may 2010 by independent media

Newsletter from Kerala State Industrial Development Corporation 3 KSIDC sets up industrial data centre

4 Interview: Industries Minister

Vol.1 Issue 1 May 2010

8 KSIDC to fund five more sectors

For the big leap

Kerala is ready to commission mega projects on the infrastructure front. Many are the country’s first and unique, and will make the State a preferred investment destination.

Works for the ICTT at a hectic pace at Vallarpadam, off Kochi

erala is making it big on its infrastructure. The country’s first International Container Transshipment Terminal at Vallarpadam, Kochi, a port-based special economic zone, another first, and a 2.5 mmtpa LNG terminal, which will provide a cheap source of energy, are making steady progress. Scheduled to commission in the 2010-2012 period, the landmark projects will make the State the hub of business and trade.

The civil work of the ICTT project is nearing completion and equipment such as gantry cranes will be installed this month. “The project will be ready for commissioning by August,” said Mr Suresh Joseph, General Manager, India Gateway Terminal Ltd, which is building the ICTT. The ICTT, being developed as the country’s first transshipment hub, draws its potential greatly from its geographical proximity to the major trade

routes linking the West to the East and vice-versa. In the first phase, the terminal is expected to handle 1.2 million TEU cargo (See box on the project). The Railways has already completed work on an 8-km electrified rail-line from Edapally to the terminal. In the process, they also set a record by building a 4.62 km bridge, the longest railway bridge in India. Work on the fourlane road connecting the terminal to NH-47 is fast nearing completion.

Contd. on page 6

Snippets Kerala PSUs to set record In a record of sorts, all of Kerala’s 37 public sector units under the Department of Industries are set to end the current financial year in profit. As many as 32 of them turned in a total profit of Rs 239 crore in 2009-10, Industries Minister Elamaram Kareem said. The Minister attributed the turn-around to a combination of new business culture, better market acumen and a helpful attitude from Government departments in the State. The performance comes against the fact that as many as 32 PSUs were running losses in 2005-06. The Kerala Minerals and Metals Limited topped the list of PSUs with over Rs 90 crore in profit, while the KSIDC came third with a profit of Rs 25 crore.

Rs 125 crore for new PSUs The Government of Kerala will set up eight new public sector enterprises at a total investment of Rs 125 crore this financial year. Among the new units, to be commissioned this year, are Komalapuram Hi Tech Spinning and Weaving Mill, costing Rs 36 crore, and Kannur Hi Tech Weaving Factory, at an estimated investment of Rs 20 crore, showing the government’s intention to promote the textile sector in the State.

India’s first marina at Kochi

In a big boost to the State’s tourism industry, Kerala has commissioned a

KSIDC, GAIL form JV for city gas project

KSIDC Managing Director Alkesh Sharma (left) and J Vasan, ED-marketing, GAIL, shake hands after signing the MoU for setting up a joint venture company for the city gas distribution project in the presence of TKA Nair, KSIDC Chairman and Principal Secretary to the Prime Minister and T Balakrishnan, Additional Chief Secretary in charge of Industries. KSIDC and GAIL Ltd have signed a memorandum of understanding for setting up a joint venture company to take up distribution of LPG across Kerala. In the first phase of the project, to be completed in 2012, the JV will distribute gas to domestic, commercial, auto and industrial world class marina in Kochi. Built at a cost of Rs 8.21 crore to global standards, The Kochi International Marina has berthing facilities for 34 yachts in the first phase. In the second phase, 50 yachts could be accommodated at a given time. Marina house, a part of the project, features 24 rooms, including four suites, a health club, caféteria and recreation facilities, besides a golf course. A favorite port of call for international cruise lines, Kochi hosted 50 luxury ships last year.

Taiwan to boost trade with Kerala

Taiwan, which is seeking to enhance trade and technical collaboration with India, has expressed keen interest to put Kerala on a priority list. Philip Wen-chyi Ong, Ambassador of Tai-

customers in the small and medium sector after taking due authorisation and clearances. KSIDC will have 24 per cent stake and GAIL 26 per cent in the JV which has a Rs 100 crore authorised capital. The rest of the equity will be given to strategic investors. wan to India, who made a three-day visit to the State, said the focus in Kerala would be on seafood, information technology and education. The visit was facilitated by KSIDC.

