Global Investors Meet - 2012 Karnataka

Chemical and Petrochemical Sector Profile

Lead Organiser

Knowledge Partner

Event Partner

INDEX
Global Scenario India Scenario Transactions and Foreign Direct Investments in the sector Karnataka: sector overview and value proposition for investors Available raw material sources Government policies and efforts Key Players Investor guidance support Investment Opportunities Shelf of Projects Key contacts

Karnataka: Chemical and Petrochemicals Sector Profile

Global Scenario
> > > > > Global chemical production is growing, and most of the growth is contributed by the chemical industry of developing countries. Growth in demand for chemicals in developing countries is leading to substantial cross-border investment in the chemical sector. The size of the global chemical industry is estimated to be around US$ 3 trillion (INR 144 trillion) Western Europe is the largest chemical producing region followed by North America and Asia Chemical and Petrochemical Industry segments Basic inorganic & organic chemical industry (Soda ash, caustic soda, liquid chlorine, calcium carbonate) Drugs & Pharmaceuticals Pesticides & Agrochemicals Petrochemicals (Ethylene, Propylene, Polypropylene, Benzene, Xylene, etc) Dyes & pigments (80% utilised by textile industry) Fine & specialty chemicals Fertilizers

Share of total industry revenue in 2010 (in %)

23.6 45.4

31

>

Asia Pacific

Americas

Europe

Some of the emerging trends of the global chemical industry are: Increasing globalization and discovery of new markets in Asia and Middle East Increasing investments in R&D (especially in the specialty and knowledge segments)

Karnataka: Chemical and Petrochemicals Sector Profile

India: contributing significantly to global chemical and petrochemical industries

> > > > > > > > > > The chemical and petrochemical sector in India presently constitutes 14% of the domestic industrial activity. The Indian chemical Industry was the 6th largest in the world and 3rd largest in Asia in terms of value added. In 2010, the size of the Indian Chemical Industry was US$ 108.4 Billion (INR 5203.2 billion). India also produces a large number of fine and specialty chemicals. Dyestuff sector in India accounts for ~7% of the world production India is also a major producer of agrochemicals. Key export destination for Indian agro-chemicals are USA, U.K., France, Netherlands, Belgium, Spain, South Africa, Bangladesh, Malaysia and Singapore There are three naphtha based and an equal number of gas based cracker complexes in the country with a combined annual ethylene capacity of 2.9 million MT Also, there are four aromatic complexes also with a combined Xylene capacity of 2.9 million MT Polymers account for more than 60% of the total production of major petrochemicals

Production of selected major chemicals & petrochemicals (In 000' MT)

Products Alkali Chemicals Inorganic Chemicals Organic Chemicals Pesticides (Tech) Dyes & Dyestuffs Synthetic Fibers Polymers Elastomers Synth. Detergent Intermediates Performance Plastics 2010-11 5981 572 1342 82 47 2791 5292 95 638 191 % growth over previous year 6.77 10.42 4.84 0 11.9 7.3 10.46 -10.38 3.24 11.05

Source: Annual report 2010-11, Department of Chemicals and Petrochemicals, GoI

Karnataka: Chemical and Petrochemicals Sector Profile

Transactions an d Foreign Direct Investments in Sector

M &A data of India (2011) - Chemicals & Petrochemicals
Target Name
Standard Profil AS Liberty Chemicals(Pvt)Ltd Sipcam Isagro Brasil S/A Reaxa Ltd Columbian Chemicals Acquisition LLC Ammonia-Urea Fertilizer Manufacturing Complex DVA Agro do Brasil Ltda Manchester Organics Ltd Kanoria Chemicals & Industries Ltd-Chloro Chemicals Division Sabero Organics Gujarat Ltd

Target
Turkey Sri Lanka Brazil United Kingdom United States Gabon Brazil United Kingdom India India

Acquirer
Ruia Group Control Print Ltd Uniphos Enterprises Ltd S. Amit & Co Aditya Birla Mgmt Corp Pvt Tata Chemicals Ltd Uniphos Enterprises Ltd Navin Fluorine Aditya Birla Chemicals(India) Ltd Coromandel International Ltd

Stake(%)
100 100 50 100 100 25.1 51 51 100 42.22

Foreign Direct Investment (FDI)

Cumulative FDI inflows (Period: April 2000 to January 2012)
Sector Chemicals (Other Than Fertilizers) Fertilizers Dye-stuffs Total INR crore 14,703 1,197 85 15,985 US$ million 3063 249 18 3330

Source: Fact Sheet On Foreign Direct Investment (FDI), Department of Industrial Policy and Promotion website, www.dipp.nic.in,

