December to February are the months for networking in India. So a group of non-resident Indians (NRIs) "" including Victor Menezes, former vice-chairman, Citigroup, Romesh Wadhwani, chairman and CEO, Symphony Technology group, and Raj Gupta, president, Rohm & Haas "" couldn't have chosen a better month to return Prime Minister Manmohan Singh's invitation. The weather also seems to have facilitated their roundtable on speciality and petrochemicals along with a group of Indian entrepreneurs and state government officials. The outcome: this will lead to setting up of special economic regions (SER) across India. The SER concept is designed somewhat on the lines of a special economic zone (SEZ). But unlike the SEZ it does not involve any fiscal incentives and export obligation. Planning Commission deputy chairman Montek Singh Ahluwalia, who is also representing the Indian government in this initiative, clarifies: "The SER concept is similar to the SEZ only in nomenclature. SERs are different from SEZs as tax and other incentive are not involved. Nobody is expecting the government to give a fiscal incentive here," says Ahluwalia. The group says that the whole idea in setting up these dedicated regions is to get the right scales, where China has already taken a lead. And what is the size that can get them the right scale? Well, they feel a land area of 10 million hectares will be ideal. This group of NRIs has three or four sectors like pharma, garments and electronics in mind, but they have zeroed in on petrochemicals to start with. The group has chalked out a $30 billion investment in the chemical and petrochemical segment in the next three-four years. The group also claims the prime minister has given the green signal for 28 out of 40 recommendations made by them earlier, which will be implemented within a period of one year. "The Chemical & Petrochemical Roundtable", as it was called, has its roots in the PM's vision of making India a prime invesment destination, which Singh expressed last year during his visit to the US. About 30 leading global chemical and petrochemical firms interested in investing in India, including Exxon, Mitsubishi, BASF and BP, were also present were there for direct interaction with 8-12 officials from the states of West Bengal, Orissa, Andhra Pradesh, Karnataka and Gujarat and discussed creating the right climate for investment. Further, they were joined by entrepreneurs and strategic investors like Parag Saxena, CEO, Invesco Private Capital, P C Chatterjee, president, Chatterjee Group, Sunil Kumar, president and CEO, ISP Chemicals, and Anand Dorairaj, director, Citigroup International. "With investments ranging between $8-10 billion each, we are looking at setting up three mega-size chemicals and petrochemicals special economic regions (SERs) across the country," says Menezes. Wadhwani is also very upbeat. "We have brought together potential investing companies in the chemicals and petrochemicals sector and there is expectation that within the next 12 months we will see a significant investment," he says. Exxon, Mitsubishi, BASF and BP can act as anchor investors in these SERs and they are looking forward to alliances with domestic companies like GAIL, ONGC, IOC etc. The group envisages an investment of around $25-30 billion in setting up two-three mega petrochemical projects in the next three years time. And what gives them the confidence that petrochemical is the right choice for SER? According to a recent report by McKinsey, while per capita consumption of plastic in India is growing at only 9.4 per cent, that in China is growing by 13.8 per cent, so there is scope. Again, speciality chemicals is expected to grow from $7 billion to $14 billion by 2010, an 8 per cent growth. India has other advantages. It has large a low cost pool of chemicals and trained manpower, and the cost of skilled chemists is 10 times lower than that in the US. The report also says there can be 30-40 per cent savings on account of local fabrication of equipment and use of local technology. India also has an advantage on account of process engineering, low plant set costs, low labour costs and control over raw materials. And according to the report, opportunities are emerging for new entrants besides biggies like Reliance, Indian Oil, ONGC, GAIL etc. Besides, South Gujarat, Jamnager, Mumbai and Haldia having capacities of 1.4, 1.2, 0.5 and 0.5 mmtpa respectively in ethylene, with an immense opportunity to create world scale hubs. The group also feels substantial FDI will be attracted into India with this. And the first round of SERs or IRs (infrastructural regions) as some of them would like to call them, will further attract foreign investment. For the second round of SER, the knowledge sector is a strong contender. Wadhwani also says that they have got tremendous response from officials all the five states, and members also felt that different governments like the Left in West Bengal and BJP in Gujarat will not pose an impediment. However, with the SEZs themselves posing innumerable infrastructural and financial constraints, what assures these NRIs that the SER will be successful? "Quality infrastructure is the only facility that we are expecting from central and state governments in IRs," says Saxena. Well, if the government has to promote India as an investment destination, it will have to provide the needful.
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Wanted: Infrastructural regions
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First Published: Dec 24 2005 | 12:00 AM IST
