The Hindu Business Line : PSL diversifying into SEZ development

“The SEZ will require about 250 acres. The company has about 200 acres of its own at Pipavav and we are in the process of acquiring the balance.” – Mr Ashok Punj

Mr Ashok Punj

Amit Mitra

Mumbai, Aug. 29 Steel-pipe maker PSL Ltd is all set to diversify into development of Special Economic Zones (SEZ), with the company getting the stage-1 approval from the Centre to set up an exclusive SEZ for alternative energy and energy ancillaries at Pipavav in Gujarat.

The SEZ will be dedicated to alternative energy products like bio-diesel, solar, ethanol and wind generation, with units producing equipment needed for such businesses also to be invited to set up their manufacturing facilities in the zone.

This will mark PSL’s first diversification initiative from its core business of producing cross-country, large-diameter pipelines for transportation of hydrocarbon and water products.

PSL is expected to shortly make a formal application for the stage-II approval, for which it should have in its possession the required land for the project.

Mr Ashok Punj, PSL’s Managing Director, told Business Line that the company will be wrapping up the process of land acquisition within a week. “The SEZ will require about 100 hectares (about 250 acres). The company has about 200 acres of its own at Pipavav, which we plan to put to use for the SEZ. We are in the process of acquiring the remaining 40 to 50 acres, which we expect to complete within a week,” he said.

After the formal stage-II approval, the company will require about six months to prepare the final project report and get other required clearances, including environment clearance. “After that we intend to develop the physical infrastructure within a year. Simultaneously, we will market the SEZ, inviting both domestic and overseas players in this sector to set up units here,” Mr Punj said.

PSL has proposed an investment of about Rs 200 crore to develop the physical infrastructure and has already initiated preliminary talks with banks and financial institutions to raise part of the funds. To start with, the company itself will set up a semi-commercial bio-diesel plant at the SEZ.

Mr Punj betting big on attracting overseas units engaged in manufacture of the whole range of equipment needed for production of bio-diesel, ethanol, solar power and wind energy. Bio-diesel is especially high in demand in Europe.

Pipe manufacturing expansion

PSL is, meanwhile, expediting the expansion of its overseas units, especially in the wake of the recent imposition of 10 per cent export duty. In fact, many pipe makers are finding it economical to supply products to the export markets from manufacturing units outside India to duck the export duty hike.

“This fiscal we will by and large meet our export commitments through our manufacturing units in the US and Sharjah,” Mr Punj said. The company has on hand export orders worth over $300 million.

PSL’s three lakh tonne unit in Mississippi, US, is expected to commence production next month, while the company is speeding up expansion of its 75,000 TPA unit in Sharjah to three lakh TPA.

The US facility is being set up at a cost of $103 million, out of which $25 million is PSL’s equity and the rest is being funded through local municipal bonds that carry a 30-year repayment period. The Sharjah expansion involves an investment of $30 million — this unit primarily caters to the West Asia and North African markets, but will look for new markets in Iran and Iraq after the expansion.