High on energy

INFRASTRUCTURE plays a vital role in any economy and, in particular, in attracting investments. Gujarat realised this many years ago. If Gujarat has been among the most industrialised States of India, it is because of its ability to surge ahead on the infrastructure front irrespective of politics. For instance, all political parties in the State have wholeheartedly supported the Sardar Sarovar Project over the past five decades.

When the State government organised an exclusive Vibrant Gujarat Urban Summit in February 2007, it helped to attract investments in the urban development sector. Of the 312 memorandums of understanding (MoUs) signed for investments to the tune of Rs.2.05 lakh crore, 106 were in township development (for Rs.80,995 crore), 143 in infrastructure development (Rs.1,14,481 crore) and 63 in commercial centres development (Rs.9,684 crore). Soon after this, the State government also announced its urban development policy to aid this process.

Gujarat has seen all-round progress in infrastructure development, be it the availability of power, water, communications, road or rail transport. When Jamnagar went through a water crisis in the 1990s, the State government ferried water in special trains to the industrial town. If the last decade saw at least four drought years, the current one has seen better monsoons, which has boosted agricultural production and solved the water crisis to a large extent.

They call it the Gujarati khamir, or the go-getting-spirit. The State rose as one to meet the challenges posed by the 2001 earthquake, particularly in Kutch district, where investments to the tune of nearly Rs.25,000 crore have been made since. The arid district is now a major centre for the production of salt and saw pipes and is also slowly emerging as Asias largest centre for wood-based industries. The post-quake tax holiday has completely transformed the economy of the district.

If the rise of the Reliance Group in the 1970s and 1980s was attributed to its capacity to scale up manufacturing and backward integration, the rise of the Adani Group since the 1990s has been attributed to its forays in infrastructure-dependent sectors such as ports and energy.

Gujarat is one of the few States that supply power round the clock in most of its towns, cities and villages although the supply is rationed sometimes in the rural areas during the harvest season because of the rise in demand.

Electricity reforms and strict observance of rules have reduced transmission losses and theft to the minimum. As a result, the Gujarat Electricity Board (GEB), which had accumulated losses of more than Rs.2,500 crore over the past few years, registered a turnaround and earned a net profit of Rs.200 crore in 2006-07.

Gujarat is also the first State to achieve 100 per cent electrification, including in all its 18,065 villages, which have access to three-phase electricity supply round the clock. This was made possible by the 56,599 km-long network of cables and the 12,621 new transformers that the government commissioned under the Jyoti Gram Yojana. The work was completed in a record time of 30 months at an investment of about Rs.1,500 crore.

Currently, Gujarat has an installed power generation capacity of 9,628 MW and an additional 4,200 MW is available from captive power plants. Plans have been firmed up to generate another 11,000 MW in the next five years at an estimated investment of Rs.4,500 crore. The power generation capacity is targeted to go up to 20,725 MW by the end of 2011-12 when demand has been projected at 14,031 MW.

A number of coal-based thermal power plants are under construction and are expected to contribute over 6,000 MW in the next few years. The State is also awaiting the Centres nod for gas-based power plants. The State ranked second in overall performance among all the States in the Power Sector Rating Report (2005) of Credit Rating Information Services of India Ltd (CRISIL) and is third in the total generation of installed capacity. Gujarat achieved a per capita power consumption of 1,354 units in 2006-07, which is more than twice the national average of 665 units.

The State has 23 power plants including nine thermal, nine gas-based, four hydro-power plants and one atomic power plant. At the Vibrant Gujarat Global Investors Summit 2007, MoUs were signed for 19 new projects valued at Rs.1,33,429 crore. The private sector contributes more than 25 per cent in the States total installed power capacity.

The new projects aim to generate 8,200 MW with private sector investment. In addition, there will be a nuclear power plant with a generation capacity of 7,400 MW. Of the 10-odd ultra-mega power projects (UMPPs) coming up in India, one is at Mundra in Kutch district with an investment of Rs.20,000 crore. The Tata Power Company is constructing the 4,000-MW power plant on 2,700 acres of arid land.

The public-private partnership venture will provide power at Rs.2.26 a unit. The project, based on imported coal, comprises five super-critical units of 800 MW each and is likely to be completed in the 11th Five-Year Plan period (2007-12). This would supply electricity to Gujarat (1,900 MW), Maharashtra (800 MW) and Punjab (500 MW), besides Haryana and Rajasthan (400 MW each).

About 10 km from the Tata plant, the Adani Group is building a 2,640-MW thermal power plant, also based on imported coal. The group has plans to invest around Rs.45,000 crore to generate nearly 10,000 MW in the long run. The Torrent Group is to build a 1,000 MW plant near Surat. Besides, the GEB plans to add 115 MW during the 11th Plan period.

