Maruti's next auto hub: Will Gujarat clinch the deal?

It is a raging battle between the states as automobile companies explore ideal locations to set up manufacturing bases.

Tamil Nadu, Gujarat and Maharshtra are the top contenders in attracting car manufacturers.

As Gujarat takes the lead in attracting automobile companies, other states complain that Gujarat chief minister Narendra Modi is doling out freebies at the cost of the exchequer to woo auto majors.

Will Modi succeed in bringing Maruti to the state? ...

"We are at a loss because Gujarat is offering largesse at cost of the exchequer to Maruti and other big players in the automobile sector, "said a top politician dealing with policy making in Maharashtra.

He was reacting to the news that Maruti chairman R C Bhargava is keen on big investments in Gujarat.

It is reported that Chief minister Narendra Modi may offer 1,000 acres of land and liberal terms to avail finances and rebates in local taxes to Maruti if they set up the first plan outside Haryana.

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The terms and conditions are being negotiated even as other states are keeping a close watch.
Modi is already under attack for offering Tata motors liberal terms to set up their plant in Sanand to manufacture Nano, after it was forced to move out of West Bengal.

After a series of labour strikes at Maruti Udyog's Manesar plant resulted in huge losses, the company is contemplating investment outside Haryana. Maruti has been offered land in Becharji in Mehsana.

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This has led to intense competition amongst many states to attract the labour-intensive automobile industry.

Maruti has plans to invest Rs 18,000 crore (Rs 180 billion) in coming years.

According to the leader in Maharashtra, the state is in talks with the Maruti top brass. It is negotiating at highest level to bring Maruti and General Electric plants to Maharashtra.

Lately, except in real estate sector Maharashtra is showing no sign of activity. He said that more than 40 MoUs have been signed with different manufacturers.

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The competition to attract car manufacturers has intensified as Maharashtra has offered plots in Satara , Pune and Nagpur to Maruti and other car manufacturers.

Like, Maharashtra, politicians and officers in Tamil Nadu are complaining against Gujarat's "undue incentives" to rich car manufacturing companies.

Recently, M Velmurugan, executive vice-chairman of the Tamil Nadu Industrial Guidance & Export Promotion Bureau said that there is a healthy competition amongst states, "But healthy competition can become unhealthy also, because some state may get desperate for investments and offer undue incentives."

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The leaders in Maharashtra are finding themselves at loss because Modi offers industrialists "one-sided deals to the advantage of car manufacturers" helping them to throng to Gujarat, says the industry insider.  

In fact, the competing state leaders argue that since Modi is politically powerful, he is not answerable to anyone.

He has more freedom to take decision on such big issues.

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Modi's office serves as one-window-solution for these car makers. Tata Motors, Peugeot - Citreon and Ford have already invested in Guajrat.

Gujarat has an industrial policy 2009 under which an 'Assistance to mega and innovative projects' programme is formulated to give red carpet treatment to investors .

It gives them financial aid in form of cheap loans, assures road links, and also promises to build up ancillary units at cost of state exchequer.