Newsletter from Kerala State Industrial Development Corporation 2 Kannur airport works kicked off
3 Ocean life, up close
Vol.1 Issue 8 December 2010
4 Engine of growth
Stepping on the gas The LNG terminal, the gas pipeline across the State and the City Gas Distribution project in Kochi together entail an investment of ` 16,000 crore in Kerala, spread across five years. The cheaper, green fuel will change the way Kerala lives its life and conducts its business. Forever. ON
Contd. on page 4
Kannur airport works kicked off
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hief Minister V S Achuthanandan laid the foundation stone for the Kannur International Airport on December 17 at a glittering function in Mattannur, 35 km from Kannur. Union Minister of State for Civil Aviation Praful Patel presided over the function. The ` 1,100-crore airport project is being developed as a public-private initiative by Kannur International Airport Ltd – a special purpose vehicle in which the State government will hold
26 per cent equity, public sector undertakings 23 per cent, other institutions promoted by the Government 2 per cent while private individuals and institutions will hold 49 per cent. The green field airport, the fourth international airport in Kerala, is expected to be ready for commissioning in two years. The government has acquired 1276 acres of land while acquisition work on 700 acres more is in progress. The airport will have a runway length of 3400 metres.
PSUs turn in record profits
As many as 36 PSUs are expected to register a total net profit of ` 300 crore for the first half of the current financial year against ` 239 crore made by 32 PSUs during the same period last year, according to the half-yearly performance review of the PSUs under the Department of Industries and Commerce. “This would be a record performance for the PSUs in Kerala,” said Elamaram Kareem, Minister for Industries and Commerce. The government plans to use the surplus funds from the profit-making units to launch 10 new ventures in the State and expand six existing ventures. The new ventures are expected to be launched in January 2011.
would integrate road, rail and water transport in Kochi has started with Minister for Fisheries and Registration S Sarma laying the foundation stone. In the first phase, bus parking facilities would be readied at the terminal. It will occupy six acres out of 25 acres earmarked for the project and is estimated to cost ` 15.80 crore. The contract for this phase was awarded to Nagarjuna Constructions. The facility is expected to open by the first half of March. The proposed waterway and Metro Rail would link to the terminal and provide commuters with costeffective, fast and viable alternatives to road transport. The construction of the main parking terminal will start once the project receives approval under the Jawaharlal Nehru National Urban Renewal Mission.
Work on Vyttila mobility hub begins
Call for themebased IT parks
Work on the first phase of the ` 450-crore Vytilla mobility hub which 2
Infosys Technologies Ltd Managing Director and CEO S Gopalakrish-
nan has said Kerala needs to focus on theme-based IT parks to attract more entrepreneurs of that particular industry. He also suggested that Kerala create a unique brand about the quality of life offered for the employees in the IT sector. The State is emerging as an attractive and investor friendly location. “We are seeing a good atmosphere in Kerala for investment. The government is always supportive for the IT industry,” he said speaking at the India ICT Summit, organised by the Confederation of Indian Industry in Kochi. Dr. Ajay Kumar, IAS, Principal Secretary (IT), who delivered the keynote address, said Kerala’s contribution to the national IT export basket has doubled in the last 10 years. S Mahalingam, Executive Director and CFO of Tata Consultancy Services (TCS), also spoke on the occasion.
Austrade opens office in Kochi
The Australian Trade Commission, the trade and investment development agency of the Australian federal government, has set up an office in Kochi with a view to enhancing business relations between the two countries. Australian High Commissioner to India Peter Varghese opened the office, which functions from Taj Gateway Hotel. Australia was looking at enhanced cooperation and investment in areas such as infrastructure, tourism, food processing, education and IT. Austrade, the ‘first port-of-call’ for companies, has an on-the-ground network of industry specialists and can reduce time, cost and risk involved in finding the right Australian business partner for an Indian company. Peter Varghese and Avinoor Ahmed, Trade Commissioner, held talks with Additional Chief Secretary (Industries and Commerce) T Balakrishnan, IAS, and KSIDC Managing Director Alkesh Sharma, IAS, on increasing Australian investment in India. Australia will help train the required manpower for setting up the massive gas infrastructure in the State, Mr Varghese said.
