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It is attracting investments, stupid!

RAHUL GANDHI, a good number of Congressmen and sections of the media persons were critical of the Adani group being favoured by the Modi government. They were focused on the low cost at which large acres of land where sold to the Adanis.

Investments flow to regions and locations that offer attractive terms. This is a global phenomenon. Offering incentives is par on course. These range from offering land free or cheap; assured supply of power at low tariff; offer infrastructure facilities; fiscal incentives in the form of tax concessions and reliefs; assured supply of water; road and rail connectivity...


How TN attracted Ford, Hyundai...

When the AIADMK government under Jayalalitha was desperate to attract large investments during her first tenure 1991-96, it had to offer special terms to DuPont and Ford Motor Company. There were offers from other states, notably Maharashtra and Haryana, which had a base for automobiles. Tamil Nadu offered land at Maraimalainagar on attractive terms; offered funding of sales tax for 14 years interest-free; capital subsidy; uninterrupted supply of power among other incentives.  Similar concessions have been offered for the Korean Hyundai Motor Company. Today these companies have invested over Rs 12,000 crore in the state; they have catalysed investments through ancillary industries; the two companies export over 300,000 cars a year and provide employment to thousands directly and indirectly. The revenue to the state through sales tax and to the Centre through excise and customs duties are substantial.

The offer of land cheap is made by several states to attract large investments. In a couple of interviews to television channels, Gautam Adani submitted two convincing replies: the land taken by him at Mundra near the sea coast was of poor quality with no takers and that the prices offered by governments prior to that of Modi were even cheaper; that Adanis have been operating in several states and have purchased lands on such attractive terms in all these.


..and how it lost Tata Titaniam

The converse of this hypothesis of cheap land price attracting investments has also been proved by prospective investors abandoning projects. The Tatas were keen to setup a Titanium project at Tuticorin, Tamil Nadu that involved an investment of Rs 3000 crore and with potential of large employment. Land needed was in the region of 10,000 acres. The company factored the cost of land at around Rs 5000 per acre for a total of Rs 5 crore. For close to 10 years, the AIADMK and DMK governments dilly-dallied on the land issue and finally asked the Tatas to procure land on its own. In this period private interests entered the game, cornered the land and jacked up the prices hundred fold. At this price, the project was unviable and Tatas abandoned it. The state lost a great opportunity to get a sophisticated plant for the under-developed Tuticorin district along with the prospects for multi-faceted technological developments and the potential for creating thousands of jobs.

Sadly, industry has not been effective in communicating to the people and policy makers the overall benefits that would flow over time from incentivised price for land. With the leftist and socialist leanings that have ingrained so deeply into the mass psyche, it has become so much difficult to dispel the advantages of providing land cheap for business. 



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