Karnataka: Chemical and Petrochemicals Sector Profile

Karnataka: sector overview and value proposition for investors

> Mangalore Refinery and Petrochemicals Limited (MRPL) is the states leading player, and public sector refinery Manufacturing Facilities: MRPL has capacity to process 11.82 million metric tonnes per annum Only Refinery in India to have 2 Hydrocrack ers producing Premium Diesel (High Cetane) Only Refinery in India to have 2 Continuous Catalytic Regeneration (CCRs) producing Unleaded Petrol of High Octane Pipelines: 6 lines from refinery to coastal terminal at New Mangalore Port, with 362-km Petronet pipeline between Man galore and Bangalore transporting 76,806 kls of Naphtha, Petrol, Kerosene, ATF, Diesel

500+ factories drive the chemical industry in the State

Over 100 factories 20-99 factories 1-19 factories

>

Presence of a dedicated Petrochemical Special Eco nomic Zone (SEZ) in Mangalore Developed in 1,800 acres of land at Mangalore, Dakshin Kannada 1,453 acres dedicated to petroleum and petrochemicals industry development

>

Mangalore SEZ: driving investments into the State Aromatics complex by ONGC Mangalore Petrochemicals Ltd (OMPL) producing para-xylene and benzene Strategic crude oil storage facility by Indian Strategic Petroleum Reserves Ltd (ISPRL) at a cost of US$208 million (INR 9984 million) Downstream petrochemical industries: methanol, propylene, benzene based; plastics, specialty chemicals

Karnataka: Chemical and Petrochemicals Sector Profile

Raw materials sources: enabling investment in downstream processing industry

Products from MRPL
POLYPROPYLENE PETCOKE SULPHUR MIXED XYLENE BITUMEN LPG KEROSENE NAPTHA ATF MOTOR SPIRIT FUEL OIL DIESEL

Production Vol. ( MMTPA)

0.44 0.9 0.2 0.08 0.25 0.3 0.34 0.89 1.09 1.19 2.27 5.28

Products from OMPL

PARA XYLENE BENZENE

Production Vol.( MMTPA)

0.9 0.27

Dabhol Bangalore Gas Pipeline

> > > > > 1,370 km Dabhol Bangalore Natural Gas Pipeline Main trunk line, which will extend from Dabhol to Bidadi Planned transmission capacity of 16 MMcm/d Construction to be completed by Dec 2012 Potential for development of Gas based projects along the Pipeline

Karnataka: Chemical and Petrochemicals Sector Profile

Government policies and efforts to promote healthy investment environment

Central Policy & Regulatory framework
The National Policy on Petrochemicals 2007, aims at increasing investments in the sector (both upstream and downstream); ensuring availability of raw materials at internationally competitive prices, creating quality infrastructure and increasing exports, etc. > > > 100% FDI is permissible in this sector. Also, manufacture of most chemical products inter-alia covering organic/ inorganic, dyestuffs and pesticides has been de-licensed by the Government. The entrepreneurs need to submit only IEM with the Department of Industrial Policy and Promotion. Only the following items are covered in the compulsory licensing list because of their hazardous nature: Hydrocyanic acid &its derivatives Phosgene &its derivatives Isocynates & di-isocynates of hydrocarbons.

> >

Anchor unit subsidy & Investment promotion subsidy to MSMEs Exemption from stamp duty and concessional registration charges Refund of conversion fine and Special incentives for enterprises coming up in low HDI districts Exemption from entry tax & Incentives for export oriented units Subsidy for setting up of ETPs Interest free loan on VAT for large & mega projects Exemption from electricity duty

State Industrial Policy, 2009-14

> > > > >

Karnataka: Chemical and Petrochemicals Sector Profile

Government policies and efforts to promote healthy investment environment

> > > > > > > >

Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units 100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years. Exemption from minimum alternate tax under section 115JB of the Income Tax Act. External commercial borrowing by SEZ units upto US $ 500 million in a year without any maturity restriction through recognized banking channels. Exemption from Central Sales Tax. Exemption from Service Tax. Single window clearance for Central and State level approvals. Exemption from State sales tax and other levies as extended by the respective State Governments

Central policy and incentives for units in Special Economic Zones (SEZs)

> > > > > >

Single Point Clearance by Unit Approval Committee headed by the Devel opment Commissioner, SEZ All industrial units and other establishments in the SEZs will be declared Public Utility Service under the provisions of the Industrial Dispute Act, 1947 50% Exemption of Stamp Duty and Registration fees Exemption of Electricity Duty or Taxes Exemption of 1% Labour Welfare Cess on construction cost Exemption from any other State taxes, cess, duties or levies as may be notified by the State Government.

