Following is an excerpt from a news report in Business Standard.

The Orissa government today signed a memorandum of understanding (MoU) with the Titanium Products Private Limited (TPPL), an Indo-Russian joint venture, for setting up of a Rs 2000 crore integrated titanium complex and sector specific special economic zone (SEZ) at Chhatrapur in Ganjam district.

SM Shroff , chairman of TPPL and the state industry secretary, A P Padhi signed the documents in the presence of chief minister, Naveen Patnaik in the state secretariat.

The company will invest about Rs 2000 crore in two phases. While the first phase will cost about Rs 1200 crore, another Rs 800 crore will be invested in the second phase. The first phase will be completed within a period of 24 months and is likely to be commissioned by October 2010. It will produce 1,08,000 tonnes of titanium slag, 68,000 tonnes of high purity pig iron, 40,000 tonnes of di-oxide pigment and 10,000 tonnes of titanium sponge.

TPPL has already entered into an agreement with the Indian Rare Earth Limited (IREL) for the supply of the raw material Ilminite. The company will require about 2 lakh tonnes of Ilminite annually for its project. India will be the fourth country in the world to have smelting technology required for production of titanium. The products will have applications in the field of aircraft engine, power plants, chemical plants, automobile industry as titanium is light and corrosion resistant.

TPPL will develop a sector specific special economic zone (SEZ) at its plant site for which it has received the in-principle approval from the Centre. However, it will require additional land beyond 250 acres acquired for the titanium complex.

The Orissa government has agreed to supply 65 Mw of power and 3 million gallon per day water for the project.

Speaking on the occasion chief minister Naveen Patnaik  … He said, the project is the anchor industry for a sector specific SEZ for establishment of downstream industries in sectors like high quality paint manufacturing, automotive casting, ductile iron casting, sillicon and zircon based products.

Patnaik said, the upcoming port at Gopalpur and the integrated titanium complex are the foundations for an industrial corridor in southern Orissa. These will further be integrated with the aluminium hinterland in Kalahandi, Koraput anfd Raygada. For the purpose, he has requested the railway ministry to take up the Therubali-Gunupur railway connectivity at the earliest.

Stating that establishment of a quality vocational educational institution offering the most modern trades relevant for the industry will be an important initiative in the skill upgradation of the local youth, Patnaik said, TPPL should explore such possibility. Besides, it should develop partnership with the local technical institutions.

Following is an excerpt from a report in Pioneer.

The Gitanjali Group, one of the oldest leading names in gems and jewellery, has proposed to set up a Special Economic Zone (SEZ) in the State. The group’s infrastructure arm, Gitanjali Infratech Limited (GIL), has approached Chief Minister Naveen Patnaik to set up its eighth SEZ for gems and jewellery.

The company’s chief executive officer Ajit A Vaidya has requested the State Government to allocate land for the purpose. If allowed, it will be the first of its kind in the State, said an officer of the Industries Department. The Gitanjali Group is known for its jewellery brands, Nakshatra, Gili, Desire, Asmi, Sangini and D’dmas in both domestic and international markets. GIL’s existing seven SEZs are spread over Maharashtra, Andhra Pradesh and West Bengal.

While the gross size of the Indian gem and jewellery industry is 20,889.21 million dollars, the country’s jewellery manufacturing is currently only a fraction thereof.

This is predominantly due to lack of availability of organised infrastructure, structured manufacturing and exporting environment, said Vaidya.

Therefore, setting up of more SEZs for this sector would promote export of the Indian products, he said.

The gems and jewellery sector, which is labour-intensive, currently generates more than 3 million jobs with the setting up of SEZs.

As there are more than 2 lakh workers from Orissa engaged in the diamond cutting and polishing industry in Surat, this will help them find jobs in their homeland, feels a senior official.

The list from the article below are: (See also this and this.)

• POSCO SEZ in Paradeep: 4004 acres
• TATA SEZ in Gopalpur: 1173 acres
• Hindalco SEZ in Sambalpur: 855 acres
• Saraf Agencies SEZ for Titanium in Chhatrapur: 131.5 acres
• Wellspun garments SEZ in Choudwar: 200 acres
• Jindal SEZ in Choudwar: 400 acres
• Vedanta SEZ in Jharsuguda: 185.62 acres
• IDCO Knoweldge Park near Bhubaneswar: 600 acres
• Infocity in Bhubaneswar: 202 acres
• IDCO Mahakalpada area in Kendrapada district: 2700 acres

Following is an excerpt from a report in Pioneer.