Ayurveda to go global The global Ayurveda Summit held at Kochi has designed a new strategy for the growth of Ayurveda to capture its fair share in the booming sector of alternative medicine in the world. The meet, organised by CII in association with the Government of Kerala and the Department of AYUSH, Government of India, has called for increased thrust on standardisation, international academic exchange, global branding, integrating Ayurveda with health tourism and wooing large-scale private investment with the active support of information technology.

ksidc news

It’s all in the numbers National Resource Centre for Industrial Development to aid data-based decision-making.

nformation is the key, they say. But correct and reliable data, a key ingredient to decision-making process, is woefully lacking in many sectors, including in the government. The Kerala State Industrial Development Corporation (KSIDC), the government’s arm for industrial development in the State, is all set to bridge this gap. KSIDC is setting up a National Resource Centre for Industrial Development. To be housed at the KSIDC headquarters in Thiruvananthapuram, the Centre will be run by the Centre for Monitoring Indian Economy Pvt Ltd (CMIE), one of the reputed names in economic research and collection of data on industry and economy in India. The Centre comprises a CMIE terminal and the CMIE data base with facilities for analysis and forecast. An Information Expert will be stationed at the Centre to ensure efficient use of databases and help users. The Centre would contain all database services including macro economic, firm-level, sectoral and regional

databases. The Centre, which has a query-based software, will furnish the data within no time if it is available with its data bank. It will engage its professionals to collect and furnish the data which is not available with it. The Centre will also offer a State Analysis Service through which the economic development of the State can be closely monitored and major sectors and industries are tracked. The Centre will help address problems such as absence of knowledge about the right source for data (which, in turn, helps to frame policies and guidelines), non-uniformity of available

data, difficulty in comparability, and hindrances for standardisation of data. Such centres have already been functioning in States like Tamil Nadu, Andhra Pradesh, Gujarat, in institutions such as IIM–A, IIM-C, large corporates like HUL Ltd, ITC Ltd and financial institutions/banks like SIDBI, Indian Bank, and United Bank of India. The Ministry of Finance and the Ministry of Commerce and Industry, Government of India also avail such service. The service will be available to government departments, public sector units, corporate bodies and research institutions.

From MD’s Desk

t gives me great pleasure to introduce Enterprise and Industrial Update-Kerala to all the stakeholders of Industries. Dissemination of correct information is the key to decision-making in a democracy. However, the main stream media has its own priorities concerning the general public and hence industrial development is often relegated to the last of its priorities. This newsletter is

part of our efforts to highlight the positive developments happening on the industrial front in our State. The inaugural issue extensively covers the major infrastructure projects that are fast-nearing completion in Kerala. It gives an update on the developments and talks about the investment opportunities these projects throw up. The issue also has an exclusive interview with hon’ble Minister for Industries Shri Elamaram Kareem. The hon’ble minister explains in detail the vibrant investment and industrial at-

mosphere in the State. It’s a reassurance to all people that this State is on the right track in industrial development. The newsletter has reports on some of the initiatives of KSIDC. We have conceived the newsletter as a medium to cover not only the activities of KSIDC, but to update you on the important developments that will help the speedy industrialisation of the State as a whole. I seek your whole-hearted support for the success of this product. Alkesh Sharma 33

It’s our alternative K

erala’s industrial front witnessed fast-paced movements in the last four years. Several mega projects, especially in the infrastructure sector, were launched and are nearing completion. Many loss-making PSUs turned around and even started diversification. New and imaginative projects accorded the trade and commerce sector some unprecedented vibrancy. Labour unrest, which Kerala is infamous for, did not bog down any of these developments. “They were the results of the government’s determination to make a point that Kerala is a place for industry and business to thrive and grow,” says Industries Minister Elamaram Kareem. Excerpts from an exclusive interview.

How do you assess the industrial and investment climate in Kerala?

