Shortage of feedstock is likely to pose a major challenge to the Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs). The government has already approved four PCPIRs and two are in the pipeline with a total notified area of about 2,140 square km.
Availability of feedstock is going to be a huge challenge for PCPIRs owing to the allocation of available natural gas to the priority sector, which includes energy and fertiliser, apart from the dip in natural gas production in the K-G Basin, said Deepak Mahurkar, associate director of PricewaterhouseCoopers (PwC). He was speaking on the sidelines of a seminar on Andhra Pradesh PCPIR held here today.
According to him, the fertiliser sector can still depend on naphtha as its feedstock while the natural gas resources can be utilised for the growth of the petrochemical industry in the country.
Also, an integrated approach will be the key to creating competitive advantage for the sector as substantial value creation comes only with other mid-and-down stream industries and not just by producing petrol and diesel, which have been the mainstay of the Indian petrochemical industry so far, he said.
Of the six PCPIRs - the designated areas for establishing chemical and petrochemical industries, including oil refineries - four are coming up on the east coast and two on the west coast. The PCPIRs approved by the Centre are brownfield Bharuch (Gujarat), Visakhapatnam (AP), Haldia (West Bengal) and greenfield Paradeep (Orissa). The one proposed at Cuddalore in Tamil Nadu is in advanced stages of approvals while the Mangalore (Karnataka) project is under the planning stage. The Gujarat PCPIR has a committed investment of $5 billion.
AP PCPIR
The Andhra Pradesh PCPIR has the largest designated area of about 603 square km spread across the two port cities of Kakinada and Visakhapatnam, a PwC report said. The state government has already constituted a notified authority for the project while the master planning of the area is under way. Though public sector HPCL, which has proposed to set up a new 15-mta capacity refinery in Visakhapatnam, was to be the anchor client, other players are expected replace it.
“We had considered HPCL, which already runs a refinery in Visakhapatnam, to be the anchor client but they seem to have different plans. Now companies like GMR are coming forward to take up this role. Whoever comes up with a larger investment plan would be accorded anchor client status,” TS Appa Rao, principal secretary - industries and commerce, said.
About Rs 19,000 crore is expected to be pumped in to build external infrastructure for the AP project. Of this, Rs 6,300 crore has been committed by the Centre in the form of viability gap funding and Rs 2000 crore by the state government towards developing the existing roads besides water and power supply network. The rest will come from the private sector. The government has already acquired 20,500 acres for the project and the acquisition of another 7,600 acres is under way, according to Rao.
The state government hopes to attract $75 billion investments into this region, mostly through industrial investments and also for building physical and social infrastructure apart from developing a captive airport.
The petrochemical capacity growth rate, which has been 3-4 per cent a year over the last five years, is expected to increase four-fold to 12-15 per cent over the next 5-7 years, the report stated.