Another SEZ (Special Economic Zone) is coming up in the State in the IT sector. Currently, the State has four SEZs in this sector.

It would be set up in 25 acres of land in Bhubaneswar on a Public -Private Partnership (PPP) mode. Electronic and Computer Software Export Promotion Council (ECS) and Larsen and Turbo (L&T) would provide the necessary support for establishment of the SEZ. Government will provide the land for this purpose. IT Minister Surjya Naryan Patro said … 1074 acres of land has earmarked for the development of IT services.

Till date Orissa has applied for 14 SEZs, of which 3 have been cleared, six given in principle clearance and five have received formal clearance from the Centre.

Meanwhile, the State Government has urged the Centre to sanction an Information Technology Investment Region (ITIR) to boost growth of IT and IT enabled services. The ITIR is being planned in the State will house space for hardware manufacturing units other than having provisions for new integrated townships, special economic zone and industrial parks.

Following is an excerpt from a report in ndtvprofit.com.

Stainless steel could shine brighter in India as in their scramble for market share the steel makers want to locate users of steel next to their factories in special economic zones.

Jindal Stainless and Steel Authority of India have plans to capture customers right next to their stainless steel plants.

"We are setting up an SEZ next to our Orissa plant on a 300 acre land which will have shops, which use our steel for making products," pointed out Ratan Jindal, VC & MD, Jindal Stainless.

Following is from a report in New Indian Express.

The Rs 2,000-crore titanium plant to be established jointly by the Russian Federation and Kolkata-based Saraf Group at Chatrapur in Ganjam district would lay the base for development of the Special Economic Zone (SEZ).

The SEZ spanning over 600 acres would house beach sand mineral-based industries.

It would be spearheaded by the Russian and Indian partners and developed into an industrial hub as the flagship titanium project gets executed, said General Director of Technochim Holdings L N Bobkov here on Tuesday.

Plans are to pump in around 3 billion USD for development of the SEZ and the concept paper would be submitted to the Governments of India and Russia for consideration and approval.

The high-value applications of titanium as raw material would open a floodgate of opportunities for value-addition by downstream industries.

Units in the sectors of casting, titanium metal, magnesium, automotive and machine parts, electronics , computers and other manufacturing sectors, etc., can come up. The SEZ would also be open to other private players, the developers have said.

Following is an excerpt from a report in Economic Times.

… According to sources, the Haryana and Orissa governments have decided to put in place a policy making it mandatory for developers to employ a member from every family in a village affected by a SEZ project.

The Cabinet, in October, approved the National Policy on Rehabilitation & Resettlement, 2007, to replace the National Policy on Resettlement & Rehabilitation for Project-Affected Families, 2003. “The policy can incorporate minor changes, if needed, for the welfare of rural folk,” an official in the rural development ministry said.

A National Rehabilitation Commission would be set up by the Centre, which will be empowered to exercise independent oversight over the rehabilitation and resettlement of affected families.

To ensure transparency, there would be a provision for mandatory dissemination of information on displacement, rehabilitation and resettlement, with names of the affected persons and details of the rehabilitation packages. Such information would also be placed in the public domain by the gram panchayats.

People would, however, be given jobs according to their qualifications. The government is of the view that salaries should at least match what an individual was earning before being displaced.

“We are also in the process of setting up a mechanism through which the affected communities would be duly informed and consulted at each stage, including public hearings in the affected areas for social impact assessment,” the official said.

Following is an excerpt from a report in tathya.in.

for Pramod Bhasin, the Capital city of Orissa is emerging as an important location for the outsourcing industry.

The President and CEO of the global leader in Business Services and Technology Solutions, Genpact has pinned high hopes on Bhubaneswar as there is strong infrastructure, good talent and tremendous government backing.

Mr.Bhasin was speaking on the occasion of ground breaking ceremony for the upcoming Special Economic Zone (SEZ) on 21 November.

