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Monday, 31 October 2011 00:00
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Driving Gujarat

Haryana must worry about Maruti’s Gujarat foray


Maruti Suzuki’s decision to set up a 1-million-car facility in Gujarat should get chief ministers of various states, not just Haryana, seriously worried. A total of six automobile majors have, within the last year or two, announced plans to set up capacity in Gujarat for a variety of reasons, the most important of which has their being unhappy in the state they are currently in—in the case of Bajaj Auto, it was a fight over sales tax refunds that was the turning point in Maharashtra; in the case of Maruti, although the decision to go to Gujarat was taken before the current round of labour strife began, the company has had a series of labour disputes in the past and so the management was keen to diversify its risk. Indeed, while Maruti has no plans to move its Manesar facilities, the fact that the strike in its Manesar powertrain facilities forced it to shut down the Gurgaon unit where there was no strike has its own lessons. The next expansion of the powertrain and other critical facilities will not take place in Manesar, but is likely to take place in Gujarat.

All of which suggests industry is on a much shorter fuse than ever before, partly driven by the fact that a host of states are now in a position to offer competing facilities. Indeed, there are now even options to move overseas—Tata Motors has facilities in Thailand, for instance, apart from of course the JLR ones. For chief ministers of different states, it means they have to be on their toes, not just in terms of offering good facilities including tax incentives, but also in terms of nipping incipient trouble in the bud. In Maruti’s case, the fact that the Haryana government was not willing to play a more active role in resolving union trouble in the past has surely been a big factor in Maruti’s decision to expand in Gujarat. Just as companies find themselves getting overtaken when they are slow to adapt—think Nokia—states also need to reinvent themselves constantly. Apart from providing land for industrial areas, this means they need to attract educational/vocational training centres from where industry can hire skilled workers—Haryana is now trying to do that; it means providing an environment where workers, industrial or service sector, wish to stay—Mumbai’s dream of becoming an international financial sector has been badly hit by the city’s inability to provide world-class infrastructure. Chief ministers, like Mamata Banerjee, will also do well to realise that once the damage is done, repairing it takes decades, leaving businessmen who can’t move out of the state no option but to try desperate measures such as a 9-day Shri Mahalaxmi Mahayagya with 500 top pandits from across the country to try and drive out negative energies.



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