D J Pandian, additional chief secretary, Gujarat government tells Shobha Mathur about the initiatives taken to woo the automotive industry to the state.
06 Jun 2014 | 5697 Views | By Shobha Mathur
D J Pandian, additional chief secretary, Gujarat government tells Shobha Mathur about the initiatives taken to woo the automotive industry to the state.
What incentives does the Gujarat government have to woo the automotive sector?
We have announced a policy of mega and innovative projects under which incentives are ...
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D J Pandian, additional chief secretary, Gujarat government tells Shobha Mathur about the initiatives taken to woo the automotive industry to the state.
What incentives does the Gujarat government have to woo the automotive sector?
We have announced a policy of mega and innovative projects under which incentives are offered to select sectors. Accordingly, the automobile sector comes under this and is eligible for incentives under the scheme of Mega Projects. Industries are required to fulfil the condition of investing in fixed assets exceeding Rs 1,000 crore and providing jobs to 2,000 people. The eligible industries get benefits of sales tax incentives for 10 years.
The most important factor for the industry setting up base is to start production during the targeted period as well as fulfil export obligations. The state government is aware of this requirement and therefore, under the scheme of Mega and Innovative Projects, the state level approval committee has been constituted to approve state-level clearances. Meetings are organised at regular intervals with investors where they are provided with information about the procedures and timelines for submission of applications and in turn, clearances by the respective departments.
The new industries set up here will be eligible to receive the benefits of electricity duty exemption for five years from the date of commencement of commercial production, irrespective of the investment. For other investors, units are getting the benefit of interest subsidy for five years as per the manufacturing policy. The SME sector will be eligible to receive the benefit of interest subsidy of seven percent subject to a ceiling of Rs 25,00,000 per annum while the large scale sector gets a two percent interest subsidy, and the ceiling will be of Rs 50,00,000 per annum for a period of five years. The intention of the state government in offering interest subsidy benefits is to provide finance at lower interest rates.
Is there any focussed move to create an automotive cluster in the state?
The plants of General Motors India and Tata Motors are in operation at Halol and Sanand respectively.
Understanding the potential to attract more investment in this region, the Gujarat Industrial Development Corporation (GIDC) has undertaken expansion activities of the Halol Estate and set up an estate at Sanand. Both estates are equipped with road, power, water and gas facilities. The Sanand estate will have railway siding facilities connecting major cities of the country and ports of Kandla, Mundra and Pipavav to handle trade.
When Tata Motors decided to set up its plant in Gujarat, it was concerned about the availability of a skilled workforce. The state government has announced a policy of skill upgradation under which industries will have tailor-made courses and they will be allowed to utilise ITI buildings to conduct skill upgradation programmes.
For the purpose, in case industries are required to purchase machinery, the government will reimburse 50 percent cost. Moreover, research activities are also important and for this, the state government is setting up auto institutes in collaboration with Kangan of Australia that will offer PG courses also.
What are the best practices being followed to improve the business environment?
Gujarat has taken a lead to market itself as the best destination for investment. iNDEXTb, the investment promotion agency of Gujarat, is working as a single-point contact for dissemination of information.
Promotional programmes are organised through iNDEXTb and state government departments through the platform of the Vibrant Gujarat Summit organised bi-annually. At these events, global speakers are invited to impart information on the latest trends. We invite Indian states as partner states at Vibrant Gujarat Summits wherein they are offered a platform to organise presentations of their states, display their exhibits and B2B and B2G meetings.
With the success of the Gujarat government concept, other states are also adopting this system. Moreover, the approach of the Gujarat government to get required clearances through the state-level approval committee has sent a positive signal to industries.
The best example is of Tata Motors. The State Support Agreement was signed in October 2008, the land was given in the same month, and the plant was ready for trial runs by January 2010.
The GIDC’s industrial estates at Sanand and Halol have the required facilities and thereby industries are not worried about land acquisition and creation of infrastructure facilities. Both estates are in the vicinity of major urban centres of Gujarat and as a result, workers are easily available.
Which automotive companies have taken land in Gujarat for building manufacturing setups?
The plants of General Motors India, Asia Motors, Atul Auto and Tata Motors are in operation in Gujarat and in addition to this Ford India, Hero MotoCorp, Honda, Suzuki (two sites for two plants) have acquired land. Over and above this, Bombardier, Apollo Tyres and Ceat are in operation, which play an important role.
The Tata project that created news has not really taken off. With other major OEMs like Ford, Maruti Suzuki, Honda and Hero coming to Gujarat, how do you find opportunities for employment, investments and supply chain improvements?
The Ford plant is under construction and is expected to start commercial production by the first quarter of 2015. Maruti Suzuki recently resolved its equity pattern and is thereby expected to start activities. The state government has already prepared a blueprint to provide the required infrastructure facilities for Maruti. Hero MotoCorp will also start construction after this monsoon.
With the entry of automotive players, the region is expected to see large quantum of investments in auto components also. The decision of Maruti to set up its plant in Gujarat can be considered a unique example for a transportation and logistics park.
Many Japanese vendors are planning to import raw materials from Japan and build warehousing facilities at the port site and will transport to Manesar as well as plants in Gujarat and in turn, finished products – cars – will be transported from their plant to the ports.
JETRO has been talking about a Japanese auto cluster taking shape in Gujarat. What is its status?
The first phase of the Japan Township has been developed on 150 hectares and allotment has started. It is expected to involve an investment of around Rs 5 billion. This township has a strategic location in terms of the first plant of Maruti and the GIDC Estate, Sanand where Tata Motors and Ford India are located.
Will there also be a Korean cluster coming after that?
Not immediately.
What are the highlights of Gujarat's automotive policy?
The key highlight is the incentives the state offers. The important factor to attract investments is to have ready infrastructure facilities. The state government is committed to providing investors with a comfort level.
How is the overall labour situation in the state?
For decades now, Gujarat offers a peaceful industrial environment and this has helped attract investments. The labour unrest is minimum in Gujarat (0.5 percent) compared to other Indian states and as a result, industries maintain cordial relations with their employees.
Has the state government brought out a white paper on the sector?
SIAM and ACMA are working on a white paper. The approach of the Gujarat government is to undertake developmental activities to fulfil industry requirement. Till date, the concept of industrial parks, SEZs was prevalent. With the development of the Delhi-Mumbai Industrial Corridor, a Special Investment Region (SIR) at Dholera in Ahmedabad district is expected. This SIR will have a zoning system and a new modern city with all amenities will come up. There are similar plans for other parts of the state.
Recently, the Centre released a report by Accenture on the Gujarat model. What are its highlights for the automotive sector?
The Accenture report on the Gujarat Model speaks about the process adopted by the state government for land acquisition. GIDC acquires land to meet with the requirements of industries after having negotiations with land owners. This avoids disputes and litigation and, as a result, the process of acquisition can be completed speedily.
The people of Gujarat understand the importance of infrastructure facilities and, as a result, any proposal concerning constructing of new roads or widening of the existing roads receives their cooperation as the value of left-out land with them will witness a sizeable price increase. When Tata Motors was scouting for a new location to set up its plant for manufacturing the Nano, the Gujarat government suggested locations where land parcels were available for allotment. This success has transformed other auto companies also.
This exclusive interview appeared in Autocar Professional’s June 1, 2014 ‘Gujarat Industry Special’
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