Author: Jyotsna Bhatnagar
Publication: The Financial Express
Date: January 1, 2012
URL: http://www.financialexpress.com/news/the-land-of-opportunity/894255/

With Gujarat rolling out the red carpet for industry instead of red tape, everyone, from giant conglomerate Tata to women entrepreneurs from Andhra Pradesh, are eyeing the state as a base for operations.

Jyotsna Bhatnagar traces the moves and strategies of the state government that have made the state an industrial haven

When a Chinese delegation comprising head honchos of leading companies from the country came to India recently to study the investment climate, they did not have Gujarat on its itinerary. But when an Indian member of the delegation called up the industries department of Gujarat, evincing a desire to visit the state, arrangements were made in less than 24 hours and the delegation cancelled its trip to another state and flew to Ahmedabad instead. They met not only top ministers and officials of the state, but chief minister Narendra Modi too. So impressed were the Chinese that they promised to return in less than two months to sew up a number of alliances and investment projects that they now plan to set up in the state.

It’s not the Chinese alone who are impressed; Gujarat has become the obvious destination for companies seeking to set up a new plant and almost everyday there are reports of fresh investment in the state. So much so that the state has become a ‘model’, one which even Pakistan wants to hear about, as evident from an invitation CM Modi got to visit the neighbouring country last month to share the state’s success story.

But none of this is incidental. As an industry observer puts it, “Gujarat’s numero uno position in the country’s investment sweepstakes is no flash in the pan event. It’s a concerted political effort to sustain the economic growth model, which has been painstakingly crafted over the years.”

Ask Saurabh Patel, one of Modi’s most trusted ministers, who holds crucial economic portfolios, including finance, industries, energy, petrochemicals and planning, whether it is the state government that invites domestic and foreign corporates to invest in Gujarat or if it’s the corporates who approach them, and pat comes the answer, “Both. We are equally proactive in approaching companies too.” The story of how the Gujarat CM sent Tata chairman Ratan Tata his famed “Suswagatam” SMS, inviting him to set up the Nano manufacturing facility in Gujarat after the Singur fiasco in West Bengal, is now part of corporate folklore.

Pro-business environment

Clearly, the Great Gujarat growth story is as much about the legendary business acumen of its people and its myriad natural bounties, including a 1,600-km-long coastline, as it is about political will and prudent policies.

Looking back, one can say the growth momentum got on the fast track sometime around 2003, when Gujarat’s industrial policy was formulated. It was a visionary blueprint for the state’s development agenda, which took a holistic view of all the facets concerning the future course of industrialisation in the state. It was the same year when the hardsell of the state began with the Vibrant Gujarat Investment summits.

“From strengthening manufacturing base by creating new industrial clusters to upgrading existing urban and industrial infrastructure and from constituting the Gujarat Industrial Promotion Board (GIPB) to providing single-window clearance to large projects, to initiating labour and power reforms, the policy provided a direction which has been followed in letter and spirit to bring Gujarat where it is today,” observes a senior government official.

Take the case of the power sector. Prior to its unbundling in 2005, the erstwhile Gujarat Electricity Board (GEB) was a ponderous behemoth with losses amounting to over R2,200 crore. That was then. Following its unbundling, the state electricity board was split into seven companies, four of which are today among the 11 discoms that are still profitable of the 75-odd discoms in the country. The GEB unbundling model is today a case study, which has been emulated by most other state electricity boards.

Same is the case with its revolutionary land policy, which was recently singled out for praise by none other than the Supreme Court. At a time when forcible acquisition of land has, according to the Supreme Court, turned the 117-year-old Land Acquisition Act into a “fraud” and the legislation a handiwork of “sick” minds with no concern for welfare of the poor, no cases of farmers or the poor being uprooted from their land have been reported in Gujarat. While hearing a case filed by the harried farmers of UP a few months back, the SC observed, “Look at Ahmedabad, which is developing, but there are no complaints from that place. They have the same officers of the same cadre as in the rest of the country,” adding that officers from other states can train under their Gujarat counterparts.

The new land acquisition policy of the Gujarat Industrial Development Corporation (GIDC), a state-owned utility which develops industrial estates for entrepreneurs and was unveiled last year, is particularly noteworthy in the way it tackles rehabilitation of those whose lands are acquired. Bhavin Shah, a 60-year-old farmer who owned a small piece of land at Chandgodar, a rapidly growing industrial cluster, is today a poster boy of this ‘pro-farmer’ land policy. Not only has Shah been able to get an attractive remuneration for his land acquired by GIDC, he has also been able to set up a small kirana shop on the commercial plot he got in lieu of his land, courtesy the policy.

“That,” elucidates a top ranking GIDC official, “is because the policy aims to make land givers active partners in the development process. Under this participatory ‘policy for development of new estates’, GIDC makes land owners partners and shares with them the resources generated by it from the estate. Not only that, land owners are also given developed commercial plots to the extent of 1% of their land acquired at a token price of R1 per square metre. The policy also ensures that any landowner whose entire landholding in the village has been acquired is assisted initially by providing a one-time financial assistance equivalent to 750 days of minimum agricultural wages for loss of livelihood, which amounts to R75,000. Similarly, any landowner who becomes a marginal farmer as a result of the land acquisition will be entitled to one-time financial assistance equivalent to 500 days of minimum agricultural wages.”

And while policies are the cornerstones on which Gujarat’s success story rests, most ministers and bureaucrats give the CM full credit for their implementation. The Gujarat CM’s chintan shibirs, or reflection workshops, are annual retreats for ministers and senior government officials used primarily for brainstorming, progress review, goal setting and developing a collective vision, while ‘v-governance’ is another unique initiative for ‘vibrant’ governance through ‘change of mindset’.

Not lagging behind in the IT space either, the Gujarat government is likely to announce a new IT policy early next year that will focus on better infrastructure and more subsidy or incentives for the IT industry. The previous policy brought rapid growth on the IT front during the past five years, achieving its target of an annual turnover of R5,000 crore by the state’s IT sector six months prior to completion of the policy period. A government official predicts the state’s IT exports are likely to rise to R1,200 crore during 2011-12, showing a growth of about 10% over last year.

Big investments

In the past six months alone, auto giants like Ford, Peugeot and Maruti have driven into Gujarat, bringing in investments upwards of R20,000 crore.

Coming back to China, which has indicated that it will pump in a staggering $100 billion investment into India over the next five years, it’s only the Gujarat government that has openly declared its intention of cornering at least 10% of this investment, which works out to a cool $10 billion.

Following the Chinese delegation’s visit talked about earlier, two Chinese companies have already inked MoUs with the Gujarat government, promising investment of over R3,000 crore for setting up projects in the state. Power equipment manufacturer TBEA has inked a proposal for setting up a R2,500-crore green energy park in the state, while telecom major Huwaei has evinced interest in setting up an R&D base with a focus on e-governance. There are preliminary indications that the Chinese may actually set up a low-cost housing township in the state at a cost of R20,000 crore, making China the second country after Japan to draw up such plans for Gujarat.

With mega projects like the Delhi-Mumbai industrial corridor (DMIC) and Dholera special investment region, the Dahej Petrochemical and Petroleum investment region and the metro rail transportation projects for Gandhinagar and Ahmedabad going on in full swing, Gujarat is all set to reach the next level in terms of development. But the government feels it still has the proverbial miles to go. Quips industries minister Saurabh Patel, “We still have the task of looking after our investors and ensuring that they are happy and confident about their investments here.”