The COVID-19 Pandemic has led to companies exiting the “world’s factory”, China in an unprecedented exodus. And the Modi government doesn’t want to let this opportunity go wasted, thus explaining the latest attempt to woo these companies by offering them land twice the size of European country, Luxembourg.
As India prepares to emerge as the new global manufacturing hub in a post-Coronavirus world, the Modi government is trying to address the biggest issue in setting up manufacturing plants before anything else, viz. land availability and acquisition.
According to the latest Bloomberg report, India is developing a huge land pool to lure firms moving out of China and looking to translocate elsewhere. The report further states that according to people in the know of things speaking on the condition of anonymity, a total area of 461,589 hectares has already been identified across the country in a bid to attract Multi-national Companies (MNCs) that will be looking for new sites once they shift their operations out of China.
Out of the entire land pool, 115,131 hectares of existing industrial land has been identified in the states of Gujarat, Maharashtra, Tamil Nadu, and Andhra Pradesh and this makes all the more sense given that these states have huge potential for attracting foreign companies but are also susceptible to hurdles in land acquisition.
Andhra Pradesh, for example, is in touch with American, Japanese, and Korean companies including Hyundai Steel and POSCO, for setting up factories in the state. Making plots of land for industrial activity readily available to these companies might help seal all such deals that can power the state towards rapid industrialisation.
The state of Maharashtra too has been on the radar of investors, but projects have a tendency to get stuck in the land acquisition process along with the environmental vigilante-NGO nexus that is ever ready to play spoilsport. The Nanar Refinery project sponsored by Aramco, one of the biggest oil companies in the world, had to be shelved because of orchestrated protests and land acquisition hurdles.
Tamil Nadu, another coastal state with immense potential for attracting foreign companies, also has a history of left-leaning NGOs blocking industrial projects. Vedanta’s Sterlite Copper Plant in Tuticorin, for example, was shut down after massive protests that hurt not only the copper industry but also thousands of medium and small sector units whose businesses were dependent on Vedanta’s plant.
In India, the investors who are desirous to set up factories are required to acquired land on their own which can at times be quite a traumatic process. Not only is land availability a big issue, but the investors are at times forced to delay their projects over negotiations with small land-holders.
POSCO and Aramco projects, for example, got shelved only because of land acquisition delays.
Delays in land acquisition have seen big-ticket projects get frustrated that can make India an unpopular destination for foreign firms investing in India despite the country’s corporate tax-friendly regime and low labour costs.
The Modi government is now looking to ensure that foreign firms don’t shy away from investing in India because of hurdles in land acquisition, and that is why it has already started identifying a huge land pool in order to ease the setting up of manufacturing plants in the country.
Ten sectors, namely electrical, pharmaceuticals, medical devices, electronics, heavy engineering, solar equipment, food processing, chemicals, and textiles, have been identified as focus areas by the government. Manufacturing is to be scaled up across these ten key sectors as India makes a massive attempt to emerge as the new manufacturing powerhouse in the world.
The foreign companies, which might be planning to shift their operations to India, are also being taken in the loop, and embassies abroad have been asked to identify companies that are looking for options to invest in.
As per the ET report, Invest India, the government’s investment agency, has received queries from firms in Japan, the U.S., South Korea, and China, expressing their interest to translocate their operations to India.
States have also been separately urged to formulate their own plans for attracting investments from abroad. The state of Uttar Pradesh has, in fact, started moving ahead in this direction already with its plans to woo Japanese companies that are looking to move out of China amidst the ongoing Pandemic.
In fact, the Modi government has taken the early mover advantage by identifying a huge land pool. The opposition had blocked one of the Modi government’s boldest reforms when it had tried to amend the regressive Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, early into its first tenure.
The Act has created bottlenecks in several ambitious projects, despite enactment of amendments by several states. The government understands that it has to make do with this Act which creates a long and cumbersome procedure for land acquisition.
The legislation requires the Social Impact Assessment (SIA) study, which involves public hearings with local bodies followed by an examination of the report by an expert group. The SIA team is given a period of six months to prepare the SIA report and the expert group also has a period of two months to analyse this report. In the worst-case scenario, the entire exercise itself can consume up to eight months.
The government then is also required to formulate a strategy for mitigating the risks of ecological impact, harm to affected families, and other adverse consequences of land acquisition.
But the real trouble comes in the form of Consent clause- 70 per cent landowners must consent in case of Public-Private Partnership (PPP) projects and 80 per cent landowners must consent in case of private projects.
This is where foreign-funded NGOs, with vested interests, can play spoilsport by agitating the local landowners not to give their consent for setting up of manufacturing plants and factories. Despite such a tedious process, the vested interests might again try to frustrate projects by filing frivolous Public Interest Litigation (PIL) petitions and orchestrating agitations to block the setting up of manufacturing plants.
India thus braces for a huge challenge ahead in inviting foreign companies in the form of land acquisition hurdles, but the Modi government is equal to the task and has accordingly started preparing well in advance so that an adequate land pool with readily available infrastructure is prepared by the time foreign companies start shifting to India.