Returning to the top spot

After two years of disasters, Gujarat, with a slew of huge investment proposals in hand, looks forward to becoming the favoured investment destination in India.

FORCED to cope with recurring calamities in the past couple of years, Gujarat is looking forward to 2003 as its season without any major mishap in recent times. With the State posting a gross state domestic product (GSDP) growth rate of 9.8 per cent at constant prices in 2001-02, it appears that things are indeed looking up, especially as the growth rate in the previous year was only 0.6 per cent. And, all it may require to revive the State as a preferred investment destination may be an event on the lines of the Global Investor Meet (GIM) that was organised by Kerala in January.

The relevant indices for the State reflect a buoyancy that was seldom heard beyond all the din of the high voltage Assembly elections in December 2002. Consider a 34.3 per cent growth in the primary sector, fuelled by a robust growth in the agriculture sector, 3.8 per cent in the secondary sector and 6.5 per cent in the tertiary sector, and the picture becomes fairly clear.

However, things are not very rosy with the revenue deficit rising as never before. From a meagre Rs.591 crores in 1996-97, it reached Rs 6,732 crore in 2001-02. On the other hand, expenditure stood at Rs 43,214 crores, up by Rs.6,747 crores from the modified estimates and the tax revenue stood at Rs.10,735 crores, reflecting a 13.5 per cent slump over the estimated figures. With the State's debt for 2001-02 at Rs.34,459 crores and another Rs.18,273 crores being its outstanding guarantees, fiscal prudence does not seem to have been high up on the State government's agenda for some time now.

But, then, Gujarat also had to cope with rehabilitation work of arguably the largest scale ever undertaken anywhere in the world during this period. With the World Bank chipping in with $650 million and the Asian Development Bank (ADB) $350 million, the State is determined to put the quake-shattered Kutch region back on its feet. The housing sector had emerged as the largest casualty, with 11,43,367 houses needing repairs and reconstruction. A total of 9,96,167 houses have already been repaired, while 2,13,685 houses required total reconstruction, of which 53 per cent, or 1,13,271 houses, have already been rebuilt.

With the repair and reconstruction project for houses billed to cost around Rs.2,700 crores, it appears that Gujarat may be in for a long haul as the amount spent till date was only around Rs.1,555 crores. For those who have been watching the Gujarat quake rehabilitation efforts, there is no denying the fact that the four towns of Anjar, Bhachau, Bhuj and Rapar have hogged all the attention.

Meanwhile, there have been a slew of glad tidings for the State with the foremost coming by way of a windfall gain in the form of enhanced royalty on crude oil. With the State claiming an aggregate hike in royalty receipts to the tune of Rs.850 crores for the year, including arrears, the annual revenue of the State under this head hereafter would be pegged at Rs.570 crores.

With the Centre having agreed to the revised calculation methodology of 20 per cent ad valorem rate as per the `Gujarat formula', the switch-over in the royalty calculation formula has resulted in an incremental rise in crude royalty receipts to the tune of Rs.350 crores to the State. Currently, Gujarat produces 5.7 million tonnes of crude per annum and the quantity is expected to rise further as new deposits have been found in and around the Cambay basin. Reports of new gas strikes in the Saurashtra-Kutch region, not as developed as the Cambay basin, have been another silver lining in the horizon. With reports of Reliance Industries Ltd (RIL) having struck gas in Kutch offshore (GK-OSJ-1) in the Gulf of Kutch to the tune of 5 trillion cubic feet (TCF), the industry is already taken up with the prospect of the Saurashtra-Kutch region turning out to be the next high potential zone vis-a-vis petroleum exploration.

There is also the prospect of this region coming good in coal bed methane (CBM) exploration later this year. According to industry analysts, the hype that surrounds the Krishna-Godavari Basin may not hold a torch to what could be found in the Saurashtra-Kutch region even as some geologists compare this petroleum block to that in the Persian Gulf.

ANOTHER area of primary concern will be water as Gujarat gears up for another summer. The key to survival for hundreds of thousands of people who inhabit the parched expanses of the Saurashtra-Kutch belt would be the availability of this fast-depleting commodity. Taking a leaf out of the State's gas transmission and distribution network, the Gujarat Water Authority has already flagged off a Rs.4,500-crore water grid programme, which is scheduled to be completed by 2004.

This is in line with the water infrastructure network planned under `Gujarat Infrastructure Agenda - Vision 2010', wherein the State government has earmarked Rs.7,500 crores towards getting the water grid up and running. Clearly, one way of doing this is to go in for the long haul, by waiting for the completion of the Sardar Sarovar project or even raising the dam's height to 120 metres, which will ensure an uninterrupted flow to the water starved regions of Saurashtra and Kutch.

Instead, the State government has opted for a pragmatic approach in which water would be brought to Saurashtra-Kutch by June-July by the inter-basin transfer of Narmada waters through the canal/pipeline system from one river bed to the next. With the Narmada water grid already completed up to Jamnagar in Saurashtra and up to Maliya at the mouth of the Gulf of Kutch, Gujarat is now ready for the final push to take Narmada water to far-flung regions in Saurashtra.

The ADB, which is at present executing a $75-million-water distribution network in Kutch under the rural water supply component of the Gujarat Earthquake Reconstruction and Rehabilitation Programme, may be asked to take up another Rs.250-crore water transmission system for Saurashtra. This would be supplementary to the Rs.360-crore water transmission and distribution network that will be executed by the ADB in Kutch and some parts of Saurashtra by June.

For Gujarat, all this would not matter if its never-ending endeavour to climb up the investment ratings ladder is not brought under scrutiny. As of October 2002, the State had to its credit 5,952 Industrial Entrepreneurs Memoranda (IEM) worth an estimated investment of Rs.2,28,733 crores on its ledger ever since the Central government unleashed liberalisation in August 1991. Of this, 788 IEM were converted into Letters of Intent (LoI), having proposed investment worth Rs.61,066 crores, of which 100 per cent export-oriented units accounted for Rs.1,131 crores.

In an industrial census carried out in 2000-01, the State was found to have 2,059 units in the medium- and large-scale sector, of which 1,570 were functioning with an aggregate investment of Rs.96,999 crores. These units accounted for an overall production worth Rs.1,08,821 crores. It was also found that 1,077 units, constituting 68.6 per cent, had investments of less than Rs.10 crores each, while there were 180 units with an investment of Rs.50 crores each. Jamnagar featured as the topmost investment destination, followed by Surat, Bharuch, Vadodara, Ahmedabad and Valsad.

Gujarat was ranked second only to Maharashtra in terms of Net Value Addition vis-a-vis manufactured goods for the sixth consecutive year, with 11.7 per cent of the country's output. The sector-wise break up put this as chemicals and chemical products 48.72 per cent; textiles 8.02 per cent; electrical machinery 7.90 per cent; machinery and equipment 5.08 per cent; basic metals 5.07 per cent; non-metallic products 4.36 per cent; and foods and beverages 4.33 per cent.

With the height of the Narmada dam likely to be scaled up and a clutch of other infrastructure projects scheduled to be rolled out, the State has a huge potential for investment. The one question that remains to be answered is whether the State will continue to bankroll some of these projects through its own resources, more often than not borrowed at high rate of interest, or look at the privatisation route. If the latter is going to be the case, Gujarat will be ready to put up some of its public sector units for disinvestment. And that, investment pundits feel, should make one sit up and take note of what is happening in Gujarat.