August 03, 2020
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The Other Frontier

The west coast has attracted the bulk of the investments, but it's a double-edged sword

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The Other Frontier
The question came at them like a bullet. At last month's Reliance agm in Mumbai, after he had finished his customary address, Dhirubhai Ambani was queried by a host of shareholders about the company's state of preparedness in the event of a possible Pakistani attack on the country's west coast. More specifically, in Jamnagar, where the company has its Rs 25,000-crore refinery, Asia's largest.

The shareholders' concerns were not unfounded. Ever since Indian troops have been engaged in the grim battle in Kargil with Pakistani-backed infiltrators, a host of Indian companies which have significant operations along the nation's west coast have expressed grave safety concerns in the event of an attack by Pakistan.

"Such concerns are not unexpected. Towns like Jamnagar, Hazira and ports like Kandla and Vadinar actually form the country's economic backbone because most of India's major infrastructure projects are located in the region," says Yogesh Desai, president (corporate affairs), Reliance Industries, adding, "We need to be cautious. For example, the bulk of the nation's oil imports come through the Vadinar port."

Industry sources claim security is of major concern since Jamnagar-besides Kochi-is the only other centre which has important army, navy and air force bases. Reliance and a host of other companies like Essar, ongc, Larsen & Toubro and gail have already been advised by the defence ministry to use non-reflecting and fatigue paint to camouflage their storage facilities and refinery structures. More so after intelligence reports talked of Islamabad's intentions of targeting India's economic zone in the event of a war.

The sources-who say the region has onstream projects worth $5 billion and another $34 billion in the pipeline-claim Reliance Petroleum has been in talks since January with as many as three insurance companies for a war insurance cover for the refinery. Its 7,500-acre Jamnagar complex has a conventional cover but is not insured for damage in case of war. Indian companies like the Life Insurance Corporation and General Insurance Corporation-which have never provided such cover for inland risks-are now reportedly looking at such business prospects, which are considered catastrophic risks on the same scale as cyclones or earthquakes and require further reinsurance support from international underwriters. Presently, the London-based Institute of Lloyds Underwriters prescribe insurance rates for war risk cover that is available for import and export of goods.

Says Ganesh Pai, joint general manager, Essar Group, "The Hazira region has seen tremendous industrial growth in the last 10 years. Essar itself has made large investments in steel and power plants. Besides, there are other major industrial houses that have large investments in this area. We are sure that the government is aware of the security needs of the region."

Adds V.C. Bedi, general manager (Hazira Works), Larsen & Toubro, "We have increased vigilance in the region and have been in close touch with the local security authorities. Other companies are following similar drills along the coastline. We cannot take chances. "

Apart from being in touch with the defence authorities, firms in the region have been making alternative measures for emergency preparedness. For example, oil companies with crude import facilities in the Gulf of Kutch are contemplating forming a joint forum which will take care of both security and environment issues in the area. Some have already sent their experts to the Gulf of Valdez in Alaska for first-hand training in the event of an emergency. The Gulf of Kutch bears close resemblance to Valdez, the site of the Exxon disaster in '89 which cost the multinational a huge $5 billion.

The companies are also in touch with the Oil Coordination Committee (occ), which is looking into measures to minimise the vulnerability of the region and, more specifically, Vadinar. That's because this port will handle over half India's crude imports by 2000. By then, very large crude carriers with capacities of up to 4 lakh tonnes will supply crude to the many mega-refineries dotting the region: the 10.5-million tonnes per annum (tpa) Essar Oil refinery at Vadinar, the 2.2 million tpa Reliance refinery at Sika, the 6 million tpa facility of Bharat Oman Refinery Ltd (borl) at Bina and ioc's inland refineries at Vadinar.

The occ had recently called a meeting of the representatives from the navy and companies like Essar Oil, Reliance Petroleum, borl, Bharat Petroleum and ioc to plan a strategy to reduce the risk of possible external attack, fire and oil spills. The occ is also seeking a consensus from the companies on sharing the costs of an expensive electronic vessel traffic management scheme (vtms). To be operated by the navy, the Rs 60-crore vtms would ensure that vessels entering the channel are tracked properly and that security is maintained.

Says Bikash Chandra Bora, cmd, ongc, "We have huge operations in the region. Though it is not a war-like situation, we have been in constant touch with the government and have beefed up our internal security."

ongc officials in Mumbai say the oil major-having realised the need for greater coordination among companies in the region in the event of external attacks and oil spills-plans a workshop in November which will be attended by all oil firms operating in the Gulf of Kutch. The workshop, which will also be attended by officials of the Coast Guard, Shipping Corporation of India and international experts, will deliberate on safety issues with protection and indemnity clubs and other insurance organisations.

Such measures may at first look seem an over-reaction, but not when viewed in perspective. The geo-strategic importance of Kargil is debatable. But the economic primacy of the western coast is definitely not in doubt.

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