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"Feedstock Availability and Inadequate Infrastructure Need to be Addressed"
With five business units in Jhagadia Chemical Park, Lanxess has invested hugely in Gujarat. Dr Joerg Strassburger, Country Representative & Managing Director, LANXESS India Private Limited elucidates companyĺs future plans and highlights the issues that affect Indian chemical industry.

What are the market forces and megatrends that will drive the growth of the chemical manufacturers globally and in India?
Driven by the economic development, growth of middle class and increase in purchasing power, there are four megatrends that we believe will continue to drive the chemical industry, more so in the emerging economies globally; namely, mobility, urbanisation, water and agriculture. Mobility is going to be one of the leading trends in the Asian region, particularly in India and China where the automobile sales have seen a steep rise and the trend is likely to continue in midterm and long term. This is in contrast with the western economies where the growth rates are rather uncertain. The demand from the country╩s growing population, for food, water, infrastructure and other products would rise and therein lies the opportunity for the chemical industry to build a sustainable future.

How do you compare the growth of Asia Pacific market the Latin America?
As a part of LANXESS╩ growth strategy, we have a strong focus on emerging markets. Both APAC and LATAM regions are critical for the growth of our company, however, the Asia Pacific region is growing faster as the consumption base is smaller and Asian giants India and China are markets with huge potential. Given the size of the company, LANXESS has made investments of around Euro 180 million in India in the last three years. Recently, the company announced its largest investment in China. LANXESS is building the world╩s largest plant for EPDM (ethylene propylene diene monomer) synthetic rubber in Changzhou in China, with an investment of EUR 235 million. LANXESS will start up a world-scale butyl rubber plant on Singapore╩s Jurong Island in the first quarter of 2013 and broke ground for a neighbouring neodymium-based performance butadiene rubber (Nd-PBR) plant on September 11, 2012.

Please apprise us about the manufacturing operations in India.
We have a very well established diversified portfolio to cater to the growing demand of Indian market. All thirteen business units are represented in India, as far as the products are concerned. We also have manufacturing plants for one business unit in Nagda, Madhya Pradesh and five business units in Jhagadia, Gujarat, which allow us to cater to the domestic and international markets. Both the facilities are very well connected to receive feedstock supplies and the strategic location allows us easy access to both Indian as well as international markets.

Tell us about the LANXESS╩ investment in Gujarat.
The LANXESS site in Jhagadia, one of the largest Greenfield investments of LANXESS, is located in the Jhagadia Chemical Park within Gujarat Industrial Development Corporation, and we have invested approximately 500 crores to build this facility. We have five business units in Jhagadia with different product lines that are very different in nature from the ones in Nagda where we have one business unit and several product lines. We have pipelines for feedstock supply from our neighbors but not for energy supply as we have our own Cogeneration plant at the site, which is fuelled by biomass (environmentally friendly fiuel). The proportion of exports from LANXESS India varies for each Business Unit and for different products range. Currently, it varies anywhere between 0 and 90 per cent. This is determined by the BU strategy, the product types manufactured at the site and the potential of the domestic market.

How did acquisition of Nagda facility fit into the company╩s growth strategy in India?
LANXESS successfully completed the acquisition of assets of Gwalior Chemical Industries Ltd at Nagda facility in September 2009. Easy access to the feedstock and close proximity to the market were the key reasons to acquire the unit. We manufacture a wide array of specialty chemicals for end users from agrochemicals, pharmaceuticals, dyestuff, flavours and fragrances, paints and coatings, etc. for the domestic as well as export markets. The facility is well connected to the neighbouring industries for chlorine supplies as the feedstock and the power requirements are met by the cogeneration plant. From the point of view of the market, this unit is very crucial for our business because of its close proximity to the state of Gujarat, since many of our customers have operations there. We also export from this facility to markets worldwide. The Nagda facility has won the IMC Ramakrishna Bajaj ┬Outstanding Achievement Trophy╩ in the manufacturing category in 2010 and the National Quality Award in the same category in 2011, and has also received the Water Resource Management Award from Indian Chemical Council in 2010 for an innovative approach to recycling domestic sewage water and harnessing it for industrial use.

What are the various challenges that India needs to address to accelerate the pace of expediting projects?
There are various issues that need to be addressed at various levels. The very basic challenges of feedstock availability and inadequate infrastructure need to be addressed both at the industry and at the policy level in context of the industry. Though the government has already formally announced PCPIRs but the ground reality is that only the PCPIR in Dahej is currently working. Though the concepts are nice but the projects are yet to see the light of the day. These PCPIRs require anchor investors, robust infrastructure including power supplies, Common Effluent Treatment Plant (CETP), enough gas supplies which are very critical for development of industry in the PCPIRs and bring investors which will eventually lead to faster project execution.

What are the challenges LANXESS is facing in India?
I feel that availability of raw materials is the biggest challenge, followed by inadequate infrastructure, which makes India highly incompetitive in terms of cost of logistics as compared to other countries. Lack of single window clearance and rising energy costs are other bottlenecks. Although the labour costs are not very high in India but to get people with the desired expertise is sometimes a challenge, particularly at the sites. However, we are highly focused on delivering premium quality products of best global standards to our customers and are constantly engaged in research and innovation to develop new products and processes that can meet their requirements in the best possible manner.

What was the rationale behind relocation of the assets of the plant for polymerbound rubber chemical and release agent from Madurai to Jhagadia?
This move was a strategic decision in order to rationalise our assets in India from an operational perspective, upgrade all the facilities and optimise the utilisation of utility services at the site.