State Of The Economy 2012

Blazing a new trail

The state is putting its tumultuous past behind, and embracing growth. Leading this change is a willing and able government machinery

Photographs by Soumik Kar

Why is Gujarat equated with Godhra? Don’t you have riots in other states?” asks a sugarcane juice seller on the street in Gandhinagar. “Instead of seeing the development in our state, you’re stuck in the past,” he accuses even as he shoves a tall glass of the sweet juice at us. He isn’t the only one who is tired of references to the two months of rioting across Gujarat in 2002. We’re on our way to Udyog Bhawan in the state capital, but the bureaucrat we were to meet backs out. “Journalists meet us, ask about Gujarat’s development and then go back to write about Godhra. I don’t want to talk to the media anymore,” he declares.

It’s obvious everywhere that Gujarat is keen to put Godhra, considered the worst instance of communal violence in India after Partition, behind it. Nobody, including businessmen, bureaucrats or people on the street wants to talk about the ‘communal angle,’ they’d rather focus on what’s right with the state. The change in attitude, among those in the state and outside, is staggering. The same man who was vilified by the business community in 2002 is now being perceived as the ideal, visionary leader for not just the state, perhaps even the country.

A year after Godhra, Gujarat chief minister Narendra Modi was confronted by leading industrialists at a CII event where industrialists like Rahul Bajaj and Jamshyd Godrej remarked on the “lost year” and asked for assurances on the safety of people in the state, prompting Modi to lash out at the “pseudo-secular” gathering. Cut to last year: in the Vibrant Gujarat summit, captains of industry heaped praise on Modi. Anil Ambani referred to him as a lambi race ka ghoda, while Sunil Mittal thought he was a CEO capable of running the country. “Gujarat is shining like a lamp of gold,” declared Mukesh Ambani and Chanda Kochhar said the state was seen as India’s growth engine. 

Certainly, signs of progress are visible everywhere: the long, smooth roads chock-a-block with large European cars, and apartment complexes and office buildings under construction everywhere. Ahmedabad’s airport is bustling with many foreigners. While a fair number are tourists, there are many laptop and small wheeled bag- totting business travellers. The airport is the best testimony to the globalisation that is underway at Gujarat. And for most investors, Godhra is a thing of the past.

In the past seven years, Gujarat has received investment commitments of ₹3,894,080 crore. Companies that have made their way to the state include some of the world’s biggest names such as Siemens AG, JSW Wagon, Sandvik Asia, FAG Bearings, Ingersoll Rand, ABB, Tata Motors, Ford, Peugeot and Hitachi. The state’s GDP growth has been ahead of the national average all through the past decade; it is a power surplus region and has over 70% share of all cargo handled in minor ports across India. So, what is Gujarat doing right? 

Online state

At first glance, the Gujarat Secretariat looks like any other government building — sprawling, with huge corridors and security guards. There’s a striking difference though. It’s clean and silent unlike other state secretariats, which are bustling with people seeking appointments with bureaucrats and waiting for their turn. A lone assistant takes us to Chief Secretary AK Joti’s room, and the noted absence of piled files takes us aback. “We believe in decentralisation and delegation of power. We don’t grant any [project] approvals here. That is why you don’t see people around,” says Joti. 

Since 2010, all project approvals have gone online, where one can apply and monitor the status of applications — there is a quarterly review of project status at the chief secretary-level. “We do not make any exceptions while granting approvals,” he adds categorically.

AK Joti, chief secretary, GujaratThe delegation of power and online approvals has helped speed up new business projects considerably. Tata Motors’ Nano plant at Sanand received all its clearances in three days, while Bombardier Transportation, the rail equipment division of Canada’s Bombardier group, took just 19 months from ground breaking to production. All projects in the state require two-stage approvals — environment and execution (for water, power, land ). While the Gujarat Pollution Control Board usually takes 90 days to decide on environmental approval, the execution cycle ranges from 18 months to five years, depending on the project size. While environmental clearances are to be granted within 90 days in other states as well, the process isn’t always followed. And execution stage clearances rarely take less than three or four years.

Most industrialists are quick to credit the Modi administration for the state’s industrial and commercial development over the past decade. But, Gujarat took its first steps towards promoting investments nearly 35 years ago. In 1978, the state set up the Industrial Extension Bureau (iNDEXTb), a one-stop shop for all investment-related activities, from advising businesses to finalising locations and commissioning projects. In the past couple of years, it has helped companies like Ford Motors and Peugeot set up shop in the state. But there’s no denying the extra effort made to woo investors, especially among the large base of non-resident Gujaratis, through the biennial ‘Vibrant Gujarat’ investment summits.

Vibrant Gujarat MoUs & actual investments

The summits have collectively resulted in the signing of MoUs worth $889 billion. “Gujarat, by itself, has been entrepreneurial, and good leadership has channelised the energy of the system,” says Mahendra Patel, chairman and MD of the Ahmedabad-based Mamata Machinery, which manufactures bag-making and packaging machines. In the past three decades, Patel has set up more than 15 companies in the state, including JVs with German and Canadian companies. “While successive governments bolstered entrepreneurship in the state, processes now are simpler than before.”

It helps that the government has been increasing its investment in infrastructure and since 2003, it has been working to improve port linkages through road and rail — a critical move, considering the state has a 1,600-km long coastline with 41 major and minor ports. Nine linkage projects have been completed, while another eight are in the pipeline. Jayesh Buch, resident director of the Essar Group in Gujarat, says the state’s infrastructure is a big draw for industry as good roads and port connectivity gives access to both inputs and markets.

