HAPPENING CHENNAI

Powered by a steady boom of multi-sectoral development, and building on its traditional entrepreneurial and infrastructural advantages, the southern metro rides on.

CHENNAI, the city that has been a pioneer in the field of industrial development, has also kept pace with the times. Perhaps the city is not as slick and glitzy as the late starters in the South such as Bangalore and Hyderabad, but its industrial culture, best exemplified by its excellence and diversity in manufacturing, has enabled it to attract newer industries while retaining and developing traditional strengths. The unique mix of the old and the new, and the big and the small, is what has enabled the city to remain vibrant and retain the competitive edge. Thus, Chennai offers software parks with their trade mark glass-and-granite-facade buildings; it also has the older industries such as leather tanneries, located on its outskirts. The city has new shopping malls, bowling alleys, and multiplex theatres the elements that are considered to be essential to the lifestyle of the professionals of the New Economy companies that have thronged and thrived in the city in the last decade. There are also the new large department stores that go with the new style.

Information Technology, the buzzword of the 1990s, has a strong accent here. The city is a leading destination for all the Indian software majors; the abundant pool of locally available talent is what keeps them going. That, in turn, has happened because of the scores of institutions offering higher education in the city, particularly the engineering colleges, which keep the supply tap open for companies to recruit personnel. The city's reputation as an important centre for higher education, particularly in the areas of IT, medicine and engineering has attracted several private institutions that provide educational support services for students. These institutions, traditionally referred to as "coaching centres", train students who aim to join professional courses, to undertake the rigorous examinations, which is a reflection of the extremely competitive selection process for admission to the institutions. Some of these private institutions have ventured into newer areas, such as imparting IT education in schools.

The changes that have occurred in the last decade, particularly the IT boom, have contributed to a substantial expansion of the real estate business in the city. However, unlike in other cities, where the real estate markets have swung from boom to bust, the relatively cautious and conservative approach that characterises dealings in Chennai would seem to have saved it from the ravages of the extremes of speculative activity.

Chennai has a long and substantial record as a base for the automobile industry in India. It is home base to several leading automobile companies. Ashok Leyland, a leading truck manufacturer, has had a long-standing presence here. The production bases of Ford Motors and Hyundai, new entrants in the passenger car segment of the industry, are in Chennai. Tyre major MRF is based in the city. The city is also host to numerous industries, which supply auto components to manufacturers across the country. In fact, Chennai's small manufacturers have been an integral part of the city a reminder of the city's commitment to the entrepreneurial spirit. Small-scale industries and ancillary industries have constituted one of the pillars of industrial growth and have contributed significantly to the growth of the city. Chennai has the largest number of small-scale industrial units among all the districts in the State.

Tamil Nadu, in general, and Chennai in particular, has had a strong base for the chemical industry. Manali, on the outskirts of Chennai, is the location of a major cluster of chemical industries. The focal point of this cluster is the mother refinery in the Chennai Petroleum Corporation Limited (CPCL) complex at Manali. Several petro-based units, using refinery feedstocks, produce a range of products, from fertilizers to polyolefins, and from nylon chips to polybutanes.

SRF Ltd. (formerly Shriram Fibres Ltd.), a major manufacturer of nylon and nylon tyre cord, is also located at Manali. The company's Manali plant, established in 1973, manufactures nylon tyre cord fabrics for bicycle tyres, industrial and belting fabrics, PVC coated fabrics, industrial yarn and fishnet twine. In 2000 the company took over DuPont's plant located in the SIPCOT Industrial Complex in Gummidipoondi, near the city. The plant follows the HPWS (High Performance Work System) that has empowered teams to take care of day-to-day operations. The plant produces Nylon 6 and Nylon 6,6 tyre cord fabric. The company is currently implementing a project to double the existing conversion of capacity of 6,500 tonnes per annum.

