Extending a welcome to foreign investors?

The short history of DuPont's nylon tire cord fabric plant in Chennai (Madras) features very little that could be called encouraging to prospective foreign chemical investors in India. To get that plant moving, DuPont's staff in India has gone through trying times. As it stands, the future of the venture, which began production in late 1997, is in no way promising.

In 1987, DuPont set up India's first nylon 6,6 joint venture with local partner Ballipur Industries. There was immediatiate hostility from local producers of nylon 6, which until then had been enjoying a cozy cartel arrangement, according to G. Irvin Lipp, DuPont's public affairs senior programs manager for external affairs in New Delhi, who recently has transferred to DuPont headquarters in Wilmington, Del. But the market looked promising to DuPont, especially considering that no plant making nylon cord fabric for the tire industry had been set up since the 1960s.

At the time, licenses were needed to set up plants. In 1991, New Delhi granted a license that was valid only if the plant was set up in the southwestern city of Goa. However, the Goans had not been consulted by the Delhi government.

"The people of Goa began to develop their own opinion," Lipp says, and DuPont "began a dialogue" with them. "Goans were very much pleased with their environment [the way it was], and they did not want more industry."

Soon after receiving the license, DuPont shelved the project "for economic reasons," Lipp says. The two partners eventually revived the venture in June 1994.

Within a few months, the Goans began protesting energetically. Lipp says that DuPont still has no idea whether Indian nylon 6 producers were fanning the flames of opposition or whether the anti-DuPont league had emerged truly spontaneously.

In January 1995, there was a major demonstration that no one from DuPont directly witnessed, Lipp says. The protest degenerated. The police used guns. One demonstrator died, and some policemen were injured. At that point, DuPont again shelved its project. Says Lipp "We believe in safety and health of employees and community. It's appropriate to pause and reflect, we said."

Following the tragedy, shell-shocked DuPont was eventually courted by a total of eight states eager to attract DuPont's investment. "We visited all those places. They all had tax holidays... We didn't want any special favors," Lipp says. In the end, Madras, which is now called Chennai, was selected.

Construction began in September 1995. "The major difference is that from the start, we set tip a community dialogue process or risk resolution process stretching from Madras to Gummidipoondi [where the DuPont plant is located]. . . . We worked diligently with the community. From the start, we recognized the reputation we had acquired [in India]," says Lipp.

The plant began operating in December 1997. By then, the Indian partner had withdrawn from the project for financial reasons, Lipp says. The current ownership structure is 95% DuPont, 5% Mitsui Chemicals. Current capacity is 6,000 metric tons per year of nylon fabric. For market reasons, the investment of about $100 million is half of what had been originally contemplated.

Although the plant is now operating, conditions in India keep changing. For instance, India's finance minister announced on June 1 that the import tariffs in India would increase across the board by 8%. That the duty was lowered to 4% 10 days later was only partly reassuring. The venture depends on raw nylon imported from Singapore. DuPont's regional management team was shocked and has since been wondering if it's at all worthwhile to conduct business in India.

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