The Hindu Business Line : SEZ in coastal AP -- Port to decide location

The Andhra Pradesh Government wants to set up a special economic zone on the East Coast with private participation, and is veering towards locating it in the Vizag region. Trade circles, however, feel that the Kakinada region offers several advantages over the former location, especially because there is already a port close by.

THE Andhra Pradesh Government's proposal to develop a Special Economic Zone (SEZ) has the trade circles in the State in a tizzy. While the Government wants to set up an SEZ through private participation on some 10,000 acres somewhere along the 160-km Vizag-Kakinada corridor on the East Coast, the trade circles are not sure if the location is right. The State Government appears to be zeroing in on the Vizag-Parwada-Anakapalle (VPA) region, close to the proposed Gangavaram port.

But a section of the trade thinks that the Kakinada-Peddapuram-Rajanagaram (KPR) region is a better choice. Its main point is that there is substantial idle capacity in Kakinada port that can immediately made be available, while the Gangavaram port is not likely to be ready in the immediate future, given the not-so-good response from prospective investors. Another reason being trotted out by the trade is the potential that the KPR region offers for development of hub industries such as agri-based items including cotton, palm oil, and marine products, and PVC pipe units.

The Kakinada port factor, doubtless, holds water in the context of this debate. The port, operated by Kakinada Seaports Pvt Ltd (KSPL) — a special purpose vehicle of the Singapore-based International Seaports Pvt Ltd (ISPL), which is a joint venture between SSA Inc of the US (17 per cent stake), PSL of Thailand (17 per cent), Kansortium Logistics Berhad of Malaysia (26 per cent), L&T (16 per cent), Southern Infrastructure (17 per cent) and Ever Link Asia (7 per cent) — is likely to handle three million tonnes of cargo this fiscal against 1.87 million tonnes last fiscal.

The Kakinada deep-water port is not getting the projected cargoes when it was taken over by KSPL from the State Government. For one, agri-based products such as fertilisers, oil extractions, sugar, rice, wheat — together accounting for nearly 70 per cent of the projected volumes in the bid document — are not allowed to be handled by KSPL and have, instead, been reserved for the Kakinada anchorage port that continues to be run by the State Government. Second, naphtha was a major disappointment for the port. When the port was privatised, naphtha was seen as a potential cargo, but with the Centre subsequently deciding to phase it out and with power projects and fertiliser units switching to gas, the flow of naphtha to Kakinada is down to a trickle.

Also edible oil imports have declined significantly after the Customs duty on this product was raised substantially in the wake of the Government's new policy to encourage the domestic vegetable oil market. Even coal, which was to have been imported by the new power projects in the region to the tune of two million tonnes in two years, did not come to Kakinada port as most of the projects switched to gas-based plants. Alternatively, the port has been getting new cargoes, each of which has the potential to become the raw material for major industries that could come up in the proposed SEZ. For example, vegetable oil — the port is likely to import about one million tonne of this, which is roughly one-fourth of the total import of about 4.5 million tonnes into the country. The port has, for the first time, introduced rail movement of vegetable oil, which has encouraged many new units to set up vegetable oil refineries in this region.

Furthermore, a massive Rs 19,500-crore LNG terminal-cum-power project has been proposed at Kakinada by a consortium led by Indian Oil Corporation (IOC). This, experts feel, can lead to many hub industries, ranging from fabrication of pipes to LNG-based units, to come up in the SEZ. Said a senior representative of the Kakinada-based trade: "Proper development of the hinterland can ensure the port of a traffic of 40 million tonnes, which can lead to development of major industrial hubs, dealing with a variety of products. All these can thrive if they are located in a SEZ."

Trade circles, however, feel that locating an SEZ in the KPR region might face problems related to land acquisition, as compared to the alternatively proposed VPA region. "But the fact that a ready port facility is available, while the VPA region will have to wait for Gangavaram port to be developed, should weigh in favour of the KPR region. Land acquisition problems can be easily sorted out," argues an industrialist based in Kakinada.

Against this background, it is felt that the State Government should weigh the prospects of locating an SEZ immediately in the KPR region. The proposed one in the VPA region could be developed simultaneously or at a latter date, depending on the progress of work on the Gangavaram port.

Send this article to Friends by E-Mail

Stories in this Section
Kochi-Lakshadweep air taxi service soon

Emirates to buy new engines

Sinha steers sops transport sector way

SEZ in coastal AP -- Port to decide location

Logistics of East Asian recovery