Search - Investment Destination - Tamilnadu - August 2012 by Infomedia18

SEARCH - Supplement August 2012

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conomic integration and the growing movement of capital across international borders have dramatically altered the scope of local industrial growth, worldwide. As multinational firms look towards different regions across the world for relocation opportunities to lower costs and enter new markets, policy makers are vying for these investments as tools to generate jobs, boost exports and upgrade local skills & technical capabilities. The outcome: states within countries not only compete with each other to attract investments, but also with other global competitors to become a magnet for monies. Survival of the fittest is the age-old reality. In manufacturing parlance, the ‘fittest’ translates into creating the most cost-effective, quality-conscious, efficient and sustainable business environment that every global and local company is looking for to establish its manufacturing base. With this as a canvas, companies looking to invest and set up base in Tamil Nadu need not search for ‘compelling’ business reasons to justify their business ventures. For starters, the state is has three major ports, which are well connected to regions in Asia, Africa and Europe. Its strategic location is especially advantageous for South-East Asia, thereby making it a gateway to the South-East Asian markets. Add to it good governance, a planned growth trajectory, well laid-out infrastructure, easy access to financial services and a steady inflow of skilled workforce that have made the state a magnet for investments. And the impact of such positives is the fact that the state is attracting a huge amount of investments. Between May 2011 and January 2012, the state received investment proposals totalling `59,907 crore. As Hiroyuki Suzuki, CEO and MD, India Yamaha Motor, reflected aptly that supplier base and the ease of catering to export markets were the two major reasons why his company chose Tamil Nadu over other states. Yamaha, incidentally, plans to set up its biggest plant in India with an investment of about `1,500 crore. Yamaha is just one of the many examples of MNCs queuing up to be the part of Tamil Nadu growth story. And why not? After all, Tamil Nadu has successfully established a positive business environment with investorfriendly policies, transparent regulations and incentives. SEZs, subsidies and tax exemptions are some of the incentives offered to lure investors into the state. Tamil Nadu has invested in mega initiatives, such as industrial corridors, which are expected to be the growth drivers in the future. With Tamil Nadu’s ‘Vision 2023’ in full swing, the state’s key investment opportunities have been identified and are being explored. Having established its prowess as one of the best performing states in India, Tamil Nadu has become the numero uno hub for the IT & ITeS, automobile and textile industries. Its value of economic activity, the GSDP, stands at `4.28 lakh crore, making it the secondlargest state economy after Maharashtra. Tamil Nadu is characterised as a state with a high per capita income and a rising standard of living. Besides, Tamil Nadu, at 15.1%, accounts for the largest number of Micro, Small and Medium Enterprises (MSMEs). Tamil Nadu is a progressive state that has put a premium on developing high-tech, knowledge-based industries. The newer industries have the potential to radically change the socio-economic structures of the region. With this potential in mind, it is important for Tamil Nadu to think strategically about improving cluster organisations and attracting high-end companies. There is no stopping this Southern Express!!

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CONTENTS 3

EDITORIAL

ELEMENTS OF GROWTH A Slice From Tamil Nadu’s Surging Industrial Growth

FIRSTS IN TAMIL NADU On The Path To Bag The Numero Uno Spot

18 20

PROJECTS & PROSPECTS It’s Raining Investments In Tamil Nadu

ROLE OF SMEs Lighting The Way To Development

BUSINESS DYNAMICS Where Is The ‘Detroit Of Asia’ Headed?

LOCATION ADVANTAGE Gateway To The South-East Asian Markets

VISION 2023 Catapulting Tamil Nadu To Greater Heights

ONE ‘Q’ MANY VIEWS Charting Growth Graphs For Tamil Nadu

INVESTMENTS Stirring Up An Industrial Revolution

AUTO COMPONENTS’ HUB Aiding The Auto Industry To Roll

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ADVERTISERS’ & PRODUCT INDEX Alphabetical Listing Of Products Presented In The Issue

SEARCH - Supplement August 2012

ELEMENTS OF GROWTH

A Slice from

Tamil Nadu’s Surging Industrial

Growth Tamil Nadu is one of the well-developed states in terms of industrial development. The State Government is focussed on stimulating further industrial development, attracting investment, facilitating new manufacturing capacity and enabling global manufacturing competence & competitiveness of local industry. With one of India’s highest per capita incomes, the economy of Tamil Nadu is one of the most dependable, consistent and urbanised in the country. What makes the state a preferred destination? Which are the sectors contributing to the growth? A peep into the world of opportunities… GROWTH PROSPECTS

NISHI RATH

amil Nadu has carved a niche for itself among the industry leaders in the country. In the present era of globalisation, liberalisation and intense competition, Tamil Nadu is resolutely addressing the challenge of moving to a higher growth trajectory. Over the years, the state has positioned itself as the most preferred destination for new investments. And now, Tamil Nadu is home to industry giants like BMW, Nissan, TVS, Ford, IBM and Polaris, to name a few. According to V Raju, MD, Shrivik Auto Ancillary Unit, “Tamil Nadu is an ideal destination for setting up industries. Factors such as availability of natural resources, skilled manpower, technology advancements and the presence of big industrial players will attract many more companies to the state in time to come.”

Tamil Nadu is the second-largest software exporter in the country in terms of value. And with the combination of talent, technology & incentivised policies, the state has all the ingredients to take the next leap in order to become a global destination for products and services. Tamil Nadu’s growth can be powered by sectors such as automotives, textiles, manufacturing, biotechnology, health, energy, pharma, animation, visual effects, and, of course, IT, where it is already establishing leadership position in India. But this is not all! Tamil Nadu must strive to become a global hub for all these sectors. It must attract investments to drive growth and revenues multi-fold, which, in turn, will help plough investment into the state for development. However, the investment scenario in Tamil Nadu is not that grim. Here’s profiling some sectors where the state is ahead of other states in the country… • Auto Hub: Chennai and the area within the radius of 50–60 km around the city have developed a strong engineering and auto parts industry,

earning the city the sobriquet of ‘Detroit of Asia’. More than 40% of India’s car production, 35% of India’s auto components production and a sizeable part of exports come from this region. Today, seven of the 20 top global automakers have moved into Chennai’s vicinity and the state is all set to welcome many

ADVANTAGE OF TAMIL NADU Fastest growing state economy in India Matured manufacturing sector Fast emerging as the IT destination Stable political climate Proactive and investor-friendly government with transparent decision-making approach Number one position in the availability of skilled manpower in India Excels in terms of human resource, infrastructure and labour relations Low cost of manpower Largest number of engineers and technicians (1,30,000 from a network of 252 engineering colleges & 210 polytechnics).

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•

more. “Chennai has a very good connectivity by road, rail and sea. The industrial belt also has the advantage of having a large pool of skilled manpower. All these factors help this region to have an edge over others,” says Mohini Kelkar, MD, Grind Master Machines Pvt Ltd. Textiles: The state contributes onethird of the total textile production in the country and is a major source of foreign exchange. Coimbatore, Tirupur and Erode have earned the nickname of the ‘Textile Valley of India’ for their textile mills. Software & Electronics: Tamil Nadu has witnessed substantial growth in IT and related sectors. The rapid rise in the number of national and international players establishing their business establishments, manufacturing facilities as well as the expansion of the activities of the established firms indicate that Tamil Nadu has emerged as a preferred destination for domestic as well as foreign companies. Leaders in the Indian IT sector, like Tata Consultancy Services (TCS), Infosys, Wipro, Satyam, HCL, as well as a galaxy of international majors, such as Accenture, Verizon, Standard Chartered Bank and ABN Amro, have established their operations in Tamil Nadu. Agro & Food Processing: Food processing and floriculture sectors have been identified as thrust sectors by the State Government for special incentives. The state’s ideal climatic conditions has fostered a strong agro-based food industry in the state. Chemicals & Petrochemicals: The state traditionally has a strong base in the chemical industry. The petrochemical industry in Tamil Nadu is on the threshold of rapid expansion. Manali, situated on the outskirts of Chennai, has emerged as a major petrochemical complex. Moreover, leading pharmaceutical companies, such as Orchid

