Odisha Govt’s Industrial Dream and The Truth

Odisha has emerged as the preferred destination for investors drawing investments worth Rs 15 lakh crore. It has entered into MoUs with 92 players across sector like steel, power, aluminium, cement and auto components attracting investments of Rs 5.69 lakh crore. However, only Rs 2.45 lakh crore investment in Odisha have taken off. Most of the major industries are facing raw material linkage and land acquisition hurdles.

BHUBANESWAR: Mineral rich Odisha may have attracted big ticket investments from potential investors and been ranked seventh in ease of doing business among the states, but when it comes to the grounding of projects it still lags behind as many of the projects are mired with various impediments.

Despite a stable government, which has been in power since last 15 years, several mega projects, including Posco, touted to be the largest foreign direct investment in India, resource-rich continue to face hurdles in even getting off the ground while several have stalled or backed out from their proposals.

Companies have shied away from investing in resource-rich state for reasons ranging from not-so-business-friendly policies, environmental issues, land acquisition, protection of ethnic tribes and their culture and the menace of left-wing ultras.

Total investment in Odisha

Since the opening up of reforms in the country, Odisha has emerged as the preferred destination for investors, drawing investments worth Rs 15 lakh crore.

A total of 264 mega projects evinced interest to set up projects with an investment of almost Rs.8 lakh crore ($120 billion) between 2004 and 2015. However, only 20 have successfully established their set-ups and have started partial or full production with an investment of Rs.12,000 crore.

Grounding of MoU signed projects

The state government has entered into MoUs with 92 players across sector like steel, power, aluminium, cement and auto components. Rs 5.69 lakh crore investment in Odisha have been committed by these MoU bound industrial units. Of the 92 entities, 45 have commenced production either on partial or full scale.

Investments to the tune of Rs 2.45 lakh crore have taken off in Odisha.

Steel sector

Major investments have come from the steel sector. With 48 MoUs, steel sector leads the pack of investors. While as many as 33 steel units have already started partial or full scale production with an investment of around Rs 1.3 lakh crore, creating capacity of nearly 15 million tonne.

Tata Steel, Bhushan Steel and Jindal Steel & Power Ltd (JSPL) have been the major investors in the sector.

Power sector

The state government has inked MoUs with 28 IPPs envisaging a total production capacity of around 37,500 Mw with proposed investment of over Rs one lakh crore. The independent power producers (IPPs) have invested around Rs 40,000 crore.

Three IPPs- Vedanta Group firm Sesa Sterlite, GMR Kamalanga and Jindal India Thermal Power Ltd (JITPL) have begun commercial production.

However, as many as 20 independent power producers are yet to commence construction work on their projects.

Sesa Sterlite has fully commissioned its 2400 Mw (4×600) power project at Bhurkamunda near Jharsuguda with an investment of Rs 8038 crore on the plant. GMR Kamalanga has commissioned four 350 Mw units of its proposed 1400 Mw power plant at Kamalanga in Dhenkanal district.

JITPL has commissioned its first 600 Mw unit of the proposed 1800 Mw plant at Derang near Angul.

Aluminium sector

Rs.66,444 crore of investment in Odisha has been proposed by three companies – Vedanta, Aditya Aluminium and RSB Metaltech. While two companies have started production, RSB is facing land acquisition hurdle both at Rayagada and Dhenkanal for setting up refinery and smelter plants.

Raw material hurdle

Most of the companies be it steel, aluminium and power, all are facing raw material scarcity.  While Vedanta is running its both the refinery and smelter plants at 50 percent capacity, despite setting up the refinery project at the heart of bauxite mines in Kalahandi, the steel sector is facing the heat of raw material linkages.

Tata steel, which has commissioned its three million steel plant at Kalinganagar after 11 years of struggle, is also not running the plant at full capacity. Similar situation is with JSPL also.

Despite Odisha attracting 12 percent of the new investments in the country’s power sector, the projects are facing inordinate delays. The cancellation of coal blocks by the apex court has also affected the projects.

Scrapping of projects

While Arcelor Mittal has scrapped its Rs.40,000 crore steel project investment in Odisha, Jindal Steel and Power withdrew its Rs.62,000 crore coal-to-liquid (CTL) project at Angul following the cancellation of the Ramchandi mine by the Supreme Court. Besides, two power projects have withdrawn their proposed projects in Odisha.

Posco project

Posco India, touted as the country’s largest foreign direct investment (FDI) , that is mired in controversy for the last nearly 11 years due to stiff local opposition over compensation and environment concerns.

The amended Mines and Mineral (Development and Regulation) Act 2015 has put fresh trouble for getting raw material linkage to set up the $ 12 billion steel project in the state. The company is in no mood to participate in the bidding process, as per the Act, to secure Khanddhara mines as it fears that the Indian companies would form a cartel to discourage the South Korean steel giant.

While there is every possibility of backing out from the proposed project in Odisha if it did not get raw material, the South Korean steel giant has inked an agreement with Uttam Steel and Power Ltd to put up a 3 mtpa steel plant in Maharashtra.

On government part- Steel and Mines Minister Prafulla Mallick informed the state assembly that it has no information of Posco backing out from the proposed project. It has sought the intervention of industry friendly Prime Minister Narendra Modi to resolve the issue.

Government initiatives

It has unveiled the latest edition of its Industrial Policy Resolution (IPR), 2015 that aims to ease business procedures and attract investment in Odisha. it aims to pull Rs 1.73 lakh crore new investments by 2019.

It has not only made it simpler to set up a business but also eased tax procedures for corporate houses.

The policy is also loaded with features like a fast track cell to clear investment proposals within 30 days, a dedicated portal to ease business processes for investors and an exclusive mobile app for investment facilitation.

Odisha aims to rank among the top three states in ease of doing business.

Land Hurdle

To overcome the land hurdle, the state government has also identified about 100,000 acres to create a land bank for facilitating to set up industries without any hassles, sources said.

The Industrial Infrastructure Development Corporation of Odisha (IDCO) has ordered the acquisition of land at Angul, Balasore, Cuttack, Deras, Dhamra, Dhenkanal, Jharsuguda, Kalinga Nagar, Koraput, Paradip, Rayagada and Rourkela in the first phase.

Natural resources

For the record, the state has about 28 percent of India’s iron ore, 24 percent of coal, 59 percent of bauxite and 98 percent of chromite, which is enough to attract any large investment to Odisha.

Assocham report 

The recently released Assocham report titled ‘Realizing economic potential of Odisha: A comparative investment analysis’, has awarded Odisha as the 3rd most preferred investment destination in India.

Manufacturing sector is accounted for highest share of about 45 percent in the total outstanding investment in Odisha. While it has attracted outstanding investments worth about Rs 12 lakh crore, projects with investments worth about Rs 6 lakh crore  are under implementation.