State Of The Economy 2017

Hope Floats

As a six-year moratorium that banned further expansion is being lifted, chemical companies in Ankleshwar look to get back on their feet

Soumik Kar

 

The 1,312 km long Narmada River awaits us as we steadily, yet meticulously approach it. The sun is about to set; the fishermen have docked their fishing boats on the riverbank. Our driver is carefully maneuvering the car on a narrow bridge as we trudge past a steady stream of oncoming traffic.

The chemical cluster of Ankleshwar that we are leaving behind is spread over an area of 1,600 hectares with 1,700 units, which manufacture a diverse range of chemicals, pesticides, pharmaceuticals, bulk drugs, petroleum products, engineering, textiles, plastics, rubber and packaging. The Gujarat Industrial Development Corporation (GIDC) set up the Ankleshwar Industrial Estate in the 1970s. Ankleshwar has had a long history, and the cluster has faced a series of challenges during its 46-year long existence. More than half the companies in this cluster are chemical units. With a total turnover of around Rs.10,000 crore, the cluster generates employment for about 2 lakh people. In terms of exports too, Ankleshwar contributes 35% to the state’s exports.

Battle for survival
In November, 2016 the Union Minister for Environment and Forests, Anil Madhav Dave announced lifting of moratorium on further expansion activity and new investments, which were put in place after the cluster was deemed a ‘critically polluted zone’ in 2010. This helped the Chinese companies gain market share, both in the domestic and global market. During this period, companies in the chemical hub found it difficult to compete and saw a decline in their sales. Production was flat while manufacturing costs doubled over the last five to six years. 

Restricted from scaling their business or leveraging any economies of scale, certain chemical companies started facing a crisis as they tried to match China’s competitive pricing. Jatin Gandhi, director, Modheshwari Chemicals, which manufactures ammonium chloride and whose revenue stand at a modest Rs.6 crore now, says his business has become unviable. “In FY10, there were 23 units within the cluster that were processing ammonium chloride. Today, only three of us remain. China’s competitive intensity has not only eroded our market share and profits, but has also created a shortage of raw materials. Ammonium chloride is a derivative tha

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