Gujarat pays a price for BJP Govt

Michelin was to set up its project in Savli near Vadodara, but has now gone to Maharashtra. Bhushan Steel wanted to set up a cold steel plant in Dahej in Bharuch district where as much as Rs 4,000 crore would be invested in three phases. It may go somewhere in South India.

A top bureaucrat told The Indian Express that the plant would be the largest cold steel project in the country. Bhushan Steel is likely to move to any of the southern states. Top industry department sources said Bhushan has not yet gone but is on the verge of it. The official said, “There are at least three to four other projects, who are also considering to go to other states instead of Gujarat.”

Incensed that Gujarat had to suffer for fulfilling Central directives while other states had their way, the Gujarat Government has conveyed to the Centre to ensure strict implementation of the decision to discontinue sales tax incentives, and is learnt to have indicated that otherwise the state would also have to re-start the incentives. Industries Minister Suresh Mehta has also reportedly told Prime Minister Atal Behari Vajpayee about this during his two-day tour of the state.

Maharashtra “indirectly violated” the directive, by announcing that those who invest in that state before March 31 would be given sales tax benefits. It also allowed those who just expressed their written intention to invest in Maharashtra. “This way they took away several units,” an official stated. He claimed Karnataka and Tamil Nadu continue to offer incentives. Among the industrialised states, Gujarat is the only one not offering any sales tax incentives to new industrial projects.

What is ironical is that the decision to stop sales tax incentives was a consensus decision, which was taken in consultation with all states. Since the Centre had announced uniform floor rate of sales tax for all states with a view to prevent unhealthy competition between them, removal of the incentives was seen as a logical corollary.

Trade and industry organisations also second Gujarat’s contention that industrial projects preferred other states because of the tax incentives. Secretary-General of the Gujarat Chamber of Commerce and Industry I N Kania said, “It is true that industries are turning away from Gujarat. Water finds its own course. Good industrial infrastructure and peaceful industrial environment make Gujarat a better destination than others, but entrepreneurs see the cost of the project.” The Centre will have to “prevent formation of oasis of incentives in the country,” says Kania.

Director of Gujarat chapter of the Confederation of Indian Industry Sunil Parekh says that basic economics of a project is every industry’s consideration. But Parekh says foreign investors also consider the educational standards in a state. “Now Michelin would see better education in Pune for the children of their officials; besides, prohibition is a deterrent,” opines Parekh.