State Of The Economy 2014

On safer shores

Bharuch is booming on the back of great roads, ports and a powered-up electrical grid

Photographs by Ajit Solanki

Chih-Hsuan Yen has been away from Taiwan for nearly two years, but still takes time to make the mental switch to English. The languages here at Dahej may be very different, but the 37-year-old Yen says there’s not much difference in work style. “Barring the summer heat and the hour-long drive from Bharuch city every morning, working here is much like working at Kaohsiung,” he says. Of course, it helps that he’s still working for a Taiwanese company — steelmaker China Steel Corporation’s India subsidiary — and he has the company of 100 compatriots who have also moved to Gujarat to ensure that commercial production of electrical steel starts at the Dahej plant this July on schedule.

None of the expats has seen much of the country or even the state so far, but that’s because right now, work is on at top speed. This is China Steel’s first project in India, so the bar is set very high. A ₹1,000-crore investment has been committed to produce 200,000 tonne of electrical steel each year. This alloy of iron and silicon is used in the power equipment industry, which includes compressors, electric motors, transformers and generators. There are 600 people employed at the Dahej facility, all putting in at least eight hours a day six days a week. So far, China Steel has acquired 50 hectares and made significant investment in the sector. “We are the first Taiwanese company in Gujarat and it has been an interesting experience for me,” Yen says with a smile.

Anywhere else, China Steel’s investment would be considered significant. At Dahej, in Bharuch industrial district, it pales in comparison with what Indian companies are investing — ONGC Petro is putting in ₹25,000 crore for a dual-feed cracker unit while IPCL has proposed a ₹10,000-crore investment for anew super specialty chemicals unit. Big Indian companies such as Reliance, Welspun and Adani Petronet have made their way here, as have multinationals such as ISGEC Hitachi Zosen, BASF and Firmenich Aromatics. 

Mega deals are almost commonplace in Bharuch district. The region, which has 11 industrial areas, including Ankleshwar, Dahej, Bharuch (city), Panoli, Palej, Vilayat and Jhagadia, has a long history of industrial activity. It is also host to large companies such as Asian Paints, Glenmark, Birla Copper, Cadila Pharmaceuticals, RPG Life Sciences, Rallis India and Sun Pharmaceuticals. But it’s not only big companies that are making a beeline to Bharuch: the district has close to 17,000 units employing over 80,000 people. And those numbers are increasing all the time, with people from Surat and Jamnagar as well as from outside Gujarat coming here in search of employment even as new units come up almost every day. What is the attraction?

Advantage Bharuch

“The assurance given by GIDC to industry was that infrastructure would support growth,” says BB Swain, vice-chairman and managing director, Gujarat Industrial Development Corporation (GIDC). That certainly seems to be the case. Speak with any business, big or small, in the region, and they unanimously point to the same advantages: no power and water hassles, connectivity with major cities and ports through good roads and rail linkages and a helpful administration. “Ankleshwar’s connectivity by roads, ports, railway and airports works in favour of Glenmark’s API facility here, where the bulk of the products are meant for the export market,” says Jalaj Sharma, director and president (operations), Glenmark. The pharma company forayed into the API business by acquiring GSK’s facility in the city in 2002. From a single manufacturing block, the location now has 13 blocks producing APIs and intermediaries for domestic and export markets.

Within the district, too, infrastructure has improved considerably: there is six-lane highway connectivity between Bharuch and Dahej and a broad gauge rail service between Bharuch and Ankleshwar that commenced in February this year.  MA Hania, president, Dahej Industries Association, recalls it would take at least three and a half hours in the mid-1990s to cover the 48 km distance between Bharuch and Dahej, which now can be done in barely an hour. “Today, Dahej has infrastructure such as effluent drainage, a desalination plant and pipeline corridor. Besides, the Delhi-Mumbai Industrial Corridor will pass through here,” he says, listing the advantages of the region. 

That’s what is attracting newcomers. The Delhi-based Payal Group, a manufacturer of basic chemicals and derivatives, for instance, came to Dahej in early 2011, inspired by others in the industry who were moving here. “We had a small plant in Daman and were looking for a larger facility. Since our raw materials are imported, we have to be near the coast to save on logistics costs,” says Nikhil Gupta, the group’s executive director.

The choice was down to either Maharashtra or Gujarat. “We were impressed by Dahej — the cost of logistics and proximity to a good port swung the deal in Gujarat’s favour — and decided to set up our facility there,” he explains. The group has invested ₹70 crore in a plant that was completed in February this year. Here, it will manufacture plasticisers, a petrochemical intermediate, with an installed capacity of 84,000 metric tonne per annum in the first phase, with two more phases expected to be completed next year. The project is housed in the 10,000-hectare Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR). According to Gupta, a huge advantage is that the supplier of chlorine, a key requirement for his plant, is very close to his factory. “The lack of subsidy from the government has been made good by quality infrastructure,” he says. It is this infrastructure that is helping companies in the region carry on business as usual, the slowdown notwithstanding.

