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Feature - Gujarat
Destination Gujarat
Why is Gujarat such a hot investment destination? CW figures
it out.
Here's one unarguable fact: Gujarat is hot, hot, hot as an
investment destination. Here's just one example. At the Global
Investors' Summit organised on 12-13 January, 2007, in Ahmedabad,
MoUs and announcements for 363 large projects, with an investment
of Rs 4,61,835 crore ($ 102 billion) were signed in sectors
as diverse as SEZs, auto and ceramics, chemicals and petrochemicals,
pharmaceuticals, engineering, textiles and apparels, agro
and food processing, bio-technology, IT, oil and gas, infrastructure,
and tourism
Advantage Gujarat
So what makes Gujarat so special? Here are some reasons:
o Strategic location gives easy accessibility to Western,
Middle-East and African markets
o Longest coastline among all states in India - 1,600 km -
dotted with 41 ports: one major, 11 intermediate and 29 minor.
Mundra, a private port, offers 15 m of permissible draft
o Rich heritage of entrepreneurial skill
o High level of industrialisation: investment equivalent to
over $ 30 billion underway
o Highly productive and peaceful workforce
o Present power-generating capacity of 9,007 mw*; plans afoot
to raise it to 17,477 mw by 2010 AD (*excluding 4,600 mw captive
generation)
o Excellent road network; length exceeding 74,000 km linking
all regions of the state
o Efficient rail network connecting all important centres
in the state
o Highest number of airports - 11 - among all states in India;
Ahmedabad is an international airport
o Leader in various industrial sectors: chemicals, petrochemicals,
drugs and pharma-ceuticals, dairy, cement and ceramics, textiles,
engineering, and gems and jewellery
o Second highest in India in terms of industrial production,
lignite, petroleum and moulding sand
o Fourth highest in India in overall mining of minerals
o Largest deposits of fluorite, agate and chalk
o Contributing almost 100 per cent of acrilonitrile, cyanide
salts, PMMA, PP, melamine, sodium bicarbonate and phosphorus,
and as much as over 80 per cent of soda ash, xylene, elastomer
and LDPE in country's total production
o Largest grassroots petroleum refinery in the world operational
in Jamnagar
o Quality network of educational institutions
o Gujarat accounts for almost 21 per cent share in the export
basket of India.
Enabling infrastructure
All this has been made possible by Gujarat's legacy - it was
one of the first few states in India to have encouraged private-sector
investment in infrastructure and those efforts are now bearing
fruit. The government has always encouraged investment and
enabled it further with organisations like the Industrial
Extension Bureau (iNDEXTb), which provides information to
the public in general and entrepreneurs in particular on the
opportunities available in the state in industry, commerce
and trade.
Today, Gujarat is working overtime, benchmarking with the
'Asian Tiger' economies to achieve competitiveness on a global
scale. It proposes to achieve an average annual industrial
growth rate of 15 per cent on a sustained basis to fulfil
the overall economic growth target of 10.2 per cent set by
the Government of India. With this in view, in 2003, the state
government formulated the New Industrial Policy. The policy
spells out its strategies for overall economic development
of the state.
Facilitating growth
The policy seeks to give direction to the process of industrialisation
and reflects the commitment of the state towards sustainable
industrial development. It adopts a proactive approach, rather
than a reactive one, to encourage free market forces to decide
the course of development and intervene only when the interests
of society or the investor community are endangered. The government,
then, has made it its mission to act as a facilitator and
source of all necessary information.
Capacity-building measures include converting District Industries
Centres into regional information hubs, called District Industries
Development Centres (DIDCs) using the latest technology. The
govern-ment will set up information kiosks at all DIDCs. The
present mechanism of Gujarat Industrial Promotion Board operational
for large projects at the state level will be made workable
at district level for small and medium projects. For giving
fast-track clearances to infrastructure projects, the Gujarat
Infrastructure Development Board (GIDB) is already in operation.