The publicly owned CPCL is one of the largest integrated refineries in south India producing fuel products, lubricants and additives. It produces a range of fuels such as diesel, kerosene, liquefied petroleum gas (LPG) and aviation turbine fuel (ATF) besides bitumen. It also produces feedstock such as propylene, superior kerosene, butylene, naphtha, paraffin wax and sulphur.

CPCL, formed as a joint venture between the Government of India and Amoco India Inc., a U.S.-based company, and. the National Iranian Oil Company (NIOC) was incorporated in 1965 and production commenced in 1969. The refinery was initially designed to process 2.5 million tonnes per annum of crude from Iran. The capacity was increased to 2.8 mmtpa in 1980, through de-bottlenecking measures. The refining capacity was increased to 5.6 mmtpa in 1984-85 at a cost of Rs.170 crores. In 1985, Amoco Inc. divested its holding in favour of the Union government. In 1993, the refining capacity was enhanced to 6.5 mmtpa.

CPCL has also commissioned a grassroots refinery with a capacity of 0.5 million tonnes per annum at Panangudi in the Cauvery Basin. Alongside, a gas sweetening and LPG separation unit producing 16,000 tonnes of LPG has been installed. CPCL has sourced its technical expertise for the Cauvery project indigenously. Among the major projects in the pipeline are the liquefied natural gas (LNG) terminal at Ennore.

Southern Petrochemical Industries Corporation (SPIC), a major industrial conglomerate with a strong presence in chemical industries, is also planning a polyester fibre and yarn project. The state-run Tamil Nadu Industrial Development Corporation (TIDCO), which is the principal agency involved in industrial promotion in the State, is establishing a major petrochemical park on about 7,000 acres (about 2,800 hectares) near Ennore, north of Chennai. TIDCO is promoting a naphtha cracker unit in this park. TIDCO is also examining the feasibility of establishing a refinery at Ennore.

Chennai is the home base of MRF, a leader and pioneer in tyre manufacturing. Starting with a toy balloon-manufacturing unit at Tiruvotriyur in Chennai in 1946, the company has grown into one of the biggest tyre manufacturers in the world. In the 1950s the company then known as the Madras Rubber Company started making tread-rubber, the market for which was until then entirely held by multinational companies. Its main tyre manufacturing plant was commissioned in 1964 at Tiruvotriyur. By the late 1960s the company started exporting tyres and by the 1970s it was exporting nylon tyres. The company started making specialised tyres for heavy-duty vehicles by the end of the 1970s. MRF today has a diversified portfolio of activities. Today, its turnover is one of the biggest among all Chennai-based companies. In 2001 the company registered a turnover of Rs.2,124 crores and a net profit of Rs.32 crores.

The Hyundai Motor Company from Korea has its car manufacturing plant at Irrungattukottai near Chennai. Set up at a total cost of $614 million, the plant began pilot production in 1998. The integrated plant has a press shop, a body shop, an assembly line, and a paint shop. It manufactures engine and transmission components and has an aluminium foundry to manufacture cylinder heads for engines. The plant has a plastic extrusion unit. In June 2002 the 300,000th car rolled out of the plant. The company recently launched its top-end Accent Viva model, produced here.

Chennai has a long history as a premier engineering centre. The entrepreneurial skills of the many small industries have sustained the sector. Many of the small industries provide ancillary support to industries such as automobiles, bicycles, castings and forgings, electrical and non-electrical machinery, pumps and transportation equipment. The city has several Industrial Estates, which provide factory space at relatively low rents, and provide other facilities to units operating there. The largest of these, established in 1958, is at Guindy, situated on 100 acres (about 40 ha). Integrated facilities have been provided for units operating here. Sheds of eight different sizes have been provided. The estate provides several technical services. Among these are mechanical, metallurgical and chemical testing laboratories, tool-rooms, a forging and heat treatment shop, a finishing shop, a wire drawing, enamelling and cotton covering unit. Besides, it offers a pressure die casting unit, a foundry, a woodworking and sports goods unit, a scientific glass product unit, a raw material depot, a technical information section with a library and blue printing equipment. Other industrial estates are located at Ambattur, Arumbakkam, Villivakkam, Kodungaiyur, Madhavaram and Perambur.