KSIDC NEWS
the bid manager for the project, has begun the pre-qualification procedures to identify developers for the project. It has invited request for qualification (RFQ) from potential developers. A special purpose vehicle, in which the State Fisheries Resource Management Society (FIRMA) and the select-
ed developer are partners, will set up the oceanarium in the public-privatepartnership (PPP) mode on design, build, finance, operate and transfer basis. The estimated cost of the project, to be set up on about 40 acres of land, is ` 350-crore. KSIDC, which had conducted a pre-feasibility study on the project, will pre-qualify and shortlist suitable developers through an open international competitive bidding process. The pre-qualification bids may be submitted till January 15, 2011. According to KSIDC officials, those who qualify in the pre-qualification bid will be invited for the financial bid. The potential developer will be selected by March this year. The project is expected to be commissioned in two years. The first of its kind in the country, the oceanarium will offer a ringside view of the aquatic life in the Arabian Sea through a 250 metre-long glass tunnel beneath the sea. The vibrancy of marine life, represented by coral reefs, sting rays, turtles, sharks and other fish, will be reproduced in the oceanarium by creating the ecosystem. The oceanarium will also host a dolphin lagoon and related tourism amenities. An International Marine Biological Research Centre is also proposed to be part of the project.
of natural gas looks promising. Work on the 5 mmtpa regassification terminal in Kochi, India’s second, is going ahead as per schedule and will be commissioned by March 2012. GAIL Ltd has already launched the massive work of laying pipelines which will be ready by the time the terminal is commissioned. With the infrastructure getting ready, it is time for Kerala society to wake up to this new eco-friendly, cheap and efficient fuel. The Gas Conference which the KSIDC organised in Kochi was aimed at preparing the groundwork for industries and individuals to make the switch when gas starts flowing. The meet was attended by all the key players and the potential customers. It was a huge success in that it opened up the opportunities
and challenges the new fuel source presents before our State. The overwhelming response of the industry was also encouraging. The meet, however, is only the first step. We need urgent action on the ground. KSIDC has already pledged itself to the cause by joining hands with GAIL for the City Gas Distribution project in Kochi. We will also help industries that make use of natural gas as fuel in all sectors of the economy, including power, tourism, food processing, cold chains etc. Downstream projects are another promising sector. Our economic progress is intertwined with our success in embracing this new fuel. Let’s make the most of it. I solicit your feedback at mdksidc@vsnl.net Alkesh Sharma
Ocean life, up close KSIDC kickstarts selection process for developer of India’s first oceanarium The State government’s plans for strengthening the tourism infrastructure are getting a fillip with the process of setting up a world class oceanarium at Puthuvypeen, off Kochi, gaining momentum. The Kerala State Industrial Development Corporation Ltd (KSIDC),
From MD’s Desk
Getting ready for a new fuel
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erala has a tough task at hand. It needs to promote industries and create jobs for its highly educated population. It also needs to be extremely mindful of its pristine environment, which sustains tourism, its single largest revenue earner. The demands made by these twin objectives look mutually exclusive, but can be met by using available tools and resources imaginatively. It is in this context that the arrival
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Minister for Industries and Commerce Elamaram Kareem inaugurates Natural Gas Conference organised by KSIDC. On stage are (from left) KSIDC Managing Director Alkesh Sharma, IAS, Principal Secretary (Power) Paul Antony, IAS, Chief Secretary Dr P Prabhakaran, IAS, PNGRB Chairperson L Mansingh and Additional Chief Secretary (Industries and Commerce) T Balakrishnan, IAS.
