India’s largest passenger carmaker Maruti Suzuki India, global auto makers Ford and PSA Peugeot Citroen, US-based pharma giant Abbott, Israel’s Teva, FMCG behemoths Amway and Colgate as well as Nestle all have something in common. They all chose Gujarat, being touted as the most business-savvy state in the country, for setting up their manufacturing plants. Already home to Reliance and Essar, Gujarat has also caught the fancy of a large number of corporate heavyweights over the past year. And many more are vying to enter the state.
It’s always been smooth sailing for Gujarat as far as investments are concerned. The state has emerged as the top investment destination in the country, attracting proposals worth Rs 16.28 lakh crore, a recent report by industry body Assocham says. Accounting for a 13.5 per cent share of total investments of over Rs 120.34 lakh crore across 20 states in India (till 2011-end), Gujarat has lived up to its image of being the country’s most attractive investment destination.
What’s more interesting in the state’s growth story is that most investment proposals have come in the form of big-ticket projects in the manufacturing sector. Gujarat has an 11 per cent share of the net foreign direct investment (FDI) proposed in 2011-12; in all, 13 FDI proposals totalling Rs 20,258 crore came to Gujarat in 2011-12, according to another Assocham report.
What makes Gujarat an attractive business destination? The reasons are well-known: good infrastructure, availability of power, readily available land, port connectivity and a pro-industry government. As M Athar, infrastructure consultant, PricewaterhouseCoopers (PwC) says, “The state has been able to develop an industry-friendly image over the last decade, not just in India but abroad. The international community now understands what Gujarat has to offer. Government delegations visiting parts of the globe to promote the state during various Vibrant Gujarat Global Investors Summits have helped to create a brand for the state.”
Talking about the government’s keenness to help set up industry in the state, insiders say, “Corporates have easy access to government officials, right from the ground level to the top-most bureaucrats. There have been instances when a particular company requiring coordination from six to seven government departments has been able to meet representatives from all under one roof, as a pro-active state machinery would promptly organise such meetings to expedite the process.”
The proof is all too visible. From a sleepy, non-descript town to an emerging auto, FMCG-cum-pharma hub, Sanand has come a long way in the last three years. The Tata Nano is no longer its sole claim to fame. Apart from car majors like Ford India and PSA Peugeot Citroen, global players like Nestle, Colgate-Palmolive, Procter & Gamble, Teva Pharma and Amway have firmed up plans to set up shop in the neighbourhood.
Nestle India, the subsidiary of Swiss dairy major Nestle, is all geared to set up its ninth plant in the country. The company has been allotted about 50 acres of land at Sanand and plans to invest Rs 400 crore to set up a new manufacturing facility. Direct selling FMCG company Amway India has chosen Gujarat over Tamil Nadu to set up its first company-owned manufacturing plant in the country, with an investment of around Rs 400 crore. Oral and dental hygiene products manufacturer Colgate- Palmolive started construction work at its site at Bol village in Sanand around June this year.
Adding to the long list of foreign companies entering Gujarat are China’s transformer maker TBEA, Japan’s Hitachi (power equipment), Korea’s Hyundai Corporation (a transformer facility), US-based Allied Mineral Product Inc (a refractory project) and Germany’s Bosch Rexroth (drive and control solutions).
The latest entrant is India’s largest passenger carmaker Maruti Suzuki India, which has zeroed in on Hansalpur — around 110 km from Ahmedabad — for its first plant outside Haryana. Maruti’s plant is also likely to attract a battery of Japanese and Indian auto component makers. During a recent meeting with Gujarat Chief Minister Narendra Modi, Osamu Suzuki, chairman, Suzuki Motor Corporation, informed the CM that many vendors from Hamamatsu — Japan’s leading auto hub — are keen to invest in Gujarat.
The state government has already drawn up plans to develop a 500 sq km zone as a manufacturing investment zone comprising 44 villages. Hansalpur, which is between Mehsana district and the Sanand-Viramgam area, is part of the state government’s Mandal-Bahucharaji special investment region (SIR) master plan.
Gujarat will catapult itself to the big league of car manufacturing hubs by 2015-16. By then it is expected to touch a car roll-out capacity of 1,015,000 units per annum (pa) — this will be the aggregate capacity of the facilities at Sanand, Halol and Hansalpur. Besides the already operational plants of Tata Motors (250,000 cars pa) and General Motors (110,000 units pa), the upcoming facilities of Ford India (240,000 cars pa), PSA Peugeot Citroen (165,000 cars pa) and Maruti Suzuki (250,000 units pa) will add to the numbers.
What do global corporates see as Gujarat’s advantages? Phillippe Varin, chairman and managing director, PSA Peugeot, cites three reasons for choosing Sanand. “Availability of greenfield land and ready infrastructure are two reasons why we chose Sanand for the plant. Moreover, it is the enterprising nature of Gujarat that attracted us to the state,” Varin had said while announcing the company’s foray into Gujarat.
As Gujarat takes the fast lane in positioning itself as India’s manufacturing capital, not just auto, but global healthcare companies too have lined up a slew of investments here. The $38.9 billion (Rs 2.15 lakh crore) global pharma giant Abbott Laboratories, headquartered in Illinois, USA, has plans to invest Rs 360 crore in a nutraceutical plant at Jhagadia near Halol. Israel’s Teva Pharmaceutical Industries is setting up a plant at Sanand through a joint venture with US-based Procter & Gamble to produce the Vicks brand of inhalers, throat drops and cough syrups.
Encouraged by the response from industrial houses, GIDC has hiked the price of land at the Sanand industrial estate to Rs 3,225 per sq mt (around Rs 1.3 crore per acre), making it one of the most expensive industrial estates in the state. Private land at Sanand is up for sale at Rs 3 crore for an acre now. Hansalpur is also on the road to similar prosperity after Maruti announced its project in the area. Locals there are waiting for good fortune to knock on their doors, as land prices in the vicinity of the upcoming Maruti plant have shot up to Rs 3 crore an acre now, from Rs 2 lakh per acre four-five years ago.
So, is land availability going to be a challenge in the coming years? Senior state government officials don’t think so. “For big-ticket manufacturing projects, land cost is around 5-6 per cent of total project cost. Even if land prices are higher by 15-20 per cent, cost of land as a proportion of net project cost would rise marginally. In contrast, if corporates are offered ready-to-occupy land, they would not mind paying a slight premium,” said one. The challenge in the coming years, they think, would be to maintain a ‘green’ environment, since more industries in the state will mean more pressure on the environment.
