India's Detroits: Pune, Gurgaon, Chennai...and now Gujarat?
Back in early 2008, in a discreet corner of his office in Gandhinagar, Gujarat chief minister Narendra Modi and four of his top bureaucrats were huddled giving shape and form to an ambituous plan - to make the state a hub for car manufacturing in the country. Sumant Banerji & Manu P Toms report. Plants in Indiaautos Updated: Sep 10, 2011 00:16 IST
Back in early 2008, in a discreet corner of his office in Gandhinagar, Gujarat chief minister Narendra Modi and four of his top bureaucrats were huddled giving shape and form to an ambituous plan - to make the state a hub for car manufacturing in the country.
What followed was a typical brownian activity that has become synonimous with the state's development over years. Phone calls were made, meetings set, faxes and emails sent: Gujarat was busy trying to figure out what it takes for a car company to set up a factory.
"The approach was much different from the other states who were trying to lure investments only on the back of incentives," says a senior official with Gujarat Industrial Development Corporation. "We knew a car company is not looking for a 5 or even 10-year timeframe, hence tax breaks do not matter much. It was infrastructure and speed that they wanted and that is what Gujarat provides."
The litmus test of how well the state had understood the sector came barely eight months later when Tata's Nano project fell through in West Bengal. A number of states rushed in to fill the vacuum. The three states that were finally shortlisted were Andhra Pradesh, Gujarat and Maharshtra; experts gave Gujarat only an outside chance of winning the race. In a fortnight in September 2008 though, Gujarat displayed to Tata its speed of execution, infrastructure and strong governance so well that it over-rode the state's relative lack of a automotive supplier base to grab the Nano plant.
"I would like to thank the chief minister and his colleagues for making this our home so fast, so quickly because urgency was the need of the day," said Ratan Tata, chairman, Tata Motors as the Nano moved from the east to the west. "We lost a lot of time unfortunately."
With the Nano, Gujarat's ambition found the launchpad it was looking for. Within a mere three years, it has attracted two more companies - Ford and Peugeot - to invest in the state. The biggest player, Maruti Suzuki India Ltd (MSIL), is also close to finalising a million-unit car plant in the state.
If that deal goes through, cumulatively, the state would have received an investment of at least R16,000 crore by 2017 from Tata, Ford, Peugeot and Maruti, and the total vehicle production in the state would have shot from just 85,000 units in 2008 to 7,65,000 units by 2014.
"Gujarat made perfect strategic sense for us as we already had a plant in Chennai which can service the southern markets while Gujarat would cater to the northern market," said Joseph Hinrichs, president, Ford Asia Pacific. "Land was also a big criteria as we cannot afford delays at that end. And of course Nano's presence in the state meant the suppliers are already here."
There is however, one factor that may upset the applecart for Gujarat - labour unrest. The sector has seen a spate of labour troubles. Though Modi's governance is some cushion, it is not foolproof. Gujarat still tops the list of states with labour strikes, as exemplified earlier this year at General Motor's Halol factory, Gujarat's oldest car plant.
"Labour is not an over-arching issue while selecting a location," said RC Bhargava, chairman, MSIL. "No state is insulated."