India petchem hubs – no chance!

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The long-contemplated attempt to build integrated petchem hubs in India, complete with shared utilities and strong investment incentives – aka China and Singapore – now seems even more of a hopeless pipe dream.

This follows the decision by Tata Motors to halt work on its Nano car plant in West Bengal following protests over land ownership.

Late last week Mukesh Ambani and other business leaders rallied to Tata’s support as they realised that the protests threatened other investments.

At stake are Reliance’s retail ambitions – and here goes, the government’s plans for petroleum, chemicals and petrochemicals investment regions (PCPIRs). How Asians love their acronyms.

I remember back in 2000 I had a meeting at the first APIC conference in Yokohama, Japan, with representatives from the Indian government who were very keen on establishing these hubs.

There has been almost no progress since and the land dispute at West Bengal is further evidence of just how difficult life can be in a thriving and open democracy where there are more vested interests than servings of yellow dahl.

China occasionally lifts the lid off the proverbial pot to release a little pressure – for example, the government’s decision earlier this year to give into protests over plans for a paraxylene plant at Xiamen in Fujian province.

But if protests seriously threatened China’s economic growth model, individual business interests with sufficiently good connections or China’s international image, the perpetrators would be marched straight off to re-education camps. You only have to look at the Olympics as an example.

So it looks likely to remain a do-it-yourself game in India when it comes to maximising integration and site-efficiency with Reliance the dominant practitioners.

From a national perspective also, maybe no PCPIRs in India would be a good thing.

“I spoke to the Indian government about these suggested sites at length,” said an industry source a few months ago.

“They at first talked about supplying the local market but when I produced numbers to point out that the scale of what was being planned was far too big for India, they conceded that a lot of the volume would be for export. Where’s the competitive advantage given India’s comparatively high logistics and feedstock costs?”

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