Graduates having command over English have fair chance of getting into Genpact, said Mr.Bhasin.

Chief Minister Mr. Patnaik laid foundation stone for the SEZ.

Spread over 12.145 acres, the commissioning of this SEZ facility will provide 5,00,000 square feet office space to provide seat for over 4000 employees.

Following is an excerpt from a report in the Statesman.

Spread over an area of 12.145 acres, the commissioning of the SEZ facility will take place in three phases between 2009 and 2011. It will provide 5,00, 000 square feet for 4,000 employees of Genpact. The development of such facility in Bhubaneswar will make it the 7th city in operation for Genpact in India.

Genpact, which has been ranked No. 1 on the 2007 list of top 15 ITeS-BPO companies in the country by NASSCOM, has recently been rated among the top three BPO employers for 2007 in Dataquest-IDC E-Sat (Employee Satisfaction) survey.

Following is an excerpt from a report in the New Indian Express.

After successful completion of first-phase land acquisition for the SEZ, preparations are on to start the second phase. In the first phase, 250 acres, including 48 acres of government land, have been acquired.

Another 250 acres would be acquired in the second phase likely to start by this year-end. M/s Saraf Agencies Pvt ltd, a Kolkota-based firm, will set up the SEZ with Russian collaboration.

The firm has been pursuing this project for the past 10 years because of the high mineral content in beach sand along the coastline.

However, the agitation against the proposed mega steel plant by Tisco delayed the decision of the firm. The firm has also started its efforts to search partners to set up its proposed titanium dioxide plant near Orissa Sands Complex (OSCOM), a unit of Indian Rare Earths Ltd near Chatrapur.

The plant will facilitate setting up of the SEZ. The company has signed an MoU with two Russian state-run agencies for the proposed SEZ that will process titanium from ilmenite ore.

The MoU was signed during the visit of Russian president Vladimir Putin to India and the project will entail an investment of $250 million (around Rs.1200 crore).

The two Russian entities that will take part in the project are Vnesheconombank or the Bank for Foreign Economic Affairs and JSC Technochim Holding, which is a St. Petersburg-based public sector undertaking.

During recent visit of Prime Minister Manmohan Singh to Russia, the Russian premier Viktor Zubkov informed that his country is ready to actively participate in development of the SEZ as part of the efforts to boost bilateral economic ties.

While the Russian firms will have a 55 percent stake in the project, there will be financial participation from them.

They will provide the technology to process titanium from ilmenite ore. The Indian government plans to use this project to set off part of the debt in the rupee-rouble account and will, therefore, invest $125 million in the SEZ.

Saraf Agencies will pump Rs 175 crore into the project and the remaining amount will be raised as loan. The company received an in-principle approval for the SEZ on August 23 last year. The ilmenite ore will be provided by OSCOM.

Following are some excerpts from that article.

… Bhubaneswar already ranks very high on the software exports frontwith Rs 732 crore completed in 2006-07, Bhubaneswar was 9th in the pecking order among Indian cities. Says Vishal Dev, director, IT, government of Orissa, “Till last year, we were the largest city in the whole of Eastern India on software exports, before being overtaken by Kolkata.” And, now have ambitious plans to reach $1,000 mn in software exports by 2012.

t is also one of the few cities in the country that boasts of the presence of the Big Four of Indian software exports. While Infosys and Satyam have been present in the city for quite some time and have 3,000 and 1,000 people respectively, TCS, after starting last year, has recruited 300 people. Wipro, too, has started campus construction. Add to this, Genpact, IBM Daksh, and ICICI, which are starting their eastern region BPO hubs, and it becomes obvious why Bhubaneswar today commands respect as an IT/BPO destination. The picture would not be complete without mentioning the arrival of MindTree Consulting, Aricent, Contiloe Films as well as Perfectus, which plan a 5,000 seater IT/BPO unit.

The arrival of these leading players also indicates how Bhubaneswar has come of age on both infrastructure as well as manpower fronts. The city today boasts of four SEZs: the earliest one, the 350 acre Infocity is already full; the first phase of the DLF Infopark work is in progress, work is starting on an integrated IT park, known as Knowledge Park, while sanction has been given to the Mancheswara Industrial Estate (29 acres).

