Tuesday, June 24, 2014: The Madhya Pradesh (MP) government is gearing up to attract investments in the electronics and IT industries based on its IT policy, which is one of the best in the country. The state government is banking on the state’s strengths like the availability of skilled manpower, good infrastructure, etc, which are required for the investments expected to flow into the state. In conversation with Srabani Sen of Electronics Bazaar,Hari Ranjan Rao, secretary, Government of Madhya Pradesh, office of the chief minister and Department of Information Technology, explains why the state is an ideal destination for IT/ITeS companies to invest in.
EB: The MP government has a very good IT policy. Tell us more about how the state government is focused on promoting the electronics industry through this policy.
The government of MP came up with a policy for the IT, ITES and ESDM sector in 2012. It is one of the most progressive policies, if compared to other states. In MP, we treat the electronic system design and manufacturing (ESDM) sector as part of the IT industry rather than as a separate sector. The electronics hardware manufacturing industry is eligible for all incentives available under the IT policy.
As far as policy support is concerned, normally, state governments extend support by way of providing land at a reasonable or cheap rate, tax related incentives, and investment related incentives in terms of interest and capital subsidies. All those facilities are available to the ESDM sector in MP. Apart from that, we are actively pushing the new Electronics Manufacturing Cluster (EMC) scheme of the Government of India in the state. MP has planned four clusters in four cities—Indore, Bhopal, Gwalior and Jabalpur, and the state will provide a number of facilities to electronics organisations that set up their manufacturing units in these cities.
EB: What type of tax benefits are you providing to the electronics industry?
We give a VAT refund for up to 10 years—limited to 100 per cent of capital investment, besides entry tax exemption for up to nine years. Besides that, a subsidy of 15 per cent on fixed capital investments for micro and small scale industries and a 5 per cent land subsidy for mega projects are also offered.
An interest subsidy of 5 per cent for a period of seven years (with a limit of Rs 2 million) for micro and small scale industries, a 75 per cent rebate on the cost of land, exemption from stamp duty, registration fees and entry tax are also provided.
So if you are setting up a unit in MP, you don’t have to pay the full rate for the land. One-fourth the price of the land is charged and stamp duty is waived off. And if you bring in more partners, the registration fee and entry tax will be waived off on electronic products.
EB: What are the major electronics or IT companies that operate in your state?
Well, MP has a small electronics manufacturing base, but in the last couple of years we have had a very good response from large IT companies. TCS and Infosys have both started construction of large development centres at Indore. These are the big names to begin with. There are a lot of BPO companies in the state. A number of medium and small scale companies are already functional in Indore and Bhopal. We want to capitalise on this and bring in more big names.
EB: Why should a company invest in MP?
The state offers a low cost of operation, cheaper land, quality manpower, a low cost of living and good infrastructure. These are a few factors that will attract companies to invest in MP.
The work-life balance is an important criterion, which is good in MP. The state also has a good pool of talent because it has a large number of colleges producing graduates and technical hands.
MP is a state that is very sound in terms of infrastructure. Power is available 24×7, not only for industries but for households and rural areas as well. MP is a power surplus state. So nobody has to invest in power backup, which is a major capital investment. The availability of surplus government land is another attraction for companies that would like to set up shop in the state.
If you want to set up an electronics facility, you should choose a politically stable and forward looking state. MP is one of the few states where the chief minister has returned to form the government for the third time, with a large majority. Due to good policies and political stability, people have trust and faith in the government. Law and order is also a non-issue in the state. For any industry, particularly the electronics industry, which requires water, we have surplus water available.
In terms of road connectivity, MP is one of the best states in the country as we have a very good road network. The Planning Commission has a scheme that’s run on the public-private partnership model, for which the central government provides viability gap funding. MP ranks No 1 among the states that have tapped this fund to build good quality roads. Around 32,000 km of rural roads have been added to the state’s network in the last six years.
Moreover, the state is strategically located at the centre of the country; so if you set up a manufacturing unit here, your business can cater to all parts of the country and you can also export with ease.
EB: But we need ports in order to export…
Pithampur is a dry port in MP. An international air cargo centre is being set up in Indore. So you do have international export facilities in MP.
EB: How are you marketing your policies to reach out to the companies?
We are not only directly asking companies to have a look at our policy but are also participating in all major road shows. We organise MP-specific road shows at the national as well as international levels. We are also joining hands with industrial bodies like ELCINA, FICCI, NASSCOM, CII and IESA to promote our policy. The idea is to make MP’s presence felt everywhere.
EB: Is there any local association working for the electronics industry in the state?
The state, so far, has not formed any electronics association of its own. However, all the major associations in various sectors are present in the state. With the increase in the growth of the electronics industry in the state we can think of having an association to safeguard the interests of the companies.
On the other hand, we actually don’t need to have any association because the state government works very closely with the industry. You require an association when you need to lobby with the government but, in this case, the government is a part of the industry.
EB: What are the major products that are being manufactured in MP?
As of today, MP has a small base for electronics. We have major software exports, primarily from a couple of companies, and we have three SEZs. As far as electronics is concerned, training equipment, oscilloscopes and some power-related equipment are being manufactured in the state. Now, some PC manufacturers and solar-related equipment makers are showing interest in setting up units in the state.
EB: On what basis have the locations for the four EMCs been chosen?
If you look at the geography of MP, it is one of the largest states in the country. We have four large cities with a million-plus population. These are Indore, Bhopal, Gwalior and Jabalpur, covering the north, south, east and west regions.
Jabalpur typically caters to the eastern part of the state, which is largely covered by the industrial belt, where we have all the power plants. Gwalior is in the northern part of the state and very close to Delhi so it caters to industries in Delhi, Gurgaon and Noida. Indore, of course, is the western hub of MP, which directly interacts with Pune, Mumbai and Gujarat. Bhopal is the central capital of the state and is MP’s second largest city. That is how we have chosen the four cities, which are large in size, with a good population, reasonable quality of life and where industries can thrive.
Also, these four cities already have a good industrial base for other sectors. IT and electronics cannot survive in isolation. They need an ecosystem, and these four cities have a huge base in terms of manufacturing and the service sector. For example, Gwalior has the Malanpur industrial area, where you have a lot of paint and other manufacturing companies. Indore has a very strong base for the automobile industry and textiles. Bhopal has BHEL and other major companies. Jabalpur has the biggest defence production set-up comprising a vehicle factory, an ordinance factory, a carriage factory and a lot of ancillary units that are supporting these larger units. So it’s a good place in terms of the future expansion of the electronics industry, particularly defence electronics.
EB: What is the government doing to get skilled manpower?
MP already has a large number of good engineering colleges—there are more than five state engineering colleges. Then we have the IIT at Gwalior, the IIITM at Jabalpur and another one is being sanctioned in Bhopal. So a large number of good private and government engineering colleges are present here. In the last five years, the number of seats in engineering and polytechnic institutes has increased from 43,000 to 120,000. The idea is to have skilled manpower available when the new industries are set up here.
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