Maharashtra’s principal secretary (industries) V.K. Jairath has been at the forefront of the state’s efforts to attract investments from domestic and foreign companies, in the face of stiff competition from states such as Gujarat, Andhra Pradesh and Uttarakhand. Much of the investment in the state in recent times has been by the automobile sector; in the second half of 2006 auto companies announced investments of more than Rs11,000 crore in Maharashtra. However, companies such as Tata Motors Ltd, and Mahindra & Mahindra Ltd that traditionally housed the bulk of their manufacturing in Maharashtra have moved out to places ranging from West Bengal to Tamil Nadu. As India’s states start to fight harder for investments, Jairath talks to Mint about the achievements of Maharashtra, and the challenges facing it including protests over land acquisition, which Jairath said became controversial over developments in “another state", a possible reference to West Bengal, which saw violence over acquisition of farming land for industrial use in Nandigram. Edited excerpts:

V.K. Jairath, principal secretary (industries), government of Maharastra.

Looking at only mega projects, the state has approved 78 projects with a total investment value of Rs72,000 crore since June 2005. These include projects from every sector ranging from automotive to chemicals and chocolates. We went in a big way with the auto sector where many companies and suppliers have come in. Almost 60-70% of these projects have kicked off...(and are) in various stages from applying for land and licences ...(and some) have started operations...Examples here would include the projects of Mahindra-Renault, Tata-Fiat and Mico-Bosch. We are also developing 119 special economic zones (SEZs).

Generally, does the state guarantee land in these projects?

Most of these projects have come in the existing areas of the Maharashtra Industrial Development Corp. (MIDC). And MIDC is a company formed primarily to develop industrial infrastructure which means acquiring land and developing it, putting up the infrastructure and providing a base for infrastructure whether it is telecommunications, roads, power or water.

Has there not been some resistance from farmers when the government tries to acquire their land in Maharashtra?

(The) Land acquisition issue is not limited to Maharashtra. In fact, this (land acquisition) became an issue not here but because of some other state. That issue has not settled down, and it is an area where there is a problem coming up every day. I think the foreign investor is quite intelligent, and he knows that in a democracy these are processes he has to undergo. One of our strongest strengths is in conflict resolution...There are going to be conflicts because there are going to be differences of opinions. However, it should never seem that the government has stepped in and bought land forcibly from the farmers.

Has this been the case?

No, but this is the impression you get. We have to ensure a farmer is happy about getting a good price for his land. The negotiations with Bharat Forge at their SEZ in Khed (in Pune region) is a case in point where farmers have been very happy because the package they have received is much more than the market price. This does not include only compensation for land...; the entire package...involves guaranteed jobs for farmers’ children, training for jobs and 15% of developed land coming back to them.

We negotiate with farmers on case-by-case basis depending on the location and farmers’ expectations. In cases where there is extreme opposition, one should not go ahead with the project. It is also important to note that 70% of land in Maharashtra is primarily rain-fed and cannot be irrigated because of its (the state’s) topography. Farmers in these areas have small land holdings...; this may be an opportunity for those farmers to come out of their meagre subsistence living a better livelihood. What is required is to convince them and then deliver on the commitments you have made. Of course, you have to balance development and food security. There will be some areas in the country where agriculture has to be grown (encouraged). But in areas where even grains for a family cannot be provided, it might be better to go through this route (industrialization) and give them (farmers) jobs.

Apart from the crowded Pune-Chakan-Talegoan region, are other areas also being developed as potential industrial hubs?

The other areas are already developed. There is enough land available in Nagpur, Amravati or Marathwada region. However, you do not get land in Aurangabad, Waluj and Shindra. There has been such buoyancy suddenly that it is going to take time to acquire land for industry.

Maharashtra has always been known for its strong union movement. The most recent example of a spat between a politically-connected union and a company’s management is that of Bajaj Auto Ltd. Doesn’t this put off potential foreign investors?

I don’t want to comment specifically on Bajaj because it also involves other issues. However, I do not think labour is an issue in Maharashtra. We have found the labour (force) very responsive, and in fact that is one of our strengths. The productivity of labour in Maharashtra in terms of output is 37% more and in terms of value-addition is 51% more than other areas in India. Labour is a concurrent subject.

It (labour and labour laws) is an important issue for the whole country. In certain areas, you have to hire and fire, say in the textiles industry. So there is a policy coming up but this is a federal issue. The state governments have their state policies but they have to be in tune with the Centre’s policy. In Maharashtra, there is no problem as such. Companies do shut down, and the government has provided (norms on) how companies should go about this—on what is to be compensated to the labour force.

Adequate power and water supply continue to be constraints across India. What kind of guarantees would you provide to industries investing in Maharashtra?

Water is not a problem. In the case of power, the chief minister has already announced what we are doing both in the short- and long-term. Plans are already there to become a power surplus state by 2011-12. Those steps have already been initiated both on the public sector front where Maharashtra Power Generation Company Ltd. (MahaGenco) has laid out its programme of increasing power generation capacity. The distribution and transmission companies have laid out their plans to build the infrastructure which will evacuate that power. MoUs (memorandums of understanding) have been entered into with private companies—Tatas, Reliance (Energy) and Jindal (Power) have come in a big way.

In the short term, the government is working very aggressively on the Dabhol project. Today, two units are operational, with 1,400MW becoming available. The third unit will come online by February 2008, adding another 2,000MW. MahaGenco has added another 500MW now. If the demand has gone up so much by 15-20%, then we need to have captive (power) generation plants online. So, there is an issue of pricing the power since these gensets (used in captive plants) run on high-speed diesel. Discussions are on. If the industry wants power, there will be a cost attached to it.

Everything now is in the domain of the regulator, so you have to go there and there is a hearing and a decision. But things are being worked around to at least try and make that captive power where facilities have been set up.