Manpower
Such little details prove that while the IT juggernaut is in motion, Bhubaneswar is totally conscious of the need to develop a social infrastructure conducive to fostering IT. That explains why the state ranks high in terms of providing manpower supply; that with forty-five engineering colleges and forty-three MCA colleges, it could do so, is a no-brainer. But, while earlier this supply was mainly migrating elsewhere, it is now getting populated in Bhubaneswar itself.

That fact that technical education is a major priority of the state government has definitely helped. While engineering colleges affiliated to nine of the universities in the state were earlier brought and standardized under the aegis of the Biju Patnaik University, the government is now setting up an IIIT, where it will start with an M Tech program in order to create a crop of new qualified faculty. Also on the anvil are plans to start NISER and a campus of IIT Kharagpur. The Vedanta Group and Sri Sri Ravishankara Vidya Mandir Trust are also setting up technical colleges in the city.

Others in the Game
While the larger companies in the city registered an overall growth of 58% in 2006-07, SMEs like JSS witnessed 120% growth. JSS Consultancy is a domestic BPO playerit handles Citibank for the entire eastern region, as well as other major clients like Tata Indicom, HSBC, Citi Financial, HDFC Standard Life, and Centurion Bank for Orissa.

Its not only about the local SMEs; domestic IT consumption is also on the rise in the city. Reasons are not too far to locate: while Orissa today boasts of steel plants like Jindal, Bhushan, and Neelachal, very soon it will also have Posco, Arcelor-Mittal, and Tata Steel, making it probably the global steel hub. Add to this, power plants like the Jindals and aluminum plants like NALCO, Hindalco, and Sterlite. Paradip Port and the airport in Bhubaneswar are being modernized while the East Coast HQ is finally coming up next month.

Rajesh Dora, MD, Printlink, one of Bhubaneswars largest resellers and SIs, agrees to this. He also informs that other than the steel sector, even the engineering colleges and institutions like OUAT and Institute of Physics are significant consumers of IT.

The Future Sunrise

The experts, too, have endorsed a bright future for Bhubaneswar. According to McKinsey, Orissas economy is poised to grow at 7.1% over the next 10-12 years, the highest in Eastern India. Morgan Stanley comments that Orissa shall emerge as a center for metals business in India and attract investments of up to $3040 bn over the next five years. Even if these predictions are partially met, the impact of IT would be enough to create waves in the Bay of Bengal. The CMIEs forecast that Orissa accounted for 15% of total investments in hand in the country in 2006, and the World Bank ranking Bhubaneswar 5th among cities in ease of doing business within India further endorses the seal of approval. An oft-neglected, but very crucial role in this IT growth of the city has been played by the government. While on the e-Governance front, the state has won awards for two consecutive years (for the Shishu locator program and the OCAC website), a proactive government with an urbane and suave CM at the helm has created a conducive environment for IT. The stability of the political regime too has helped. A confident Naveen Patnaik proudly proclaims, “Bhubaneswar, indeed, is the future sunrise of the IT industry.”

Pioneer reports that Ersama MLA and former Minister Damodar Rout on Sunday has initiated a joint political move in favour of the Posco project proposed near Paradip in his constituency.

Excerpts

“Under no particular party’s banner, political leaders met in Jagatsinghpur to chart out a strategy for a show of strength with a slogan Aage maati pare party, literally meaning land first, party later. Presiding over the meeting, Rout harped on the fact that 85 per cent people in Kujang tehsil, where the South Korean steel major wants to set up its greenfield project, were supporting the 12-million-tonne per annum plant. As they are not united, their voice is cowed down by a handful of agitators. Rout sought to prove the point that the anti-Posco brigade was a minority group making tall claims. It was decided to organise a mass meeting on Tuesday at Balitutha, which leaders cutting across party lines would address. Rout’s move follows Chief Minister Naveen Patnaik’s instructions to him to extend his support for the Posco project in his constituency.

Rout, in his turn, has asked the Jagatsinghpur district authorities to help in smooth conduct of the Tuesday meeting, to which Collector Pramod Kumar Mehrada and SP RP Singh have reportedly agreed.

