Friday, September 14, 2012

'Emerging Kerala - 2012' and a bunch of hopes

Kerala set milestones in many areas like social development, land distribution, healthcare, women empowerment, education, governance etc. One of the fields left behind was industrial development; while running long and un-ending ideological struggle, both political movements and society forget to set firm steps on the track for industrial development.

It’s not that nothing happened, for e.g. Technopark - Thiruvananthapuram is India's first and largest IT/ITES park, Rajiv Gandhi Centre for Biotechnology (set up in 2002) is one of the pioneering institution in that sector. But, in most of the cases, state failed to follow up and end as a spectator when others cruised in both sectors.

In between, Kerala tried to do something in manufacturing as well. Many didn't take off, and many others comfortably landed inside red tapes. Summits like 'Global Investors Meet (GIM-2003)' raised hope, but failed to fully take off.

In this situation, the recently concluded 'Emerging Kerala - 2012' summit inaugurated by Premier Manmohan Singh, raises new hopes for industry. Small but highly populated states like Kerala has little land to offer for mega projects. NHAI's struggle in expanding the width of National Highways clearly describes this problem.

Some of the projects listed in the summit are critical for the future of economic development in Kerala

Supplementary Gas Infrastructure Project

This is a joint venture (Kerala Gail Gas Limited - KGGL) between, KSIDC and GAIL. KGGL will operate, "City Gas Distribution in Kerala, CNG Stations for KSRTC Buses, establishment of Gas Training Institute, laying of Spur Lines from GAIL's main pipeline, setting up of small Gas based small power generating plants etc. The total investment for the project is estimated at Rs.2,000 Crores ($400 million)".

There are some natural advantages for this project. First of all Kerala seaports - especially Kochi, Vallarpadam ICTT, proposed Vizhinjam port  - are located close to international shipping routes. The same routes which ships a good portion of Oil and Gas from Gulf of Persia to East, South East and Far East Asia. These ports can act as LNG gateway for India.

Moreover in urbanised area like Kerala, pipeline gas distribution network will be easier.

With an expanded LNG terminal in Kochi and supporting gas distribution networks, gas can give a major push to Industry in South India.

Vizhinjam International Deepwater Multipurpose Seaport

We are hearing about this port for decades. Located close to the capital Thiruvananthapuram, if this port really developed and raised to ICTT status, then we will be able to reduce the dependence on Colombo, Singapore and Salala ports for transhipment.

According to government, "dredging, reclamation and basic infrastructure like construction of break-water and quay will be done by Vizhinjam International Seaport Ltd (a company fully owned by Govt of Kerala). Port Operation will be on PPP model. Terminal superstructure will be built by private operator who will also operate and maintain it for 30 years."

Total cost is estimated to be around 7000 Crores ($1.4 billion). Considering the history of Vallarpadam ICTT, Vizhinjam will take another decade to take off. Another problem is capital; I don’t think cash strapped Kerala government will be able to execute it on its own.

It will be better to bring in private players and other port operators like Singapore Port Authority.

Titanium Sponge

One of the rare but valuable metal available in Kerala shores. Currently, Indian Rare Earths Ltd and Kerala Metals and Minerals Ltd (KMML) are operating in this field. It is good to start the production of Titanium sponge, in which is you are ready to move up in the value chain - from the primary operation of exporting the ore to exporting the metal - profits will explode.

Considering the international scenario, where China is holding a virtual monopoly over rare earth materials; major electronics manufacturing countries like Japan will be more than interested to partner.

Petroleum, Chemicals and Petrochemicals Investment Region - PCPIR

"proposed in Kochi...PCPIR is planned in 10,000 acres of land. entire area will be in close proximity to the Kochi Refinery of BPCL...40% of the PCPIR region aggregating 4000 acres will be the processing area."

I am not sure from where 10,000 acres of land will come. If we are waiting for this much land the program will soon find its way to cold storage.

It will be better to take a look at Singapore Petrochemical Complex. 'Petrochemical Corporation of Singapore (Pte) Ltd started as a joint venture between the Government of Singapore, The Development Bank of Singapore Limited and the Japan-Singapore Petrochemicals Company Limited (JSPC). The present shareholders are JSPC (50%) and QPI and Shell Petrochemicals (Singapore) Pte. Ltd. (50%).'

Kochi has the potential to become a petro chemical hub. A good port, near to international shipping channel, wide hinterland, rising industrial needs in South and Western India.

There is a long way between, having the potential and having something. Considering the high level trade union activism, left leaning politics, socialist ideologies, chances are very low for foreign companies like Shell, BP, Exxon, BASF, DuPont, Mitsubishi, Mitsui to come and invest.

GAS Power plant

As shale gas production is exploding in US, its price is coming down in international market. Once gas price is delinked from oil prices and we start importing from Qatar, Iran, Russia etc there is a possibility for abundant gas supply in Western shores of India.

With rising crude oil price, deficiency of Coal in market, political problems related to setting up new Nuclear power plants, gas is in a good position to become energy queen.

With the possible expansion of Petronet LNG's Kochi terminal's capacity from 2.5mn tonne (to be commissioned by the end of 2012), to 5mn tonne by 2014 Gas power plant is very much viable.

"Govt. has accorded approval to set up 1100-1200 MW Gas based Power Project at Cheemeni in Kasaragod District".

Life Sciences Park

"Creating a "cluster of industry (IT, Nano technology, biotechnology & Life Sciences), research institutions and sci-tech academy...would address the IT related needs of the rapidly emerging life sciences industry...260 acres..."

Promising idea, with potential to provide huge number of jobs and possible tax generator for government.

Electronic Park

I am not so sure about the viability of an electronics hardware industry in Kochi due to various reasons. After all we are yet to have a modern microprocessor plant anywhere in India. In such a situation it will be difficult for the wafer industry to take off.

High Speed Rail - HSR

Do we really need an HSR? Additional tracks or dedicated freight corridors will do the job at a lower cost.

Thiruvananthapuram - Kochi first phase billed at 41,245 Crores and Kochi - Mangalore second phase billed at 1.18 lakh crores may end up as a non-starter.

What we need is good rail and road connectivity among seaport, airport, manufacturing areas and India's rail and road networks. HSR can wait.

National Investment & Manufacturing Zone - NIMZ

Kochi-Palakkad (NIMZ) is a good idea in paper, but may not take off with the current grant designs.


I think government needs to identify some core industrial areas for development and focus on there. Port facilities & transhipment, petro-chemical complexes, banking & financial services, Healthcare and tourism looks promising.



1. Emerging Kerala 2012
2. Petroleum chemicals & petrochemical investment region (PCPIR)
3. Kochi-Palakkad National Investment and Manufacturing Zone (NIMZ)
4. High Speed Rail Corridor (HSRC)
5. Electronic Hub
6 Titanium Sponge Project
7. Life Sciences Park
8. Gas Based Power Project at Cheemeni
9. Kerala State Industrial Development Corporation

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