EXPOSITION OF THEME

BY

R.P. KHATOR

PRESIDENT - AIIGMA

Hon’ble, Dr. V. Krishnamurthy, Chairman, National Manufacturing Competitiveness Council, Government of India, Mr. M. K. Sanghi, President, ASSOCHAM, Mr. M. Anbunathan, Chief Controller of Explosives, Mr. R. K. Bansal, Director, Department of Food Processing Industries, Ministry of Food Processing, Mr. Sanjay Garg, Deputy Secretary, Department of Industrial Policy & Promotion, Ministry of Commerce and Industry, Government of India, other senior officials from Central & State Governments, other guests, delegates and friends,

 

I am extremely glad & feel highly privileged to get this opportunity to present the exposition of theme on the occasion of 27^th NSIG in this beautiful coastal city of Chennai. The theme of the Seminar chosen is “Gases for Agro-Industries, Health Care and Technology Growth” is typical to the use of gases. The modern application and opportunity of various gases is tremendous and therefore these gases are key to the overall economic growth of any country.

 

At the outset, let me express our deep sense of grief and sympathy to all those who have suffered so heavily in the Tsunami that hit our country and many of our neighboring countries on 26^th December, 2004. Needless to mention that this Association makes its sincere appeal to all, that everybody may extend best possible support and assistance to the Tsunami relief efforts. We on our part have already initiated action to ensure that a suitable amount can be donated to the Tsunami relief fund.

 

Year 2004 has seen a robust growth of the world economy despite soaring oil prices, inflationary pressures, worsening war in Iraq, troubles at the United Nation, heighten tension in Palestine and adverse growth prospects in the poorer countries. However, Indian business growth recorded about 7% growth, which is considered very good specially in terms of the low rate of growth in the past. The exaggerated fear of the future was misplaced with demand for export of many Indian goods primarily steel. Our Rupee is becoming stronger day by day and now it has come to a point where it may become harmful to exporters. The Foreign Exchange reserve have shoot up to over US $ 130 billion. This has been possible due to huge dollar inflow into local stock markets from Foreign Institutional Investors coupled with Foreign Direct Investment inflow. The government is now contemplating to liberalise the outflows, a step short of making full capital account convertability.

 

 

 Our Indian businesses whether large or medium sized, are looking forward to healthy export markets almost everywhere, including United States, Russia, China, Latin America and South-East Asia. However, businesses within India face stiff challenge on two fronts : high energy cost and high capital cost. The Government has made numerous simplifications in the financial administration, but a lot need to come to place & support the industry in its growing activities.

 

We are happy that the infrastructural projects in the country are given top priority. Gas Industry will surely be benefited with these, specially road development and power sector. It is very important that India though an Agricultural economy have made an indelible mark in many high-tech areas. We all know that today India is earning from software service export is to the tune of $ 3 billion. So we need not always talk with a baggage of history, and rather can dedicate ourselves as a part in the engine of growth and economic progress.

 

Our business prospective in the national level is also making a sea change. We all are aware that our economy has now long been facing lot of uncertainty due to fluctuating oil price. Today, we are in a position when Oil companies are approaching us for a long term purchase contract. Recently, India has also signed a 25 years agreement for import of LNG. This deal also provides us the participation rights in two oil fields in Iran, which provides 90,000 barrel of crude oil per day. This agreement will work to assure stability in our future economy, to help manage other external fluctuations.

 

The Tenth Five Year Plan recognized that for India to move into a high growth trajectory will require a sustained demand impetus from public expenditure, specially public investment and therefore it may be necessary for some relaxation in fiscal deficit. The investment requirement for 2005-2006 is envisaged to be very high and therefore suitable encouragement should be extended to the investors. We are very optimistic that with the Planning Commission having recognized this requirement would ensure suitable provision in the ensuing budget.

 

This modest approach also will be a matter of pride, since this is likely to witness highest average growth since Independence and will be one of the fastest growing economy in the world. The growth rate should surpass the Eight Five Year Plan(1992-97) record growth of 6.68% and the Planning Commission and the Finance Ministry have been seriously exploring ways to enhance the pace of economic growth.

 

The changing environment are also bringing new challenges to all sectors of the economy. The industry will need to manage the social security matters through various instruments. Privatisation of roads, ports and power supply is also likely to have an impact on our manufacturing practices and commitments for delivery and services. Presently, the growth pattern for industry is the strongest and very steady which has touched 11.3% during the month.