More than 60 representatives from various political parties participated in the deliberations on Sunday. A few of them suggested to organise the mass meeting at a later stage, but Rout said, “Strike the iron when it is hot.”

A section of political observers, however, feels that there may be a scuffle between the anti- and pro-Posco supporters on the day”

The orissa.gov.in site has a page on PPP (private-public partnership) which contains the Orissa draft PPP policy and a list of projects in Orissa planned to be funded through PPP. Following are excerpts from a recent report in Telegraph.

The Orissa government is planning to invest Rs 125,000 crore in 36 infrastructure projects to be taken up under the private-public-partnership programme.

…Under the programme, the state government will leverage its financial resources with that of the Centre, to prepare a shelf of projects. These will be taken forward through a transparent selection process. There will also be viability gap funding, if the projects are initially loss-making.

The policy will also create Orissa Infrastructure Development Fund with a corpus of Rs 1,000 crore. Projects that are part of the programme include roads, bridges, ports and harbours, airports, airstrips, inland container depots, industrial parks, special economic zones and townships.

“We have already entered into agreements with IL&FS and PricewaterhouseCoopers, who will be the consultants for these projects. A few more will be empanelled soon,” said Parag Gupta, special secretary of the state secretariat’s public-private-partnership cell. …

Sources said IL&FS was picked as a consultant because of its joint venture with state-run Industrial Infrastructure Development Corporation for the Bhubaneswar Integrated Road Network project. PwC is also a consultant for several road projects. The state has also signed an agreement with the Infrastructure Development Finance Corporation (IDFC) in this regard. IDFC is funding some projects in association with Nabard.

“Two more consultants, including Ernst and Young and another Calcutta-based firm, will be enrolled soon,” the sources said.

The empanelled agencies will help identify projects that need to be taken up, prepare pre-feasibility and detailed project reports. They will then hand the reports over to respective departments.

Some of the projects being taken up are the Capital Region Ring Road, to span 98km, and the Bhubaneswar-Paradip Road, a 90km stretch. Each of the projects will cost around Rs 700 crore. They will be executed by the state public works department.

Other projects include sector-specific infotech SEZs, which will cost around Rs 352 crore and an IT & corporate tower in Bhubaneswar to be set up for Rs 146 crore.

Following is an excerpt from a Pioneer report

Chief Minister Naveen Patnaik on Friday laid the foundation stone of the Semiconductor Technology Innovation Centre. The centre will be the first of its kind in the country and will mark the beginning of a new era in the development of the IT Industry in Orissa.

Silicon Park will be established in Infocity SEZ with total project outlay of Rs 80 crore over a period of five years. The centre would provide employment opportunities to 1,600 software professionals …

Laying the foundation stone, Patnaik said the centre would take up chip design, embedded software development for products used in IT, Telecommunication and emerging technologies. It will also provide an entrepreneurial business environment and a semiconductor product eco-system.

“My Government is actively considering declaring Electronics and hardware manufacturing as a thrust sector,” he said, adding that the State Government is pursuing an ambitious target of achieving one billion US dollar in software export from the State by 2012.

Chairman of the STG Pvt Ltd M Chandrasekhar Reddy and eminent scientist from Silicon Valley Damodar Reddy were present on the occasion.

The report in New Indian Express on the same event has the following extra information.

The Chief Minister announced that the State Government will set up three more IT special economic zones (SEZs) in the State.

One of them, the knowledge industry township, will be set up jointly with the Union Urban Development Ministry and NASSCOM while the second one will be established by DLF.

While the above report mentions about three new SEZ’s, it only talks about two. The following from Samaja mentions that the third one will be a BPO based SEZ.

Economics Times reports on such an effort. I hope Orissa government is aware of this and is making pitches for one of the locations in Orissa. Following are excerpts from the Economic Times report.

THE government is planning to build 6-7 new IT townships, called knowledge townships, close to major urban centres and international airports. The residential townships will be based on the walk-to-work concept. This means the professionals working there will be encouraged to live close to the workplace.

