Rs 114-cr ‘common facility centre' coming up near Tiruchi

For over half-a-decade, it was a project on paper. Now, it is galloping at breakneck speed.

When its efflorescence is complete, the Tiruchirapalli Engineering and Technology Cluster Ltd (TREAT), could well turn out to be an example of what happens when men pool in their money and minds, and the government chips in with funds.

The not-for-profit (‘Section 25') company is setting up a ‘common facilities centre' at a cost of Rs 114 crore. Tiruchi is fabrication-intensive (thanks to the anchor industry, BHEL).

Fabricators in this region need several kinds of machines, but they will typically not need to use even a fourth of the machines' capacity. For example, a shot-blasting machine (that smoothens welded portions), a CNC lathe, or a painting machine, might be used only once in a week — the rest of the times, the machines will be lying idle.

The resultant overhead costs will make the unit less competitive.

The obvious solution is a ‘common facility centre' that will have all these machines, which the fabricators can use, for a fee, only when they need to.

The idea is simple, but not easy to implement. To give a parallel, the common-sense solution to power shortage in any industrial estate is a captive power plant, but how often does this happen? There are many practical difficulties.

For example, to muster up enough funds (from the typically small scale units) is a daunting task.

It is precisely to address such needs has the government of India has a ‘cluster development programme', under which it gives a grant to special purpose companies that serve the common needs of units in an industrial cluster.

Old project

TREAT itself has been long in the making. It has been talked about since at least 2005. “The problem,” says Mr S. Sampath, Director, TREAT, “was in presenting a convincing business case to the government.”

What changed the fortunes of TREAT was the advent of IL&FS Cluster Development Initiative Ltd, a year ago.

The IL&FS subsidiary looked at TREAT and said that there was first a need to professionalise the preparation of the project report. It brought in the consultants, Grant Thornton, for that.

Grant Thornton examined mainly the business case for TREAT — if TREAT cannot financially sustain itself, then the Central Government will not give any grant.

But the consultants assessed that there was indeed a good business model. It sent its report directly to the Department of Industrial Policy and Promotion (DIPP).

In the very second sitting, (which was attended by the Tamil Nadu Industries Secretary, Mr Rajeev Ranjan), the DIPP gave its ‘in-principle approval'. Interestingly, the Secretary of DIPP also suggested to TREAT representatives that they ought to “think big”, expand on their proposal for a Rs 75-crore project, even if they had to take commercial loans.

This resulted in a re-work of the project.

Also advised by TAL Manufacturing Solutions Ltd, a Tata group company, TREAT came up with a Rs 112-crore ‘common facilities project', to which the government would provide Rs 60 crore as grant.

Fifteen per cent (Rs 17 crore) would be brought in by the promoters, and the other Rs 35 crore, in bank loans. It was approved. The first tranche of Rs 18 crore was released in December 2010.

Three-centre facility

Mr K.G. Muralidharan, Chairman and Managing Director, TREAT, says the common facilities will be fully operational in 18 months.

The facilities will actually come up in three places around Tiruchi-Siruganur, Thuvvakudi and Mathur.

The Siruganur facility, which is being created with an investment of Rs 60 crore, is the biggest.

It will house a huge machine shop, fabrication facilities, a rolling machine (to bend thick steel plates) and an R&D centre.

The Rs 20-crore Thuvvakudi centre will be a vast area where large fabricated products (such as wind towers) can be shot-blasted and painted, a CNC cutting machine that “can serve even the aerospace industry”, and a testing and calibration centre.

The Rs 30-crore Mathur centre will be essentially to service smaller companies for jobs such as punching and shearing.

Immense benefits

TREAT will transform the Tiruchi industrial scene. Because of the Rs 60-crore grant — capital that need not be serviced — the users of the facility will be “60 per cent cheaper” than they would be if they didn't have the facility, says Mr Sampath.

In conjunction with another co-operative effort, BIDASS (for BHEL Industries Development and Service Association), TREAT could prove to be immensely beneficial to the Tiruchi small and medium industries. BIDASS provides services such as common procurement of consumables — mainly welding electrodes, but also other items such as lubricants. BIDASS also runs an Oxygen plant.

Mr Muralidharan says the next tranche of funds from DIPP could come in June. But right now, he is busy organising a meeting of machinery suppliers, most of whom are from abroad, which is to take place in Tiruchi on Thursday.

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