The Central government-run Central Leather Research Institute (CLRI), which provides training and support services to leather units, is an integral part of the leather industry here. The Vikram Sarabhai Industrial Estate, exclusively for the electronics industry, provides facilities for units manufacturing electronic goods and items.

THE managerial revolution of the 1990s, which has changed the way industrial production is organised, has swept Chennai. New mantras of total quality management (TQM), ISO certification, the "Lean" movement and so on have breathed new life into industries in Chennai.

Sundaram Brake Linings, a pioneer in the field of brake linings for the automobile industry, has during the last decade transformed its shop floor. The company, incorporated in 1974 as a joint venture with a U.S. company, became 100 per cent Indian-owned in 1995. Starting in the late1980s, the company introduced changes in its manufacturing process, which cut the layers of hierarchy, lowered inventory levels and modernised its plant at Padi in Chennai. In the process the company made substantial savings in costs and improved its operational efficiency. Company sources pointed out that all this did not necessarily mean firing workers or cutting wages. Much of the Lean system was based on the Toyota Motor Company's experience in production line techniques, particularly in making them flexible, enabling the company to respond quickly to changing market demands. Since then several other companies of the TVS Group have absorbed these industrial practices.

Sundaram Fasteners Ltd. (SFL), another company in the TVS Group, has been a consistent exporter of automobile parts. In the last fiscal the company exported Rs.82 crores worth of products. The company has been a long-time supplier of radiator caps for automobiles in the international market. It perceives "tremendous opportunities" for itself as an outsourcing base. It is planning the acquisition of a U.S.-based radiator cap producer. A company source told Frontline that despite the technological changes in the automobile industry, the company is not about to become "irrelevant".

CHENNAI has a long tradition as the financial capital of South India. The trading and industrial activity in the city has spurred the growth of the financial sector. The city has a strong financial system, served by all India financial institutions such as ICICI, IDBI and IFCI, commercial banks such as the State Bank of India, Indian Overseas Bank, cooperative banks and non-banking financial companies (NBFCs) such as chit funds and indigenous financiers. Foreign banks such as Citibank, Standard Chartered Bank, Hongkong and Shanghai Banking Corporation, ABN-Amro Bank, Bank of Tokyo-Mitsubishi, BNP-Paribas and Bank of America have offices in Chennai. Despite the partial meltdown in NBFC business in recent years, the city is still a base for several leading NBFCs such as Sundaram Finance. Chennai is also the home base of the public sector Indian Overseas Bank.

Chennai-based Indian Bank was established in 1907, as part of the swadeshi movement. Its global deposits were Rs.24,039 crores at the end of March 2002. The quantum of the bank's advances, from its nearly 1,400 branches, amounted to almost Rs.11,000 crores. During the last financial year the bank made a profit of Rs.33 crores, after six years of losses. Indian Bank made an operating profit of Rs.307 crores during 2001-02, which amount represented a four-fold increase over the previous year. The bank has submitted a restructuring plan to the Union government. The bank, which had posted heavy losses on account of high levels of non-performing assets, has undertaken efforts to have these accounts settled on a priority basis.

CHENNAI is home to many theme and amusement parks. Kishkinta, the theme park on the outskirts of Chennai, was one of the first such parks. It has been promoted by Navodaya Mass Entertainments Ltd. and the Malaysia-based Berjaya Group Berhad. The theme park has several attractions for children as well as adults. Spread over an area of 150 acres (about 60 ha), it is among the biggest of its kind in India.