ELEMENTS OF GROWTH

TAMIL NADU ATTRACTS `9.2 LAKH CRORE WORTH OF INVESTMENTS TILL JUNE 2012 According to the ‘Achieving Higher Growth in Tamil Nadu’ study, conducted by the Associated Chamber of Commerce and Industry of India (ASSOCHAM), by attracting about `9.1 lakh crore of the total investments worth over `139.2 lakh crore made across the country, Tamil Nadu accounted for 6.5% of the total investments made by both the government as well as private sectors in India as of June 2012. The year-on-year growth of investments is about 15%. Around `3.5 lakh crore—almost 38.5% of the total investments—was made in the power sector, while the services, manufacturing and real estate sectors had 32.3%, 17.5% and 9.6% share of the total investments proposed in the state. The study also revealed that around 48% of investment projects were under implementation, over 42% were at the MoU stage and over 9% of projects had either been stalled or did not have any updated information. The GSDP has grown from `219 lakh crore to around `428 lakh crore with a CAGR of over 10% between 2004–05 and 2011–12. The services sector contributed 65.8% with 12% CAGR to GSDP, while the industrial sector accounted for 26.5% with a 7% CAGR, and agriculture & allied activities at 7.6% with a 4% CAGR. The manufacturing output and construction activities contributed around 17% of GSDP and about 9% growth rate between 2004–05 and 2011–12. The state also has the highest share of the services sector to GSDP, at 64.7% followed by Maharashtra at 61.9%. Chemicals & Pharmaceuticals Ltd (the third largest manufacturer of sterile cephlosporin), Dadha Pharma, Malladi and Citadel, have set up their units in Tamil Nadu. The state is also an ideal location for: - Contract manufacturing - Global sourcing base - Process engineering for products going off patents - Manufacture of generic and other bulk drugs & formulations. • Biotechnology: The forest, agricultural and plant resource base of the state are both large & diverse, and represent a great opportunity for biotechnology products. The state has the second-longest coastline in the country, which presents enormous opportunities for developing marine biotechnology. • MSMEs: Tamil Nadu has the highest number of micro, small and medium enterprises (MSMEs) in India—nearly seven lakh registered units. The state has also invested approximately `32,000 crore in SMEs, providing employment to more than 50 lakh people—

the highest for any state in India. However, with the world increasingly becoming integrated & production becoming faster with the help of new technologies, it becomes imperative for SMEs to adapt themselves to the changing conditions to provide the necessary products & services.

THE MARCH AHEAD The industry in Tamil Nadu has geared up to meet the future challenges. The State Government, too, is leaving no stones unturned. Its ‘Vision 2023’, the futuristic development plan that Chief Minister J Jayalalithaa unveiled, has chalked out some major plans to lead the state to a better tomorrow. Tamil Nadu stands at a critical juncture— its advantages in economic and social development indices provide the potential to sustain accelerated growth over the next decade, and create global hubs in select sectors. nisi.rath@infomedia18.in With inputs from Tamil Nadu Industrial Development Corporation Ltd (TIDCO)

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FIRSTS IN TAMIL NADU

On the path to bag the Numero Uno spot Tamil Nadu has already made some promising and bold beginnings when it comes to industrialisation. But this is not what the state is all about. Apart from attracting huge investments and major multinational players, Tamil Nadu has taken some unique initiatives towards being one of the most developed states in the country. Here’s taking a look at some of them…

World’s first biorefinery in Tamil Nadu The Central Leather Research Institute (CLRI) located at Chennai, a unit of the Council for Scientific and Industrial Research (CSIR), has successfully developed a biorefinery. The biorefinery will produce biodiesel, bioethanol, biohydrogen and biomethane. Tanneries have been a major cause of environmental pollution and groundwater contamination. Groundwater in Ranipet, Ambur and Vellore regions has been contaminated by toxic materials like chromium and cadmium in the solid waste disposed of by the tanneries. This biorefinery will help ensure that tanneries across

the country do not discharge any kind of solid waste. A tonne of solid waste from the tannery will yield 200 litre of biodiesel, 200 litre of bioethanol, 120 cubic metre of biohydrogen and 200 cubic metre biomethane. The cost of producing a litre of diesel through this process will be `20. The entire solid waste will be consumed by the refinery. The water received at the end of the process could be used for gardening. The pilot plant that consumes two tonne per day solid waste is being set up in Ranipet, 200 km away from Chennai, with financial assistance offered by the Union Government.

Wärtsilä’s first in India ‘Remote Monitoring Station’ Wärtsilä, a global leader in complete lifecycle power solutions for the marine and energy markets and a pioneer in introducing new technology, recently launched its ‘Remote Monitoring Station’ (RMS) in Chennai, its first in India. RMS ensures real-time monitoring by Wärtsilä experts to enable real-time advice/suggestions to help maintain continuous optimum and efficient performance of the plant. It will ensure remote online monitoring of selected parameters and sign posting of deviations detected to ensure highest possible reliability. The RMS was inaugurated by Pierpalo Barbone, VP – Services, Middle

East and Asia, Wärtsilä Corporation and Rakesh Sarin, MD, Wärtsilä India. “Wärtsilä has been at the forefront in the development of highly efficient technology. The ‘Remote Monitoring Station’ at Chennai is a fine example of this. The remote station will reduce the number of unplanned stoppages and increase plant productivity,” said Barbone. “By setting up the Remote Monitoring Station in Chennai, Wärtsilä has maintained its legacy of introducing new technology. This monitoring station enables remote monitoring of land-based power plants in an economical way,” said Sarin.

Tamil Nadu first to announce Average Power Purchase Cost Tamil Nadu Electricity Regulatory Commission (TNERC) has announced Average Power Purchase Cost (APPC) for the state, thereby becoming the first state to do so. The Renewable Energy Certificate (REC) Mechanism allowes RE Generator to sell power at

APPC to the Distribution Licencee and still participate in the REC mechanism. This development willl help RE generators to evaluate and structure their electricity sale to maximise their revenue through the new option created. Compiled by Nishi Rath

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PROJECTS & PROSPECTS

NISHI RATH

amil Nadu is attracting a huge amount of investments. Between May 2011 and January 2012, the state received investment proposals totalling `59,907 crore. In fact, just on a single day—May 14, 2012—the Tamil Nadu Government signed MoUs for investments worth `7,850 crore. (A major chunk of these investments will come from the automobile industry.) Some major

It’s

Indian Oil Corporation to set up a `4,500 crore LNG terminal. Moreover, the State Government will also set up a Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) in Cuddalore and Nagapattinam districts. The Cabinet Committee on Economic Affairs has also approved this project. Nagarjuna Oil Corporation Ltd (NOCL) and state-owned Chennai Petroleum Corporation Ltd (CPCL)

would be the lead tenants in the proposed PCPIR. Tamil Nadu is also turning out to be an attractive destination for FDI. According to a recent study by Frost & Sullivan and the Associated Chambers of Commerce and Industry of India (ASSOCHAM), the FDI equity inflows in the state has increased from `3,653 crore in 2009–10 to `6,711 crore in 2011–12. The FDI inflow into the state increased by around 10%

Raining Investments in Tamil

Nadu

Tamil Nadu has been witnessing a steady ﬂow of investments since the past few years, which has now changed into a torrent with a large number of companies ﬂocking to the state. Recently, 28 leading industrial institutions have zeroed in on Tamil Nadu and plan to invest around `36,000 crore, according to the state industries department. This is not where the list ends; there are projects that are at a nascent stage, while some are still in the pipeline. Here’s taking a look at some of the major investments and projects that will take forward the growth momentum...

companies that have signed MoUs with the State Government include Ashok Leyland–Nissan, Yamaha, Daimler and Eicher Motors. Commenting on why Tamil Nadu is a favourable investment destination, Hiroyuki Suzuki, CEO and MD, India Yamaha Motor Pvt Ltd, says, “The two main reasons why we chose Tamil Nadu over other states in the south are the supplier base and the ease of catering to export markets from here.” State-owned industry leaders are also keen on investing in Tamil Nadu. For instance, Tamil Nadu Industrial Development Corporation (TIDCO) has signed an MoU with the Gas Authority of India Ltd (GAIL) to float a new company. The company has plans to invest around `10,000 crore to set up pipeline infrastructure and power projects based on LNG. TIDCO has also inked an MoU with

during the fiscal, compared to `6,115 crore during 2010–11. ASSOCHAM in its report, ‘Vision Tamil Nadu: Building Sustainable Tomorrow’, has explained why the state has been attracting such huge investments. According to the report, “Tamil Nadu has set up industrial parks and special economic zones (SEZs) and offers tax incentives. Besides, FDI is allowed in the manufacturing industries based in the SEZs. With a good influx of talented human resources, Tamil Nadu has been able to attract incentives.” The state has ranked first in the number of factories, first in the number of workers employed in factories, third in the gross industrial output and third in net value addition. Tamil Nadu has indeed set the pace for the rest of the states to follow. nisi.rath@infomedia18.in

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PROJECTS & PROSPECTS

Yamaha to invest `1,500 in its largest plant in the country TheTheInvestment Investment India Yamaha Motor Pvt Ltd recently signed a memorandum of understanding with the Tamil Nadu Government to set up its largest plant at Vallam Vadagal on the outskirts of Chennai with an investment of `1,500 crore.

The TheProject Project At present, the company has two plants—one at Surajpur in Uttar Pradesh, and the other at Faridabad in Haryana. However, owing to the growing demand for two wheelers in the Indian market, the company plans to set up a third plant in the industrial park in Vallam Vadagal. The new plant will occupy an area of 4,40,000 sqm. Of the total 4,40,000 sqm area, the construction on 1,14,000 sqm, which is reserved for the factory facility, is scheduled to commence in September this year. The plant is likely to start operations in early 2014. With this third plant, the production capacity of India Yamaha Motor Ltd will be increased, in stages, to a level of 18 lakh units annually by 2018, with an initial annual capacity of 4 lakh units achieved in 2014. Yamaha indicated that the Chennai project would be a super mega plant and would receive the standard incentives, including uninterrupted power supply among other benefits. By 2018, the Chennai plant will roll out 65% of Yamaha’s vehicle output, making it the biggest among its three factories. The company said that it will build a proper ecosystem near the plant by inviting Japanese and local vendors, whose investments could be as much as `500 crore (around 30% of Yamaha’s investment). As Hiroyuki Suzuki, CEO and MD, India Yamaha, affirmed, “We expect at least six Japanese auto part vendors to set up plants here. A similar number of domestic suppliers are also expected to invest. We expect at least `500 crore worth of investments from these vendors/suppliers on their new projects initially.”

