How Gujarat Model scored over Maharashtra and got the Vedanta Foxconn Project

| Updated: September 15, 2022 8:09 pm

A major political slugfest is on in Maharashtra as the Opposition continues to corner the Eknath Shinde led government for letting the Rs 1.54 crore plus Vedanta Foxconn deal slip from Maharashtra to Gujarat.

It must be noted that Maharashtra had primarily offered a subsidy of Rs 40,000 crores to Vedanta-Foxconn project. Compared to this, the subsidy offered by Gujarat was Rs 28,000 crores. While Maharashtra was offering 1100 acres of land in Talegaon in Pune district, Gujarat offered about 200 acres of land in Dholera SIR(Special Investment Region) in Ahmedabad at 75 per cent of the going rate. Maharashtra offered 1,100 acres of land at Talegaon Phase IV in Pune district. Out of this, 400 acres were offered free of cost while the remaining 700 acres were offered at 75 per cent of the current rate. 

Still, why did the project land up in Gujarat’s lap?

There are two real reasons for Vedanta coming to Gujarat. One is that Gujarat is the home state of Prime Minister Narendra Modi. Compared to other States where BJP is in power, it is much more consolidated and unrivalled in Gujarat which makes it safe and hassle free for any industrial house to set up a plant. Labour unrest in Gujarat is particularly low and this even after most of the labour is taken up on a contractual basis with no permanent employment clause or service benefits.

Secondly, while Vedanta was assessing both Maharashtra and Gujarat for the setting up of the semiconductor project; Maharashtra was engulfed in a major political crisis. Gujarat scored a brownie point because as Maharashtra continued to be engaged in a messy political crisis, the BJP government in Gujarat went ahead and chalked out an incentive policy specially for industries interested in setting up semiconductor projects.

The policy was formally announced by Gujarat Chief Minister Bhupendra Patel on July 27. Insiders involved in framing the policy claim that Gujarat got an idea to chalk out this sector specific policy only after Vedanta formally began assessing Gujarat for setting up the Project. Gujarat, needless to say, is the only State in India to have a specific incentive and subsidy policy exclusively dedicated for the semiconductor sector. Much of this credit also goes to IAS officer in charge of science and technology, Vijay Nehra.

It must be noted that Dholera is a dream project of PM Narendra Modi. In his words, “ Dholera will be developed better than delhi and four times bigger than delhi and six times bigger than China’s Financial Capital Shanghai.”Dholera Special Investment Region (DSIR) is among the first and the largest of the eight production cities to be developed under Phase-I of the Delhi Mumbai Industrial Corridor and is intended to be the earliest and biggest smart, sustainable ”greenfield industrial town” located approximately 100 kms south of Ahmedabad to appeal to a population of 2 million, employing over 8,00,000 by 2042. Dholera also would have its own international airport according to the Gujarat government.

Vedanta was assessing both Maharashtra and Gujarat for this ambitious project. However, Maharashtra was embroiled in a major political crisis a few months ago that also led to a change in government. Meanwhile, the Bhupendra Patel led BJP government chalked out an attractive policy to lure the semiconductor segment. As per the new policy, besides the assistance provided by the Government of India, additional assistance at the rate of 40 percent of the capital assistance (provided by the Government of India) will be provided by the State Government. Under this policy, Dholera Semicon City will be set up at Dholera Special Investment Region (Dholera SIR) and eligible projects will get 75 percent subsidy on first 200 acres land purchase and 50 percent on additional land required for other projects approved under ISM.

As per the policy, all  eligible projects will be provided with water at the rate of Rs.12 per cubic meter for the first five years and for the subsequent five years it shall be increased at the rate of 10 percent on a year-on-year basis. A power tariff subsidy of Rs. 2 per unit has been provided and all eligible projects get exemption from paying electricity duty as per the provisions laid down under the Gujarat Electricity Duty Act, 1958.

Further, provisions have been made for one-time refund of 100 percent stamp duty and registration fee paid to the Government by eligible projects for lease/sale/transfer of land for the purpose of the project. A single window mechanism will be set to obtain various approvals in a hassle free manner.

Semiconductors are essential pieces of many electronic products – from cars to mobile phones, ATM cards, and kitchen appliances. The semiconductor supply chain was affected due to the outbreak of the coronavirus pandemic and hence the shortage of the semiconductor further affected many industries, including electronics and automotive sectors.

The Indian semiconductor market was valued at $27.2 billion in 2021 and is expected to grow at a healthy CAGR of nearly 19 percent to reach $64 billion in 2026. However, none of these chips are manufactured in India so far. The Indian government brought a fiscal incentive scheme for manufacturing semiconductors in the country mainly to cut dependence on imports from nations like Taiwan and China. This Vedanta Foxconn project is the first of its’ kind in India.

Vedanta chairman Anil Aggarwal has said, “this is the largest ever investment in Gujarat… ours will be the first semiconductor plant in the country,” adding local manufacturing of chips will make laptops and tablets affordable. He further informed that Gujarat unit will manufacture 40,000 wafers and 60,000 panels per month to begin with.

There would be a political impact of this project coming to Gujarat. Maharashtra Chief MInister Eknath Shinde is not wrong when he expresses concern about the project coming to Gujarat. This is mainly because this slip of project has unified the Opposition in Maharashtra. From Supriya Sule of NCP to Uddhav and Aaditya Thackeray of Shiv Sena and Raj Thackeray of Maharashtra Navnirman Sena(MNS) and the Congress has blamed the Eknath Shinde government for not doing enough to get such an employment oriented massive project for the State.The all-important election for Mumbai’s municipal election, the BMC, is to be held soon. Also, though Maharashtra is the investment hub after Tamilnadu, of late several projects have been slipping to Gujarat. A cursory glance reveals that this includes shifting of the diamond Bourse from Mumbai to Surat in Gujarat and moving of the International Financial Centre to Gujarat’s GIFT City from Mumbai’s Bandra Kurla Complex. Ajit Pawar, Leader of the Opposition, in Maharashtra has written to Chief Minister Eknath Shinde pointing out that the project was needed for the growth of Maharashtra and jobs.  

Also Read: Mining Conglomerate Vedanta Picks Gujarat For USD 20 Bn Semiconductor Foray

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  1. ashok

    What is most heartening is that a world class manufacturing facility for semiconductors is coming up in India. Which state, that is secondary.

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