The companies setting up units in the townships may be extended tax sops under either the software technology park (STP) or special economic zone (SEZ) scheme. Each township would have a minimum 10-hectare (1 hectare = 2.471 acres) built-up area to make it compliant with FDI rules relating to investment in real estate. Each township is likely to entail an investment of Rs 500-650 crore, depending on the area.

A committee comprising members from the PMO, ministry of IT & telecom, urban development, civil aviation, Dipp along with Nasscom has identified several areas for setting up the knowledge hubs.

Sources in the committee said that these proposed townships will be extension of satellite towns like Gurgaon (to be called Gurgaon Plus). Similarly the township near Mohali will be called Mohali Plus. The first of these new townships is expected to come up by 2012 and the rest by 2015.

… services like IT and BPO will be encouraged in these units.

Many domestic and foreign real estate players have expressed interest in owning land and build such townships.

“We want each township to be FDI compliant so that they can attract foreign expertise,” a senior DIPP official said. Every township would be a special purpose vehicle where states and developers would have stakes.

Urban development secretary M Ramachandran said that his ministry would advise the committee on facilities like water, electricity, drainage and other civic facilities. “We will also help in developing the structures,” he said.

“The townships may also have an IIT/IIM or such academic institutions to build an ecosystem. For tax sops, we are pushing for extension of STP scheme else the companies can also opt for SEZ status,” said Nasscom president Kiran Karnik. The townships will come complete with educational, recreational/amusement and healthcare infrastructure.

“The basic reason for proposing such townships is the existing saturation in real estate and infrastructure amongst existing IT hubs,” Mr Karnik added.

Gurgaon real estate rentals have shot up meteorically in the recent past while Bangalore doesn’t have any real estate. …

Currently, Mohali, Mysore, Noida and Gurgaon have come up as satellite townships to major state capitals, most of which have international airports.

… SEZs offer a five-year 100% tax exemption with two subsequent five-year exemptions of 70% and 50% to units.

Business standard reports on government of Orissa and POSCO’s plans regarding R & R and compensation. Following are some excerpts.

… The government is also working on improving the compensation package for the area’s beetle-vine workers, who are among the most vocal opponents of the project as they fear loss of livelihood.

A joint exercise will be started soon for implementing the rehabilitation package. We will sit with Posco executives to decide what best can be offered to the displaced, in excess of the entitlements prescribed by the government’s rehabilitation policy and the package prepared by the company, …

The proposals which are being examined include a pension scheme for the displaced persons and a job card for all the displaced who are less than 60 years in age.

The PIB release states that the Board of Approval of SEZ recommended grant of formal approval of an SEZ with developer Hindalco Industries Limited in Sambalpur for aluminum and aluminum products. The SEZ will come up in an area of 115.94 hectares.

I came across a 1-page note someone from POSCO-India gave me when I was visiting Bhubaneswar in December 2006-Jan 2007. The 1-page note summarizes a study done by NCAER. The study has also been reported in News media such as Hindu Businessline. (POSCO-India in its web page has additional links.) We will give some excerpts from the Hindu Businessline report.

The 1-page note: POSCO-India’s rs 52,810 Cr investment by 2016 will stimulate Orissa Economy.

• Economic Benefit:
  • Generate Rs 29,760 crores additional annual gross output for Orissa including Rs 12,610 Crore of POSCO-India’s direct gross output.
  • Create excess annual value addition of Rs. 12,100 crores for Orissa which equals 19% of Orissa’s state GDP in 2005-06 (equals 11.5% in 2016-17)
• Employment:
  • Job creation of 870,000 man years, absorbs 88% of state unemployment backlog (i.e., decrease in backlog of employment from 9.9 lakhs in 2005-06 to 1.2 lakhs).
  • 18,000 man years of direct employment in POSCO-India.
• Tax Contribution:
  • POSCO-India annual tax contribution (Rs 2,620 Crores) would be appx. 17.6% of total tax revenue of Govt. of Orissa in 2016-17.
  • POSCO-India SEZ would contribute Rs 174,970 crore tax revenue in next 35 years.
    • Rs 77,870 crores would be to Govt. of Orissa and Rs 97,100 crores to Govt. of India.
    • The differences of tax between SEZ and DTA status is less than 8% for Govt. of Orissa and 5% for Govt. of India.
• Comparison with current Orissa Economy:
  • Orissa in 2003-04:
    • Gross Output: 111,378 crores
    • State GDP: 53,830 crores
    • Employment: 143 lakhs (2001 census)
    • Tax: 8170 crores (2005-06)
  • POSCO-India’s impact:
    • Gross Output: 29,760 crores
    • State GDP: 12,100 crores
    • Employment: 8.7 lakhs
    • Tax: 2620 crores