In another major initiative, seven PSUs the Gujarat Power Corporation, the Gujarat State Investment Ltd., the Gujarat Mineral Development Corporation, the Gujarat Industrial Power Co., the Gujarat State Fertilizers Company Ltd, the Gujarat Narmada Valley Fertilizers and the Gujarat Alkalies & Chemicals came together in 2007 and formed the Bhavnagar Energy Company. The company, formed with an initial capital of Rs.625 crore, will set up a 480 MW lignite-based power project at Ghogha in Bhavnagar district with an investment of Rs.2,300 crore.

The wind energy sector is also witnessing massive investments. The installed capacity through wind farming in Gujarat is now 600 MW. The State government recently announced a wind farm policy to make it more attractive for private investors. Companies entering this sector can now sell power to any entity. Earlier, manufacturing units were allowed to generate power for captive consumption only and any surplus had to be sold to the GEB. The tariff has also been revised to Rs.3.37 per unit from Rs.2.60. Investors have been exempted from the payment of electricity duty.

The State is preparing a solar power policy; the plan is to go for solar cities, solar offices, and so on.

Gujarat entered the oil and natural gas production scene very early among the States. It has reserves at Ankleshwar, Mehsana, Tapti High (Indias second largest gas production centre), Hazira, Bharuch, Gandhar, Dahej, Jambusar, Palej, Kalol and Ahmedabad. Apart from the Oil and Natural Gas Corporation, the Gujarat State Petroleum Corporation Ltd (GSPC), Cairn Energy and Nico Resources are involved in gas production in Gujarat.

Private players such as British Gas and the Adani Group, and public sector companies such as Gas Authority of India (GAIL), Bharat Petroleum Corporation Limited (BPCL) and GSPC are involved in the gas distribution business.

The countrys only liquefied natural gas (LNG) terminals are located at Hazira and Dahej. Similar terminals are proposed to be set up at Mundra and Pipavav. The Kandla Port recently invited bids from refineries to set up an exclusive terminal for crude in Kutch district.

Gujarat also has an extensive gas transmission network. A 2,200-km-long gas grid is under construction for supplying gas to residential and commercial establishments in the urban areas. Three underground coal gasification (UCG) projects are under implementation and one more is on the cards. The State is all set to emerge as the hub for UCG in the country.

The Narmada River, which has been dammed with the ambitious Sardar Sarovar hydroelectric power-cum-water supply project, has been described as the lifeline of Gujarat. Although the canal network is still under construction, it supplies water to different parts of Saurashtra, north and central Gujarat and Kutch, as also to parts of neighbouring Rajasthan. At its peak reservoir level of 123 metres during the monsoon season, the dam generates 1,200 MW of hydropower a day. All the six 200-MW turbine generators start working as soon as the water level reaches 110.64 m.

Work on the Bus Rapid Transport System (BRTS) for Ahmedabad, included for financing in the 11th Five Year Plan, is already in progress. Its first phase, now under development at an investment of Rs.500 crore, is likely to start in June 2009.

Gujarat would be a major beneficiary of the proposed Delhi-Mumbai Industrial Corridor (DMIC) as 38 per cent of the 1,483-km corridor will be in the State. The DMIC Influence Area in Gujarat covers eight districts and 3.70 crore people. Two investment regions and four industrial areas have been identified in all. The Ahmedabad-Dholera Investment Region and the Vadodara-Ankleshwar Industrial Area will be developed in Phase One.

Other key projects include the Special Investment Region (SIR) at Dholera and the Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) at Dahej. Car makers such as Suzuki have evinced interest in shipping their exports from the States ports, particularly in Kutch and Dholera.

Gujarat is far ahead of many other States in terms of communication. An estimated 1.50 crore people make use of mobile telephony; every fourth person owns a cellphone. The Internet has also penetrated almost every nook and corner of the State.

Gujarat, with 55 SEZs sanctioned so far, has emerged as the SEZ capital of the country. With approximately 16,500 hectares of land earmarked for SEZs, Gujarat tops the national list. Since most of the SEZs are located in arid regions and coastal areas with sparse population, the State has not witnessed any protest over allocation of land. Industrial peace has also been a major reason for Gujarat becoming an investment destination.

After a successful turnaround exercise in recent years, State public sector undertakings are now looking to enhance their operations through fresh investments, diversification in products and services and expansion outside the State. These ventures are expected to invest over Rs.5,000 crore by 2010 in various projects. The Gujarat State Fertilizer Company Ltd plans to invest Rs.500 crore in its third melamine plant, sulphuric acid plant, methanol and windmill projects; it is also entering into a joint venture with TIFERT in Tunisia to ensure uninterrupted supply of phosphoric acid.

Similarly, Gujarat Alkalies and Chemicals Ltd has signed a Rs.500-crore expansion plan with Dow Chemicals. The Gujarat Narmada Valley Fertilizer Company has plans to invest Rs.2,000 crore along with the United States-based AluChem to set up a $400 million plant to produce alumina-based speciality products. The Gujarat Industrial Power Ltd is commissioning two lignite-based power plants of 125 MW each in Surat. The State governments call that PSUs invest 30 per cent of their profits before tax on corporate social responsibility projects evoked a good response.