Engine of growth
The KSIDC seminar ushers Kerala in to the possibilities of gas-based economy
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he one-day ‘Natural Gas Conference—Gas Infrastructure in Kerala: Engine of Economic Growth’ organised by KSIDC at Kochi on December 13 is hailed as a timely initiative to introduce the possibilities of a gas-based economy to the stakeholders of Kerala’s economy. The meet brought together all key players-policy-makers, regulators, marketers, consultants, and most importantly, representatives of the industry who are the direct beneficiaries of the various projects—on to a stage for meaningful interaction. In all the four sessions, erudite men presented the possibilities and challenges before an audience, that is yet to taste gas as an industrial infrastructure. The interactive sessions saw potential clients clearing their doubts about the bottlenecks, including pricing and connectivity. The speakers agreed that nat4
ural gas would make Kerala economy more competitive in an increasingly competitive world. The points they put forward include: • • •
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Natural Gas will shape Kerala’s economy in the future because it is cheap and eco-friendly Kerala will have gas infrastructure ready in 13 districts by 2012 India will have 3 LNG terminals and 21,000 km pipeline by 2013; 5 terminals and 35,000 km line by 2015. It will require $50-70 billion investment in the next five years. Price of gas as well as energy is only going to go up; so better have the infrastructure and make the most of it. Kerala should turn to eco-friendly fuel, for global warming can pose real threat to its existence. City gas distribution in India is
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going to be a big business. It will cover over 150 cities in the next 5 years. Its critical to address matters of safety in CGD systems. Gas allows companies/units to run their own power generating units.
Industries in Kerala will be able to use LNG in the following sectors: • Power generation • Transportation, including water transportation • Fertilisers • Bakeries • Cooling-heating-power generation in hotels • Food chains • Dehumidifiers • Tea-processing • Cold chains • Construction • Manufacturing of testing and safety equipment
Minister for Industries and Commerce Elamaram Kareem, who inaugurated the conference, said the arrival of gas will transform the lives of people in Kerala. He said an administrative price mechanism would be able to address the needs of the power and transport sectors and would benefit various sectors of the economy. Pointing out that the State government had given a blanket permission to the gas pipeline project of GAIL, he demanded that nodal agencies of Kerala government such as KSIDC be given sufficient participation in implementing the city gas distribution projects. The availability of natural gas will have a tremendous impact on the development of power plant at Cheemeni near Kannur, high speed rail corridor from Thiruvananthapuram to Mangalore, industrial corridor from Kochi to Coimbatore, Titanium sponge factory, Kannur airport and overall industrial growth, he said. Dr P Prabhakaran, Chief Secretary, Kerala
The gas infrastructure when put in place will be a boon for the domestic as well as industrial customers of the State. L Mansingh, Chairman, PNGRB
There is no statutory provision for pricing gas, and it will be basically decided by price discovery system. Instead of focusing on pricing, States should ensure setting up proper infrastructure so that their economies will grow. Gas, anyway, will be cheaper than all other fuels such as diesel, naphtha or furnace oil. It will offer big opportunities for entrepreneurs as the country is planning to make an investment of up to $50 to $70 billion in the next five years. LNG will be made available to 13 districts of Kerala in two years. Ernakulam has been included in the 4th round of the bidding process, which would take place on January 27. However, the board is contemplating giving
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magine Kerala’s booming tourism industry turning to natural gas, the green fuel, for its energy requirements. Or power projects making use of the cheaper fuel. Or manufacturing units using a more efficient, less polluting alternative
another one month for the bidders to prepare their plans. T Balakrishnan, Additional Chief Secretary (I&C)
Once the gas pipeline network connecting Kochi Petronet LNG terminal with Mangalore and Bangalore via Coimbatore is completed, Kerala would be able to get gas both from indigenous source and LNG terminals at Kochi, Dhabol and Dahej. Industries such as power generation, fertilizer and petrochemical production are shifting towards natural gas. There are several ways in which natural gas may be used on-site to generate electricity. Fuel cells, gas-fired reciprocating engines, natural gas-fired industrial turbines and micro turbines with capacities varying from 7 KW to 1500 KW use natural gas as fuel all over the world. Paul Antony, Principal Secretary, Power
Kerala has lined up gas-based power projects which will generate 3750 MW power. The regulatory body should mull over introducing a pool pricing system to make power from these projects affordable. S Venkatraman, Director-Business Development (GAIL)
Gas is one of the most promising sectors of our economy. World over, natural gas meets 24 per cent of the energy needs while it is only 9 per cent in India. The government policy seeks to take this to 20 per cent by 2025. Gas will help the nation, whose GDP grows at 9 per cent, to meet the twin, and often conflicting, demands of power and green environment. The share of the manufacturing sector in Kerala’s economy will go up with the arrival of gas. Manu Shrivastava, Joint Secretary, Ministry of Petroleum
A pool pricing mechanism will help
The thermal power plants in Kerala could find using gas to be more economical than other fossil fuels. So would industrial establishments.