This government in the last four years has worked hard to create a positive climate on the industrial and investment front. And it has paid off. Entrepreneurs now feel that they can do business here. They have watched industries, both in the private and public sectors, in Kerala doing well and making profits. Our infrastructure has improved a lot. The State now offers best connectivity, be it air, rail or sea route. Every village has motorable roads and digitalised communication network. We can offer the best skilled labour for any industry, another unique achievement. Our record in law and order has been commended by national media. In Kerala, one need not pay hafta to do business. We have ensured that investors in India and abroad took note of these developments. We called investors’ 4

meet in India and abroad and communicated this changed image of Kerala to them. We told them that Kerala no longer loses man days due to prolonged labour unrest. In fact, Central government statistics says Kerala’s record on this count is far better than most States. That several mega projects were completed on time proved our point.

What are the tangible results?

More entrepreneurs now come to Kerala, and they commend our record. Dubai Ports has almost completed the Vallarpadam International Container Transshipment Terminal in record time. It is one of the biggest infrastructure projects in the State and they never faced major issues on the labour front. The Railways built India’s biggest railway bridge at Vallarpadam ahead of schedule. The LPG terminal is another major project which is nearing completion. BEML Limited set up its manufacturing facility in Palakkad in record time. Kerala Soaps, a State PSU which was closed sometime back, took less than 10 months from the date of foundation-laying to production in a new unit. Projects in Kerala no more get delayed due to labour issues. Is it that the labour unions have become weak? No. They are stronger now, with the difference that they are more mature. The impression that trade unions in Kerala play a destructive role is no more relevant. Instead, they are all concerned with the productivity and the survival and growth of their units. Labour in Kerala has a high level of

awareness about the globalised market and the competition their companies face at the hands of MNCs. They recognise the need to ensure productivity and quality. The survival and growth of a unit are no longer a concern of the management alone. This is a marked difference in their stand. The managements also know this. They have realised that they cannot ignore working class rights. It’s a conscious and well-settled position from understanding each other’s concerns. I do not claim that there are no undesirable aspects on the labour front. But they are largely confined to the unorganised sector. The government will act strongly against any illegal and unethical demands by the labour. The government has proved its commitment by intervening strongly to stop the undesirable labour union practices at Cochin Port Trust. We are happy that the industry did take notice of the government’s commitment. Is this a sustainable change? It is. It has two faces. Employees would strongly oppose any move to destabilise the public sector. It is a political fight. At the same time, they are open to the realities of the world and

We provided the basic facilities and BEML took less than a year to start its unit in Palakkad. Such developments also break several myths about the industrial climate in Kerala.

want their companies to be competitive. What prompted you to take an initiative for the turn-around of State PSUS? The Kerala Study Congress held in Thiruvananthapuram some time back had suggested certain measures which can help loss-making PSUs turn around. One was tying up with Central PSUS where there is a synergy. The government worked on them: we have formed six such tie-ups with Central PSUs. This was our answer to those who advocated closing down or sale of lossmaking PSUs. Kerala is the only State which has successfully designed and implemented such an imaginative and successful scheme. However, I would like to point out the fact that all these alliances happened when the Left parties were supporting the UPA government at the Centre. The last Central PSU to set up a unit in Kerala was Hindustan Newsprint, 35 years back. In contrast, in the last four years, we have several of them starting units here. Apart from their joint ventures, companies such as HAL, BEL and BEML are setting up manufacturing units in Kerala. This is no mean achievement. Kerala had no defence manufacturing unit.

What was the single most difficult decision you took with regard to the restructuring of PSUs? We came to power at a time when there was a huge backlog of payments due to PSU employees. Some companies have not implemented a wage hike for 14 years. The employees naturally expected a speedy solution in the form of government aid when a trade union leader became Industries minister. But I took a different stand. The government’s financial position allowed no more aid. Instead, the government would help the units turn around. We told them that wage revision will be taken up considering productivity and profits of their units. It was a tough decision, and took some time to convince trade unions. The best part is, our policy succeeded. Now, most units have implemented wage revision, meeting the expenditure from their own coffers. Employees today ask for their demands based on the company performance. They now talk of business and profits of their units. You also implemented professionalisation of PSU management. We decided to bring technocrats to head PSUs. Today, all but one PSU chief ate technocrats. And the exception is an IAS officer who is an IIM alumnus. We have found a replacement for him also. We introduced monthly review of loss-making PSUs. We had asked the managements to assess their problems with the help of the Restructuring and Internal Audit Board and suggest turn-around strategies. Some wanted financial help while some others sought marketing push. The Finance Department took a very helpful attitude towards their demands. We also went with synergizing their work with government departments. Like the tie-up between Kerala State Drugs and Pharmaceuticals and the Department of Health.