WhyWhyTamil Nadu? Tamil Nadu? The company had earlier stated that it was scouting

• The new facility will join the currently operating factories of India Yamaha Motor Pvt Ltd at Surajpur, Uttar Pradesh and Faridabad, Haryana, to meet the increasing demand for two wheelers in India. • Plans call for the construction of a factory facility with a total floor space of approximately 1,14,000 sqm and is scheduled to begin in September 2012, with the completion and start of operations 2012 2014 scheduled for January 2014. • The new factory will employ 1,800 people and have an annual two wheeler production rate of 4,00,000 units at the start of operations. The production capacity will be increased in stages to a level of 1.8 million units annually by 2018 2018. By then, the employment people. figure is expected to reach 6,500 people • The new factory will employ a ‘theoretical value-based production’ concept that operates on a system of completely synchronised manufacturing of parts and complete assembly of two wheelers. • The new Chennai factory will be the first in the Yamaha Motor Group to have a ‘vendor park’ in its vicinity that will bring together the production operations of main external parts suppliers, thereby enabling complete synchronisation of external part suppliers and production. • This system will reduce losses in the areas of production management and distribution to extremely low levels in the overall engineering, manufacturing and marketing process, thus making the new production base highly efficient and profitable.

for land in South India, preferably with port facility, to make India an independent export unit for selling its two wheelers in the overseas markets, including Latin America and Africa. This explains its choice of location.

The Positive Aftereffects The Positive Aftereffects The new plant will initially employ 1,800 people. When the production capacity reaches to the level of 18 lakh units annually by 2018, the employment figure is expected to reach 6,500 people. Moreover, the Chennai plant will be the first of its kind to have a vendor park in its vicinity, which will help spruce up production operations.

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PROJECTS & PROSPECTS

Videocon’s `1,500 crore manufacturing plant to commence production soon TheTheInvestment Investment Homegrown consumer durable giant, Videocon Group, would soon begin production in its `1,500 crore manufacturing plant in Tamil Nadu.

The TheProject Project In 2009, the State Industries Promotion Corporation of Tamil Nadu—the government agency that allots land for industrial projects—allotted around 70 acre to the Videocon Group to set up a plant at Manamadurai, near Madurai. The plant will manufacture LCD Plasma TV sets and other electronic goods & spares. The company has invested around `800 crore in the plant, so far. Though there was some delays in the completion of the project due to the economic slowdown and other related issues, the company officials claim that work is on in full swing now and the production might start in the next four months. Confirming the same, Rajkumar Dhoot, MD, Videocon Group, recently said, “The Tamil Nadu project has been delayed. However, work on the project is on. We have already invested a huge amount in the plant

and will be manufacturing TV sets to begin with. The plant will start production in 3–4 months’ time.”

WhyWhyTamil Nadu? Tamil Nadu? Dhoot said that although they had a plant at Hosur in Tamil Nadu, they wanted to set up a new unit to stay upgraded to the change in technology and new trends in the industry. The company is also planning to develop the facility as an export hub to serve the neighbouring markets. “The plant will be used to export electronic goods to countries like Indonesia and Malaysia, where there is demand,” added Dhoot. Of course, proximity to the ports will be an added bonus!

The Positive Aftereffects The Positive Aftereffects Industry experts are of the opinion that with an industry leader starting manufacturing in Tamil Nadu, SMEs located nearby will also get an opportunity to flourish. Moreover, the new plant, once operational, is expected to provide employment to around 700 people.

Tamil Nadu may house Amway’s first facility in India TheTheInvestment Investment Direct-selling FMCG company, Amway India, is looking to set up its own manufacturing facility in Tamil Nadu. The estimated outlay is `400 crore.

The TheProject Project The proposed project would be the company’s first production facility in the country. The company has been mulling over establishing a facility in either Gujarat

or Tamil Nadu. However, the likelihood of the facility coming up in Tamil Nadu seems greater, according to sources. With this facility coming up, Tamil Nadu may become a hub for the company in future. Meanwhile, the company has recently opened its second office at Coimbatore, taking its total office network in the state to 22. Coimbatore has been among the Top 3 markets for the company in Tamil Nadu. In addition, the company recently tripled the production capacities at its vendor facility at Baddi, Himachal Pradesh, by commissioning four new production lines, taking the total investment in Baddi to `105 crore.

PROJECTS & PROSPECTS

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Mahindra mulls `4,000 crore investment in Tamil Nadu TheTheInvestment Investment Mahindra plans to invest around `4,000 crore to set up a four-wheeler unit, which will be the largest single investment in automotives. The investment would be over and above the investment committed for its proposed manufacturing and testing facility at Cheyyar, Tamil Nadu.

The TheProject Project The company sees Tamil Nadu as one of the potential

states in the country for its proposed four wheeler plant. Anand Mahindra, VC and MD, Mahindra & Mahindra, recently met Tamil Nadu Chief Minister J Jayalalithaa to explore opportunities for setting up a manufacturing plant in the state. Pawan Goenka, President, Mahindra & Mahindra, who accompanied Mahindra, recently said, “This is the first meeting pertaining to the same. It is a very early evaluation of the possibilities in Chennai.” According to initial information, the company has plans to set up a facility in a 400-acre area in Cheyyar with an investment of around `1,800 crore. The investment would be over and above the investment committed for its proposed manufacturing and testing facility in Cheyyar.

Chennai Port to increase its car-handling capacity TheTheInvestment Investment Chennai Port is expected to see an investment of `126 crore in the current fiscal year, with a major part of it going to increase its car-handling capacity.

The TheProject Project The port will invest around `100 crore on expanding the development of a Ro-Ro-cum-multi-purpose berth and multi-level car parking facility. At the southern end of the Container Terminal at Bharathi Dock of the Port, a

300-m long berth is proposed to be developed along with the multi-level car parking facility to handle automobile cargo. The facility will be offered for development through public private partnership mode and is likely to be completed by October 2014. Almost 16 firms have responded to the Request For Quotation (RFQ), as per the latest announcement by Chennai Port authorities. Apart from this, they will also invest `25 crore for setting up a barge jetty to cater for bunkers and edible oil using the shallow waterfront. This barge jetty is planned at the Port’s Bharathi Dock. Around seven firms have already submitted RFQs and their applications are under scrutiny. The project is likely to start operations by September 2013.

JICA to invest `1,000 crore for various infrastructure projects TheTheInvestment Investment Japan International Cooperation Agency (JICA) plans to invest `1,000 crore in various infrastructure projects in Tamil Nadu and is awaiting the Central Government’s approval. According to government sources, JICA will invest `500 crore as policy loan and another `500 crore as project loan in the state.

The TheProject Project The funds will be used for various infrastructure projects, such as building roads and setting up power transmission lines. JICA expressed willingness to support the Tamil Nadu Transmission Corporation’s plan to expand its operations. Moreover, a team of experts from the agency will offer technical guidance to the Corporation.

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INVESTMENTS

Stirring Up An Industrial Revolution Tamil Nadu’s reputation for efﬁciency and competitiveness will make the state one of the top three preferred investment destinations in Asia and the most preferred investment hub in India in time to come, believe industry experts. From new manufacturing units to major expansions, Tamil Nadu is all set to witness some major investments. Here’s proﬁling some of the major investments that are set to take the state’s development to a whole new level… NISHI RATH

PETROLEUM, CHEMICALS AND PETROCHEMICALS INVESTMENT REGION (PCPIR)

92,160 crore

Investment: `

Project: Investment region Location: Cuddalore and Nagapattinam districts Description: The Cabinet approved the proposal of the Tamil Nadu Government to set up a Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR). A total investment of about `92,160 crore is expected in the Tamil Nadu PCPIR, which includes committed investment of `22,160 crore. It envisages the development of physical infrastructure such as roads, rail, air links, ports, water supply, power, desalination plant and Common Effluent Treatment Plant (CETP) at a total cost of `13,354 crore. The project will be in Cuddalore and Nagapattinam districts in the coastal belt of Cuddalore, Chidambaram, Shirali and Tarangambadi talukas. It will cover an area of 256.83 sqkm with a processing area of 104 sqkm. The remaining area will be used for non-processing activities.

ASHOK LEYLAND

4,150 crore

Investment: `

Project: Greenfield facility for Light Commercial Vehicle (LCV) Location: Pillaipakkam, near Chennai Description: Hinduja’s flagship company, Ashok Leyland, made an investment of approximately `4,150 crore. The proposed investment includes an LCV project in association with its Japanese partner, Nissan. The company is expected to launch two more products by the end of this year. The facility will be set up by Ashok Leyland-Nissan Motor Company. Meanwhile, the company will also invest in Hosur, Ennore, and at Velli Vaayalsavadi and Orgadam. This would include expanding the capacity for medium and heavy commercial vehicles.

