— PHOTO: M. GOVARTHAN

NO TAKERS: A 53-acre site of the Tamil Nadu Small Industries Development Corporation at Rasathavalasu, near Vellakoil, Erode, has had no takers since its formation in 1999 because of its locational disadvantage.

CHENNAI: Now that State Governments have been told not to get involved in the process of land acquisition for industries or Special Economic Zones, Ministers and officials in many States have started thinking of new strategies to woo investors. Offer of land in ideal locations, either free or at very reasonable price, remains one of the key instruments with the States to attract new industries. If this tool is taken away, what can the State Government and their industrial promotion agencies do in future to lure investments. How do they remain competitive in the investment market?

Key concerns

A cross-section of entrepreneurs and officials interviewed identified the following areas as key concerns of industries and investors in choosing locations for new projects: 1. Availability of land at convenient locations, and at a reasonable price. 2. Provision of basic infrastructure by the State or its agencies. 3. Easy access to transport and communication. 4. Proximity to airport and seaport for export and import requirements. 5. Availability of housing for employees within a limited radius. 6. A business-friendly approach by officials and the local administration. 7. Assurance on affordable, uninterrupted, and quality power.

Till now, the State Governments, through their special agencies, have catered to these needs and focused not just on provision of land and infrastructure, but also offering them a "one-stop-shop" for processing and granting all permits and sanctions. Speed remains the essence of the game and States that act faster tend to attract more investors.

Though industry sources insist that all these issues acquire importance in setting up shop in any place, land remains the most sensitive. "We are much better off acquiring land from, or at least through the State Government or its agency. Dealing directly with the private landowners can pose problems and we will not have a decent parcel of land available with any single owner. That is why the States also use this leverage to convince us in choosing a particular location," explains an industrialist, who recently opted to settle for a plot near Sriperambudur, about 40 km out of Chennai.

The more progressive and dynamic States have managed to build up land banks over the years, spread across different cities and towns, to cater to future needs. These are the States that find it easier now to woo investors. The earlier incentives such as identification of backward areas or taluks, capital subsidy schemes, or even tax holidays are slowly giving way to new and current packages such as infrastructure, quality power, and swift processing. State Governments are drawing up new industrial policies to cope with the changing scenario, looking at both the services and manufacturing sectors.

Andhra Pradesh for instance has built up a huge land bank of 50,000 acres over the years, with 20,000 acres being added in the last two years. The State's Infrastructure Development Corporation offers incentives to assist investors and industries, even in areas such as effluent treatment. Yet, the State seems to be more popular with the services sector than hardcore manufacturing segments.

With land becoming a highly sensitive issue, Karnataka came up with a new industrial policy for 2006-11 to market itself. Though it has distributed 28,796 acres till April 2006 to industries, the Karnataka Industrial Area Development Board came under fire for its massive land acquisitions, especially in and around Bangalore.

The current policy focuses on the backward taluks, offering special incentives for industries opting to set up shop in these areas. In addition to the capital subsidy scheme, Entry Tax and special entry tax exemptions are on offer, besides a special human resource development grant of five acres of land and a capital contribution of 50 per cent of the project cost to set up a Human Resources Development training centre. The State had a head start in both IT and Biotech sectors, though neighbouring States have caught up with it.

Tamil Nadu too offers land in identified pockets of the State, where the State's agencies have acquired land for industrial development. Many of the old industrial estates are now being refurbished and made over - from the light engineering, small and tiny industries to IT and ITES centres.

The State has emerged as a frontrunner in IT and ITES segments now, in addition to the emergence of private sector led industrial estates and clusters.

A whole range of SEZs is waiting to take off. But the State finds it difficult to deal with the growing opposition to land acquisition plans, even for mega projects such as Chennai's international airport.

It remains to be seen how the land issue affects State Governments in attracting more investments. Industries seem to looking for other sops — especially cheap and quality power.

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