Chief executives of BJP-ruled states

Business Standard, 31/12/2010

These investor-savvy chief ministers are pulling out the stops and rolling out the red carpet – with impressive results.

Narendra Modi

“There will come a day when, if you are not in Gujarat, you will be considered stupid.” This endorsement came from none other than Ratan Tata, chairman, Tata Sons, who appeared smitten by Gujarat Chief Minister Narendra Modi’s charm when he made the statement at the 2007 Vibrant Gujarat Global Investors’ Summit (VGGIS). Tata walked the talk, inaugurating a Tata Motors Nano plant in Sanand, Gujarat, on June 2, 2010.

Starting 2003, VGGIS has helped rebrand Modi as the CEO of Gujarat, rather than as a dyed-in-the-wool saffron chief minister. Some $2,609 billion worth of investments have been committed to Gujarat in the four investors’ summits between 2003 and 2009.

The cost of eliciting those commitments? Sometimes, less than you would think. “A Rs 1 SMS got the Rs 2,000-crore Nano plant to Gujarat,” Modi had said, referring to his message to Tata Motors Vice-Chairman Ravi Kant, inviting him to relocate his troubled Nano plant from Singur in West Bengal to Gujarat.

According to state industries department data, 63 per cent of the projects signed between 2003 and 2007 have either been implemented or are under commissioning. The figure rises to 80 per cent in investment terms. “It is evidently an effective tool to facilitate the inflow of investments to the state,” said B B Swain, state industries commissioner, on the VGGIS initiative.

The state will hold its fifth VGGIS on January 12 and 13, 2011, for which around 65 countries have confirmed their participation. This time, Gujarat is also trying to rope in other states, and around 12 of them are likely to participate.

“It is a brilliant, strategic move by Gujarat in terms of positioning,” said Chandrajit Banerjee, director-general of the Confederation of Indian Industry (CII), which is working closely with the Gujarat government on the event. “Interestingly, all BJP-ruled states are coming forward to host events that would bring investments to their states,” said Y Sharma, chairman of the Gujarat Council at CII.

Nirmala Sitharaman, a spokesperson for the BJP, whose chief ministers drive the investors’ meet theme, said: “Maharashtra, Gujarat and Karnataka have benefited from the investment boom in the technology sector. The new government in Jharkhand is also making efforts in the same direction. Chief Minister Arjun Munda has formed a team of experts, which will look for ways to bring in investments. The Bihar government has also said it wants to attract investors.”

B.S.Yeddyurappa

Under Karnataka Chief Minister B S Yeddyurappa, the first BJP government in southern India created a record of sorts by attracting investment worth almost Rs 4 lakh crore in June this year, when it hosted the Global Investors’ Meet (GIM).

Though the state government took more than a year to organise the GIM, after postponing it twice, the event turned out to be a huge success. Some 389 memoranda of understanding (MoUs) were signed at a total investment of Rs 3.93 lakh crore. The potential job creation from all these projects will be 711,000 as and when they materialise.

The state government attracted some big-ticket investors like ArcelorMittal, Posco, Shell, Bhushan Steel, Tata Metaliks, Surya Roshni, NMDC, Essar Steel, Rajashree Cements, JSW Steel, Hazira Steel and Bharat Forge in the iron & steel and cement sectors, as well as Infosys, Wipro and IFCI in the services sector. “The Yeddyurappa government started on the right note, but the worry for investors is that the present instability in the government may affect their investment,” said K R Girish, national head of the litigation practice at KPMG.

Aroon Raman, chairman, CII Karnataka, said: “One good thing about Karnataka is that a large number of companies that signed MoUs at GIM paid an initial deposit for land acquisition. The government has done well to set up a task force to review the progress of these investment proposals. There is certainly some momentum on the industrial front in the state.”

The Karnataka government faces three major challenges that it must overcome before investment flows into the state: Acquisition of land, allocation of water and captive mines. In addition, the supply of power is another big hurdle for the government, as the state is already starved of it. Companies that signed MoUs collectively require 3,700 Mw of power and 3,338 million litre of water every day.

V P Baligar, Karnataka’s principal secretary, department of commerce & industry, and mastermind of the GIM, is very optimistic. “No doubt it is a tough task to provide mining assets and water to steel firms. But, we have taken some policy decisions like allotting mining leases to only those who do value addition. We have received more than 1,200 applications for mining leases. We can issue captive mining leases for the creation of 40 million tonne of steel. This means the companies can source up to 40 per cent of raw material from within the state. The balance has to be procured from the open market.”

Baligar strongly feels that around 20 per cent of the Rs 3.93-lakh crore in commitments will flow within one year. Already, companies like Nestle India, Ashok Iron Works, Gujarat Ambuja, J K Tyres, Gopalan Enterprises and Reliance Power have started work on their projects. Of the MoUs signed, about a third are at various stages of implementation, involving an investment of Rs 2.43 lakh crore, he explained.

The government has received more than Rs 1,000 crore towards the initial deposit for land acquisition from 137 companies. It has already earned around Rs 100 crore by way of service tax from these companies and over Rs 30 crore as short-term interest from the initial deposit. “We spent around Rs 30 crore to organise the meet. But, we have recovered our expenses from the interest earnings on the initial amount deposited by companies for land,” Baligar added.

Shivraj Sing Chouhan

Similarly, after almost a decade, private investors have started reposing their faith in Madhya Pradesh again. Investment is pouring in. In the words of Reliance ADAG Chairman Anil Ambani: “My company is investing Rs 2.5 crore per hour to attain a commitment of Rs 75,000 crore in Madhya Pradesh, vis-à-vis the state government’s plan size of Rs 2,700 crore in five years.” He was speaking at the Destination Madhya Pradesh investors’ meet at Khajuraho in October.

The ruling BJP government started its investment drive from August last year with a roadshow in Mumbai and, amid criticism, State Chief Minister Shivraj Singh Chouhan, who is also the industry minister, embarked upon foreign jaunts to hawk the state in Europe, the US, and other countries.

Although Madhya Pradesh is rich in coal and limestone, a prominent reason for power and cement sector heavyweights like Ambani, Ruia, Kumarmangalam Birla and JP Gaur to look for opportunities in the state, other investors are also looking to set up core manufacturing units. “We are looking for a place to set up India’s first fuel-efficient locomotive manufacturing unit,” said C P Sharma, a top executive of Daulatram industries. He is planning to invest Rs 300 crore in a project near Bhopal.

J K Singh, chairman of Mesco OMC Mining, told Business Standard: “It was a heartening experience in Madhya Pradesh. We have already started working on our power, aluminium and cement project, and hope our investment size will touch Rs 5,000 crore.” Mesco is setting up alumina, cement and ferro plants in Chhindwara district.

Corporate executives like R M Gupta (Aditya Birla group) and Anil Bansal (Ambuja Cement) said the Khajuraho meet proved an excellent effort on the part of state government. The numbers speak for themselves. A total 107 MoUs worth Rs 235,966 crore were signed at the event.

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