Once the strategy was finalised, the managements were required to send monthly status report of their performance to me. There was a proforma wherein they indicate their performance vis-à-vis that of the previous month as well as that of the same month the previous year. The reports should reach me before the 10th of every month. I would call CEOs of some of them for a review meeting in which they explain the performance, failure if any, and their reasons. I would come to the meeting after studying their report and hence was able to assess their problems. We offered more help to those who genuinely needed it while those who failed to show results were shown the door. I used to sit through the review meeting full time. I missed only one or two review meetings in the last four years. It was a very good administrative experience for me as it gave me first hand information on the problems they face with respect to funds, raw materials, employee relations and marketing. Now my understanding of our companies is better than that of any official. The effort was worthwhile. Several units turned profitable in the last four years. Grand Kerala Shopping festival was an experiment. What is the government’s assessment of it? The government looks at trade and commerce as an area that attracts a lot of investment and generates employment, that too without government involvement. The services sector contributes 56.5 per cent of the State’s GDP and we decided to help the segment perform better. Our assessment is that GKSF is a success. The reasons are many but the simple meter to measure it is the increased tax collections. Consumers get the coupons along with the bill. We compared the tax revenue from the previous edition of GKSF, and there is a steady growth. Our investment in GKSF is more than justified. But the government was not looking at the tax revenue alone. It provided a platform for Kerala manufacturers to showcase their wares. And we succeeded on both counts.

The 4.62 km rail-bridge, India’s largest, connecting the ICTT to the Indian Railway network. The work on the bridge was completed in record time.

Advantage Industry

The Vallarpadam ICTT will host mother ships that travel on international sea routes and visit major ports. At present, the containerised cargo from India is carried by feeder vessels to ports in Colombo, Singapore or Dubai for trans-shipment. The average cost for lifting a container to a feeder vessel is around $150. A similar amount is needed for downloading also. And this process takes up to eight days. Once

the ICTT is commissioned, exporters will be able to load the containers directly to the mother ships, saving $300 and precious time. This savings would make Indian exports more competitive in the international market.

LNG Terminal

With the erection of the roof of the first storage tank, 40 per cent work on the Rs 4,000 crore liquefied natural gas terminal by Petronet LNG is complet-

ed. The fixing of the 83-metre diameter roof, bigger than a football ground, is considered a critical point in the terminal project with a capacity of 2.5. The roof of the second tank will be fixed this month. The project is scheduled to be completed by the first quarter of 2012. Petronet has already entered into an agreement with Australia for the import of gas. Petronet has already tied up for 1.5 mmtpa LNG from the proposed Gorgon project in Australia.

By invitation

Enterprise opportunities

By Suresh Joseph

he development of port infrastructure, as in the case of the railways, provides a positive stimulus to the economic and social growth of society. Better support infrastructure of roads, waterways and enabling policies will help spread the benefits of such landmark projects much further outwards. It will also enhance the multiplier effect of the development of the port infrastructure.

Container Freight Stations

(CFS), which are essentially extensions of the Container Port outside its physical boundaries, increase the capacity and efficiency of the port since unproductive moves inside the port are reduced/eliminated. The tremendous strides that the container ports 66

of Chennai, JNPT and Tuticorin have made prove the need to develop CFSs. The CFS is not just a container stacking and delivering yard. It is a mini logistics centre with facilities for warehousing, bonding cargo, LCL consolidation, open storage, storage of laden and empty containers, repair, cleaning and fumigation of containers. It is imperative that the CFS has to be equipped with reliable and modern equipment and manpower that considers service to customers ‘a sacred duty’. The other major challenge an entrepreneur will face in setting up a CFS in Kerala is the high cost of land and construction. It is a well known fact that Kerala, like Hong Kong and Singapore, is a land strapped State. This limitation

can be overcome in three ways – better management of the existing land area, vertical growth and reclamation. The Government should promote vertical growth instead of horizontal growth which strains the availability of land. The ATL Logistics Centre in Hong Kong is the best example of how vertical growth can ease pressure on land and make facilities of global standards available by the intense utilisation of available land. Scientific reclamation and development of new townships is another option. Another enterprise that holds vast potential in conjunction with the development of the ICTT is that related to empty container parks. The Lines will need space to park empty contain-

