Revving up growth

Logan CARS Ready to roll out from Mahindra & Mahindras Nashik plant. - PUNIT PARANJPE/REUTERS

The Vilasrao Deshmukh governments new industrial policy has made a host of multinational companies rush to invest in the State.

LoganCARS Ready

SAMPLE these: The iconic automotive brand General Motors is setting up a vehicle manufacturing facility at Talegaon near Pune with an investment of over $300 million. The plant will have a production capacity of 1.4 lakh vehicles annually. Volkswagen is going to invest Rs.2,450 crore to establish a plant in Pune with a capacity to produce 1.10 lakh units. DaimlerChrysler has started construction of its plant to produce Mercedes-Benz vehicles at Chakan in Pune. The plant will manufacture 15,000 cars every year. Mahindra Renault, the joint venture between Mahindra & Mahindra and Renault of France, is rolling out Logan cars from the Indian partners Nashik plant.

These are only a few indications of the interest multinational corporations and corporate India are showing in Maharashtra. Having already uncorked a new industrial policy to rev up industrialisation, the Vilasrao Deshmukh government is now planning to prepare a comprehensive master design, for which it plans to contract the services of an international consultant.

With a share of 10 per cent of Indias geographic area, the State contributes over 13 per cent of the national gross domestic product. It has a per capita income that is about 39 per cent higher than the countrys. Its services sector accounts for over 61 per cent and its industrial base over 26 per cent of the gross State domestic product. It contributes 40 per cent of the national fiscal receipts. According to the State governments industrial policy document, it attracted the highest (22 per cent) Foreign Direct Investment in the country between 1991 and March 2006, involving 3,893 proposals with a total committed investment of Rs.56,628 crore.

Says V.K. Jairath, Maharashtra Industries Secretary: Our policy is that we are committed to own a project that comes up in the State. Our responsibility does not end after the signing of the Memorandum of Understanding (MoU) in fact, it starts from there.

In the information technology sector, 25 per cent of the top 500 software companies in India are based in Maharashtra, while 10 of the top 20 software and services exporters have operations in the State. No wonder that it contributes over 20 per cent of the countrys total software exports.

The State government has initiated measures to lead the State into the next phase of economic reforms, with emphasis on structural changes in addition to fiscal incentives for the promotion of industry and balanced regional growth. The Industrial, Investment & Infrastructure Policy of Maharashtra, unveiled last year, aims at an industrial growth rate of 10 per cent, service sector growth rate of 12 per cent and additional employment generation of 20 lakh by 2010.

The State government has identified infrastructure development as the thrust area. According to Jairath, the sectors that would see significant investments include food processing, semi-conductors and retail. The government is planning to come out with separate agro-processing and infrastructure policies.

Says Rajiv Jalota, Chief Executive Officer of the Maharashtra Industrial Development Corporation (MIDC): Infrastructure and communication are the key drivers of industrial growth and therefore these are our focus areas. He said the MIDC would lay special emphasis on cluster-based development, which would be achieved through developing appropriate infrastructure based on the needs of specific industries and providing common facilities.

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The industrial policy proposes a string of promotional and financial incentives to investors. For instance, new projects, under the small-scale, medium-scale and large-scale sectors, will be eligible for Industrial Promotion Subsidy (IPS), with the quantum of subsidy linked to the fixed capital investment. Actually the annual subsidy will be equal to 25 per cent of any relevant taxes paid by the eligible unit to the State or to any of its departments/agencies.

The thrust is also on single-window clearances. Recent surveys have indicated that it took almost 89 days to start a business in India. The State government realises that it is necessary to streamline and simplify the process for granting licences and permissions. Effective steps will be taken towards providing single-window clearance, the policy states.

In order to increase the FDI inflow, Mantralaya has set up a separate cell, which will function as a single-point contact for all inquiries from foreign investors. A high-level committee has been set up to accord fast-track clearance for FDI proposals.

With Maharashtra accounting for over 45 per cent of the total exports from the country, the State government has rightly accorded significant priority to the development of SEZs, both multi-product and product specific zones, through public-private partnership.

According to Jalota, the State will see the emergence of about 93 SEZs, of which the MIDC will develop 22 on its own and 7,300 hectares of land will be used for these. Five such zones are being developed jointly with private partners on 7,000 hectares, while another nine are being developed in the MIDC area by private developers. The expected investment on infrastructure and in industries in the SEZs will be $22 billion and the expected employment in these zones will be 5.5 million. These SEZs will be fully developed within three to five years, he said. IT and IT-enabled services account for the biggest chunk (32) of the proposed SEZs.

Development of airports is also high on the governments agenda. The State government has decided to hand over 14 small airports and airstrips in the State to private parties for development and maintenance and will soon invite tenders for privatising these airports. These airports are now under the control of the MIDC. The airports will be developed on the basis of public-private partnership. Airports at Kolhapur, Latur and Yavatmal have significant traffic. Those in Ratnagiri, Nanded, Osmanabad, Sholapur, Karad, Sangli, Amravati, Gondia and Baramati are being developed.