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Agriculture vs Industry: Should industry lose out in TN?

Recently, Haldia Petrochemicals Ltd, West Bengal had offered to construct a petrochemical plant in Cuddalore at an investment of around Rs 50,000 crore.

Agriculture vs Industry: Should industry lose out in TN?
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Chief Minister Edappadi K Palaniswami, actively soliciting investments in Tamil Nadu, has reportedly assured the representatives of the company that permission for the plant would be expedited.

This, coupled with infrastructural improvements in chemical clusters like common effluent treatment plants, pipeline corridors and desalination plants in the coastal areas, will stimulate a rapid growth of the chemical industry in the State.

Against this backdrop, the recent statement of the Chief Minister that the eight Cauvery delta districts from Nagapattinam to Cuddalore would be declared a protected agriculture zone where setting up of new projects on hydrocarbon will not be granted permission is a bit confusing. This scheme will impede the efforts of the Centre to relax environmental impact assessment and to exempt hydrocarbon projects from public consultations that were earlier mandatory. These requirements were found to be roadblocks that delayed/stopped major investment projects.

Massive protests in the Delta region

In recent years, the State has witnessed several massive protests in the Delta region, including opposition to the coal-bed methane exploration project, the Neduvasal hydrocarbon extraction programme, ONGC’s oil exploration at Kathiramangalam, and the Vedanta group project for hydrocarbon extraction in Nagapattinam.

A few hundred farmers effectively stalled the laying of a gas pipeline connecting Kochi with Bengaluru by GAIL. The project cleared in 2010 could not be implemented despite the Supreme Court upholding the contentions of GAIL more than four years ago.

TN not a large producer of good grain

Tamil Nadu is not among the large producers of food production by states. Its record post-green revolution has not been flattering. While Punjab recorded an annual average growth in food production of 9.3 per cent, TN’s was just 2.7 per cent during this period.

The State suffers from several disadvantages:

Highly urbanised with average land prices high.

Land holdings are highly fragmented with the average at less than two acres. This comes in the way of application of science, technology and management, essential for increasing productivity.

Average productivity is far lower than the potential.

The State is not a lead producer in any crop.

The contribution of the primary sector of agriculture is just around 8 per cent to its GDP and is falling around half the nation’s.

Huge revenue potential for oil and gas

In this background, the State should look at the benefits to the farmer in terms of deriving the best returns from his land holdings. The average return from paddy assuming even full utilisation of the land through multi cropping, is around Rs 50,000 per acre or around Rs 4000 p.m. Look at the possibility of taking oil or gas out of this land. It should run into a few lakh rupees! Remember, such potential for getting oil or gas out of land is not available from everywhere. Of course, the State should advance the case for the land owner and the State getting a fair share of the revenue from oil or gas.

Innovative US model that made millionaires of farmers

America offers a striking example of such an innovative approach. Hardly three decades ago this prosperous country with her huge dependence on oil and gas for meeting its energy and transportation needs, was spending massive amounts on imports. A highly imaginative policy focused on a multi-pronged strategy:

Improves fuel efficiency of vehicles

Planned large scale production of ethanol from corn produced in abundance and mandating an ethanol-mix with petrol

Incentivised production of shale gas

Intensified exploration and production of oil at its vast oil-rich regions of Alaska, Texas

All these were aided by a big jump in the prices of crude and natural gas backed by needed incentives to the land owners, oil explorers and producers and the concerned state governments. By intelligent sharing of the bonanza, American farmers have been extending cooperation. In less than two decades, such a focused policy has helped the US emerge with surplus in its energy needs and an exporter of oil and gas. India has invaluable lessons from the US success story. There is urgent need to step up prospecting, exploration and production, particularly for shale gas.

Focus on chemicals and petrochemicals

Years ago, the Nagapattinam-Cuddalore corridor was designated as a Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR). With the Chennai Petroleum Corporation Ltd planning to set up a 15 million tonne oil refinery at Nagapattinam, there is a huge opportunity to develop the corridor as a thriving petrochemical complex. If a gas pipeline could be extended to Cuddalore, a large fertilizer plant with capacity of 5000 tpd could also be set up at this coastal town. Remember nearby Neyveli producing urea till the 1970s that met the fertilizer needs of the central districts of Tamil Nadu? The focus on chemicals and petrochemicals will help widen the industrial base of Tamil Nadu.