We now give some excerpts from the Hindu Business line article of January 2007 which partly explains how some of the above numbers were calculated. That article was written by R. Venkatesan who works for NCAER, but the article was his personal view.

The NCAER study broadly used the ADB/World Bank methodology on the social cost-benefit with minor adjustments for the local parameters. Econometric models were used to project border prices for the useful life of the project. The project’s impact from the State economy perspective — in terms of the impact on the State GDP (output multiplier effects) and employment opportunities created within the State (employment multiplier effects) was also assessed.

The output multiplier for iron ore was found to be 1.4 compared to 2.36 for steel. In other words, every Rs 1 lakh worth of output in the iron ore sector would result in Rs 1.4 lakh of output (including the Rs 1 lakh output of iron ore) compared to Rs 2.36 lakh for every Rs 1 lakh output of steel. The employment multipliers for iron ore and steel work out to 0.35 and 0.69 man-years respectively. Therefore, in terms of both output and employment, steel has a larger impact.

These multipliers imply that the Posco project would create an additional employment of 50,000 person years annually for the next 30 years vis-à-vis 870,000 person years in the steel project alternative. In terms of value addition, the iron ore and steel project alternatives would contribute 1.3 per cent and 11.5 per cent to Orissa’s State Gross Domestic Product (or SGDP) by 2016-17 respectively.

An important part of the study was the Least Cost Analysis of technology options in the steel-making, the Finex process that Posco purports to bring and the traditional blast-furnace technology. The Average Incremental Economic Cost was used as the yardstick; this was followed by computing the economic IRR (internal rate of return)
to examine whether the project was economically worthwhile from the national economy point of view.

The EIRR for the Orissa project works out to 16.6 per cent for base case and even in the worst case scenario, the EIRR at 13.9 per cent would remain above the hurdle rate of 12 per cent. The economic impact of the project was estimated at $2.5 billion at the test discount rate of 12 per cent.

The significant feature of the study was the estimation of depletion premium or the opportunity cost for depleteable and non-renewable resource iron ore for reasons cited below:

India’s high-grade ore (+ 65 per cent Fe content — Haematite) reserves, proven and probable, amount to only 0.58 billion tonnes. And even if we were to factor in indicative and inferred reserves (probable/feasible), the total reserves (proven and possibly future potential) would be only 0.92 billion tonnes.

India’s medium-grade ore (+62 per cent Fe to 65 per cent Fe — Haematite) reserves, proven and probable, is only 1.3 billion tonnes. Here too, if we factor in indicative and inferred (probable/feasible and pre-feasibility estimated) reserves, the total reserves (proven and possibly future potential) will be only 2.8 billion tonnes.

Policy Implications

Orissa stands to gain significantly if instead of exporting iron ore it processes it to steel within the State, in terms of both employment generation (17 times), and GDP impact (9 times).

India’s high and medium grade iron ore reserves may not last more than 19 years even if exports of these grades are frozen at the current level or if the targets set out in the draft steel policy are to be met. The economic analysis considered the depletion premium for high and medium grade iron ore. This is the opportunity cost to the national economy of using the depletable resource, which is the average incremental cost of depletion premiums computed year-wise.

Any exporter of iron ore of medium and high grades from the State needs to pay a depletion premium of $27 per tonne. Even this would be a sub-optimal policy from the State’s viewpoint if it can process the medium and high grade ore to steel. No such depletion premium has been applied for coking coal as its price did not exhibit any
trend before the recent steep price hike.

For the eastern States seeking to raise the mineral sector’s share in their GDP, it may be a good idea to set up processing facilities. It would not be advisable to allocate iron ore mines through open bids or accept increased royalty payments, even accounting for the depletion premium, compared to the option of processing iron ore to steel. Future cost-competitiveness and logistical advantage imply that iron ore-rich States can compete with existing over-capacities in the US, Europe and Japan even after factoring in the capital charges for new investments.

