Rather than letting policy tangles halt its growth progress, RIL ‘quit India’ and eyed the world as the market for its refinery products, writes NARESH MINOCHA
This is the case of a conglomerate that was initially not allowed to sell some of its products directly in the domestic market. This is also the case of India’s most influential business house that was later allowed to sell its products without receiving any subsidies from the government, but had to compete with government-subsidised products that were sold by the state-owned units. In normal circumstances, what would a promoter in such circumstances have done? Close down the particular manufacturing base, or register it as a sick company with Board for Industrial and Financial Reconstruction.
Most entrepreneurs would have opted for either of these solutions, both in the global and domestic arena. But then, one can’t expect the Mukesh Ambani-owned Reliance Industries to behave like any other company. After all, it has influenced policy-making in this country for decades. Faced with such hostile policies and regulatory environment, RIL decided to ‘secede from India’ and look at the world as its market. It decided to export the products manufactured at its 33 million tonnes per year refinery at Jamnagar, Gujarat. After over six years of lobbying, RIL did the unthinkable in April 2007. It transformed its refinery & the adjacent petrochemicals plants into an export oriented unit (EOU). Although EOU policy allows companies to sell half their produce in the domestic market, RIL exported 60% of its refinery products valued at $6.99 billion in the first half of 2007-08. The changeover to an EOU, along with its export focus through SEZs, constitute an interesting study of an entrepreneur, who turned policy discrimination at home into a global business opportunity.
For years, both policy makers and experts contended that an EOU refinery was not viable as it was impossible to do the 20% value-addition to imported inputs as was mandatory under the rules. In fact, the government had rejected applications in the 1990s on the grounds that these projects lacked capability to attain the minimum value addition. But it approved eight EOU refineries that showed the capabilities to do so. Till today, none of them have seen the light of the day, or are seriously talked about.
This is the case of a conglomerate that was initially not allowed to sell some of its products directly in the domestic market. This is also the case of India’s most influential business house that was later allowed to sell its products without receiving any subsidies from the government, but had to compete with government-subsidised products that were sold by the state-owned units. In normal circumstances, what would a promoter in such circumstances have done? Close down the particular manufacturing base, or register it as a sick company with Board for Industrial and Financial Reconstruction.
Most entrepreneurs would have opted for either of these solutions, both in the global and domestic arena. But then, one can’t expect the Mukesh Ambani-owned Reliance Industries to behave like any other company. After all, it has influenced policy-making in this country for decades. Faced with such hostile policies and regulatory environment, RIL decided to ‘secede from India’ and look at the world as its market. It decided to export the products manufactured at its 33 million tonnes per year refinery at Jamnagar, Gujarat. After over six years of lobbying, RIL did the unthinkable in April 2007. It transformed its refinery & the adjacent petrochemicals plants into an export oriented unit (EOU). Although EOU policy allows companies to sell half their produce in the domestic market, RIL exported 60% of its refinery products valued at $6.99 billion in the first half of 2007-08. The changeover to an EOU, along with its export focus through SEZs, constitute an interesting study of an entrepreneur, who turned policy discrimination at home into a global business opportunity.
For years, both policy makers and experts contended that an EOU refinery was not viable as it was impossible to do the 20% value-addition to imported inputs as was mandatory under the rules. In fact, the government had rejected applications in the 1990s on the grounds that these projects lacked capability to attain the minimum value addition. But it approved eight EOU refineries that showed the capabilities to do so. Till today, none of them have seen the light of the day, or are seriously talked about.
Source : IIPM Editorial, 2012. An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face