DAIMLER INDIA

44 billion (over €700 million)

Investment: `

Project: Capacity expansion Location: Oragadam, Chennai Description: Ford Daimler AG’s Indian subsidiary, Daimler India Commercial Vehicles (DICV), opened its state-ofthe-art production plant for BharatBenz trucks, encompassing about 160 hectare in Chennai. The total investment from DICV is over €700 million, including a manufacturing plant as well as an R&D centre. While the initial production capacity planned is 36,000 units per year, the company aims to ramp up production to 70,000 units per year. The production of BharatBenz heavy-duty trucks will start by the third quarter of 2012.

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INVESTMENTS

TVS GROUP

770 crore

Investment: `

Project: Brownfield expansion Location: Hosur Description: TVS Motor and Sundaram Clayton Ltd (SCL), part of the $5-billion TVS Group, will invest in a brownfield expansion at Hosur that will support TVS Motor’s growth target of 8–10% for the whole year. The investment comes at a time when the company has lined up some new launches, including a 125-cc motorcycle during the JulyAugust time frame.

INDIA CEMENTS LTD

750 crore

Investment: `

Project: Unit expansion Location: Thalavai in Ariyalur district Description: Chennai-based India Cements Ltd is planning to invest around `750 crore in one of its plants located at Thalavai in Ariyalur district of Tamil Nadu. The proposed investment is aimed at expanding the existing capacity of the plant to two million tonne, from the present 1.8 million tonne a year.

FORD INDIA

750 crore

Investment: `

Project: Capacity expansion Location: Chennai Description: Ford India will invest `750 crore to manufacture a new compact sports utility vehicle named ‘EcoSport’. The investment would create 400 additional employment opportunities. The company’s wholly-owned arm, Ford India, will release the product in the market later this year. Ford India had set up its factory at Maraimalai Nagar, near Chennai, in 1995, and has invested around `4,500 crore, so far, in the assembly, engine plants and the manufacture of models like Figo, Fiesta Classic and Endeavour.

EICHER MOTORS

350 crore

Investment: `

Project: New plant for Royal Enfield Location: Oragadam, Chennai Description: Spread over 50 acre, the proposed Royal Enfield plant is slated for completion by the first quarter of 2013. Once completed, the new plant will increase Royal Enfield’s current capacity of 70,000 units per annum to 1,50,000 units per annum. Eicher Motors Ltd, the maker of Royal Enfield, has signed an MoU to invest `350 crore in the state for a period of five years. nisi.rath@infomedia18.in

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AUTO COMPONENTS’ HUB

Aiding the

auto industry to R LL Tamil Nadu is one of the largest automobile hubs in the country, with a capacity to manufacture 1.3 million cars and 3,60,000 commercial vehicles every year. This translates into three cars every minute and one commercial vehicle every 75 seconds. This positively affects the auto component sector. Taking a look at what has ticked for the sector, the edge it holds and the hurdles the region needs to go past in the future... NISHI RATH

amil Nadu contributes nearly 35% of the overall auto component industry in the country, which clocked a turnover of $40 billion in 2010–11. The state has over 107 auto part companies with holistic capabilities to produce nearly the entire range of components—from engine parts, drive and transmission parts to suspension and braking parts, electricals, body and chassis parts. Coming to the chief players,Sundaram

The rapid growth in both the auto and component sectors in Tamil Nadu, especially Chennai, which has earned for itself the title of ‘Detroit of Asia’, has been primarily due to the availability of skilled manpower and a strong engineering sector. Clayton, Wheels India (from the TVS Group), Wabco, MM Forgings, UCAL and Hinduja Foundries have helped the industry grow.

“Tamil Nadu is a good location to start your auto component business. And with major auto companies entering into the picture, the future for auto component manufacturers is bright. We established Shrivik in 1992, and entered into automotive components manufacturing field with an aim of doing things differently. Since then, we have been at the forefront of manufacturing automotive components and assemblies. Today, we are one of the leading manufacturers of automotive components for LCV and marine engines,” informs V Raju, MD, Shrivik Auto Ancillary Unit, Chennai. This rapid growth in both the auto and component sectors in Tamil Nadu, especially Chennai, has earned the state the title of ‘Detroit of Asia’. The growth in auto and auto components has been primarily due to the availability of skilled manpower and a strong engineering sector.

AUTO COMPONENTS AND TYRE MARKET Chennai and the nearby regions is slated to have a production capacity of nearly 2.2 million vehicles a year,

WORLD-CLASS TESTING FACILITY With investment from the Central Government, a state-of-the-art, `5,000 million automobile testing facility will be coming up in Chennai. The facility will occupy an area of 304 acre. After completion, this facility will be the most advanced vehicle testing and R&D centre in India, which will be capable of meeting the global standards. The facility is likely to become operational by September this year. The government has introduced an ‘Ultra Mega Policy for Integrated Automobile Projects’, offering a very attractive support package for projects investing not less than `4,000 crore. The government is also in the process of drafting a sector-speciﬁc policy for automobiles with many new initiatives from the government not only to attract new investments, but also to improve the competitiveness of the existing units. making the city one of the top automotive manufacturing centres in

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the world. In tyre manufacturing, too, the state has succeeded in attracting major investments from firms like Michelin, JK Tyre, MRF and Apollo Tyres. The total installed tyre manufacturing capacity of Chennai is set to exceed 1,600 metric tonne a day. “The presence of auto giants is a major reason for auto component manufacturers being able to thrive in Tamil Nadu. But apart from that, the availability of skilled manpower and other natural resources and proximity to the port and availability of other modes of transport gives Tamil Nadu an edge over other states. Recently, some majors auto players have expressed interest in having their manufacturing facilities in Tamil Nadu. This will open up more opportunities for auto component makers,” says an official from a leading auto company on condition of anonymity. This also means that Chennai will soon come up not only as the automobile capital, but also as the tyre capital of India. The growth of the automobile industry has not only led to the development of auto component manufacturing, but has also laid the foundation for vehicle

Chennai is also emerging as a leader in auto component manufacturing besides vehicle design and related R&D. At present, Chennai has ﬁve major R&D and vehicle development centres. design and related R&D. At present, Chennai has five major R&D and vehicle development centres promoted by renowned auto majors including Daimler, Renault-Nissan, Visteon, Mahindra and Ashok Leyland.

GROWTH OF THE CHENNAI CLUSTER In the recent past, the component industry in Chennai (including Sriperumbudur, Maraimalainagar, Kancheepuram and Oragadam) has got further impetus with several global auto giants setting up their plants here.

AUTO COMPONENTS’ HUB

AUTO COMPONENTS AND AUTOMOBILE INDUSTRY AT A GLANCE Auto Component Manufacturers Association of India estimates the global auto component industry to be at US$1.2 trillion in value. This ﬁgure is estimated to touch US$1.7 trillion by 2015. Tamil Nadu accounts for 35% of India’s auto component production. There is abundant availability of skilled manpower in automobile engineering, which makes the state the most effective location to set up base in. Chennai is known as the ‘Detroit of Asia’ since its automobile industry produces over 40% of the country’s auto parts and vehicles. Chennai is set to become one of largest hubs for tyre manufacturing, globally. Chennai is now emerging as one of the Top 10 global automobile manufacturing centres with projects like Ford, Hyundai, BMW, Renault, Nissan and Mitsubishi HM. Chennai will have an installation capacity to produce 12,80,000 cars and about 3,50,000 commercial vehicles each year which translated to 3 cars output every minute and one commercial vehicle every 75 seconds by 2010–11. Chennai produced 5.60 lakh passenger cars accounting for 30.6% of India’s production. Chennai is now a supplier of high value and critical automobile components to global auto makers such as General Motors, Chrysler, Toyota, Ford and Volkswagen, among others. Hyundai has made Chennai the manufacturing and export hub for its small cars. The i10 and I20 are being manufactured only in Chennai and exported to the world. Chennai is Hyundai’s largest base outside Korea. Tamil Nadu has excellent port logistics at its ports in Chennai and Tuticorin, which provide a gateway for exports & imports. Chennai Port has dedicated berths for automobile exports.

The ancillary industry has literally sprung up near these plants to provide a robust capacity base. According to a recent diagnostic report by Micro, Small and Medium Enterprises (MSMEs), “Intellectual workforce and trained industrial labour, strong engineering and auto sectors” are the factors that have helped Chennai attract the auto component industry. Besides, the ports in Chennai and Tuticorin have also helped facilitate export and import of raw materials for the industry. However, apart from Chennai, other parts of Tamil Nadu are also home to component companies. Besides catering to auto majors in the country, component makers in the region also serve the export markets.

THE ROAD AHEAD Tamil Nadu’s current annual output

in the automotive sector is estimated to be $3-3.5 billion with an estimated share of 35% in the Indian automotive industry. Its contribution to the state’s GSDP is 7–8%. The state’s auto components sector constitutes 35% of India’s auto component production that is produced in units in Chennai. The Tamil Nadu Government plans to transform the state into one of the top three manufacturing hubs for automotive and auto ancillary in Asia, by 2015. But as the region braces itself for the road ahead, it needs to sort out a few worrisome aspects—availability of adequate labour and power shortage. Tamil Nadu has always been an established auto/auto component hub. While investments will continue in the region, what we can say is that it needs state support for infrastructure.