States like Kerala. LNG used to be a supplier’s market till two years back; however, today it has softened, and the prices are more sober now. Gurpreeth Singh Chugh, Consultant, Crisil
India’s primary energy consumption grows 5-6 per cent a year now. Up to 40 per cent of this is being met by import of fuels such as oil, coal or gas. This import figure will go up at least 2.5 times by 2025. The power sector is the biggest consumer of gas now at 45 per cent; however demand from CGD systems will double in the coming years. The demand for gas alone will go up 7.5 times by 2025. SP Singh, Senior Consultant, Deloitte
FDI is allowed, but regulated. It is welcome in the automatic route only for capital investment and for fresh investment, and not for running a business or for buying existing shares. There are several anomalies in the taxation system, and they have to be removed, especially as gas fuels power production in a big way. States must tax it at the lowest slab. J Wasan, Executive Director, GAIL
The consumption of gas in the industrial sector has more than doubled from 6 to 13 per cent in the last 10 years. India has one of the smallest pipeline network; we will have 21,000 km by 2013 and 35,000 km by 2014-15. India will have five terminals in the next five years. The priceofLNGisonlygoingtogoup. MS Unnikrishnan, Managing Director, Thermax Industries
Power consumption in Kerala is low, lower than global standards. It is going to go up. The State may use gas intelligently and economically for its power requirements. for cooling and heating. Or homemakers turning on the reliable and safer piped natural gas in kitchens. Rest your imagination; they are all set to become a reality. The LNG regassification terminal of Petronet LNG at Puthuvypeen is scheduled 5
Gas-based appliances are more efficient, require lesser maintenance and last longer than those which run on electricity. Gas can be directly used in geysers, air-conditioners and refrigerators. to be commissioned in 2012. GAIL Ltd, armed with an unprecedented blanket permission from the State government, is laying pipelines across the State to carry the gas to its potential customers. The Petroleum and Natural Gas Regulatory Board, the regulator, has already launched the process of picking up an entity to implement the city gas distribution (CGD) project in Kochi; Thiruvananthapuram may be next in the line. The ` 4,000-crore gas pipeline project will be implemented in two phases. In the first, a 96-km pipeline from Kochi to Aluva will be laid. The second phase consists of a 1018-km pipeline from Aluva to Kanjirkkod, Kanjirkkod to Mangalore and Kanjirkkod to Bangalore via Palakkad. A sub-sea pipeline from Kochi to the thermal power plant at Kayamkulam, which could be later extended to Thiruvananthapuram, is also part of the project. Industries on the route of the pipeline could tap gas through feeder lines, while isolated industrial establishments could opt for transporting LNG in trucks and storing them in tanks. Kerala’s gas demand is estimated to be 5.58 mmscmd and it is projected to grow to 36 mmscmd by 2025. Petronet, anticipating increased demand as and when the terminal starts operation, has sanctioned doubling the capacity of the terminal to 5 mmtpa. The 20-year gas supply deal it has signed with US energy major ExxonMobil will ensure the Kochi terminal an annual supply of 1.5 million tonne LNG from Exxon’s Gorgon LNG terminal in Australia. The gas is expected to start flowing from 2014. In the meanwhile, Petronet LNG will buy gas from the spot markets depending on the demand for gas in the region. 6
T
he arrival of natural gas throws open many hitherto unavailable opportunities to industries and entrepreneurs in the State. Setting up the supply chain — the sources of gas, the infrastructure to transport it and the end consumers — itself offers big investment opportunities. Laying the pipes and operating and maintaining them, supplying the valves, fittings, meters and safety devices for the pipeline network, setting up LNG hubs and managing fleets of tankers are businesses with a lot of potential. Setting up CNG outlets for vehicles also offers new investment and employment opportunities. Gas will be a source of cheap energy for a number of sectors. Industries could use it in boilers and furnaces. Vehicles running on CNG will have lower fuel costs, are more environmentfriendly and have higher efficiency due to the high octane levels of natural gas. Gas is an ingredient in industries such as fertilisers, polymers, glass and plastics. The availability of gas will help these industries reduce their costs and be more competitive. The power and fertiliser sectors account for around 70 per cent of the natural gas consumption in India. The industrial and CGD projects account for the remaining gas consumption. Natural gas occupies 24 per cent of the global energy basket, compared to just 9 per cent in India, showing the potential for its increased use in the
country. The thermal power plants in Kerala could find using gas to be more economical than other fossil fuels. So would the 700-odd industrial establishments located around Kochi which can substitute liquid fuel used for generating power and heating and cooling with gas. The switch from coal or other liquid fossil fuels to LNG can also reduce the carbon emissions from these plants by half.
