India’s petrochemical investment region awaits anchor investor

22 March 2013 07:58  [Source: ICIS news]

By Ajoy K Das

KOLKATA (ICIS)--A proposed refinery and petrochemical investment region in the Indian southern state of Andhra Pradesh is becoming a non-starter due to lack of anchor investors despite provincial governments efforts to get it going, a government official said on Thursday.

India’s central and provincial governments signed an agreement for the establishment of the Vishakapatnam-Kakinada Petroleum, Petrochemicals, Chemicals Investment Region (VK-PCPIR) in 2009 that will require billions of dollars in investments.

The PCPIR is spread over 600 sq kms along a 140-km coastline.

However, talks between government officials and the state-owned Hindustan Petroleum Corporation Limited (HPCL) and GMR Group, one of country’s largest infrastructure company, to set up refineries and petrochemicals plants at VK-PCPIR have made no headway.

Provincial government officials and officials from the Department of Chemicals and Petrochemicals were currently in talks with oil refining companies in Kuwait and the US to become the anchor investors but no take-off date could be set for commencing work at VK-PCPIR till such talks yield firm investment commitments, the official said.

But he declined to identify the refineries in Kuwait and US.

HPCL earlier this month announced investing $6.85bn for a 9m tonne/year refinery at Barmer, in the deserts of central Indian province of Rajasthan  and an additional investment on  a petrochemical plant planned in the next phase.

This project will be HPCL’s primary focus and  its interest in VK-PCPIR was doubtful, the official added.

Even a grass-root refinery proposed by GMR Group too had not made any headway with the latter backing out after showing initial interest, the official said.

The VK-PCPIR was conceived in 2009 and a memorandum of understanding between the Indian government and southern provincial government of Andhra Pradesh, where the project was located, was signed the same year.

According to a fact sheet of the Department of Chemicals and Petrochemicals, VK-PCPIR was envisaged an investment of $5.8bn by HPCL for a 15m tonne/year refinery and a petrochemical complex, $5.7bn by GMR Group for a 15m tonne/year refinery and 450,000 tonne/year polypropylene  plant.

The provincial government in partnership with private investors had proposed investments to the tune of $3.5bn for construction of allied infrastructure. 

A viability gap funding to the tune of $222m had been sought from the federal government.

Meanwhile, despite the absence of any anchor investor, the provincial government of Andhra Pradesh was going ahead with preparation of Environmental Impact Assessment (EIA) report and  Environmental Management Plan (EMP).

However, the official in the department of chemicals and petrochemicals said that while the provincial government was working towards getting the project started with smaller downstream units, it was unrealistic since such investment commitments, in the absence of anchor investments in basic refinery and petrochemical plants, will not be viable.

($1 = €0.77)

Author: Ajoy K Das

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