Jayesh Buch, Essar GroupGujarat is also creating the country’s first special investment region (SIR) at Dholera, in Ahmedabad district. SIRs differ from special economic zones (SEZs) in that they aren’t exclusively for exports. They will have residential complexes as well as industries, and world-class infrastructure — the SIR is being planned as a smart city, with digital control of all facilities like water and electricity. When complete, the Dholera SIR is slated to be bigger than even China’s Shenzhen: it will cover over 900 sq km along the Delhi-Mumbai Industrial Corridor (DMIC). In all, 24 SIRs are planned along the DMIC. 

That’s still some way off though. For existing industries in Gujarat, the biggest boon has been the state’s investment in power. For several years, the state has worked at renovating old power plants, selected independent power producers in line with Central guidelines and implemented India’s first wind power and solar power policy. “Renewable energy sector is among the new industries that rapidly developed in Gujarat in the last five to 10 years. We are one of the leading states in wind and solar power with 2,582 MW of wind installed capacity and 600 MW of solar installed capacity,” says Gujarat’s industries commissioner BB Swain. Since 2010, Gujarat has been a power-surplus state; against a supply of 13,354 MW, current demand is 11,000 MW, and the state now sells power to other states, including Karnataka, Uttar Pradesh and Tamil Nadu.

BB Swain, Gujarat’s industries commissionerPower-hungry sectors like telecom have benefited. “We have a distinct advantage in Gujarat because electricity supply is privatised in Ahmedabad and Surat. There aren’t power cuts, and that eliminates the need for diesel generator sets at telecom tower sites,” points out Anil Tandan, chief technology officer, Idea Cellular. Power from DG sets can work out to as much as ₹16 a unit, but the state supply doesn’t come cheap, either. At ₹5.65 a unit, Gujarat has one of the highest industrial power tariffs in the country, and that’s a deterrent to new industries. There’s a proposal now to grant concessions in power tariffs to new industries that are set up in specified areas of the four state-owned power distribution companies, but nothing’s been finalised yet. 

It isn’t industry alone that has profited in an ‘always-on’ Gujarat. At Kanera village, some 25 km outside Ahmedabad, Dineshbhai Chauhan beams as he explains how life has become easier with 24x7 power. He is the secretary of an Amul mandli, a milk collection centre from where milk is collected twice a day. Even a few years ago, the chances of milk spoiling due to lack of power or power cuts was high. Now, though, the villagers sell about 350 litres of milk everyday. Kokilaben Sakrabhai Chauhan, a member of one of the 1,100 families in the village, owns four buffaloes and sells about 55-60 litres a day. “We are paid ₹43 per litre for full fat milk,” she says delightedly. The rate was hiked from ₹37 per litre in February, increasing the 52-year-old’s daily income by about ₹300.  

Agri inputs

With talk about Gujarat as India’s most industrialised state, it’s easy to overlook the progress in agriculture. Between FY02 and FY11, this sector registered a growth of 10.7%, compared with 10.3% for industry. “Setting up of check dams, bori bandhs (sand bag dams) by the state government and involving local communities in rainwater harvesting as well as ground water recharge has helped agriculture,” says Laveesh Bhandari, director, Indicus Analytics. 

Other steps, such as promoting diversification to high-value crops like spices, fruits and vegetables and offering capital subsidy of ₹2.5 lakh to set up green houses, have helped. iNDEXTb’s head Mukesh Kumar feels in addition to boosting the state’s power capacity, the Sardar Sarovar Project will also help agriculture. The project calls for a main canal with a network of 74,626 km for irrigation. Work on 29 of the total 38 branch canals has been completed, with the remaining to be finished by 2013-14. This will increase the state’s irrigated area from 30% of gross cropped area to 46%. 

The impact of these efforts is already visible. Chandubhai Gotabhai, a tobacco farmer in Kheda district’s Sokhda village, says his fortunes changed with water supply to his fields. Earlier, he could grow just about 250 kg tobacco annually on his half-hectare plot but now, the yield is upward of 600 kg. At current prices of ₹1,200-2,000 for 20 kg, Gotabhai’s income is up ₹25,000 a year. Some 15 km away, Manguben Rawal is busy weeding out paddy fields. Her Malharpura village benefited from the construction of a group well that irrigates the fields. She works on her employer’s farms for ₹150 per day. Earlier, paddy cultivation was not possible due to water constraints and earning opportunities for people like Rawal were remote. “Life is good now,” she smiles. “All we now need are streetlights in our village.”  

Paradise regained

Is Gujarat really as Utopian as it appears? Scratch the surface a little, and a slightly different picture emerges. Farmers’ share of power has actually dropped over the past decade. Prohibition and the lack of metropolitan cities means youth aren’t keen on staying on in the state, pointing to a manpower crisis in the near future. 

Achyut Yagnik, founder-secretary of the NGO Setu and co-author of The Shaping of Modern Gujarat, says industrialisation has led to the displacement of local communities in the Kutch and Saurashtra regions, where land was allotted to corporates like the Adani group. “Creeks in the Rann have been either filled up or diverted. So, not only have fishermen been displaced, but the ecological balance is also threatened,” he says. Environmental issues dog a number of other projects, several of which are pending before the National Green Tribunal of the environment ministry. 

Just last month, the tribunal directed OPG Power Gujarat to stop work on its 300 MW Bhadreshwar thermal power plant at Mundra, following petitions by fishermen, salt pan workers and local residents. Similarly, the environment clearance given to Nirma Industries to set up a cement plant in Bhavnagar was revoked by the ministry last December after farmers in Mahuva said the proposed site was a wetland.

More worrying, perhaps, is the fact that Muslims in the state are still bearing the brunt of the decade-old riots. There are fewer Muslims working in manufacturing and organised trade than in other parts of the country; instead, they are more likely to be engaged in informal trade or be self-employed. There is subtle discrimination at work, in school and college admissions, white collar jobs, and while procuring bank loans. It may take another decade for the Godhra shadow to
disappear completely.