A NEW WAY OF LIFE
As the availability and accessibility of gas increases, the market for gas based appliances is also expected to experience high growth. Gujarat Gas, which operates in India’s most advanced gas market, has already developed natural gas-based appliances catering to specific industries. In Kerala too, the stage is set for developing applications that will usher in the gas age. Apart from the basic applications of gas, the State needs to develop highend versions if it is to reap the full ad-
Interview L Mansingh, chairperson, PNGRB
Focus on services sector
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etroleum and Natural Gas Regulatory Board is the statutory body mandated to frame rules for the sunrise industry and to ensure that the players play by the rules. Its chairperson, L Mansingh, has had decades of experience in the sector having held several positions in Gujarat and at the Centre. As managing director of Gujarat Industrial Investment Corporation and Principal Secretary of Industries & Mines Department, he played a key role in creating the gas infrastructure in Gujarat. In an interview with Update, Mansingh said Kerala should move fast on laying the infrastructure. “Instead of looking at manufacturing sector, Kerala should ensure that gas helps its services sector, including tourism.� Excerpts:
to the State. Industries found that it was a cheap fuel that made their products competitive, and the demand rose. Today, Gujarat has the best gas infrastructure. The ceramic industry in Morvi industrial area is the best example of how natural gas can help the survival and growth of the small and medium enterprises. Gas arrived at a time when the industry was finding it difficult to face competition from cheap Chinese imports. They were almost resigned to the impending closure of their units. It was at that time the government arranged a pipeline to carry natural gas to them. It changed the game: today, they are not only doing brisk business, but also are exporting in a big way. The cheap natural gas made their products more competitive.
How did the arrival of natural gas help the industrial sector in Gujarat? Gujarat was the first Indian State to make industrial use of natural gas. We brought gas, which was being burnt at Bombay High as a wasteful by-product,
Don’t you think pricing is an issue for industries? My suggestion is that you do not lay too much emphasis on pricing. Natural gas would anyway be cheaper than all other fuels. Plus, it brings several other
vantage of a gas-based economy. Only the widespread use of gas in such applications could help the gas ecosystem attain volumes which would provide them with economies of scale.
ger than that of conventional electric systems. Natural gas-based chillers and dehumidifiers could also find a ready market here.
Gas-based appliances are more efficient, require lesser maintenance and last longer than those which run on electricity. Natural gas can be directly used in geysers, air-conditioners and refrigerators. Natural gas-based airconditioners use 30-50 per cent lesser energy than those that use electricity, need lesser maintenance as they have no compressors and have lesser moving parts. Their life is often 2-3 times lon-
Natural gas-based air-conditioners use 30-50 per cent lesser energy than those that use electricity, need lesser maintenance as they have no compressors and have lesser moving parts.
advantages: it is a more efficient fuel which requires no inventory, no storage and little maintenance. Industries need not fear pilferage. It comes with an assured supply 365 days of the year. Industries should build efficiency on such smart fuels and do good business. How can Kerala benefit from natural gas? Kerala should ensure that natural gas powers its tourism sector, as it is your main revenue earner. As a green and clean fuel, it will help keep the pristine character of your State. Technology is available for the various needs, including for temperature manipulation, for the hospitality industry. Ushering in natural gas to the transportation sector will also help preservation of nature and the fight against global warming. Natural gas will also help sectors such as food processing, cold chains and water transport which holds immense scope in Kerala.
