News Release Details
Some futile assertions in petrochem policy
New Delhi 02-Oct-2007
The new petrochemical policy announced last week is an innocuous document that, like many other sect oral polices unveiled in the recent past like steel and food processing policies, doesn't seek to bestow any new power on its architects. The policy is just a statement of intent, a chronicler of the sector which is an important pillar of India's manufacturing industry, and, to a certain extent, comprises a plan of action for the future growth of the sector. So, no new law or regulations would emanate from the policy. A key question that the policy unveiled by Union minister, Mr. Ram Vilas Paswan last week attempts to bring into focus is the "right pricing" of feedstock’s it promises to make available naphtha and natural gas, the feedstocks, at "globally competitive prices". Of course, there is no mention as to how this would be done. It is merely said a taskforce (yet another one!) will work for this. As for gas pricing, a larger debate is anyway underway. More upstream units cracker complexes would be set up to increase ethylene output from 2.7 ml, at present to 6.9 mt to ensure that this basic raw material is abundantly available for downstream plastic and synthetic fibre industries. The broader objective of the policy is to enhance per capita polymer use—in the form of plastics and synthetic fibres from current low level of 4.7 kg (world average is 25 kg) to a respectable 12 kg. The policy speaks of investment to the tune of Rs 36,000 crore in the upstream sector in the next five years and indicates that a major vehicle for these investments would be the proposed "four-five" petroleum, chemical & petrochemical investment regions (PCPIRs) for which the government would expend Rs 10,000 crore to create the basic infrastructure. Plastic recycling R&D, development of the technology for photodegradable polymers and plastics and new synthetic fibre technologies have also been promised.Some other assertions like those about de-reservation of plastic items from the SSI sector, inclusion of synthetic fibres under the technology upgradauon fund scheme, etc are anyway policies that have already been adopted or being implemented and don't quite need an emphasis. A rather striking (and discomfiting) feature, however, was a statement which the Union minister PR Dasmunshi made in April 2007 when he spoke to the press after the Cabinet gave its approval for the petrochem policy. He said an inter-ministerial group would be set up to make use of plastics mandatory in certain areas. Clearly, the UFA government would do well not to fulfill this promise which smacks of the projectionist era. As for ensuring the "globally competitive prices" of feedstocks, the issue is integrally connected to the economics of India's petroleum sector, which is closely knit with the global oil industry, given India's large import dependence to meet the crude oil requirement. And the dynamics of the gas economy doesn't allow easy fixing of the problem of "high or non-competitive prices". This is even as there are still unanswered questions about the veracity and viability of wholly "market-determined" gas pricing in India at this juncture. The policy assurance of globally competitive feedstock pricing, therefore, means little.
New Delhi 02-Oct-2007
The new petrochemical policy announced last week is an innocuous document that, like many other sect oral polices unveiled in the recent past like steel and food processing policies, doesn't seek to bestow any new power on its architects. The policy is just a statement of intent, a chronicler of the sector which is an important pillar of India's manufacturing industry, and, to a certain extent, comprises a plan of action for the future growth of the sector. So, no new law or regulations would emanate from the policy. A key question that the policy unveiled by Union minister, Mr. Ram Vilas Paswan last week attempts to bring into focus is the "right pricing" of feedstock’s it promises to make available naphtha and natural gas, the feedstocks, at "globally competitive prices". Of course, there is no mention as to how this would be done. It is merely said a taskforce (yet another one!) will work for this. As for gas pricing, a larger debate is anyway underway. More upstream units cracker complexes would be set up to increase ethylene output from 2.7 ml, at present to 6.9 mt to ensure that this basic raw material is abundantly available for downstream plastic and synthetic fibre industries. The broader objective of the policy is to enhance per capita polymer use—in the form of plastics and synthetic fibres from current low level of 4.7 kg (world average is 25 kg) to a respectable 12 kg. The policy speaks of investment to the tune of Rs 36,000 crore in the upstream sector in the next five years and indicates that a major vehicle for these investments would be the proposed "four-five" petroleum, chemical & petrochemical investment regions (PCPIRs) for which the government would expend Rs 10,000 crore to create the basic infrastructure. Plastic recycling R&D, development of the technology for photodegradable polymers and plastics and new synthetic fibre technologies have also been promised.Some other assertions like those about de-reservation of plastic items from the SSI sector, inclusion of synthetic fibres under the technology upgradauon fund scheme, etc are anyway policies that have already been adopted or being implemented and don't quite need an emphasis. A rather striking (and discomfiting) feature, however, was a statement which the Union minister PR Dasmunshi made in April 2007 when he spoke to the press after the Cabinet gave its approval for the petrochem policy. He said an inter-ministerial group would be set up to make use of plastics mandatory in certain areas. Clearly, the UFA government would do well not to fulfill this promise which smacks of the projectionist era. As for ensuring the "globally competitive prices" of feedstocks, the issue is integrally connected to the economics of India's petroleum sector, which is closely knit with the global oil industry, given India's large import dependence to meet the crude oil requirement. And the dynamics of the gas economy doesn't allow easy fixing of the problem of "high or non-competitive prices". This is even as there are still unanswered questions about the veracity and viability of wholly "market-determined" gas pricing in India at this juncture. The policy assurance of globally competitive feedstock pricing, therefore, means little.