Like Gujarat and Maharashtra, such a focus will also witness quantum jumps in investments in industrial projects. The infrastructure is readily available at Cuddalore: for over a decade, the Nagarjuna Oil Refinery Ltd had been battling with the setting up of an oil refinery. It did not progress, came under the IBC and was closed. The rich infrastructure along with the large land area and all clearances, lend for early execution of a large petrochemical unit by HPL. Tamil Nadu can emerge a large player in a fast growing market for chemicals and petrochemicals. Presently, Gujarat meets bulk of the demand for such products with high profits. Tamil Nadu has excelled in textiles, leather, cement, automobile, auto components and IT industries. With the cyclical fortunes of these industries, diversification into chemicals and petrochemicals will contribute to greater stability for industrial growth.

TN’s share in the high growth chemical/petrochemical sector is just six per cent of the nation’s. With its long coastline and rich infrastructure, Tamil Nadu should tap the potential for the high-investment petrochemical sector.

In particular, this offers huge scope for downstream units, with large employment potential with wages much higher than in the farm sector.

This will also help the central districts of the State catch up on industrial development with the northern and western regions. There is need for a clear focus to build on the strengths of the State that has limited natural resources but an abundance of educated manpower, port facilities, good infrastructure and a strong, stable administration. In the long term perspective, it would make sense for the State to focus on the secondary and tertiary sectors, viz., industry and services. Already the State excels in these. Tamil Nadu’s record in these is exemplary. Policymakers and political leaders should work to expand on these thriving sectors and to develop agriculture as a profitable agri-business with rich inputs of science, technology and management.

Centre must consult State leadership

The Centre should understand the sensitivity of such issues that have been triggering protests and widespread agitations, especially in Tamil Nadu. Politically hyper-active and socially over-conscious, the State has been prone to resort to agitations over sensitive issues. Remember the long-drawn opposition to the Kudankulam Nuclear Power Plant and the expansion of mining at Neyveli? Later these projects proved to be great money-spinners and provider of employment in large scale.

The Centre should have anticipated the reaction to taking decisions unilaterally on the exemption of hydrocarbon exploration projects from holding public hearings and obtaining environmental clearances. With elections to the Assembly due next year, the Centre should have factored the impact of such decisions on the AIADMK government that has been successfully weathering the threats for survival ever since the demise of the party supremo, J Jayalalithaa. It should have consulted and convinced the State leadership of the imperative for this change.

Convince on the need for gas and oil

Central ministers like Dharmendra Pradhan handling Petroleum and Natural Gas, Prakash Javadekar, in-charge of Environment, Forest & Climate Change, and Prahlad Joshi, Parliamentary Affairs, apart from the Prime Minister himself, should have discussed the issue with the State policymakers. From the nation’s point of view, there are compelling reasons for attempting the change. Bulging outgo on the import of crude oil and gas that constituted a sizeable share of petroleum imports and stagnant exports demand maximising exploration and indigenous production of oil and gas. Also, such resources are not available everywhere, in every State. The Nagapattinam area has been explored for several decades and is having proven reserves.

The great enthusiasm with which oil exploration and production was focused resulted in India reaching the level of 30 per cent self-sufficiency in the 1980s. Production has been stagnating since, with no great breakthroughs in fresh discoveries and added production. Indigenous production has fallen to around 20 per cent. There is a huge increase in the outgo on imports of petroleum products at $ 111.9 billion (21.8 per cent of total imports).

The prospect for the prosperity of the land owner, the region, the State and the country, need to be marketed convincingly. There is the imperative to build consensus on such crucial issues with the states.

Depute Nitin Gadkari for building consensus

Arun Jaitley succeeded in a remarkable measure in building such consensus for pushing the tough issue of GST. Prime Minister Modi has proved his capabilities to build close relations with a large number of global leaders of stature with varying ideologies. He should now spend his energies on building such rapport with leaders of different states and also of the opposition. He would also do well to designate a senior cabinet colleague to focus on this. I would commend Nitin Gadkari for such an assignment.

— The writer is Editor,Industrial Economist

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