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ROLE OF SMEs

pm en t

Lighting the Way to D

o l e ev

The role of small and medium enterprises (SMEs) towards achieving holistic development, especially in a developing country like India, cannot be undermined. And the state of Tamil Nadu, which has been at the forefront of several development indices, has recognised the importance of SMEs in developing a highly successful manufacturing sector. This has helped the state in not only geographically diversifying the growth across the state, but also in generating high employment. Here’s analysing the state of the SME sector in Tamil Nadu...

DEBARATI BASU

mall and medium enterprises (SMEs) play a vital role in the growth of the Indian economy. As per a survey conducted by ASSOCHAM, SMEs’ contribution towards the GDP was 17% in 2009. This figure is likely to increase to 22% by the end of 2012. SMEs contribute over 45% of industrial output, 40% of exports— which is estimated to increase to 44% by the year end— and employ 60 million people, apart from having the potential to create nearly 1.3 million jobs every year. In fact, the SME sector is the second largest employment generator after agriculture.

TAMIL NADU: A MODEL DESTINATION FOR SMEs Tamil Nadu has nearly seven lakh registered SMEs—the highest in any state in India. The investment in SMEs in the state is estimated to be `32,000 crore providing employment

to more than 50 lakh people—again the highest for any state in India. A number of SME clusters have emerged across the state supporting the industrial and service sectors. Tamil Nadu, over the years, has formulated an ecosystem that favours the growth of SMEs. Affirming the same, Jayachandran Krishnaswamy, Senior Engineer, Kaeser Compressors

SMEs need adequate amount of training programmes that will keep their knowledge in sync with the global trends. (India) Pvt Ltd, says, “Chennai has numerous small industry hubs that have been regularly receiving various types of government benefits and facilities, like common power plants, export support, etc. Although there are issues that we are still facing, there has been a cumulative effort on solving them.” Unlike most states, the economic

resources of Tamil Nadu are not concentrated in a small industrialised area. The state has a network of about 110 industrial parks and estates offering developed plots with supporting infrastructure, which has helped immensely in the development of SME clusters across the state. They are also well connected through roads, railways and air transport. Some of the major SME clusters in Tamil Nadu, which are identified by the United Nations Industrial Development Organisation (UNIDO), are in Chennai (auto components & leather products), Coimbatore (machine tools & agricultural implements), Madurai (readymade garments and rice & pulses mills), Salem (readymade garments), Tiruchirappalli (engineering equipment) and Virudhnagar (cotton & safety matches).

CHALLENGES ENCOUNTERED There are many shortcomings that the SME sector has to overcome. Some

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of the major challenges that the sector has to surmount include: Availing easy finance The solution to all the major constraints faced by SMEs is related to finance. The non-availability of easy credit facilities and exorbitantly high interest rates are the two major issues that are faced across all levels of the industry. These two issues become serious, especially for the SME sector, because of their inability to correctly assess the financial requirements and manage its funds judiciously. It, therefore, needs a quicker and hassle-free procedure to avail finances. Government Aid Support by the government is a major requirement for developing SMEs. Along with various schemes to financially support the industry, the government needs to simplify and rationalise the procedures for SME registration. Understanding global requirements The world is changing at a very rapid pace and there is a dire need for SMEs to keep themselves abreast with the latest upgradations. They need to have a clear understanding of what the global customers need to manufacture products that match their requirements. For this, the industry needs to have a proper channel of communication between the OEMs at large and the entire gamut of SMEs. The industry associations also need to step up and take the initiative. Support for R&D SMEs could become the fountainhead of innovations as they are the closest to the ground realities of manufacturing. However, in the desperate measure to cut down cost to make marginal profits, the first thing that is usually struck off from the list of expansion plans is the investment in research and development. Elaborating further, M Balachandran, Hon’ble Secretary, AIEMA, highlights, “In many cases, the products made by SMEs are rejected by bigger companies because these products do not meet the quality

ROLE OF SMEs

standards. Usually, SMEs are not aware of the quality standards. However, if these bigger companies provide SMEs with in-depth brief about the quality of material and the products beforehand, the rate of rejection can be significantly reduced.” Although this involves making huge investments, every SME should try to design its own products and create a brand for itself in the market. Taking these actions will require additional support from the government, educational institutes and OEMs. Enhancing knowledge base Indian SMEs need to upgrade

the quality and precision demands of today. Therefore, SMEs need adequate amount of training programmes that will keep their knowledge in sync with the global trends.

MILESTONES TO ACHIEVE Owing to globalisation, the SME sector is facing stiff competition from countries such as China. Moreover, Indian SMEs need to move up the value chain. They need to be innovative and adaptive in order to tackle the rapidly changing global economy and compete with large-scale industries. Additionally, the government needs

SMEs IN NUMBERS • The SMEs in Tamil Nadu comprise of automobile ancillaries, textiles and food processing. The automobile ancillaries industry has grown due to the presence of companies like Ford and Hyundai. • During the 12th Plan Period (2012–17), Tamil Nadu will set up 100 industrial clusters with a Common Facilities Centre (CFC) to enhance productivity, competitiveness & capacity building of micro, small & medium enterprises (MSMEs), said Rural Industries Minister MC Sampath recently. • The State Government has identiﬁed and validated 18 of the 100 industrial clusters. Proposals for six mega clusters along with CFCs have been sent to the Centre for approval. It would cost roughly between `9 crore and `14 crore per cluster. It has been proposed to set up clusters for the electronic industry (Coimbatore), gold jewellery (Madurai), coir (Bhavani), gate and grill (Tirumullaivoyal), women’s readymade garment (Thalavaipuram), lorry bodybuilding (Namakkal) and sago (Salem). • During the 11th Plan Period (2007–12), 50 projects were identiﬁed by the State Government, of which seven have been completed and eight are under various stages of implementation. • For the current year, 20 clusters would be taken up for implementation costing `136.07 crore. The Centre would provide a grant of `97.30 crore and Tamil Nadu’s share would be `10.48 crore. • Last year alone, the government provided a subsidy of `66.50 crore to 3,824 MSMEs. themselves with the latest technology—both in terms of knowhow and machinery. While upgrading the shop floor would require adequate finance, a lot needs to be done to make this segment abreast with the latest manufacturing solutions. Unfortunately, a large segment of Indian SMEs is still using conventional methods, which is not only time consuming, but also compromises with

to chip in by improving the infrastructure and providing adequate financial aid to SMEs. Therefore, a combination of suitable policy measures, skill enhancement and good infrastructure facilities are the basic requirements for making the SME sector of Tamil Nadu competitive both on the national as well as international stages. debarati.basu@infomedia18.in

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BUSINESS DYNAMICS

Where is the

‘Detroit Of Asia’ headed?

Since the last decade, the Indian automotive industry has been moving ahead at breakneck-speed. As the industry moves towards its next phase of growth and expansion amid tough competition, Chennai is looking to position itself as one of the top three automobile hubs in the world. It remains to be seen whether this region is able to stay ahead of competition and maintain its status of being the ‘Detroit of Asia’. DEBARATI BASU

ndustry-friendly government policies, proximity to a large port and an emerging industrial ecosystem have led to the development of a huge conglomerate of automobile manufacturing industry based in and around Chennai. It accounts for 30% of India’s automobile industry in the four-wheeler market and 35% of India’s automobile component industry. As a result, Chennai has rightly earned the sobriquet of the ‘Detroit of Asia’.

THE HISTORICAL BASE The state of Tamil Nadu has been able to leverage the historical advantage that it had and has built a highly successful automobile hub. Manufacturing started in this region in 1840, with Simpson & Co first making rail coaches and later diesel engines. In September 1949, Ashok Leyland started indigenously assembling A40 Austin cars from Ennore, near Chennai (then Madras). It now has three plants in Tamil Nadu, making it one of the largest makers of trucks, buses and off-road vehicles in India.

The next big automaker to set up its base in Chennai was the TVS Group (in 1960), which is now headquartered here. Thus, Chennai has a healthy background in the automotive industry, which has helped it in catapulting itself to one of the top 10 automotive hubs in the world.

BUILDING BUSINESS Commenting on the conducive ecosystem that has developed in and around Chennai over the years, D Ramamoorthy, Director, Applied Engineering & Technologies Pvt Ltd, avers, “The political situation in the state has been stable. This has been fundamental in attracting foreign investors into the state. Besides,

ADVANTAGE CHENNAI Being a port city ensures better connectivity by sea A stable political set-up State government’s investmentfriendly industrial policies A large close knit cluster of auto ancillary units Adequate ﬁnancial support for SMEs’ growth Abundant availability of educated, trained & skilled manpower.