Business as usual

It is 11 am and the harsh sunlight makes it clear that summer isn’t too far away at Ankleshwar. The temperature will hit the mid-40s in less than two months, Piyush Parmar says with a shrug. Parmar runs Shobhna Enterprises, a ₹1-crore entity that manufactures acrylic products that include signboards, boxes, folders and sheets. The business has grown by 15% each year, a rate he says he is comfortable with. But then, this is no big operation — Shobhna Enterprises has just two workers in a manufacturing unit that is all of 600 sq ft. A basic transistor blares tinny retro Bollywood music all day as they work quietly on number plates and signboards with messages such as Beware and Danger Ahead. Speaking a little loudly to be heard over the plaintive notes from the ’90s Bollywood hit Qayamat Se Qayamat Tak, Parmar points out, “With just two workers, my overheads are low. Labour costs are increasing but we manage that by producing more.” 

Parmar has been in Ankleshwar since the mid-1980s, when his family owned a radiator manufacturing business in the city. He’s also dabbled in several ventures such as the family business and chemicals before settling into acrylics. So far, the slowdown hasn’t really impacted him. He works with clients such as Wockhardt and Gujarat Gas and has been getting repeat orders every six months or so. Now he wants to grow and some of that growth will come from a ₹25-lakh investment in new machinery, which will expand capacity. “We will approach banks soon for a loan.”

One reason Parmar has managed to achieve respectable growth in the past few years is that he has several pharma clients — a number of pharma companies of all sizes have made their manufacturing base in the district. And the pharma business has been largely insulated from the slowdown. “In the pharmaceutical business, you are in trouble only if your product dies. We continue to work 24x7 and serve clients such as Sanofi Aventis and Ipca,” confirms Sanjay Marathe, founder and managing director, Chemcrux Enterprises, which manufactures intermediates for bulk drugs, dyes and pigments. A first-generation entrepreneur, Marathe came to Ankleshwar in 1983 after his MTech from IIT Bombay to start his own company with an initial investment of ₹6 lakh, with 60% funded by Gujarat State Financial Corporation and the rest from personal savings. Now, Chemcrux has a turnover of ₹20 crore and manufacturing capacity has grown from 1 tonne per month to 100 tonne. “There is continuous demand from our clients and this is an industry that is relatively immune to recession. To that extent, business growing is not a serious concern.”

With companies meeting their revenue targets, it’s not surprising businessmen in Bharuch are able to take the usual worries of rising raw materials and labour costs in their stride. “This is a reality we have to deal with. Yes, margins have dropped as a result but that is also an indication of a maturing industry,” reasons Marathe. That’s an approach echoed by Parmar. “There is a slowdown and margins are under pressure. But still, turnover is increasing at least 10-15% every year,” he points out.

Newer territories

It’s not as if businesses in Bharuch have no complaints, but what’s interesting is that they have found the solution within the district itself. The trouble centres on pollution from the chemicals industry in Ankleshwar, which led the government to declare it a critically polluted area in January 2010. It’s ironic, really: Ankleshwar itself became a chemicals destination in the late 1970s after Vapi was found to be violating pollution norms. And while effluent plants have since been set up in Ankleshwar, its status as critical zone continues, so no new projects are being approved in the city. Of course, it doesn’t help that Ankleshwar is a mature industrial hub, so finding space for new projects or expansion is anyway difficult. “In Ankleshwar, most of the land available so far has been disposed. To that extent, new firms planning to set up operations have to look elsewhere in the district,” explains Swain.

Not surprisingly, that has hampered the Ankleshwar story.  “The ongoing moratorium prohibiting setting up of new industries as well as expansion of existing facilities is definitely a huge setback for the belt. Also, the discontinuance of tax benefit for industries makes it a lesser preferred industrial destination today,” Glenmark’s Sharma points out. But the district’s advantages mean companies forced to look outside Ankleshwar often settle for one of Bharuch’s other industrial areas.

“All the new entrants in the district need large swathes of land and that facilitated the movement of industries, big and small, to places like Dahej,” opines Hania. This is obvious especially when projects are large and huge quantities of land are required. Dahej is in a position to offer that.

Chintan Shah is one among a host of people who have picked up land in Dahej. About two years ago, the 40-year-old bought a 20,000 sq m plot for ₹2.5 crore and expects to start construction there soon — Shah intends to invest ₹10 crore in the new facility. His ₹85-crore specialty chemicals company, Tatva Chintan Pharma, has been growing at over 15% every year and a clientele that includes companies such as BASF and Merck. Sitting in his modest office at his Ankleshwar unit, Shah recalls a time six or seven years ago when peeping out of his window was enough to make his eyes water. “I’ve been here 18 years and my decision to move to Dahej is only because of a high level of uncertainty in Ankleshwar in terms of approvals for new projects.”

Some entrepreneurs are looking at the redistribution of business within the district as a business opportunity. Prashantbhai P Modi is the proprietor of Hotel Shree Plaza, a 23-room property in Bharuch, where the occupancy is at a healthy 70% today. With more businesses opening up in Dahej, he is considering expanding operations. “We may open a hotel in Dahej now,” he says. Ankleshwar’s loss may be Dahej’s gain but the overall winner continues to be Bharuch district.

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