 

Consumer goods both durable and non-durable, contributed to the big spurt in the manufactured output. This shows that the overall growth of the industrial production can be easily achieved at 10% with some effort.

 

Gases per se broadly include: Oxygen, Nitrogen, Argon, Helium, Carbon Dioxide and Acetylene. Oxygen, Nitrogen & Argon are the primary gases and these gases are manufactured in air separation plant, small and big spread all over the country. A flood of activity for setting up oxygen plant had taken place in the country in the 1970’s  and this Association was formed in 1975. Today almost all gas manufacturing unit in the country are member of this Association and also a large number of equipment manufacturers   who are connected directly or indirectly with the gas industry, have joined the Association as members. We now also have some foreign companies who have joined the Association as Foreign Member, having potential interest in the gas industry in India.

 

The total production and sale of various gases have gradually been increasing and has presently achieved a turnover of about Rs. 2,700 crores. About 50% go as pipeline gas for captive supply. Argon production during the year estimated at 22.6 million cubic meters, though increased considerably, it has not been able to keep pace with the demand. There was also import of argon to the extent of about 1.5 million cubic meters, but it could bring little respite. The demand for argon continued to be high with more steel units resorting to the manufacture of stainless steel and other downstream activities. Demand of argon from automotive sector also remained very high.

 

The growth of Carbon Dioxide was about 15% . A detailed table giving production and sale of gases is given below:

 

PRODUCTION & SALE OF GASES 2002-2003 & 2003-2004
GAS	UNIT	SALES   VOLUME						% GROWTH for Merchant Volume
		2002-2003			2003-2004			2003-2004
		Captive	Merchant Market	Total	Captive	Merchant Market	Total
Oxygen	mcm	1800.00	420.7	2220.7	2200.0	482.1	2681.1	14.6
Nitrogen	mcm	150.0	120.0	270.0	250.0	141.6	391.6	18.0
D.A.	mcm	-	9.1	9.1	-	9.1	9.1	Nil
Argon	mcm	-	18.3	18.3	-	22.6	22.6	23.5
Carbon Dioxide	‘000 tonnes	-	157.9	157.9	-	181.6	181.6	15.0
Helium	mcm	-	0.42	0.42	-	0.51	0.51	21.4
Hydrogen	mcm	-	31.6	31.6	-	35.6	35.6	12.7

 

 

The production of gases are growing steadily to meet the demand of the industrial growth in all sectors. Gases being critical raw material in metallurgy, pharmaceutical, chemical, agro-industries, food preservation and most other spheres of industrial and medical activity, the growth of the economy have a direct effect on the demand for these gases. With the growth of industrialization the demand pattern of gases are also changing in India.

 

The gas industry is distinctly segregated in three areas, namely: wholly captive units, largely captive units and wholly merchant units. Each of these sectors have grown in the past year and number of new units are in the pipe-line. While the demand is rising steadily, it is necessary that the manufacturers adopt a quality system for not only the manufacturing of the gas but also the procedure, services and inspection of gas cylinders & tankers. It is well known that proper checking of cylinders and tankers can result into accidents putting to loss human life and property.

 

We are very happy that the govt. has introduced the new Gas Cylinder Rules 2004, giving many modifications sought by the industry. We must congratulate  the Department of Explosives, for the efforts made by them to ensure that the Rules are notified within stipulated time. We are especially indebted to the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, who made this possible. However, a major area of concern continue to remain for the import of gas cylinders. The industry always demanded that the government should insist that cylinders of specific standards and certified by authorized certifying agencies are only allowed to be imported without further limiting the import to any particular company. This is a serious bottleneck for import of cylinders in India. Most modern companies manufacturing ISO quality products supply cylinders all over the world. But these companies  find it very difficult to export cylinders to India. It is necessary that the Department of Explosives should take up the matter for amendment of Gas Cylinder Rules to mitigate this problem of the gas industry. Gas cylinders are lifeline of gas industry and any difficulty in its availability is a threat to the development of gas industry.

 

India is an agriculture-based economy. Agriculture generally have remained primitive except certain pockets of development. We must make a renewed effort to ensure overall technology application amongst the rural people so that they can take best advantage to achieve optimum growth. Similarly, in the field of animal husbandry, though some work has been done in many states, much more is required to be done. In both these areas Nitrogen and Carbon Dioxide play a very important role and wider application of these gases can see faster growth of rural economy of the country.