Karnataka State Policy for Special Economic Zones Act, 2009

Karnataka: Chemical and Petrochemicals Sector Profile

Chemical and petrochemical industry: a growing investment focus for state

International Case Study - BASF
> > > > BASF is a leading Global Chemical Manufacturing company. In India, it manufactures polymers, tanning agents, leather chemicals and auxiliaries, crop protection chemicals, textile chemicals, dispersions and specialty chemicals, performance plastics, automotive and coil coatings, construction chemicals, polystyrene and polyurethane systems BASF first came to Karnataka in 1995-96 and set up a dye manufacturing unit. Today, it plant in Mangalore is the largest BASF site in South Asia Also, the BASF Mangalore site is among the 153 BASF global production sites certified in accordance with ISO 14001.

Other key Players

Mangalore Refinery & Petrochemicals Ltd

Industry Focus
Oil and gas refining facilities with annual refining capacity of 11.82-million MT; Manufacturing facilities of MRPL include Crude and Vacuum Distillation Units , Hydrocracker Units , Soaker Visbreakers, Continuous Catalytic Regeneration Platforming Unit , LPG Merox, Hydrogen Plant , Bitumen plant Urea, Di-ammonium phosphate, Muriate of potash, Granulated fertilizers, Soil conditioners and Specialty fertilizers

Mangalore Chemicals & Fertilizers Ltd.

Somu Group

Speciality fine chemicals, Pharma intermediates, Agrochemical intermediates, Speciality solvents, Standard herbal extracts, Cosmetic intermediates, Nutraceutical products

Karnataka: Chemical and Petrochemicals Sector Profile

Chemical and petrochemical industry: a growing investment focus for state

Major investments received during GIM 2010 (in million)

Company name
Mangalore Refinery & Petrochemicals Ltd Zuari Fertilizers & Chemicals Akzon Nobel India Ltd

In US$
3291.25 951 52.71

In INR
1,57,980 45,650 2,530

Area
Oil refinery (Dakshin Kannada) Urea (Belgaum) Paints and varnishes (Mysore)

Investment Guidance
> > > > > Karnataka Udyog Mitra (KUM): First contact point for all investors in Karnataka and nodal agency to facilitate investments. KUM executes initiatives to enable smooth transition from investment proposal stage to implementation stage State High Level Clearance Committee(SHLCC): Chaired by Honorable Chief Minister of State of Karnataka to approve projects with investments above US$ 10.42 million (INR 500 million) State Level Single Window Clearance Committee(SLSWCC): Chaired by Honorable Minister for Large and Medium Industries meets every month to approve projects with investments between US$ 0.63 million (INR 30 million) and US$ 10.42 million (INR 500 million) District Level Single Window Clearance Committee (DLSWCC): Chaired by Deputy Commissioner of the District , for approval of projects with investments up to US$ 0.63 million (INR 30 million) Combined Application Form: Available on KUM website for obtaining required statutory approvals

Karnataka: Chemical and Petrochemicals Sector Profile

Investment Opportunities
Special Economic Zones Transport Hubs Petrochemical Industrial Parks Logistics Parks

Infrastructure

Investment Opportunities Education, R & D

Eco-friendly technologies and products Research and development centers Dedicated courses, ITIs and colleges to support the industry through skill development

Manufacturing
Para Xylene based industries Benzene based C3 Chain C4 Chain Methanol based

Indicative investment areas in intermediate and downstream industries based on available raw material
>

Intermediate petrochemical units

Propylene-based: Acrylonitrile, Oxo-Alcohol P-Xylene-based: Purified Terepthalic Acid, Polyethylene Terephthalate, Polyester Staple Fibre, Polyester Filament Yarn/ Partially Oriented O-Xylene-based: Phthalic Acid Benzene-based: Nylon Filament Yarn/ Nylon Industrial Yarn, Cyclohexane, Caprolactum, Adipic Acid, Polyamide, Linear Alkyl Benzene, Aniline Propylene and Benzene-based: Cumene, Phenol and Acetone, Bis Phenol A, Acrylonitrile Butadiene Styrene, Styrene-Acrylonitrile, Poly Methyl Methacrylate, Polycarbonate Syn Gas I: Methanol, Acetic Acid Methanol-based formaldehyde

>

Downstream petrochemical units:

Synthetic & technical textiles, garments and apparels Speciality chemicals, coatings, adhesives, sealants, rubber chemicals, Pesticides, Dyes Plastics and plastic products Bulk drugs and API Agro-chemicals and organic chemicals

Karnataka: Chemical and Petrochemicals Sector Profile

Shelf of Projects
Investment potential (US$ million)
4166.67

Project
P- Xylene, Benzene, and C3 Chain based intermediate industries Synthetic and Technical Textiles, Speciality Chemicals, Coating, Adhesives, Agrochemicals, Dyes and Plastics, and Organic Chemicals Chemical and Petrochemicals Park

