The Hindu Business Line : Turbo-charging India’s economic engine

The State Government has identified infrastructure development, encompassing power, roads, railways, communication, airports and ports as the thrust area.

— Shashi Ashiwal

On the fast track: Mr Vilasrao Deshmukh, Chief Minister of Maharashtra, says “We believe in inclusive growth.”

Amit Mitra

Iconic automotive brand General Motors is setting up a new vehicle manufacturing facility in Talegaon, near Pune, in Maharashtra with an investment of over $300 million and a production capacity of 1.40 lakh vehicles.

Volkswagen is set to invest Rs 2,450 crore to set up a plant at Pune with a capacity of 1.10 lakh units annually. DaimlerChrysler has started construction of its new plant for Mercedes-Benz vehicles at Chakan in Pune, which will roll out 15,000 cars every year. Mahindra Renault, the joint venture between Mahindra & Mahindra and Renault of France, is rolling out Logan from the Indian partner’s Nashik plant.

These are a few indications of the interest MNCs and corporate India are showing in Maharashtra. Having already uncorked a new industrial policy recently to rev up industrialisation in Maharashtra, 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 India’s geographical area, the State contributes over 13 per cent of the national GDP, with a per capita income that is about 39 per cent higher than the country’s. Its services sector accounts for over 61 per cent and its industry base over 26 per cent of the GSDP, while it contributes 40 per cent of the National Fiscal receipts.

According to the State’s industrial policy document, it attracted the highest foreign direct investment at 22 per cent as compared to other States between 1991 and March 2006, involving 3,893 proposals with committed investments of Rs 56,628 crore.

Says Mr 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 signing of MoU — in fact it starts from there.”

IT sector

In the IT sector, 25 per cent of the top 500 software companies in the country 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 country’s 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 new 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, encompassing power, roads, railways, communication, airports and ports as the thrust area.

Says Mr Rajiv Jalota, Chief Executive Officer of Maharashtra Industrial Development Corporation (MIDC): “Infrastructure and communication are the key drivers of industrial growth and, therefore, these are our focus areas.”

He said MIDC would give special emphasis on cluster-based development, which would be done through developing appropriate infrastructure based on the needs of specific industries and provision of common facilities.

Financial incentives

The industrial policy has announced a string of promotional and financial incentives to investors in Maharashtra. For example, 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. Payment of IPS every year 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.

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

Special Economic Zones

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

According to Mr Jalota, the State will see the emergence of about 93 SEZs, out of which MIDC would be developing 22 on its own involving 7,300 hectares. Five such zones are being developed in joint venture with private partners on 7,000 hectares, while another nine in the MIDC area by private developers. “The expected investment on infrastructure and in industries in 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.

Out of the 93 proposed SEZs in the State, IT and ITES zones account for the biggest chunk (32), followed by multi-product/ services (22), textile and biotech (16) and auto/ auto components (2).

Airports

Development of airports is also high on the State Government’s agenda. It has decided to hand over 14 small airports and airstrips in the State to private parties for development and maintenance, with tenders for privatising these airports to be invited soon. Currently, these airports are under the control of MIDC.

Mr Jalota said the development of the airports would be on the public private partnership model. Airports at Kolhapur, Latur, and Yavatmal have significant traffic but other airports such as Ratnagiri, Nanded, Osmanabad, Sholapur, Karad, Sangli, Amravati, Gondia and Baramati are being developed.

According to Mr Jairath, the emerging sectors that would see significant investments in the State include food processing, semi-conductors and retail. To ensure this, the Government is planning to come out with separate agro-processing policy and infrastructure policy.