 

Our country has already achieved high agricultural output, but every year we face post harvest loss due to inadequate storage and distribution facility. Nitrogen and Carbon Dioxide are used in the latest technology for storage, transportation and distribution through cold chain to minimise this loss. The cold chain not only help to preserve the products but also help to maintain nutrition level. Apples from Himachal Pradesh that we find today round the year is due to Nitrogen storage facility created in Himachal Pradesh.

 

We are confident that the officials from Ministry of Food Processing Industries, Government of India, Ministry of Agriculture, Government of Tamil Nadu, and the Scientists from Central Food Technology Research Institute present in the Seminar will help us to prepare a roadmap for wide application of gases for food processing and food freezing.

 

Presently, our Association is making efforts to integrate as much as possible the business of industrial gases with that of LNG and CNG. The primary consideration in this direction is that the people involved in industrial gas industry is quite conversant with technology and practices to be followed for handling LNG and CNG.

 

Accordingly, we are trying to promote a business model, whereby LNG can be transported in cryogenic tanks, to be transferred to cryogenic storage tanks installed at suitable locations, specially where the pipeline is not likely to reach in the near future. To make the proposal improve its viability, we have suggested to make a study and development of a facility, so that cold can be drawn from the LNG while gasifying the same, and use the use the cold for cooling the input for the air - separation plants. This would on the one hand substantially reduce the power requirement & is also considered to be highly cost-effective. As a further business proposition we have suggested that the CNG obtained in the process can be used for filling CNG in motor vehicles, as also if a suitable adjacent industrial/residential area can be identified then the gas can be distributed for such cluster of industries or housing through pipeline. The proposal needs a thorough study & pilot project development for which Gas Authority Of India (GAIL) has already expressed their interest and have initiated action for the same. We are confident that AIIGMA and GAIL can jointly work for a fast track development of such a business model which can be uniquely beneficial to a large section of remotely located industrial cluster and habitation. This will also lit a new horizon to innumberable remote locations which can provide new opportunities to the people.

 

Taxation structure needs a total re-orientation to achieve the high level of investment and growth required by our country. We are happy that the government is also considering to totally revamp the excise, custom and income tax provisions to ensure growth. The main aspect is that broad issues need to ensure that the taxation should be in line with other ASEAN countries.

 

The rates of income tax, excise and custom duty also need to be substantially reduced. Coming specifically to Gas Industry, special consideration need to be given for application of gases, which result in quality improvement, higher productivity or power conservation. Since, all these three factors are of national priority, their need to be a special push for application of gases, when it is used to meet these objectives. We have been making efforts in the past to provide workers training facility, which will ensure quality, productivity and safety –all at one go. I am very glad to inform you that we have finally succeeded to identify proper methodology to develop such training modules and start them forthwith. The same is being done in cooperation with Confederation of Indian Industry and City & Guilds International, who are recognized professional skill trainers and certificate issued by them is recognized in almost all parts of the world. This will ensure primarily the product quality, high productivity and safety across the industry with workers dully trained. It will also give better marketing opportunity to the machinery suppliers from India, who can also assure the customers to supply proper dully trained manpower along with the machinery and equipments.

 

Relaxation of government policies and efforts made by the industry helped to make this industry a strong international class product supplier. But, it is necessary to make a resolve to make a total commitment for product quality assurance, guaranteed service and high productivity in our  industry.

 

While the industry will continue to make its efforts, there is necessity for specific attention from all the concerned authorities to assist in this direction. Some of the constraints being faced by the industry are highlighted below for attention of the authorities: -

 

1)       Non - availability of gas cylinder at economical price.

2)       Import of gas cylinder should be allowed as per the approval of specification.

3)       Gases should be subjected to Specific Duty under Central Excise Tariff to avoid constant litigation and ambiguities.

4)       Investment on gas cylinders, transport tank for cryogenic liquids (gases) and storage tanks installed at customer’s premises should be allowed for claiming MODVAT

5)       Central Pollution Control Board has declared manufacture of all industrial gases other than Acetylene and Hydrogen under “Green Category”. All State Pollution Control Boards should also follow the same classification, as already agreed in the Ministerial Meet.

6)       Medical gases being life saving should not attract any Sales Tax in any state.

7)       Custom duty on Calcium Carbide falling under Tariff heading number 2849 should be reduced to 5% ad valorem.

8)       High power tariff and irregularity of high quality power.

9)       High interest rate.

 

We are confident that our march forward will make this country strong and a very rewarding and challenging growth in the future. The whole country is today geared to face this challenge and move forward. The gas industry will make every endeavour to ensure that the industry will emerge as a force to recon with and will give a strong hand to make India rise high.

 

 

 

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