The LNG project will bring in an

ICTT – The Project Total area: 115 hectare Total investment: Rs 2,200 crore

First phase

Capacity: 1.2 million TEUs. 600 metres of berth 4 Super Post-Panamax gantry cranes 2 Mobile Harbour Cranes, with nearly 3000 ground slots (800 for empties and 90 for reefer) 15 Rubber Tyred Gantry Cranes

investment of another Rs 4,000 crore by GAIL (India) Ltd for setting up a pipeline connecting Kochi with Bangalore. GAIL will also lay a pipeline from Kochi to Kayamkulam in Kerala to supply gas to the power station of the National Thermal Power Corporation. Petronet plans to increase the capacity of the terminal to 5 mmtpa soon which will bring in further investment. A 1,200-MW power plant in the vicinity of the LNG terminal is planned. The total investment the project will bring in to Kochi is estimated to be Rs 16,000 crore.

Port-based SEZ

barges, private container train operations and the like. The first movers in these spheres will leverage advantages for quite some time. The commuting problems of the State can be very easily solved by developing infrastructure to handle big passenger and cargo handling centres along the coastal towns. A master plan must be made out to link the sea and the backwaters to provide an efficient, cost-effective and green alternative to the present day passenger and cargo transportation. In developing this mode the State has very little to do in terms of land acquisition, as either the land is available with it or can be made available through reclamation. Investors will not shy away from such Green initiatives and any amount of international funding can be arranged in the event of local funding falling short of requirement. For instance, as far as container transportation is concerned, the State should promote the development of two small hubs at Kannur/

Kozhikode in the north and Kollam in the south. To these small hubs cargo should be transported in barges from the ICTT and distributed to the deeper hinterland from there. Such a development has the benefit of expanding the ripple effect of the development of the ICTT and taking growth and economic benefits to the people of those regions rather than set in motion unscientific urban migrations. If the State is able to leverage the geographical advantage and promote the entire State as the logistics hub for the rest of the country, it can solve many of its vexatious issues. The issues of the educated unemployed and social evils can be resolved if it concentrates on the 3 Ts – Tourism, Technology and Transshipment.

Final phase

The Cochin Port has commenced work to set up the first Port-Based Special Economic Zone in India. Apart from the ICTT and the LNG Terminal, projects such as bunkering terminal, distribution park including Free Trade Warehousing and process industries have been proposed in these SEZs. The Cochin Port Trust, the developers of the SEZ, has already floated tenders for the project. The SEZ will be set up on 401 hectares, which is divided between Vallarpadam (115.25 hectares) and Puthuvypeen (285.84 hectares).

Capacity: 3 million TEUs 1800 metres of berth 18 Ship-to-Shore cranes 15,000 ground slots More than 50 RTGs.

Connectivity:

A new four-lane, 18-km road from Kalamassery An 8-km electrified rail line from Edapally

ers so that they are made available to the end user, as and when required. On the Willingdon Island there is a profusion of empty parks on Cochin Port Trust property. With activities starting at the ICTT in June 2010, the need for empty parks is already felt. The National Inland Waterway-3 is another potential enterprise. The transportation to all coastal towns of passengers and cargo must be overtly promoted by the State by using the waterways. Developing such waterway infrastructure is a low gestation enterprise, but the effects of such a modal shift has long term, positive ramifications for the State. Again, the examples of development of Singapore, Indonesia, Malaysia and Hong Kong are there as guideposts – there is no need to reinvent the wheel. With road, rail and water connectivity, the ICTT is poised to challenge some of the major foreign ports in the neighborhood. There is immense potential in trucking, trailer movements,

