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Soumik Kar

The State of Business 2013

Growth magnet
Cheap land and ample power is drawing industries to Halol

Rashmi K Pratap

Automated growth: HNG's Glass factory (L) and Gunnebo's safe and locker making plant  

Sometime in the late 1960s, a young man returned to Bhowanipore in Calcutta after studying mechanical engineering in the US. He took up a job with Union Carbide and continued there for a couple of years but when the chemicals giant asked him to move to Japan, he quit. It was a decade when India was transforming rapidly from an agro-based to industrial economy and Niranjan Vora wanted to be a part of this transformation.

Plastic carry bags were new in India at the time, but they were nothing fancy — plain and single coloured. Having seen bags of better quality and design while studying in the US, Vora decided to set up a unit for printing logos, pictures and other information on carry bags. West Bengal, his home state, was seething under Naxalism then, so he decided to go right across the country, to Gujarat. Raw material would come from the newly-established Indian Petrochemicals Corporation (IPCL) at Baroda, so Vora set up his company 40 km away, at Halol. 

Four decades later, Vora’s company Dynaflex has expanded to tamper proof envelopes, bubble mailer bags for companies such as Flipkart and eBay, apart from making some 2.5 million carry bags every week. And the 73-year-old Vora, who continues to run the ₹50-crore company with his two sons, hasn’t stepped out of Halol. “In 40 years, we have never faced any labour problems, which has allowed us to singularly focus on the business.” 

What attracted Vora to Halol remains a draw for several companies even today: proximity to raw materials and domestic markets, reasonable land rates, a modern port — Kandla — about 400 km away, and peaceful industrial relations. Over time, other positives have been added to the list — excellent road connectivity with Vadodara, Delhi and Mumbai, zero power cuts and adequate supply of gas as well as water. Little surprise then that Halol has managed to attract giants from various sectors like auto, tyres, security solutions, glass makers, pharma firms and a host of small and medium enterprises in the plastics and engineering industries. 

Switching gears

In many ways, Halol is still a small town or, at best, an industrial township. You negotiate herds of cattle on the road, industrial units next to banana plantations and maize fields. At the local eatery where we stop to grab a bite, the waiter looks intently at our bottled water. “This can’t be from Halol; you must have bought it in Vadodara,” he says knowingly. We nod — there are only two brands of bottled water in Halol. Amenities are at subsistence level here — no shopping centres or entertainment options. Work has made the trek to Halol, but leisure hasn’t — yet. 

“Forget theatres, there aren’t even any good restaurants here,” cribs Aslam Sheikh, a 25-year-old mechanical engineer working with an MNC. “You have to go to Vadodara for good food.” Sheikh should count his blessings that he works in present-day Halol, which has roads, power and water, say old-timers; the Halol of the 1990s counted these as luxuries. Kirit Thakkar set up Kirit Packaging Industry in 1976 to make plastic agriculture shade nets and vermicost beds used in organic farming. His choice of business was decided by circumstance — back in the 1970s, there was no water source in Halol and only industries that didn’t require water (such as plastics) were given permission to set up units. “Water for industrial use came much later,” he says. 

The commute from Vadodara didn’t improve until the millennium. P Balendran, vice-president of General Motors India, recalls three-hour long trips from Vadodara in the mid-1990s. “In the evenings, it could take four hours. Today, that time has been cut to half an hour, thanks to the Halol-Vadodara toll road,” he says.

Still a steal

Although land prices at Halol are rising, it is affordable compared
with other industrial clusters

GM has so far invested over ₹1,600 crore in Halol. Having started with an annual production capacity of 12,000 vehicles in 1996, its capacity stands at 110,000 units per year now. That’s taken the American car-maker’s total capacity in India to 250,000 (its other plant at Talegaon, Maharashtra, can make 160,000 units a year). At Halol, GM runs two shifts a day, churning out over 80,000 cars a year.

Others at Halol, too, are in expansion mode. Swedish security solutions provider, Gunnebo Security Group, which makes bank lockers, vault doors, fire resistant cabinets and ATM safes, is pumping in ₹30 crore at its plant here to increase production lines from three to five. The ₹250-crore Gunnebo, which has been in India since the 1930s, set up the Halol plant in 1985. It currently has a capacity to make over 55 safes and lockers every day, which will go up to over 110 pieces a day after the new plant is commissioned. “Over the last five years, we have seen significant changes in Halol. Apart from good infrastructure, there are good quality suppliers for us in and around this area,” says Sandeep Deshpande, MD, Gunnebo India. One of its biggest suppliers, Essar Steel, is just over 200 km away at Hazira, reducing the cost of transportation of raw materials. He adds that most other vendors are also within a radius of 400-500 km. 

And this nearness to related industries is one of the factors that also pulled Ceat Tyres, the flagship company of the RPG Enterprises, to Halol. In 2008, when Ceat was scouting for a location to set up its radial tyre plant, places in Tamil Nadu and Maharashtra were also in the running. “Halol won on every parameter — land cost, labour scenario, nearness to markets and raw materials,” says Anant Goenka, MD of Ceat Tyres.  

