Why investment promises at Make in Odisha summit are not quite a juggernaut

Along with investors from abroad, businesses pledged Rs 4.19 trillion across 183 projects over the next 12 years in Odisha.

The theme of this year’s Make in Odisha investment conclave that wound up last week was “Come and Join the Juggernaut”. Going by the attendees, the galaxy of India’s corporate leaders certainly heeded the call.
 
Flanking Chief Minister Naveen Patnaik on the dais at the inaugural plenary were the who’s who of India Inc — from Reliance Industries Chairman Mukesh Ambani, Aditya Birla Group Chief Kumar Mangalam Birla, Tata Sons Chairman N Chandrasekaran to Vedanta Resources Chairman Anil Agarwal. Those present among themselves controlled two-thirds of the industrial output.
 
These industry stalwarts not only added sparkle to the show, but also promised to loosen their purse strings and invest in a range of projects— from metal processing to strengthening the state’s digital backbone. Along with investors from abroad, they pledged Rs 4.19 trillion across 183 projects over the next 12 years.
 
Yet not everyone seems enthused by the numbers. Questions have started to emerge over the sanctity of the investments pledged at the meet, which is more than double the amount committed in 2016. In the first edition of the biennial Make in Odisha conclave, the state had attracted investment intentions to the tune of Rs 2.03 trillion.
 
The concerns stem from a familiar ground. By the government’s own admission, only three of the projects announced in 2016 have gone into production; nearly 65 per cent are in implementation stage. “Many projects announced in 2016 are now under implementation and will be commissioned in due course,” said a senior officer of the state industries department.
 
Indeed, two years is a small period to judge the fruition of an industrial project. Yet there is another aspect to the story. Not all investments pledged at the conclave are fresh. Some of them, which have gone to inflate the total value of proposals, were announced months earlier.
 
To name a few, Tata Steel had announced to expand the capacity of its Kalinganagar facility to 8 million last year itself. SAIL, too, had lined up its plan to expand the Rourkela plant to 10 million tonnes last year. Similarly, Jindal Steel and Power and Vedanta had announced their expansion plans much before the conclave and Taiwan’s CPC group had first shown interest in setting up a petrochemical complex in July this year. All these have gone into the calculation of the Rs 4.19 trillion investment intention.

A closer look at the project proposals shows another trend. Many of the large projects are brownfield, not new investments. JSPL (Rs 600 billion), SAIL (Rs 410 billion) Tata Steel (Rs 100 billion), Vedanta (Rs 150 billion) have all pledged investments in existing plants.
 
The state’s track record of delayed implementation —Tata Steel took 11 years to set up Kalinganagar plant— and issues over land acquisition and raw material, which saw Posco and ArcelorMittal shelving their Odisha plants, may have fuelled this trend.
 
These problems, however, are unlikely to plague investors this time round, said state officials. An industry department official said the bulk of the projects in value terms comprises capacity expansion. “These promoters already have the land, so realising these investments won’t be a problem,” he said.
 
As for the greenfield projects, most of them are small in size, requiring smaller parcel of land and a cluster-based approach to meeting raw material and infrastructure needs. The state has created a land bank of over 1,25,000 acres and put in place a robust project approval and monitoring system to expedite the implementation process, he added.
 
The results are yet to be seen clearly as the investment proposals have gone along familiar lines. Belying the state’s focus on non-mineral sectors, the conclave saw the largest chunk of investment in the traditional metal processing sector, where Odisha has a natural advantage due its abundant reserves of minerals such as iron ore, coal, bauxite, manganese and chromite. This sector received 56 per cent of the promised investment, valued at Rs 2.36 trillion across 53 proposals and assuring creation of 0.18 million jobs.
 
One sector that threw up a surprise, however, was petroleum.  Save for a refinery by Indian Oil Corporation, the state has received no fresh proposal over the past decade. This time, though, the sector received Rs1.35 trillion worth of proposals spread over 37 projects. Topping the list was a Rs 700-billion proposal from Haldia Petrochemicals to build an oil refinery and downstream complex.
 
The surge in proposals may have to do with the emphasis Odisha is getting with Dharmendra Pradhan, who belongs to the state, as the minister of petroleum and natural gas.
 
The chief minister has set a target to implement 75 per cent of the fresh investments over the next two years.  According to him, the conclave was a watershed moment in Odisha’s industrial journey and the diversified investments would generate 5,91,000 additional jobs.  
 
“The target by the chief minister is ambitious yet achievable. The focus for the next two years will continue to be on translating the investment intents into projects on the ground,”said state industry secretary Sanjeev Chopra.
 
Many still have reasons to worry. Anil Agarwal and Naveen Jindal, who are facing serious challenges over raw material supply after sinking in Rs 600 billion and Rs 450 billion in their aluminium and steel facilities respectively, want the state to resolve the standoff. “Apart from bauxite for alumina refining, we are facing serious problem of coal supply for aluminium smelting operation,” Agarwal told reporters at the plenary. “You have brought me to the state as a bride, how you treat me is up to you,” he quipped.