The writer is General Manager, India Gateway Terminal Limited, the Indian arm of Dubai Ports World, which is building the ICTT 77

New horizons

KSIDC identifies new sectors--logistics, infrastructure, media&entertainment, education and retail for funding

o speed up the growth of industries in the manufacturing and services sectors, the Kerala State Industrial Development Corporation (KSIDC) will offer long term lending in five sectors: Logistics Infrastructure Media & Entertainment Knowledge Centres Retail Logistics: The Indian logistics industry is growing at 20 per cent vis-àvis the average industry growth of 7.5 per cent. Besides, the growth of economy implies more outputs and more demand for specialised logistics services. Kerala is on the point of take-off in respect of several projects having potential for logistics sector development. Projects: Logistics parks Container freight stations Godowns Cold storages, cold chains Lending norms Debt-Equity:1.5:1 Collateral security: 50% of loan Moratorium: 2 years Repayment period:8 years Infrastructure: The government is planning massive increase in investment in infrastructure (up from 5 per cent in 10th Plan to 9 per cent in

11th Plan). To put Kerala also in this growth trajectory, KSIDC will offer long-term funding for the following projects: Industrial parks including SEZs Commercial complexes/malls Multiplexes Lending norms: DE ratio: 2:1 for commercial complexes/malls/multiplexes; 2.33:1 for industrial parks. Collateral: 50-75% of loan Moratorium: 2 years Repayment: 8 to 10 years (For DE ratio, project land would be generally taken at document value only; however, existing land acquired more than 10 years ago can be considered at 75% of the fair value as assessed by an approved valuer.) Media & Entertainment: The media industry has hotted up in the last decade creating massive employment in projects varying from films, tele-serials, advertising and digital media. The sector is expected to record a CAGR of 12.5 per cent till 2013. Projects: Television serials Music programmes Film production Digital media Advertisement

Colouring dreams

which has set a Rs 1000-crore target for exports. The Textile Centre, part of a planned Textile Town, is set up at a cost of Rs 45 crore, hosts six main units: • A wet processing plant for dyeing and winding • A common effluent treatment plant • Bonded warehouse • Water harvesting pond • Hazardous waste treatment plant • A standard design factory

Kinfra textile centre to boost exports

he Textile Centre, developed by the Kerala Industrial Infrastructure Development Corporation (Kinfra) under the Textile Centre Infrastructure Development Scheme at Nadukani near Kannur is all set to boost the textile industry in the district Dyeing unit

The dyeing and winding plant is set up at a cost of Rs 24 crore, made available from the ASIDE scheme of the government of

Lending norms Debt-Equity :0.40:1 Collateral: 100% of loan Moratorium: 4 to 6 months Repayment Period: 1 to 2 years Knowledge Centres: The most literate State in India is all set to become its educational hub. It has already been recognised as a favorite destination for higher education with students from various States enrolling for various specialised courses. There is a demand for setting up institutions for imparting education at the level of graduation and above in the State. Projects: Medical Paramedical Engineering Management Bio technology, nano technology Computer, IT Lending norms Debt-Equity: 1.5:1 Collateral security: 75% of loan Moratorium: 2 years Repayment period: 5 to 6 years Retail: The retail sector in India is witnessing a huge revamp with traditional markets making way for new formats such as hypermarkets, multiplexes and malls. Projects: Retail chains Specialty stores Lending norms: Debt-equity ratio: 1:1 Collateral security: 75% of loan Moratorium: 2 years Repayment Period: 5 to 6 years India, Kinfra International Apparel Parks Managing Director J. Krishna Kumar said. The plant can process 15 tonne yarn and 70,000 metres of fabric a day. It is meant for the use of the units within the park but can be accessed by outside units also depending on the availability of slots, he said. The Centre has laid a 9-km pipeline to ensure availability of water. The Centre has also set up a crèche, dispensary and an ambulance unit for the employees of the units in the centre. The park is set up on 124 acres which it leases to units on a 90-year lease. Considering the demand and the growth potential , the Centre is acquiring another 200 acres.