Gas could also be used for distributed power generation. Combined heating, cooling & power (CHCP) systems, where the heat produced during power generation is used for heating/cooling requirements, could be installed in industrial facilities and commercial establishments for power generation. Gas-based generators are more economical than diesel-based ones as well as backup devices like inverters. They offer an economical and convenient backup power solution to commercial establishments. Gas-based fuel cells have the potential to deliver clean, dependable electricity wherever it is needed. 7
The City Gas Pipers For the residents of Ernakulam District, the wait for gas cylinders could soon become a thing of the past. KSIDC has teamed up with GAIL to bid for the city gas distribution project.
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ity Gas Distribution (CGD) projects, which supply piped natural gas (PNG) to household customers and compressed natural gas (CNG) to the transport sector, will soon come calling to Kerala. Piped gas is the preferred means for gas distribution in many cities in the world, thanks to its many advantages. For customers it provides unmatched convenience as it obviates the hassle of booking gas and the wait. Natural gas is cheaper than LPG; has the lowest carbon footprint among fossil fuels, and can reduce carbon emissions thereby leading to lesser pollution. Natural gas being lighter than air rises and dissipates faster on leakage, unlike LPG that accumulates due to its heaviness. Hence Natural Gas is much safer than LPG. PNGRB has invited bids for CGD project in the whole of Ernakulam District, in CGD Bidding Round IV. The last date of bidding is 28th Jan, 2011. CGD bids for other districts through which the gas pipelines will pass - Kozhikode, Kannur, Palakkad, Thrissur, Kasaragode and Malappuram, will also be called soon. The service could be extended to the rest of the State , in-
CGD is not a new concept in India, where CGD projects started more than a century ago, with the formation of the Calcutta Gas Company in 1880. 8
cluding Thiruvananthapuram, the State capital, once pipelines are laid to those areas. KSIDC has already formed a JV with GAIL for CGD in Ernakulam district. A CGD project is a network of pipelines to transport gas within a specified geographical area. Different levels of pressure have to be maintained at different points of the network to satisfy the various segments of gas users – domestic, commercial, industrial and automobiles. It starts with a City Gate Station (CGS), where gas is received from the main pipeline. From the CGS, feeder pipelines take gas to CNG Stations for fuelling vehicles and to District Regulating Stations (DRS) where the gas distribution pressure is regulated. At the DRS, the gas pressure is reduced from 19 bars to 4 bars and transferred to a service regulator – a device that further reduces the pressure from 4 bars to 0.1 bar and ensures the flow of gas at a constant pressure. The service regulator supplies gas to meter regulators, installed before the meter at apartment complexes, where the pressure is again reduced to 21 mbar and supplied to households. Its advantages have made CGD projects popular in our country too. CGD is not a new concept in India, where CGD projects started more than a century ago, with the formation of the Calcutta Gas Company in 1880. But the projects stagnated and could not expand, mainly due to the shortage of gas. New discoveries of gas fields in the country – Krishna Godavari basin,
PNGRB has invited bids for City Gas Distribution (CGD) in the whole of Ernakulam District, in CGD Bidding Round IV Panna-Mukta and Tapti gas fields, etc gave a fill up to CGD projects. LNG terminals which facilitate import of gas added to the availability of gas. Pipelines are being laid across the country, forming a national gas grid, to transport the gas from different sources to locations across the country. Gujarat Gas Company Ltd, Mahanagar Gas Ltd (MGL) and Indraprastha Gas Limited (IGL) are some of the major companies operating in this space. Gujarat Gas Company Ltd, the largest private sector player in CGD in India, supplies gas to 3 lakh customers in various districts of Gujarat. MGL started operating the CGD project in Mumbai in 1994, and it serves more than 4 lakh customers today. IGL has been operational in Delhi since 1995, and has around 2 lakh PNG customers. The projects gained momentum after the formation of the PNGRB, which regulates and licences CGD projects, in 2006. Today, there are around 20 companies in India that distribute piped gas in various cities. Currently more than 200 cities have been identified for CGD with the roll out expected to happen inline with the commissioning of the pipelines.
For private circulation only. Prepared by Independent Media (+91 484 2423331) for Alkesh Sharma, Managing Director, Kerala State Industrial Development Corporation Ltd, Keston Road, Kowdiar, Thiruvanathapuram-695 003. Executive Editor: K G Ajith Kumar. The opinions expressed in these columns need not necessarily reflect those of KSIDC.