Advantage auto

Gujarat is an auto hub now, with plants of GM, Asian Motor Works, and Tata Motors in the state. Others in the pipeline include Ford India and Maruti Suzuki. Hero MotoCorp is already setting up a plant in Halol. It helps that India’s other auto hub, the Pune-Talegaon belt, is relatively close by. “Halol gives us easy access to OEMs in Gujarat and Maharashtra. It is also not too far from the coast, facilitating exports,” Goenka adds. Ceat supplies tyres to all major OEMs, including Maruti Suzuki, Tata Motors, Hero Motocorp, Bajaj Auto, Piaggio, Mahindra & Mahindra. All these either have plants in Gujarat and Pune, or are setting up facilities at these locations.

That’s working to others’ advantage too. HNG Float Glass, part of the ₹2,000-crore HNG group, is a case in point. It’s  600 tonne per day plant at Halol can easily cater to customers in Gujarat, Maharashtra and the NCR. “Automakers are among the biggest consumers of float glass in India,” says Kailash Jain, president, HNG Float Glass. “And there are many automotive companies coming up in Gujarat — GM is just across the road from our factory.” That isn’t the only plus Halol offers. The best sand for making glass is available in Allahabad and Bhuj; by sourcing from Bhuj, HNG is able to keep a lid on its transportation costs. Besides, a 37 km natural gas pipeline running from Padmala to Halol, ensures adequate fuel supply to energy-intensive industries.   

The flip side

As more companies set up plants here, Halol is at risk of tarnishing its sterling reputation. Land costs are shooting up and in June 2012 the Gujarat Industrial Development Corporation (GIDC) hiked industrial land rates by nearly 30%, from ₹525 to ₹780 per sq m. Corporates aren’t complaining — yet — because that’s still cheap compared with other industrial clusters across the country and considerably lower than Sanand, the most expensive industrial cluster in the state (see: Still a steal). Infrastructure, although good till now, isn't keeping pace. Issues of poor roads and inadequate drainage cropping up, they may soon baulk at paying higher rates. “Poor internal roads and badly maintained drains lead to water logging during monsoon. This adversely affects transportation of raw materials and finished goods. Glass being fragile, our breakage and loss during transit shoots up in those rainy months,” explains Jain.

Thakkar, who is also president of Halol GIDC Industries Association, agrees that roads and the drainage system in the city leave a lot to be desired. While the Vadodara-Halol toll road has made commutes out of the city much easier, internal roads are still a mess — once you turn off the toll road, there are more pothole and less road. Solid waste management is also becoming a problem. There are 250 packaging units and 125 engineering SMEs in Halol GIDC. The solid waste they generate is currently dumped at Nandesari, 50 km away. “Nandesari is now almost full and we want to create a solid waste dumping ground in Halol itself,” says Thakkar. “The industry body’s requests are still pending with the government.”

Meanwhile, labour issues are also building up — although labour costs in this region have largely remained stable. “As the industrial base has expanded, it is sometimes a struggle to get quality human resources,” says Deshpande. There’s a high level of automation at most plants — just 30 people man the huge shopfloor at HNG — so the demand for skilled manpower isn’t in large numbers, but attrition levels are climbing. There’s also a dearth of quality educational institutions in Halol, so industries are dependent on Vadodara and other areas for their people needs. “We largely recruit diploma holders from Industrial Training Institutes (ITIs) and they have high expectations,” says Goenka. “With so many opportunities in Halol itself and the rest of Gujarat, attrition is 20%.”

Biren Parikh moved to Halol from Porbandar in 2010 and has already changed two jobs. Currently working as a shift supervisor in an engineering SME, he’s planning to move to an MNC that’s expanding capacity. “Each job improves my salary and with MNCs, I stand a chance of working at their other plants in future,” he says. 

Now, corporates are joining hands with the state government to train workforce. Over 220 ITIs across Gujarat offer courses backed by corporates — GM India has developed technical courses on automotive technology through an ITI in Vadodara, which has been training people for the car company since 2008. Thermax, Tata AutoComp and Orbis Elevator, too, have tied up with ITIs. They surely help in plugging the demand-supply gap for technical workers.

But is that enough? Ajay Desai has been witness to the gradual influx of people into Halol. In 1993, he set up the ₹60-crore Axtel Industries — which makes equipment for the food processing industry — and employs people not only from neighbouring villages but also Vadodara. Now, he notes, “As connectivity with Vadodara has improved, people are coming to work here from not only other parts of Gujarat, but also Rajasthan, UP and Bihar.” Still, it will take some time for the labour shortage to fully get addressed given Gujarat’s brisk pace of growth. Aslam Sheikh offers his take on solving Halol’s labour issue. “Movie theatres must show Hindi and Bhojpuri films as well — then people will stay on.” 

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