Investments in petro schemes fall in 11th Plan

The progress of various schemes of the ministry of chemicals and fertilisers for petrochemicals, including its flagship Petroleum, Chemicals and Petrochemical Investment Regions (PCPIRs), considerably slowed in the 11th Plan (2007-12).

In its report to the government on the sector, the Planning Commission says the pace of investments has been much below expectation as has emerged in its discussion with state governments, the Department of Petrochemicals and the industry.

The primary reason for the slowdown in PCPIRs is the various private and public sector undertakings, which are acting as anchor tenants that have officially ‘put on hold’ their proposed investment decisions, according to the ministry. On the other hand, state governments are of the view that the proposed Budgetary support from the central government has been inadequate for developing the infrastructure in PCPIRs.

Similarly, the plastic park scheme announced by the ministry never took off with vigour. The objective of the policy, announced in 2010, was to encourage the competitiveness of the plastic industry by upgrading the quality of the product to meet the end-use of domestic industries and exports. However, the high cost of centralised effluent treatment and the negative image of plastic as a major environmental pollutant has hindered major investment and participation in the scheme, said the report.

At first, in 2006-07, six states gave proposals for PCPIR. Of these, three – Gujarat, West Bengal and Andhra Pradesh —were approved in 2009.

The various anch-or tenants for the PCPIRs are ONGC Petro Additions Ltd (OPAL), GAIL and Gujarat State Petro-leum Corporation (GSPC) for Bharuch, Gujarat; Indian Oil Corporation and CALS Refinery by Spice Energy for Haldia, West Bengal; Hindustan Petroleum Corporation Ltd and GMR Consortium for Visakhapat-nam, Andhra Pradesh, and Indian Oil Corporation for Kendrapara and Jagatsinghpur in Orissa.

The Karnataka government has decided to shelve the proposal altogether.

Till date, committed investments in all these Cabinet-cleared projects have barely reached 50 per cent of the proposed investment. The Gujarat PCPIR has a committed investment of Rs 22,930 crore (as against proposed investment of Rs 50,000 crore).

While the Haldia IOC-promoted PCPIR received investment to the tune of Rs 48,180 crore (Rs 93,180 crore), the Visakhapatnam projects committed funds worth Rs 1,74,654 crore (Rs 3,43,000 crore). The Haldia projects, though cleared in 2009, are yet to decide as to whether they are part of the West Bengal government’s PCPIR, which will determine the state government’s cooperation in the project.

Officials said the ministry aimed at creating a window for the government funding support and had proposed this to the Planning Commission. It is evaluating the scope of budgetary funding in these projects, apart from the specified mode of viability gap funding (VGF) and through public-private partnership (PPP).

Under the extant project guidelines, there is no budgetary support and the entire funding is to be done by the participants, which includes a government petrochemical public sector undertaking as anchor investor. The VGF scheme provides financial support in the form of grants, one-time or deferred, to infrastructure projects undertaken through PPPs.