Export of iron ore needs to be restricted to grades other than medium and high-grade ore categories; for instance, export of beneficiated ore from Goa using inland waterways logistics advantages could be encouraged. Allowing exports of high grade ore would facilitate export of steel from existing over-capacities in the US, Europe and Japan to East Asia at the expense of future steel exports from new Indian steel capacities which are likely to enjoy cost-competitiveness over existing over-capacities elsewhere.

I am not qualified to judge the above analysis. I would appreciate any comments, analysis, criticisms etc. on the above.

Business Standard in an article in April listed several infrastructure related projects that Orissa is planning using PPP. Following are excerpts from that article.

… the Orissa government has lined up 18 new projects in the Public Private Partnership (PPP) mode entailing an investment of over Rs 6000 crore.

Of the 18 projects, 12, mostly large and medium, have already been consolidated with investments of Rs 3500 crore.

Another six projects, fairly bigger in respect to the previous ones, are under active consideration and would cover an investment of around Rs 2500 crore, according to government sources.

Source said, till date, an around Rs 5300 crore investments have already been lined up and are under implementation in the PPP module in 12 odd projects across the state.

In all the Orissa government plans to develop 30 odd projects in different sectors in the PPP module over the next two years covering an investment of over Rs 11,300 crore. …

The PPP modules currently under implementation and those under consideration cover a wide range of activities starting from port cuilding, railway line construction, road development and erection of urban clusters. …

The new projects being considered under the PPP module included development of road links in the Capital Region Ring Road, the Bhubaneswar-Paradip Road, the Suakati-Dubuna Road and the Tensa-Barsuan-Lahunipada Road.

These would entail a primary investment of Rs 1547 crore for the development of 279 kilometres of road, including a four-laning of the first one.

Other than this there would World Bank identified projects where four laning would be done of the Sambalpur-Rourkela road from the existing two-lane road.

The long pending Joda-Bamebari Road and Koira-Rajamunda Road covering 229 kilometres would also be taken up.

The PPP module would be used for two vital rail links. The first was the Angul-Duburi-Sukinda rail link and the second the Gunupur-Theruvali link. In both cases, the Special Purpose Vehicle ( SPV) route was being proposed. The investment for the rail links was estimated to be in the region of Rs 570 crore. The Angul-Sukinda rail link would be of 90 kilometres and the Gunupur-Theruvali link would be 79 kilometres.

PPP’s for setting up Bio-tech parks, SEZ for IT/ITES companies and integrated commercial and residential complex, an enclave at Shahidnagar are were also part of the city building endeavour of the Orissa government.

This apart, a commercial shopping complex and an A.C.Market complex at Unit IV are also being contemplated in the PPP mode as part of city development plan.

Till date, investment for the SEZ for IT/ITES companies had been identified and were estimated to be in the region of Rs 35.67 crore. As for the other residential and commercial complexes, project details and cost were being worked out on a war footing.

Coupled with these, a multi-product SEZ at Paradeep had been suggested by the government for development using the PPP route. It was expected to entail an investment of Rs 712 crore.

Land of around 1093 hectares would be needed for the SEZ in the Marshagahi Tehsil of Kendrapara under Paradeep.

This article is probably based on a presentation available from the Orissa govt. website. That file seems to be corrupt but its google cache shows part of the information.

NDTV reports that the Gopalpur SEZ has been cleared by the Central Govt.

There was a lot of hue and cry that why the Gopalpur SEZ was not moving further in Orissa. Recent events show that it was held up due to security clearances which was required. Hopefully this will ensure faster development in Orissa.

Tahtya reports that Chhatisgarh Futuristic Infrastructure Development Company (CFIDC) has floated a proposal to set up a Gems and Jewellery Special Economic Zone (SEZ) in the state.

The company has come up with a proposal to set up a sector specific G&J SEZ at Bhubaneswar on a land of 150-200 hectare near the air port with an investment of Rs.250-Rs.300 crore.

Samaja also covers in its news.