By Tejash Mody, Surat, 28 January 2012

On the occasion of inauguration of industrial exhibition in Surat organized by the Southern Gujarat Chamber of Commerce and Industries yesterday, Gujarat minister of state for Industry Shri Saurabh Patel presented a state scan of Gujarat’s industrial sector and challenges the sector is likely to face in coming days. Presented above is a video of Shri Saurabh Patel’s speech. Some major points of Shri Patel’s speech are presented below.

“Gujarat is going at fast pace. Shri Rohitbhai talked about economic slow down, and we are preparing our budget, but good signs are that this year also we are going to have double digit growth rate. So when the country is talking about something between seven and eight, we are sure that by end of 31st March, we will be able to show much better result.”

“From 1960 to 2002, forty two years the total plan size of all governments put together was 50,500 crores. From 2002-2007 49,500 crore 2007-2012 we will be crossing 1,50,000 now you know why decade is ours.”

Slowdown? Not in Gujarat

“Practically if you look at it, we are on automatic mode since last four five years, and this is resulted in VET collection this year has growth of more than 25%. When you talk about economic slow down there are three parameters which usually have effect of slowdown. Number one is VET collection, second is the energy consumption on industrial side which compared to last year is always 10% higher and third is transaction of land and building stamp duty, all three have shown a positive trend. Direct collection in Gujarat is also much higher, so people have paid good amount of tax.”

“I was talking with one of the big Oil majors in one of the functions, and he said the petroleum ministry called their marketing person asking why is it that in Gujarat their consumption is higher compare to other states. And the minister was replied that it is not only in petrochemicals side but everywhere.”

“Government of Gujarat has concentrated on providing infrastructure and this is one of the main reasons why the growth rate is good.”

“There are three four issues which I feel are going to be major concern for all over the country. But positively we will be out of that.”

And therefore newer inquiries for setting up industry in Gujarat keep coming

“One of the most important is availability of energy and financial condition of utilities. Three four months back the energy minister called a meeting of all the energy ministers of country on only one point agenda and that was health of utilities. Imagine that in the country the losses of all utilities put together will reach one lakh crore this year. How can you provide power. On one side you don’t have money to buy coal, then how you would provide electricity? And can you imagine that Gujarat is not only self sufficient but on much better place. This year alone from 13000 MW, we will be reaching 18,000 MW in a span of next eight to ten months. Unfortunate part is today 20 million units we are backing down. The reason is the country doesn’t have power on one side, there’s load sharing of 8-10 hours, and even at the rate of Rs 3.80 there are no buyers in country because of lack of finance.”

“Now why I am telling you? That’s because automatically the strength of Gujarat is going to be surplus power, which will drive industries from other parts of the country to the state. It is because if you need to run generator for 6-8 hours daily, which industry will sustain? And therefore newer inquiries keep coming. So the problem of the country is beneficiary to the state because of our infrastructure.”

Fuel and prices of fuels due to inefficiencies, a major issue

“Biggest second issue that the country is facing today is availability of fuel and the price of fuel. Because of inefficiencies in the sector especially coal, availability of coal is not there as per requirement. Can you imagine 15 top industrial houses producing generating power meet starting from energy minister, coal minister, environment minister, planning commission deputy chairman and finaly the prime minister on one single day and informing them what is going to happen in near future if the government of India doesn’t take quick decision. Because of inefficiency, mining output is not as per what it should be, they have increased coal prices and due to deteriorating system they have raised coal prices in range of 25% to 125% on 1st of January. After various representations before the power ministry and coal ministry, it is possible that there will be brake on coal price rise, but the decision it seems will not be reversed entirely, and there will be some increase at least. So pricing of coal, and pricing and non-availability of gas are going to be very important parameters as far as the industries are concerned.”

Land availability a major issue, Gujarat model of acquiring land

“Other issue is availability of land. And Government of Gujarat through GIDC has come up with a very aggressive policy. And as per that the price of land is determined by third party which is going to be based on market rate. And added to this, for livelihood, we give one percent commercial land to farmers at one rupee token, so that they continue to get income. Plus employment is given, and most important is that we give them profit on the development of that land into estate. Suppose Rs 100 are paid for the land, after construction if the land is sold at Rs 500 with road etc, then we give 10% on that Rs 400 difference. This way we are acquiring huge chunks of land especially in Sanand and Dahej. Unfortunately politics comes in a way, people are provoked. Recently a meeting was held in Dahej, but it didn’t get response. Such people bring politics and create speed breakers which make our progress delayed.”

Industries must be ready for desalination, high cost of water

“One more issue is water which we have to tackle now. It is very important that if Gujarat has to maintain this, desalination plants have to come up on the sea shore. It is expensive but it is going to be the matter of concern. It should be realized that agriculture growth is equally important. For development of industry, for increase in purchasing power, the income of the farmers has to increase. And the strength behind growth of Gujarat industries is that purchasing power of farmers has also increased.”

“Today we have double digit growth rate even in agriculture sector. Because of growth in agri sector growth there’s wide distribution of income and this is a very important sector which will require water in big quantum. And hence the industry has to get used to high cost of water over a period of time and desalination should be one of the important aspect to solve the issue of water.”

GST will being tax on diamonds, chamber should study GST

“Government of India committee is working on the GST model right now. It is very important that the trade and industry should study the implications of GST because it is going to have a long term effect. Unfortunately none of our trade asociations in the state or at the national level have been aggressive as far as GST is concerned. Nore they have gone through the advantages and disadvantages of the same. It is very important that SME, and chambers should understand the implication and see that in days to come they are not harmed by the new implementation through the changes in law.”

“I will just give a small example. Diamond will be having tax under GST. So you can understand what will happen to Surat. The strength of Gujarat is employment through diamonds. We have villages that enjoy huge employment in diamond sector.”

The minister concluded his speech with details of preparations of Vibrant Gujarat Summit 2013 and Gujarat’s march on the path of development through SIR and SEZs.