The state has also taken initiatives to make e-governance
a norm in its everyday activity and strengthen its grievance
redress mechanism.
Infrastructure initiatives
Gujarat has decided to benchmark itself with the quality of
infrastructure available in developed countries and ensure
that it is made available to both industries and citizens
at reasonable tariffs. Its initiatives include strengthening
the road network; building pipelines for bulk supply of water;
gauge conversion of railway tracks; establishment of SEZs
and industrial parks; upgrade of GIDC and private estates;
greater emphasis on upgrading urban infrastructure; and establishing
trade centres.
SEZ paradise
The state government has promulgated ordinances to facilitate
setting up SEZs and industrial parks. In order to attract
investment, it offers a variety of incentives, including electricity
duty exemption for 10 years, exemption of stamp duty or registration
fees on transfer of land, loan agreement, credit deeds, mortgage
documents or any other contracts. Sales tax, purchase tax,
motor spirit tax, luxury tax, entertainment tax and other
taxes are also exempted for units. The government has also
exempted tax on supply of raw materials from the domestic
tariff area to units. In Gujarat, at present, SEZs are already
in place in Kandla and Surat and on the anvil in Dahej, Hazira
and Mundra.
Urban upgrade
Suggested parameters for urban upgrade include good educational
facilities; a pollution-free environment; quality leisure
and healthcare facilities; overall competitive cost of living
index; intellectual stimulus for professionals; broadband
connectivity in line with global standards; and modern airports
and railway stations. The government also aims to develop
model cities in Gujarat.
HRD hope
Believing that any quality enterprise requires good quality
manpower too, the state plans to focus on R&D activities;
establish synergy between educational institutions and industries;
involve industrial houses in training; promote the concept
of educational complexes; and upgrade skills to enhance productivity.
Simultaneously, the state's process of labour reforms will
continue, with simplification of rules and procedures and
flexibility in labour laws in SEZs and industrial parks.
Green Gujarat
The state aims to aggressively ensure that industries adhere
to stipulated environment-friendly norms. Gujarat, which will
boast of the highest number of common effluent treatment plants,
also scores over other states in technically safe disposal
facilities for disposal of solid and hazardous wastes and
common conveyance facilities for safe disposal of treated
effluents. Apart from tree-planting, periodic and rigorous
monitoring of water and air quality at various locations and
cleaner technologies, the state proposes to create a coordinating
nodal agency to help trading of carbon credits announced under
the Kyoto Protocol for the benefit of industries and utilities
desirous of upgrading their equipment under this programme.
This will bring international funding programmes to local
entrepreneurs.
Agro aware
To strengthen the existing agriculture base of Gujarat, apart
from widespread use of modern techniques and equipment, the
government plans to establish food parks of international
standards; quality systems; and organic farming. It will also
form effective and continuous linkages between agriculture
universities, R&D institutions and farmers and maintain
a thrust on special sectors, like castor seeds and psyllium
husk.
Supporting the small
To strengthen small and medium-sector units, Gujarat plans
a cluster development approach with common facility centres
in clusters; assistance for technology upgrade; technology
acquisition and patent tracking fund; cash subsidy for common
R&D activities; and interest subsidy.
High energy
The state government has resolved to take rapid strides towards
enabling industries with competitive, cleaner and efficient
energy resources. Non-conventional sources of energy like
wind and solar energy will also be encouraged. Power-sector
reforms and rationalisation of electricity tariffs will go
a long way in sustainable development. The availability of
natural gas is also expected to bring about a quantum jump
in the industrial economy.
Other initiatives
Apart from the above, the Gujarat government's game plan includes
continuing to create an environment conducive to investment;
promotion of investment from NRIs and foreign direct investment;
port-led development and regional development. For instance,
the government has decided to develop three economic corridors
in the state; these include the areas falling along Bharuch-Dahej
-Umbergaon, Vadodara-Mehsana-Palanpur and Surendranagar-Rajkot-Morbi-Kandla.