The recent inauguration of Mahindra City, the country's first private sector industrial park, by Mahindra Industrial Park Ltd (MIPL), has opened up fresh possibilities in infrastructure development for industrial users. The project, near Chengalpattu, executed by the Mahindra Group, the key investor, hopes to draw fresh investment in developing it. Six years ago when it was conceived, the park was aimed at providing services to automobile ancillaries and other such non-polluting industries. Now, in the context of the industrial recession, the promoters have extended the scope of the project to include IT-enabled services, particularly in the Business Process Outsourcing (BPO) sector.

About Rs.300 crores has been invested on basic infrastructure. In order to attract IT and BPO companies, a further investment of Rs.500 crores to Rs.700 crores may be needed, according to the promoters. They expect investments to the tune of Rs.7,500 crores in the park in the next five years. Individual plots are being offered on a 99-year lease to investors; the base price for each plot is Rs. 32 lakhs an acre. Mahindra City is spread over 1,450 acres (about 580 ha). TIDCO and the Infrastructure Leasing and Financing Services (IL&FS) have taken stakes in MIPL.

The ECC division of the engineering major Larsen & Toubro has been a prominent developer of infrastructure in Chennai. It constructed the showpiece Jawaharlal Nehru Stadium in the city. It has undertaken civil engineering projects for companies, apart from structural fabrication and construction of workshops. It has also been involved in major public health engineering projects.

Alacrity Foundations Private Ltd., well known for its housing projects, is also based in Chennai. The Group's housing division, Alacrity Housing Ltd., which became a separate entity in 1992, is a pioneer in rainwater harvesting techniques in the water-starved city.

The liberalisation of the economy that started in the early 1990s has spawned a consumerist boom. The rise of the upper middle class and changing lifestyles have had a significant impact on the way products are marketed. The proliferation of brands of products of both the durable and the non-durable variety has changed the concept of retailing in Chennai as elsewhere. Industry sources point out that Chennai is regarded as an ideal market for brand launches thanks to the city's discerning consumer base. The growing number of department stores has actually become an important part of life for the better-off sections of society in the city. The new methods adopted by retailing companies envisage displaying and selling different brands in a comparative context. In Chennai, retailing firms such as Viveks and Vasanth and Co. have found it profitable to promote competition within the store. Viveks claims that it is the largest consumer electronics and home appliances retail chain in the country. The firm has 25 showrooms in six cities, and a turnover of Rs.125 crores. It has also extended its reach to areas such as consumer finance and real estate.

Chennai is often considered to be the health care capital of India. The facilities in several specialised areas are considered to be near-world class. It has been a trend-setter in the realm of corporate hospitals in the country. During the last decade, several corporate hospitals with multi-speciality facilities have been established in the city. It is home base to Apollo Hospitals, the pioneer in the concept of a corporate multi-speciality hospital. Other, hospitals, among them Vijaya Hospital, Malar Hospitals, and the hospital attached to the Sri Ramachandra Medical College and Research Institute have widened their reach by developing their services. Among the several Chennai-based hospitals that have quickly adopted new and modern medical procedures is the Madras Medical Mission Hospital. The M. V. Hospital for Diabetes and the Diabetes Research Centre are among the hospitals that cater to the growing needs of patients suffering from diabetes.

The Voluntary Health Services, a pioneer in the field of providing quality care at affordable prices to the poor and needy, has also modernised and developed its services over the years. Sankara Nethralaya, the pioneer in eye care, which caters to the needs of patients from across the country, is also Chennai-based.

Despite the strengths, there are weaknesses that have to be addressed if Chennai is to remain an attractive destination for industrial development and investment. Speaking at the valedictory function of Connect 2002 recently, Tamil Nadu Governor P.S. Rammohan Rao highlighted some of these aspects. He pointed out that the State needed to invest more in research and development if it aspires to be a leader in the knowledge-intensive industries. Chennai's often-precarious water supply situation also figured in the list of problem areas. The Governor suggested the creation of a task force to deal with these problems, on the lines of the one operational in Bangalore.