Tamil Nadu already has a very strong base in auto ancillary units—a factor which has worked as an added advantage for the state in terms of helping it cope up with situations wherein major auto companies made forays into the state.” Ford Motors ventured here in 1995; Hyundai also opened its factory here. BMW, Caparo, Daimler, Hindustan Motors, Mitsubishi, Nissan, Renault, Royal Enfield, Caterpillar and TAFE are some other major automakers that have made Chennai their home. Apart from these, some notable auto component companies that have set up their manufacturing plants in and around Chennai are Tube Products of India, Bharat Forge, India Pistons and Brakes India, among others.

PAVING THE WAY FOR FURTHER GROWTH India today has positioned itself as one of the fastest growing auto markets in the world, second only to China. A survey of auto ancillary companies conducted by the Confederation of Indian Industry (CII) estimates that India will be one of the top five auto component manufacturing economies by 2025—and the industry will be worth around $700 billion. Amid all this, the demand from the domestic as

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well as international auto companies is on the rise. The survey also says that the Indian automotive industry is expected to grow at the rate of about 13% per annum over the next decade to reach a size of around $165–175 billion by 2022. Additionally, the size of the global auto component industry is also expected to grow at the rate of 12% over the next decade to reach around $160 billion by 2016. With all these estimations, can Chennai stay behind? The huge industrial clusters that Tamil Nadu has developed have helped in the mushrooming of its

SUCCESS FORMULA Due to human resources and infrastructure advantages Tamil Nadu has emerged as the leading investment destination for automotive and auto parts manufacturers. auto ancillary units. Recognising its potential, Tamil Nadu has since been playing all the cards right to allure foreign investments into the state.

CHENNAI: THE MOST PREFERRED DESTINATION FOR AUTOMAKERS Chennai has the potential to become one of the top three automobile hubs in the world. Unlike other industry clusters, Chennai boasts of abundant availability of educated workforce. The industry has also been consistently working towards strengthening its manpower base. Added to the skilled work force, the investment in this region has generated more than 2,00,000 jobs accounting for 12% of the economic output of the state. It also has a good supplier and good technology base. All these advantages will help Chennai progress.

TACKLING THE CHALLENGES Connectivity and infrastruture While the city has the immense benefit of having a port, growing business demands have generated an urgent need for developing better connectivity

BUSINESS DYNAMICS

Profile of the Automotive Industry, Tamil Nadu, 2011

Source: Government of Tamil Nadu and Frost and Sullivan analysis

with other cities in the country via rail & road routes. The industry has also been demanding better infrastructure in the state. Promising government projects Government projects promising better road connectivity to other states is also a long awaited dream. Focussed efforts towards better connectivity will help businesses to unlock their potential manifold. Inadequate power supply

FACTS Tamil Nadu has seen major investments in the automobile industry over many decades and manufactures cars, railway coaches, battle-tanks, tractors, motorcycles, automobile spare parts and accessories, tyres and heavy vehicles. Chennai is the manufacturing and export hub for Hyundai’s small car. Hyundai’s i10 and i20 models are manufactured only in India and are then exported to the rest of the world. Hyundai, Nissan and Ford have found Tamil Nadu to be the most cost effective location for manufacturing cars. While Karur is a hub for bus body building industries, Namakkal is the major source of heavy vehicle and lorry body building.

Apart from infrastructure, the state also faces the challenge of inadequate power supply. Elaborating on the same, Jayachandran Krishnaswamy, Sr Engineer, Kaeser Compressors (India) Pvt Ltd emphasises, “Power availability is a ubiquitous problem. Even as the industries located within the city experience a power cut of as less as one hour every day, the companies located on the outskirts of Chennai are facing a tough time with daily power cuts of over eight hours. This inadequate power availability has been a major drawback for us as it stalls the delivery commitments to the clients.” Global competition Apart from these hurdles, Chennai also faces a much bigger challenge globally with countries like Thailand and China aggressively gearing up their manufacturing base.

RELENTLESS EFFORTS TO PURSUE GROWTH NEEDED It was probably easy for Chennai to become the ‘Detroit of India’, but given the increasing demand, the pace of growth and the ever-increasing competition, both the state and the central governments have to work relentlessly to make Chennai grow even more and be counted as one of the highly developed automotive industry hubs of the world. debarati.basu@infomedia18.in

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LOCATION ADVANTAGE

Gateway to the Gateway South-East Asian Markets There are several factors responsible for industries to develop in a particular state or region. Though factors like competent policy, availability of natural resources and skilled manpower play important roles, what cannot be ignored is the geographical location of the state. Industry hubs often spring up naturally in such areas; and Tamil Nadu’s case is no different. The state lies in the South, ideally located in the Deccan Peninsula with the Bay of Bengal in the East, the Indian Ocean in the South and the Western Ghats & the Arabian Sea on the West. Over time, it has developed as one of the most promising industrial states of India. A report…

NISHI RATH

amil Nadu is one of the best investment destinations in India. It is one of the leading economies among the Indian states with an average growth rate of 9%. Tamil Nadu has some unique advantages, including its geographical location as a gateway to the South-East Asian markets. “The state has three major ports, which are strategically located and well connected to regions in Asia, Africa and Europe. Among the other advantages are the well-developed automobile industry in the state, highly skilled human resources, investmentfriendly policies and the promise & determination of the State Government

to make Tamil Nadu a new growth model and the No 1 industrialised state in the country,” said Masanori Nakano, Consul General, Consulate General of Japan, on a recent visit to Tamil Nadu.

CHENNAI: THE AUTO HUB Chennai, and the area within the radius of 50–60 km around it, has emerged as the ‘Detroit of Asia’, with a strong engineering and auto parts industry supporting it. More than 40% of India’s car production and 35% of India’s auto-components production, a sizeable part of exports, come from the region. Its strategic location has helped Chennai emerge as the hub of commercial activities. The climate here

favours port operations all through the year, which is a big advantage for auto companies. Chennai also boasts of a good network of banking and financial institutions, apart from modern telecommunication infrastructure. According to an announcement by the Port authority, Chennai Port is the largest exporter of cars in India, exporting 2,52,640 cars in 2011–12, including those of Hyundai, Nissan, Ford and Mitsubishi. So, what attracted these biggies to the southern state? There could be many reasons for the same, but the most important of all is the geography of the state, which has played a major role in its industrial development. Moreover, Tamil Nadu has the second largest coastline in the country (1,076 km), and has three major ports and 16 minor ports. Thus, Chennai enjoys a favourable climate among automakers and the Tamil Nadu Government is determined to make the city a global hub in the field of automobile and auto-components manufacturing. “Tamil Nadu is on top with regard to manufacturing automobile and

The ‘real Detroit’ also failed, and , in the case of India, where there is internal competition from states, like Gujarat, a lot more has to be done to maintain the dominant position. auto components. We aim to make Chennai and other parts of the state a global hub in this regard,” Tamil Nadu Chief Minister J Jayalalithaa, recently said in the State Assembly. According to industry experts, Tamil Nadu still has much more potential, which needs to be tapped. “There is a constant need to think of ways to strengthen the existing resources. Dedicated freight corridor from production areas to Chennai Port will definitely help. More importantly, automation and efficiency at Chennai and Tuticorin ports need to increased,” said an official from a major steel company on condition of anonymity.

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Additionally, easy access to the ports has been a major attraction for most of the companies that are considering export as an important option, but there are several other issues that need to be looked at in order for Chennai to become the ‘Detroit of Asia’ in the true sense. However, the location advantages are not only restricted to the auto industry, even other industries can benefit from them.

ENERGY SECTOR CAN CASH IN ON THE COAST Tamil Nadu is the only state where both monsoons (South-West and North-East) criss-cross, giving it the unique advantage of 10 months of good offshore winds. According to experts, the best spot for offshore wind is off the coast of Tamil Nadu. Without counting a biosphere reserve off Rameshwaram, Tamil Nadu has an estimated potential of 30,000 MW, nearly five times its current installed wind capacity of 6,500 MW.

THE PROBLEM AREAS Recently, an apex industry body appealed to the State Government to focus on low-cost renewable energy sources to overcome the power shortage faced by the state at present. It also urged the government to take policy measures to meet the challenge of falling shares of agriculture and industry sectors together with power shortage. They also suggested that the Maritime Board should form joint ventures with private investors to develop the ports & SEZs in the port areas. In addition, special purpose vehicles need to be formed to create road & rail connectivity with the hinterlands. Also, the availability of land amid increasing competition has become one of the major problems. Land availability for wind farm projects is becoming difficult owing to the growing demand for land. And the fact that there is no policy in place for offshore wind farm projects adds to the woes.

LOCATION ADVANTAGE

CHENNAI PORT TO BUILD AIR FREIGHT STATION NEAR AIRPORT The Chennai Port Trust plans to build an Air Freight Station (AFS) near the airport under public private partnership mode. The Port Trust owns 2.13 acre of land about 2 km away from the Anna International Airport. Incidentally, the country’s first AFS, which is a concept based on the idea of providing airlines nodes near the production centres, was commissioned at the Central Warehousing Corporation (CWC) four years ago. Faced with congestion at the Chennai air cargo complex, the air cargo user community suggested the AFS to hold imported goods. Currently, there are two AFSs – CWC and Indev. There is scope for more such facilities at Chennai. The location is ideal for this facility as cargo volume through the Chennai airport is increasing, an official of the Port Trust said. An aircraft’s cargo will be shifted to the AFS and consignees can take delivery of the cargo after statutory clearances and duty, including custom documentation and examination, cargo acceptance check (weight/volume), security checks (X-ray screening/physical check) and palletisation. The AFS will help avoid congestion at the gateway airports. Some other advantages are an integrated chain, customised logistics solution, lower logistics cost dwell time at the airport and lesser damages/claims. The Port Trust has issued an expression of interest notice to the trade to explore market interest for developing an AFS. It could also be a dry dock for storage of air cargo and its stuffing/destuffing from air containers to complement the facilities at the air cargo complex.