Opportunity alert
Finally, here are the sectors the state government has identified
for future growth:
o Agro and food processing
o Textiles and apparels
o Chemicals, petrochemicals and pharma-ceuticals
o Engineering, auto and ceramics
o SEZ and port-led development
o Power, oil and gas
o Gems and jewellery
o Medical tourism
o Biotechnology
o Information technology
o Urban development
o Tourism
So, will you be there?!
Partner in Growth
The Gujarat Urban Development Company Ltd is planning many
interesting projects and looks at private public partnership
to realise them. Srinivas Katikhitala, MD, GUDC shares with
CW some initiatives that will spur growth.
The Gujarat Urban Development Company Ltd (GUDC), a special
purpose vehicle of the urban development department, specialises
in infrastructure planning and provides end-to-end solutions
for projects. It has the distinction of having completed one
of the largest reconstruction effort in an urban area in situ
viz rebuilding Bhuj after it was devasted by the earthquake
in 2001. A complicated task as work was carried out in groundfield
situation of a functioning city. It involved a complete overhaul
of infrastructure and included widening of roads and building
earthquake-proof structures.
Currently it is working out modalities for water supply of
an entire town on public private partnership basis.
Integrated townships
The Gujarat government is on the verge of announcing the integrated
township policy which essentially seeks to guide supported
urbanisation. The idea is to identify areas which have high
economic potential, where jobs and business activities can
be undertaken, and then plan infrastructure in an integrated
manner there. This will provide incentives to the private
sector to come in and built housing stock etc. GUDC will be
the nodel agency for this. Once this policy is notified certain
areas of Gujarat will be taken up for planned development.
This will involve extension of the existing infrastructure
and creation of a green channel-like situation, almost like
a SEZ. These townships will be given specialised treatment
so that there are no delays or cost overruns. "It will
involve an enormous amount of hand holding," explains
Srinivas Katikhitala, MD, GUDC.
Waste management
Smaller nagarpalikas are unable to manage their solid waste
because they lack expertise and resources to take on this
responsibility. As the nodal organisation GUDC is putting
together a solid waste management framework for 161 municipalities
thus generating economics of scale in various clusters. "Currently
we are working out the time and motion studies to balance
the transportation cost against the management cost,"
reveals Srinivas, who then wants to rope in private participation.
"The bundling itself is an incentive as the private sector
will not be able to do this on its own. We have appointed
a consultant for this and should be ready with the details
soon."
The next logical step is to convert organic waste into vermicompost
and use the inerts for landfills. Already 60 vermicompost
sites are under construction and methane generated here will
be traded for carbon credits. The Gujarat government has notified
GUDC as the exclusive carbon trade intermediary for the urban
sector. Srinivas is hopeful that the benefits derived by trading
carbon credits will help finance other projects. Three organisations
have shown interest in this project. "We are looking
at it very carefully. The Gujarat Industrial Infrastructure
Development Board Act lays down the formal process for private
participation . We want to be clear ourselves before talking
to the private sector. Gujarat was the first state to have
the BOT act. This itself is an incentive for private enterprise
to work in a state where the environment is business friendly."
Municipal bonds
To generate funds GUDC is also planning to initiate municipal
bonds. A municipality cannot access the capital market on
its own either because of lack of ability to understand the
market and respond to it, or its essential inability to project
its own credit worthiness. So GUDC is planning to set up an
intermediary which would enable viable investment projects
to be funded through the municipal bond. It has an understanding
with the UTI bank and is also in talks with other companies
and banks to partner it in this endeavour. The next two three
months should see some progress on this.
Quick Bytes
o New townships to be planned in areas with high economic
potential.
o Small municipalities to be
clustered for economics of scale.
o Solid waste management to be thus made economically viable.
o Waste to be used for vermiculture and landfills.
o Municipal bonds to generate funds for projects.
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