Why Gujarat is emerging an auto-hub?

Virendra Pandit Ahmedabad | Updated on September 08, 2011

The Nano assembly line at Sanand.

When Mr Ratan Tata decided to relocate the Nano-car project from Singur, West Bengal, in 2008, he got a message from the Gujarat Chief Minister, Mr Narendra Modi, inviting the cheapest car's maker Tata Motors to the western State. That message clinched the issue and set the ball rolling to realise Mr Modi's desire to make Gujarat the new automobile hub of India.

In three days flat, Mr Tata got 1,100 acres of land at Sanand. The rest is history.

Ford and Peugeot

One by one, automobile majors have since been flocking to Gujarat. Ford India, Peugeot, Maruti Suzuki, Hero — their officials made rounds of the State and the first two, have announced that they are ready to park themselves next to Tata Motors in Sanand.

On July 28, Ford India announced its second Indian facility on 480 acres at Sanand; on September two, Peugeot, too, announced its re-entry into India via Sanand, from 584 acres of land.

They are investing Rs 4,000 crore each. Within six weeks of its announcement, Ford India even held a ceremony on Monday (September 5), and Peugeot is also expected to follow suit in the next few weeks.

Maruti's plans

Reports suggest that Maruti, which is seeking a bigger chunk of land in the northern Gujarat district of Banaskantha, could develop a whole town — the company already has a pre-export inspection facility at Mundra with a capacity of two lakh vehicles.

Hero MotoCorp, too, is reported to be scouting for land for its proposed manufacturing plant. Gujarat's journey to emerge as an auto-hub began in the 1990s when General Motors set up a manufacturing facility at Halol in Vadodara district.

Mr Modi, who came to power in 2001, marketed the State as investment-friendly through the biennial Vibrant Gujarat Global Investors' Summit that began in 2003.

Abnormal concessions?

What attracts global and Indian automakers to Gujarat?

While the State Governments and officials of the companies setting up shop in Gujarat have remained tight-lipped about the financial concessions —particularly after the main Opposition party, Congress, claimed in 2009 that the Modi Government doled out concessions to the tune of Rs 33,000 crore to Tata Motors in order to woo them to Sanand —the reality may be somewhat different.

The State Government, in its industry promotion policy, provides tax benefits to projects having a minimum investment of Rs 1,000 crore, provided they stick to their timeline and begin production within a specified period. No other State Government works as fast as the one in Gujarat when it comes to implementation.

Besides, for all practical purposes, the only decision-maker in Gujarat is Mr Modi himself — a workaholic and hard taskmaster, working 20 hours a day.

Business environment

As Mr Michael Boneham, President and Managing Director, Ford India, said on Monday, his company selected Gujarat because of its location as it offers ports for possible exports to western markets, cost and logistics considerations, business environment and the State Government's “transparent and competitive” offers. “We took a lot of time and saw activity to zero in on Gujarat.”

Gujarat attracts investors because of its better labour-industry relations, infrastructure that include good roads and ample electricity and water and central location between Delhi and Mumbai, said Mr Maheshwar Sahu, Principal Secretary, Industries

The proposed Delhi-Mumbai Industrial Corridor with Japanese aid and loan worth $90 billion will add to the State's advantage, he added. About 38 per cent of the 1,483-km long highway will pass through Gujarat alone, including Ahmedabad district where Sanand is located, 30 km from Ahmedabad, the financial capital of the State.

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Published on September 07, 2011
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