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Is India losing out to other Asian countries for investments in the Petrochemical Sector?
 

The opening of the economy in 1991 has lead to good growth in India. The petrochemical industry has particularly shown an impressive growth with substantial capacity additions. Ethylene capacity has gone from less than 0.5 million tonnes in 1992 to almost 2.5 million tonnes by the turn of 2002. Similarly, the capacities of propylene have also gone up. Infact, consumption of polymers has touched approximately 4 million tonnes by 2002. Despite the impressive growth, no new major investments have been seen after the Haldia Petrochemical project. Some investments have been made in PET and PS projects. There is a distinct possibility of some investments in PVC.

However, no multinationals are seriously considering investments in India. Investments, however, have been considered in other countries of Asia. Multinationals seem to be more interested either in the Middle Eastern regions on account of an access to cheap feedstock or in China on account of significantly larger consumption and very impressive growth potential. Besides China, Singapore is also attracting huge investments, particularly in cracker and PE/PP plants. Shell is considering developing a 1 million tonne cracker at Singapore after the successful completion of 800kt Exxon Mobil project a couple of years ago.

The question about lack of investment by multinationals in India possibly has a few answers. First is the relatively poorer infrastructure facilities. The cost of capital, although has been reducing in the last few years, is still higher than Singapore or China. The inflexible labour laws and slow decision making as well as rigid burecarcy make multinationals select either Singapore or China as the preferred Asian regions for investments in petrochemical industry.

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