THE PATH COULD BE SMOOTH IF… The ‘real Detroit’ also failed, and , in the case of India, where there is internal competition from states, like Gujarat, a lot more has to be done to maintain the dominant position. More focus on key infrastructure like power and development of ports will be prudent to encourage more investments into the state. A proactive government can facilitate an atmosphere that is conducive for rapid growth and

Chennai, and the area within the radius of 50–60 km around it, has emerged as the ‘Detroit of Asia’, with a strong engineering and auto parts industry supporting it. expansion. By taking timely action on two of the major issues mentioned above, Tamil Nadu may sustain the momentum of sustainable growth and development.

ADDED ADVANTAGE: FINANCIAL CITY NEAR CHENNAI The

Tamil

Nadu

Government

unveiled a series of proposals a couple of months ago. It included setting up of an integrated financial services centre, food irradiation centre and an aerospace park. A Policy Note tabled in the Assembly said the government would promote a financial services centre near Chennai to attract domestic and overseas financial institutions. While Chennai has emerged as a base for info-tech companies, auto majors and BPOs, it has not yet been successful in attracting many financial institutions. The plan to encourage the financial sector to set up units in Chennai may bring strategic advantages. Land was identified by Tamil Nadu Industrial Development Corporation Limited near Sholinganallur to draw banks, insurance companies, mutual funds and stock brokers. While the proposal has not taken off at the expected pace, the latest announcement may give it a fresh impetus. nisi.rath@infomedia18.in

SEARCH - Supplement August 2012

VISION 2023

to be traversed. Today, Tamil Nadu is a mid-sized state in the Indian Union, with a good standing on many economic and social parameters. It not only scores among the top three states on many dimensions, but also does well on most others including infrastructure provision. The sweep of Vision 2023 is bold, and seeks to be an aspirational statement for the people and Tamil Nadu Government to catapult the state into the league of developed regions of the world and to the top of the Indian states. The world has become more complex, volatile and unpredictable in the past few decades than it has ever been in history, and it is likely to remain so in

anked among the top three on several economic and social indicators, Tamil Nadu is one of India’s most progressive states. However, over the past few years, the state has lost its edge in terms of economic growth and fiscal position. To repair the situation, the state has identified the need for formulating a succinct strategy for rejuvenating the economic & social growth of the state and to reclaim the top position. Such a strategic blueprint for development aims to achieve a consistent economic growth rate of over 10% per annum in a highly inclusive manner. However, the objective of attaining economic prosperity and employment generation

Catapulting Tamil Nadu to Greater Heights Tamil Nadu Vision 2023 aims to propel Tamil Nadu to attain its potential along multiple dimensions of economic prosperity, social progress, inclusiveness, cultural plurality and environmental sustainability. While the state can certainly build on its strengths, in order to achieve Vision 2023, it would be critical for Tamil Nadu to identify the infrastructure requirements of the state and the strategies to develop the required facilities. with inclusive growth is sought to be achieved through the implementation of a coherent vision. The Budget for 2011–12 had listed the preparation of the vision with a focus on developing a shelf of projects for strengthening infrastructure.

VISION 2023 FOR TAMIL NADU Vision 2023 Tamil Nadu (‘Vision 2023’) sets the plan for infrastructure development for the state to reach the desired outcomes by 2023. The three outcomes of Vision 2023 include: • The per capita income of Tamil Nadu’s residents will reach US$10,000 per annum (at 2010 prices; US$1=`45)—the present

median income of upper middle income countries—by 2023. • Tamil Nadu will attain a high standard of social development, with the Human Development Index of the state matching those of developed countries by 2023. • Tamil Nadu would provide to its residents high quality infrastructure at par with the best in the world. Crucial to achieving the aims of Vision 2023 is identifying the infrastructure requirements of Tamil Nadu and the strategies to develop the required facilities. Any visioning exercise has three essential defining points—the starting position, the targeted outcomes and the trajectory

the future. Therefore, any visioning exercise has to contend with the uncertainties that will affect us in the future. Accordingly, contingency plans and alternatives have to be thought through. This calls for a responsive and capable government at the helm of the state at all times. Vision 2023, accordingly, addresses the differential requirements of various stakeholders in the state with a view to enabling high rates of growth and economic development that is highly inclusive & sensitive to potential downsides by conferring resilience to the state’s economic and social fabric.

SEARCH - Supplement August 2012

GROWTH STRATEGY The Tamil Nadu Government plans to adopt multiple strategies that energise various segments of the economy and create a virtuous circle of enhanced competitiveness, efficiency and vibrancy in all sectors. It seeks to galvanise the citizens and other stakeholders to march towards the targets in unison. The strategy for development is about building on the strengths of the state to exploit opportunities while simultaneously protecting the vulnerable sections of the state from the intrinsic weaknesses. Accordingly, Vision 2023 identifies 10 thrust areas that form the basis of acceleration in the economy and achievement of the long-term goals. These thrust areas are: Increasing the share of manufacturing in the stateâ&#x20AC;&#x2122;s economy According to the latest data (2010â&#x20AC;&#x201C;11), the composition of the GSDP of Tamil Nadu is primary sector 12.6%, secondary sector 25.8% and tertiary sector 61.6%. Given the strong emphasis in Vision 2023 to accelerate growth in the overall GSDP and per capita incomes, it is imperative that all the three sectors grow at high rates. Making SMEs vibrant A highly developed manufacturing sector needs a vibrant and dynamic SME sector that forms the base for providing essential goods and services. Therefore, one of the strategic initiatives underlying Vision 2023 is to boost the creation and sustenance of several SME clusters across the state. This will have the dual benefit of a geographically diversified growth in the state and high employment generation, the latter being a characteristic of the SME sector. Making Tamil Nadu the knowledge capital and innovation hub of India It is imperative for Tamil Nadu to significantly enhance its factor productivity if it is to compete with other destinations in India and East Asia to increase its investments, output and employment in the manufacturing and service sectors. This can be achieved only if all organisations in Tamil Nadu make knowledge and innovation the centrepiece of their activities. This thrust on innovation has to happen across the board of economic activity in the state, including services, manufacturing, agriculture, administration, and financing. This needs coordinated and deliberate action along the following lines: a. Ushering in a revolution in skill development aimed at skilling 20 million persons across the state over the next 11 years b. Establishing best-in-class institutions as Centres

VISION 2023

SEARCH - Supplement August 2012

VISION 2023

TEN VISION THEMES Vision 2023 Tamil Nadu identifies 10 themes for the state as follows: Tamil Nadu will be among India’s most economically prosperous states by 2023, achieving a six-fold growth in per capita income (in real terms) over the next 11 years to be at par with the upper middle income countries. Tamil Nadu will exhibit a highly inclusive growth pattern—it will largely be a poverty-free state with opportunities for gainful & productive employment for all those who seek it, and will provide care for the disadvantaged, vulnerable & the destitute in the state. Tamil Nadu will be India’s leading state in social development and will have the highest Human Development Index (HDI) among all Indian states. The state will provide the best infrastructure services in India in terms of universal access to housing, water & sanitation, energy, transportation, irrigation, connectivity, healthcare and education. Tamil Nadu will be one of the top three preferred investment destinations in Asia and the most preferred in India with a reputation for efficiency & competitiveness. It will be known as the innovation hub and knowledge capital of India, on the strength of world-class institutions in various fields and the best human talent. Tamil Nadu will ensure peace, security & prosperity for all citizens & business, enabling free movement and exchange of ideas, people & trade with other Indian states & rest of the world. Tamil Nadu will preserve and care for its ecology and heritage. It will actively address the causes of vulnerability of the state and its people due to uncertainties arising from natural causes, economic downturns and other man-made reasons and mitigate their adverse effects. The state will nurture a culture of responsive and transparent governance that ensures progress, security and equal opportunity to all stakeholders. of Excellence in various fields that will attract the best talent from across the globe c. Fostering a social climate and institutional structure that will encourage free movement of people to and from other states of India and other parts of the world. Specialisation in service offerings While Vision 2023 articulates allround growth and development, a good strategy also calls for specialisation in some areas. The adage of ‘putting one’s best foot forward’ is apt here, and Tamil Nadu should strive to be world class in some areas, which will make the state a ‘brand of excellence’ and enable it to stand apart in a crowded and increasingly noisy world. Under Vision 2023, the government will aggressively position Tamil Nadu as a global leader in the following industries and activities:

