,300 crore and also set up a polyester plant of capacity 3 lakh tonnes per annum with an investment of Rs 1,500 crore.
Apart from the Rs 4,000 crore that Indo Rama would invest in the next five years, the setting up of the PTA project will attract a number of textile units in the area. Lohia projected a 20 per cent growth rate for the PTA industry in the country while the world-wide growth rate will be 9 per cent.
Both Harasawa and Kimura promised the latest technology for the project and tight time schedule for its completion by 1999-end.