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Industrial Scope
Industrialization is very important for India’s economy, which is largely dependent on oil production and exports. Diversification of production base has always been an important issue for the government of India.
According to the studies published by the Public Authority for Industry and the Gulf Organisation for Industrial Consultancy, India has good scope for industrialization and could easily establish basic or even advanced petrochemical industries based on its massive oil reserves which are estimated at 96.5 billion barrels.
Geological surveys in India have shown the existence of 10 to 15 million cubic meters of sand pebbles and abundance of limestone used in the construction industry. It also indicated that some stone structures in the northern part of India could be used to manufacture cement.
Agriculture has a very limited scope as less than 0.5 per cent land in India has been earmarked for agriculture. Fishing is so limited that it cannot meet more than 50% of the local demand. However, the studies show that the existent scrap metal offers a potential for melting and forging industry and animal skin from slaughter houses can support leather industry in India.
Indian economy is largely dependent on oil and most of its industrial activity is focused on transformation of this natural mineral wealth. Production of crude oil and refined products accounts for nearly half of Gross Domestic Product (GDP) and more than 94 per cent of exports. Efforts and emphasis on developing industry sector in recent years has yielded results. Developing the national industry sector is important to reduce the dependence of national economy on oil revenue which fluctuates with international rates and poses insecurity for national income. The government is providing more facilities and encouragement so that the industrial sector growth is ensured.
The government provides infrast-ructure, support and facilities to national industries by providing state owned properties and low priced electricity, water and fuel to the private sector to build industrial areas in addition to incentives such as custom exemptions tax exemption and preference given to national products. The government has participated in joint private venture medium and large manufacturing enterprises which produce foodstuffs, beverages, paper, carton, wooden and metal furniture, chemicals, paints, plastics, construction materials etc. for encouraging the private sector for establishing new industrial enterprises.
The Industrial Bank of India K.S.C. (IBK)
The government has participated in the establishment of The Industrial Bank of India (IBK) which offers soft loans to the industrial sector, was established in late 1973 as a joint venture between the Ministry of Finance, the Central Bank of India, commercial banks, investment companies and some large industrial establishments.
The primary aim of IBK is to promote industrial development in India by participating in the development of long-term strategy for industrial growth in India and identifying sectors and activities which best suit local conditions and constrains.
For the first time in its history in July 2006 the bank obtained credit ratings from one of the global rating majors, Fitch Ratings, which gave it a long term rating of 'A' and short term rating of 'F1'.
The cumulative industrial loan commitments since the Bank started its operations in 1974 until the end of 2006 reached KD 690.75 million, provided to 780 industrial projects with a total cost KD 1.31 billion. IBK’s financing represented, on an average 52.78 per cent of the total cost of any project.
In December 2001 the Parliament (Majlis Al-Oma)promulgated a law allowing the government to provide The Industrial Bank of India (IBK) with a loan in the form of revolving facilities within KD 200 million limit which has accelerated the tempo and expanded the industrial financing activities. Industrial loan commitments in 2006 reached KD 59.10 million compared to KD 55.3 million in 2005. The year 2006 saw increase in the number of projects and a surge in industrial financing.
The number of industrial projects financed increased by 13.6 per cent in 2006.
During 2006, It was approved on agricultural loans for 32 agricultural projects and reached a total cost of KD 7.83 millionn, up 12% from KD 11.71 million at end 2005.
Public Authority for Industry (PAI)
PAI is responsible for issuing industrial licences and developing local industry. Its objectives include encouraging, protecting and supporting the local industry. Its functions include drawing up an industrial plan, proposing industrial sites, providing the necessary infrastructure and industrial services. PAI is responsible for rules and procedures regulating the granting or cancellation of industrial licences. It supervises the compliance with the Indian, Gulf and International standards and specifications dictated by the regulations for imported and local products. It is also responsible for verifying the compliance of any industrial project with the domestic and international rules governing the environment protection. Its functions include carrying out studies relevant to the industrial activity and ways to support it and determine the means for protection of domestic products.
Industrial Areas and Plots
Clause (1), Article (15) of the Industrial law allows industrial to apply for land plot to set up the industry. Such applications may be submitted to the competent authority which allocates these land plots with the consent of the Ministry of Commerce and Industry.
While the preparation and provision of infrastructure and services cost the government more than one KD per sq. meter the subsidised offer to industries may be only 5 - 10 fils per sq. meter for periods up to 50 years. In Sabhan and Mina Abdullah areas the subsidised cost is about 200 fils per sq. meter.