District/ Location
Dakshin Kannada

District
Dakshin Kannada

Subsector
Intermediate Industries Downstream Industries Infrastructure

Mangalore SEZ

Dakshin Kannada

2083.33

Hassan

Hassan

104.17

Mangalore SEZ

Mangalore

Dakshin Kannada

Infrastructure

104.17

Karnataka: Chemical and Petrochemicals Sector Profile

Source:
> > > > > > > > > > > > > > Department of Commerce & Industries, Government of Karnataka; website: http://www.karnatakaindustry.gov.in/ Karnataka Udyog Mitra (KUM), Government of Karnataka; website: http://www.kumbangalore.com/ Economic Survey of Karnataka 2010-11, Planning Programme Monitoring & Statistics Department, Government of Karnataka, February 2011, http://www.planning.kar.nic.in/sites/planning.kar.nic.in/files/ES_Final_Printing_English_13-3-11_5.30.pdf, accessed on 31 October 2011. Indian Chemical Industry: A Sector Study, Export-Import Bank of India, March 2007, http://www.eximbankindia.com/op/ OP%20117%20Chemical%20Industry%20[Full%20Report].pdf, accessed on 29 November 2011. Chemicals: November 2010, India Brand Equity Foundation, November 2010, www.ibef.org, accessed on 28 November, 2011. Factsheet on Foreign Direct Investment (FDI): From April 2000 to September 2011, Department of Industrial Policy and Promotion, September 2011, http://dipp.nic.in/English/Publications/FDI_Statistics/2011/india_FDI_September2011.pdf, accessed on 28 November 2011. Annual Report 2010-11, Department of Chemicals and Petrochemicals, Ministry of Chemicals and Fertilizers, Government of India, http://chemicals.nic.in/English.pdf, accessed on 28 November 2011. Annual Report of Industries & Commerce Dept. for 2010-11, Department of Industries & Commerce, Government of Karnataka, http://karnatakaindustry.gov.in/documents/AnnualReport2010-2011Eng.pdf, accessed on 28 November 2011. Economic Survey of Karnataka 2010-11, Planning Programme Monitoring & Statistics Department, Government of Karnataka, February 2011, http://www.planning.kar.nic.in/sites/planning.kar.nic.in/files/ES_Final_Printing_English_13-3-11_5.30.pdf, accessed on 31 October 2011. Karnataka: November 2010, India Brand Equity Foundation, November 2010, http://www.ibef.org/download/ Karnataka_190111.pdf, accessed on 28 November 2011. Basic Statistics on Indian Petroleum & Natural Gas, 2009-10, Ministry of Petroleum and Natural Gas, Government of India, October 2010, http://petroleum.nic.in/petstat.pdf, accessed on 8 December 2011. Number of Registered Factories and Number of Workers Classified According to its Manufacturing Processes, Dept. of Factories, Boilers, Industrial Safety & Health, Government of Karnataka, 31 March 2011, http://labour.kar.nic.in/ fandb/f_static.htm, accessed on 29 November 2011. Mangalore SEZ Ltd website, http://www.mangaloresez.com/, accessed on 29 November 2011. Mangalore Refinery and Petrochemicals Limited (MRPL); website: http://www.mrpl.co.in/

Karnataka: Chemical and Petrochemicals Sector Profile

Karnataka: Chemical and Petrochemicals Sector Profile

Contacts
Principal Secretary to Government of Karnataka Commerce & Industries Department
# 106, 1st Floor, Vikasa Soudha, Dr. Ambedkar Vedhi, Bangalore - 560 001, India. Ph.: +91-80-22252443 / 22034340 Fax: +91-80-22259870 Email: prs_ci@karnataka.gov.in

Commissioner for Industrial Development and Director of Industries & Commerce

2nd Floor, Khanija Bhavan, No.49, Race Course Road, Bangalore - 560 001, India. Ph.: +91-80-22386796 Fax: +91-80-22389909 Email: commissioner@karnatakaindustry.gov.in Visit us at: www.karnataka.industry.gov.in

Managing Director, Karnataka Udyog Mitra

3rd Floor, Khanija Bhavan (East Wing), No.49, Race Course Road, Bangalore - 560 001, India. Ph.: +91-80-2228 2392, 2228 5659, 2238 1232, 2228 6632 Fax: +91-80-2226 6063 Email: md@kumbangalore.com Visit us at: www.kumbangalore.com

Mangalore SEZ Ltd. Managing Director & CEO (KAPPEC)

No. 16, Pravana Park, 3rd Floor, Infantry Road, Bangalore - 560 001, India. Ph.: +91-80-2286 7552, 22867553 Fax: +91-80-22867551