Letting supply lead the way

By Malini Hariharan

Conventional wisdom suggests that it is best to build a plant where the market is. But can ready availability of material develop markets.

Take the case of India. In an interesting presentation at India Chem last week, Mathew George of Indian Oil Corp (IOC), pointed that each of the top five polymer consuming states in the country (Maharashtra, Gujarat, Daman, Uttar Pradesh and West Bengal) had a polymer plant.

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Source: IOC

The western region of India with its strong industrial base has always been a magnet for the plastics processing industry. But the rise of Uttar Pradesh and West Bengal has been purely supply driven. Gail (India) started a gas cracker and polyethylene plants at Auraiya, Uttar Pradesh in the 1990s while Haldia Petrochemicals commissioned its naphtha cracker complex at West Bengal in 2000.

George also identified ten distinct processing clusters in the country with activity concentrated in areas that offer the best tax incentives.

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Source: IOC

The analysis has interesting implications for IOC which has just commissioned its cracker complex at Panipat in Haryana state in northern India, which currently accounts for only 2% of India’s polymer consumption.

The Haryana state government has been talking of developing a polymer processing cluster but progress has been slow. Until this happens IOC will have to rely on neighbouring states some of which are seeing increased investment activity.

There is also Pakistan next door and IOC has already moved around 1000 tonnes by rail. The Lahore market has the potential to absorb even larger volumes but logistics bottlenecks and politics will have to be overcome.

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