Kakinada revisited

A few months back I had referred to an article in the Indian press which raised doubts on the economic viability of ONGC’s refinery and petrochemicals project at Kakinada, Andhra Pradesh.

A few readers have posted comments arguing that the project is good for the local economy and should go ahead. I have no doubts that the project will go a long way in development of the region but I am still not convinced whether India needs yet another export-oriented project and also if such projects will be viable in the long run.

But it appears that the state government is quite focused and Andhra Pradesh appears set to be first state to get a PCPIR.

Their plan is to develop the entire coastal belt stretching from Visakhapatnam to Kakinada (see map)

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This places the proposed zone close to the recently discovered and soon to be commercialised Krishna Godavari gas fields. It is also well located to serve the Indian solvents, paints, pharmaceuticals, plastics and agrochemical industries.

According to the Andhra Pradesh Industrial Infrastructure Corp, 77% of land for the proposed 150 000 acre zone has already been acquired. Land to the extent of 8800 acres is already available for allotment.

The plan is to have five special economic zones within this area including two for pharmaceuticals and one for textiles.

The anchor investors would be Hindustan Petroleum which has plans to expand its existing refinery at Visakhapatnam and join hands with Gail, Total and Mittal for a new refinery and petrochemicals complex. The $6bn complex would have the capacity to process 15m tonnes/year of crude and produce 1m tonnes/year of olefins and aromatics.

The second major investor would be ONGC with a 15.5m tonnes/year refinery and an associated 450,000 tonnes/year polypropylene (PP) unit. ONGC also has plans to invest $5bn to develop the KG basin gas field and produce 25mmscmd of gas by 2025.

These projects have the power to transform Andhra Pradesh and revitalise the eastern coastal belt of India. What is needed is speed and this will go a long way in attracting more investors.

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