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Sanand close to realizing auto hub dream as Maruti comes knocking

Sanand close to realizing auto hub dream as Maruti comes knocking

Ahmedabad: The Narendra Modi-led Gujarat government moved closer to its previously articulated dream of making the state an automotive hub, with Maruti Suzuki India Ltd chairman R.C. Bhargava saying it was the most probable destination for the company’s seventh plant—the first outside Haryana—that will be built with an initial investment of 6,000 crore.

Bhargava added that Sanand is among the locations in Gujarat being considered by the company.

Earlier in the week, the Central government-owned Hindustan Aeronautics Ltd (HAL) submitted a proposal to invest 4,000 crore in a factory at Sanand, a senior state government official said. This person, who did not want to be identified, declined to provide more details. A HAL spokesperson could not be contacted at the office.

If Maruti decides on Sanand, it will become the second largest auto company to build a factory there after Tata Motors Ltd, which decided to relocate the plant for its low-cost small car Nano from Singur in West Bengal to the central Gujarat town. That story has passed into business folklore—how Ratan Tata received an SMS from Modi saying his company would be welcome in Gujarat (after the land acquired by the West Bengal government for the Tata plant became a rallying point for activists and political parties—notably the Trinamool Congress—opposed to forcible acquisition of land from farmers).

That was in 2008.

Since then, Modi has worked hard to make Sanand an automotive hub. The state government has declared it a special investment region, allowing auto and auto ancillary companies to avail of various tax incentives apart from having their projects cleared rapidly. The state government-owned Gujarat Industrial Development Corporation has also acquired at least 5,000 acres of land from farmers in villages in and around Sanand that can be given to automotive companies. Mint learns that the state government’s moves have elicited responses from several automotive companies, including Maruti Suzuki, Ford India Pvt. Ltd, Ferrari SpA and Hyundai Motor India Ltd. Mint couldn’t independently confirm the status of discussions between the state and these companies.

Auto component company Bosch Rexroth (India) Ltd is in the process of investing at least 50 crore in a factory in Sanand. General Motors India Pvt. Ltd has an automobile manufacturing plant at Halol in Gujarat.

HAL’s proposal suggests that the incentives on offer have made Sanand an attractive destination for any complex manufacturing activity. And the Tata Motors factory in town has emerged as a lighthouse for other automotive companies.

“States usually take 90-180 days to give clearances for land and other issues. When we were in the process of moving our Nano project to Gujarat, the state government gave us the clearances in just three days. It has never happened before," Ratan Tata said in 2009 at the Vibrant Gujarat Global Investors’ Summit that’s held every two years.

“All auto companies coming to the state for investment do visit the Tata Nano plant to learn about their experiences in the state," said a second state government official, who also did not want to be identified.

Top officials of Maruti Suzuki met Modi on Tuesday.

“We had a meeting with the chief minister today regarding our future expansion. The discussion was very promising and the state government’s attitude was very positive. We are looking at setting up a plant with an initial capacity of manufacturing 1 million cars (per annum). Such a plant will require around 500 acres of land and an estimated investment of 6,000 crore," said Bhargava. There would also be scope to double production capacity, he added.

Maruti Suzuki’s managing director Shinzo Nakanishi and other senior officials of the firm were also present at the meeting.

Bhargava said the company would decide on the location for its factory in the next three months.

A senior Maruti Suzuki executive, who did not want to be identified, said a factory in Gujarat would reduce transportation costs.Minthad reported on 18 May that Maruti was evaluating the state for setting up a manufacturing unit.

“We have an agreement for exports with Adani’s Mundra Port for a roll-on roll-off car terminal from where we are exporting cars, mainly our hatchback model A-star. Currently, the A-star is manufactured at the Manesar plant, then transported by road to Mundra, which costs a considerable amount of money and time," the official said.

A factory in Gujarat could also serve customers in the western and southern parts of the country, he added.

Maruti’s Gujarat factory is expected to generate around 150,000 jobs while ancillary units and support facilities will create an equal number of jobs, the state government said in a separate press statement.

“Hyundai and Ford have been shown a couple of locations, including Dholera and Sanand, but Hyundai officials did not like Dholera as it is not developed yet," said an official in the state’s industries department, who did not want to be identified.

A Hyundai spokesperson said: “The company does not have any expansion plans as of now."


Shally Seth Mohile in Mumbai contributed to this story.

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