Back-office capital of the world: Tamil Nadu shall aim to be a global leader in attracting large-scale back-offices for knowledge-intensive businesses, such as banks, insurance companies, financial services companies, consultancies, engineering, accounting, architecture, law firms, design firms, scientific research, data management & analytics, telecommunication, technology and media. Healthcare capital of South Asia: Given that Tamil Nadu is renowned for healthcare facilities (hospitals in Chennai, Coimbatore, Vellore and Madurai are popular with patients from all over the country and outside), Tamil Nadu should aggressively position itself as the medical tourism destination of South Asia. Audio and video production and post production: Chennai is recognised as India’s leading audio and video

production centre. Given the scalability of the operations, the cost advantage that India enjoys globally, and the reputation for quality that Chennai has developed in this area, there is no reason why this service cannot be extended to Hollywood and other major film producing countries of the world. Tourism: This has very high potential for local employment generation, and Tamil Nadu has considerable natural endowments that enable tourism as an industry to flourish. Vision 2023 gives significant thrust on this sector to reach its potential over the next 11 years. Thrust on skill development The single most important resource for the success of Vision 2023 is the availability of trained, knowledgeable and skilled manpower in Tamil Nadu. Without a body of sufficiently skilled workforce, no economy can hope to develop to its fullest potential. Vision 2023 envisages imparting skills through training 20 million persons over the next 11 years. This includes 15 million people entering the job market and five million who are already part of the working population. Around 65% of the persons targeted for skill development (these persons would have studied up to secondary school) would be provided with training for basic skills for a variety of livelihoods, about 33% would be persons who have undergone formal education as part of vocational training programmes or in colleges, while the top 2% would be top echelon professionals. Vision 2023 aims to achieve universal secondary education and more than 50% enrolment in higher education (comprising of vocational and college education). The objective of Tamil Nadu’s skill development vision is to confer basic skills to the persons at the bottom of the pyramid, estimated to number approximately 10 million and increasing by about 0.8 million each year for the next 11 years. In addition, about five million people

SEARCH - Supplement August 2012

who are already in the workforce would be subject to re-skilling (upgrading of skills). Improving agricultural productivity Agriculture and allied activities provide subsistence for around 40% of Tamil Nadu’s population and contribute to about 13% of the GSDP. The share of agriculture in the state’s GSDP has dropped from 40% in 1960s to 12.6% in 2010–11 in real terms. The agriculture sector’s growth turned positive in 2009–10 and is poised to sustain growth owing to the increased thrust on improving productivity. Vision 2023 has a three-pronged strategy covering the following: • Improving productivity by introducing scientific agricultural methods and building an institutional network to support the continued adoption of the same. • Ensuring timely irrigation by intelligent use of available water by adopting effective recharging mechanisms, drip/sprinkler irrigation systems, timely cleaning and deepening of tanks & canals, and adopting appropriate cropping pattern based on water availability. • Developing suitable post-harvest infrastructure to maximise the benefits of value addition and timely marketing of produce. The state will also extend agricultural extension activities to cover the entire farming community. Transforming 10 cities into world-class cities Tamil Nadu is already the most urbanised state in the country (48% is classified as urban), and Chennai urban agglomeration accounts for 25% of the total urban population in the state. While a number of towns have been categorised as ‘urban’ based on the population figures, infrastructure services are found wanting in most of these towns. Vision 2023 envisages developing 10 world-class cities (essentially existing towns whose infrastructure is to be upgraded significantly including provision of access to 24x7 water supply, efficient mass transit systems while, at the same time, making them opendefecation and garbage free), which will become the nuclei and engines for economic growth, thereby facilitating regional and balanced development across the state. Thrust on social welfare programmes to ensure inclusive growth Tamil Nadu has been at the forefront of implementing social welfare measures benefitting the underprivileged and vulnerable sections of the society. Vision 2023 envisages that the vulnerable and disadvantaged sections will be extended protection by the state and will be equipped to

VISION 2023

SEARCH - Supplement August 2012

VISION 2023

take advantage of the benefits of the economic growth. Signature Projects Vision 2023 envisages a few large infrastructure projects, which would create huge positive externalities and open up possibilities for rapid growth of the economy. Most of these projects call for significant capital expenditure and an active role of the State Government in facilitation. Encourage PPP in infrastructure project creation and service provision The total investment requirement for infrastructure over the 11-year period is estimated at `15,00,000 crore (~US$ 330 billion). Given that the present annual capital expenditure of the Tamil Nadu Government is of the order of `14,000 crore, it cannot be expected to contribute to more than one-third of the required investment of annual infrastructure creation. Therefore, a substantial portion of the financing for infrastructure has to be obtained from

non-governmental sources, including private sector organisations, banks and foreign direct investment. The government will play the central role of a procurer of infrastructure services on behalf of the people of Tamil Nadu, and will facilitate private investment & service delivery in infrastructure sector. Under the PPP mode, the government will play the role of a change agent and will orient infrastructure projects in line with Vision 2023, and will also focus on the important functions of regulation & overall governance. Implementation of Vision 2023 will call for significant institutional reform to accelerate infrastructure development in PPP mode.

piecemeal, they are not likely to succeed. The goals set are achievable, but call for a participation by all the stakeholders—the State Government, the urban & rural local bodies, political leaders, civil servants, corporate entities, small & medium enterprises across the state, the academic institutions, the NGOs, and the people of the state— to go the extra mile to attain the goals. Finally, it should be remembered that the specific goals of Tamil Nadu Vision 2023 are not rigid targets, but are essentially directional polestars for the decision makers and people of the state to measure their progress. The journey towards these goals is as important as reaching the destination.

A WHOLESOME PACKAGE It is important to realise that the goals set in Vision 2023 and the actions required are part of a wholesome package with inter-linkages among them. Taken in part or implemented

Compiled by Kimberley D’Mello The article is an excerpt from ‘Strategic Plan for Infrastructure Development in Tamil Nadu: Vision Tamil Nadu 2023’ by the Government of Tamil Nadu

Our search for authentic and informative articles… SEARCH solicits, original, well written, application-oriented, unpublished articles that reflect your valuable experience and expertise in the general manufacturing arena. You can send us Technical Articles, Case Studies and product Write-ups. The length of the articles should not exceed 3000 words, while that of product write-up should not exceed 200 words. The article should preferably reach us in soft copy (either E-mail or CD). The text should be in MS Word Format and the images in 300 DPI resolution and JPG format. The final decision regarding the selection and publication of the articles shall rest solely with SEARCH.

So, join our endeavor to provide relevant and useful content to our readers… rush your articles, write-ups to archana.nayudu@infomedia18.in

SEARCH - Supplement August 2012

ONE Q MANY VIEWS

Charting growth graphs for Tamil Nadu Tamil Nadu is one of the most developed states in India. It is an important hub for manufacturing industries, especially automotive, textiles and software. The state’s growth graph will continue to rise due to several reasons like availability of skilled labour, location advantage and support from the government. Here’s what experts opine about the future of industrial growth in Tamil Nadu...

In the recently released Vision 2023 document for Tamil Nadu, there is a particular thrust on the development of small and medium enterprises. The three initiatives that the government has taken include the allotment of `50 crore for the development of district industrial centres in 32 districts, implementation of common facilitation centres for 20 industrial clusters at the cost of `136 crore and programme to encourage first-generation entrepreneurs at the cost of `100 crore, which will be implemented this year. The MSME Department will act as a catalyst for the development of the medium state industries. Dr Niranjan Mardi, Principal Secretary – MSME Department, Government of Tamil Nadu

We have been working towards promoting the development of the MSME sector in Tamil Nadu. We have taken up skill development initiatives, best technology and management practices for which we are seeking proactive partnership from the industries. We will be further working towards making the MSME industry proactive. Thiru Hans Raj Varma, CMD, Tamilnadu Small Industries Development Corporation Ltd (TANSIDCO)

Chennai and its surrounding industrial areas have witnessed tremendous growth in the past few years and growing sectors like automotive, precision engineering and IT, among others, have taken the city to greater heights. As the infrastructure in the state (Chennai in particular) improves rapidly, the pace of industrial growth looks all set to continue on this trajectory. This augurs well for the machine tool industry for which Chennai is a key market. We, at HAAS, have over 300 machines working in and around Chennai, in diverse applications from automotive and medical to hydraulics & precision tool rooms. We see a lot of activity and growth in these sectors, which is consequently driving the demand for CNC machine tools and automation. As manufacturing continues to spread in and around Chennai, planning will be tkey to sustaining this growth. The government and private industry, together, will have a key role to play in ensuring this. Terrence Miranda, MD, Haas Automation India Pvt Ltd

Chennai is definitely emerging as the next industrial hub, especially in the area of automobiles and aerospace. Compared to the rest of the country, the cost of land & labour is relatively lower—a big advantage for the manufacturing sector. In addition, it has the location advantage of having a port, besides having technically qualified and experienced personnel. The government is also encouraging the manufacturing industry to set up new projects. All these initiatives will eventually result in Chennai becoming the next industrial destination. N Gopinath, VP – Marketing, MMC Hardmetal India Pvt Ltd

Compiled by Nishi Rath

SEARCH - Supplement August 2012

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