From a backward state not so long ago, the so-called heartland of India has made some firm strides to be counted among the frontrunner states in India.
Madhya Pradesh Chief Minister Shivraj Singh Chauhan can justifiably feel proud of the numbers. His state, which was part of the pejoratively named BIMARU provinces till not so long ago, has decisively shed that tag and now competes with the frontrunners in rolling out the red carpet for investors and attracting investment dollars.
“People asked: Where is Madhya Pradesh No one had heard of Madhya Pradesh, not to mention its investment credentials. Barely 300 people participated in 2007. We have turned it around since then. This year, we had to stop registration for GIS when we had received 8,000 confirmations,” Chouhan said at this year's Global Investors' Summit (GIS), which his government organises to attract investments from India and abroad.
Investments on the ground
The numbers are impressive by any yardstick. Between GIS 2014 and this year's event, the state attracted investment proposals worth Rs 2.75 lakh crore. Proposal worth Rs 5.50 lakh crore were received at this year's summit alone.
Answering critics who carp that most such proposals don't translate into actual money spent on the ground, the Chief Minister informed the gathering at GIS 2016 that almost a fifth of this amount, Rs 50,000 crore, has already led to the setting up of 110 factories around the state that have started manufacturing.
Besides, the state has set up 175 food processing units and 92 renewable energy plants since GIS 2014.
The turnaround
In 2003, when the BJP government came to power, Madhya Pradesh was still considered a poor backward state with terrible infrastructure, potholed roads and a huge power deficit. The state's economy was still primarily dependent on agriculture and few industrialists were interested in investing.
Thrust on agriculture and agri-processing
Over the last seven years, things have turned around. Agriculture, which still accounts for a large part of the state domestic product, has been growing at 20 per cent over the last four year. This has given rise to a thriving agri-processing industry, which has reduced wastage, increased farm incomes and generated huge employment.
The GIS has not been a ritual or an event for us. We have stopped the practice of signing up of MoUs because they are pieces of paper. The GIS for us is a demonstration of Madhya Pradesh as India's most complete investment destination.-Shivraj Singh Chouhan, Chief Minister, Madhya Pradesh
The numbers are telling - land under irrigation has jumped more than five-fold from750,000 hectares to four million hectares in 2016. This was one of the key reasons why MP was able to avert any major economic dislocation despite facing two back-to-back droughts last year and the year before that.
It has been estimated that up to 50 per cent of India's food and vegetable produce is wasted every year due to the lack of modern warehousing and supply chain facilities linking the farm to the market. To overcome this, the state has established nine million tonnes of warehousing capacity since 2013, thus, doubling such infrastructure. About one-third of this has been added through private investment and another third via the public-private partnership route.
According to the Madhya Pradesh government website, it has the following advantages:
- MP recorded the highest agricultural growth (averaging 20%) in the country, for the last three years
- Has been receiving ′Krishi Karman′ award for spectacular performance in agricultural production, for the past four years
- It is the leading domestic producer of agricultural resources like gram (#1), soyabean (#1), pulses (#1), wheat (#2), onion (#2) and green peas (#2)
- MP is the third largest producer of milk in the country
- With presence of six government-owned modern food parks and two private food parks, Madhya Pradesh provides plug and play facility for food processing companies
- Key food processing players operating in the state include Coca-Cola, Pepsico, Parle Agro, LT Foods, Cadbury, Ruchi Group, Britannia Industries and Balaji Wafers
The power sector, which is critical for the development of industry and a key enabler of rapid growth, is also on the fast track. Generation in the state has zoomed six times from 2,900 MW to 18,000 MW over the last decade and a bit.
“Between 2014 and 2016, we have added 5,400 MW of installed capacity and our total power generation capacity of 18,000 MW includes 3,175 MW from renewables,” Madhya Pradesh Chief Secretary Anthony Disa told the gathering at this year's investment summit.
A set of well-considered policy measures eschewing populism and based on pragmatic consideration has led to this surge. These include, according to the state government website:
- No electricity duty for first 10 Years
- Permission for third party/captive sale
- Sale outside the state permitted (Solar)
- 100% banking permitted
- Wheeling charges reduced to 2 per cent
- No VAT and entry tax
- Benefits of industry status
- Reduction in contract demand
- 100 per cent CDM benefit to developer
- Bankable document for revenue land (on right to use basis)
- Only application is required in conversion to NA land usage status
- 50 per cent stamp duty exemption on private land purchase
The gains over the last few years have been well documented by independent sources. They have led to Madhya Pradesh being home to Asia′s largest solar power plant (135 MW at Neemuch). The world′s largest solar power plant (750 MW at Rewa) is expected to begin operations soon.
Then, “the state has a very progressive policy framework for renewable energy, which has resulted in a jump in capacity over the last five years from 332 MW to 2,567 MW. Additionally, about 9,000 MW of projects are under construction in the state, in the sector.”
The state offers investment opportunities in all the three fields of generation, transmission and related equipment and machinery.
Madhya Pradesh is also attracting investments in defence manufacturing and the automobile sector under the Make in India programme. Companies such as Volvo, John Deere, Mahindra & Mahindra, Eicher and Force Motors have operations in the state. Besides, MP is also considered a major destination for investments in the textiles, tourism and urban development sectors.
The availability of land has emerged as a key roadblock to large industrial investments in India. This situation got exacerbated after the Narendra Modi government's efforts to ease the land acquisition act got embroiled in political controversies and was stalled by the Opposition in the Rajya Sabha where the ruling NDA government lacks a majority.
The Madhya Pradesh government has overcome this obstacle by proactively creating a 25,000-hectare land bank for potential large investors.
Moreover, the government has also developed 231 notified industrial areas, complete with access to facilities like roads, power and water, over about 15,000 hectares for the medium and small scale sector.
Last year, Madhya Pradesh came in at the fifth spot among all states in the domestic Ease of Doing Business rankings by the Department of Industrial Policy and Promotion and the World Bank.
Then, investors also finds its its single window proposal submission and clearance platform, easy tax payment facilities and its image as a peaceful state with no history of labour strife as attractive.
The state also has highly developed road infrastructure. Over the last two years alone, 4,200 km of highways and 10,000 km of rural roads have been built.
The state has made great strides in industrialisation over the last decade but many problems, chief among them being unemployment, still persist.
The state economic survey recently pointed out that Madhya Pradesh had 1.6 million educated unemployed people.
“We want to increase our per capita income and bring more and more employment opportunities to Madhya Pradesh, Chauhan said.
“The GIS has not been a ritual or an event for us. We have stopped the practice of signing up of MoUs because they are pieces of paper. The GIS for us is a demonstration of Madhya Pradesh as India's most complete investment destination,” Chouhan told the summit this year.
Chauhan's efforts received a boost when the Ambassador of South Korea, Cho Hyun, said his country's electronic manufacturing companies - he didn't name them - were considering setting up facilities at in the state
“We have such industrial clusters in Chennai, Pune and Noida and similar cluster may be set up in Pithampur,” he told reporters on the sidelines of the meeting.
While there can be little argument that Madhya Pradesh has taken great strides forward and has decisively moved out of the pejorative “Bimaru” bracket, it will take some time before it can be counted among the front ranks of industrialised states such as Gujarat, Maharashtra and Tamil Nadu.
But going by the indicators available - growth rates, rank in Ease of Doing Business survey, investment inflows, etc. - it can realistically expect to get there if it can sustain its reforms agenda over the long term.