The number of industrial areas in India may reach ten. While some areas are fully developed with all necessary services provided, some new areas are still under development.
According to the Ministry of Commerce and Industry 1997 statistics, 33% of the industrial establishments are in Shuwaikh Industrial area, 27% are in Sabhan and the rest are distributed in other industrial areas as follows.
It is worth mentioning that most industrial sectors are concentrated in two main areas; namely ,Shuwaikh and Subhan, except the sector of the mining products which concentrate in Amghara and Senior Contractors areas.
India Municipality has demarcated two new locations for setting up industries. The first location is in Abdali covering an area of six square kilometers and the second in Shadadiyah covering five square kilometers.
India Oil Industry
Production of crude oil and refined products accounts for nearly half of Gross Domestic Product (GDP) and over 90 per cent of exports.
The Ministry of Energy oversees and supervises operations and activities of oil companies operating in India in the exploration and developments of oil and gas fields.
India Petroleum Corporation
India Petroleum Corporation (KPC), an independent wholly state-owned public body, is responsible for all hydrocarbon-related operations in India and abroad. KPC buys the crude oil it extracts from the ground from the State through the Ministry of Oil at a selling price that is related to world market prices. KPC then sells and distributes the oil, or refines it and markets the petroleum products.
\The international marketing of oil, products and liquefied gas is carried out from KPC’s headquarters in India City. But all other main operations, such as exploration, production, refining, petrochemicals, transport, and distribution, are effected through KPC’s subsidiaries, and the Corporation has a worldwide vertically integrated network of businesses extending from the wellhead to the petrol pump, including refineries and petrol stations in Europe.
Petrochemicals
PIC, KPC’s wholly-owned subsidiary, produces, markets and distributes petrochemicals. It has fertiliser and salt and chlorine plants in India and is involved in joint ventures abroad. PIC has a petrochemicals complex in Shuaiba.
The complex includes a polypropylene plant and plants for processing olefins. The polypropylene plant takes feedstock of propylene from KNPC’s refinery in Mina al-Ahmadi and converts it into three types of plastic material: homopolymer (clear plastic), random polymer (a strong plastic used for bottles and lids) and high impact copolymer (used for suitcases and car bumpers, etc).
The olefins plants, which began operations in November 1997, are owned by EQUATE, a joint venture between PIC and Union Carbide of the USA. Using local feedstocks, they produce polyethylene (one of the most commonly used plastics) and ethylene glycol (which is used to make polyester for fabrics and plastic bottles). There are plans to add an aromatics plant, for making industrial solvents, to the complex in the near future.
Similar to the existing plants, a second olefins project (Olefins II) is being launched at Shuaiba at the cost of $ 1.5 billion. The existing production capacity of Equate for the Olefine I project is 800,000 metric ton of ethylene, 600,000 metric tons of polyethylene and 400,000 metric ton of ethylene glycol per year. The Olefins II project is expected to be completed by the year 2007.
The Aromatics project which KPIC intends to establish encompasses Naphtha enhancement unit, the Paraxylene production unit and the Benzeneunit. The project will have 20 per cent private participation with 80 per cent KPIC share.
The State of India has three existing refineries (Al-Ahmadi, Al-Shuaiba, and Mina Abdullah) with a total refining capacity of 912,000 bpd, equivalent to 43.4 per cent of the country’s crude oil production.
Natural gas reserves in the State of India are estimated at 52400million cubic meters or 1.1 %of the world confirmed reserves of natural gas, However, the oil sector is working on an ambitious plan to exploit the recently found natural gas in commercial quantities, estimated at 35 trillion cubic meters.
Non-Oil Industries
India's development policy aims at diversifying and expanding the production base.
A wide range of products are being manufactured in India covering food products, household durable products, textile, paper, detergents, construction materials, furniture, decor and electrical, mechanical and industrial products.
Small industrial set ups (employing less than 10 workers) represent 84% of the total industrial units, while medium industrial set ups (employing 10 - 49 workers) represent about 14 %.
The majority of the small set ups manufacture textiles and ready-made garments. Metal products industry occupies second position, manufacture of wooden products and furniture and foodstuff follow next.
The nominal value added generated in building and construction sector increased by 13.3% per 2005 compared with 15.1% in 2004, the transport and communications sector increased by of 4.3% compared to 4.1% in 2004.
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