With Maharashtra losing the ambitious $20 billion Vedanta-Foxconn semiconductor joint venture to Gujarat, the state’s image as the most favoured destination has taken a beating and, expectedly, has led to a war of words between the ruling party and the Opposition.
More importantly, it has also fuelled a debate on whether ‘’competitive federalism’’ as envisaged by former finance minister Arun Jaitley, is being given a go-bye, as observers and analysts are surprised over the pampering of a particular state while others, despite putting in their best, are getting a rough deal.
Traditionally, Maharashtra has been the leader in not only taking industry- and investor-friendly decisions but also in their strict implementation. This was because the state’s GDP is $420 billion, it has one of the highest per capita incomes in the country at $3000 in 2021-22, it contributes 20% of the industrial output in India, and it has the highest value of exports accounting for 20% of the country’s exports. Maharashtra has the largest base of internet subscribers in India at 97 million, 133 telecom subscribers, and it is one of the leading states with 991 engineering and management colleges and 966 ITIs. More importantly, the state has the highest employable talent in India at 68%.
In case of attracting the foreign direct investments, it is number one, barring a few exceptions for a particular period, accounting for 30% of India’s share. As per the Department for Promotion of Industry and Internal Trade (DPIIT), of the total $591 billion inflows in India, Maharashtra accounts for a record $174 billion from the year 2000-2022 against $45.9 billion of Gujarat, $77.9 billion of Karnataka, $38.7 billion of Tamil Nadu and $254.6 billion of others. According to the same data, Maharashtra has almost 3.7 times higher cumulative FDI than Gujarat and 2.2 times higher cumulative FSI than Karnataka.
In addition, since a large manufacturing base already exists in the state, brownfield FDI (expansion projects) is expected to see an upstick as global markets recover to pre-pandemic levels.
Against this backdrop, Maharashtra was best suited for Vedanta Foxconn to develop the semiconductor project comprising display, semiconductor and other outsourced semiconductor assembly offering units. After Vedanta Group chief Anil Agarwal’s announcement through his series of tweets that they have selected Gujarat and not Maharashtra, state industry minister Uday Samant reacted, “Only and only Mr Agarwal will be able to tell why they did not opt for Maharashtra but Gujarat.’’ Mr Agarwal’s announcement, the Gujarat chief minister’s tweets incorporating the MoU signing photos and Prime Minister Narendra Modi’s tweet announcing that a new beginning has been made have not just stunned the Shinde-Fadnavis government but forced them to seek intervention of the PM who now has assured them that Maharashtra will get big projects in future.
What is surprising is that the previous Maha Vikas Aghadi government, which had been in serious talks with Vedanta-Foxconn since January, had created a framework comprising a subsidy of almost Rs 39,000 crore against Rs 28,000 crore by Gujarat. The MVA government pursued their negotiations but as pointed out by Chief Minister Eknath Shinde and Mr Samant, they could not get the high power committee (HPC) clearance which would have paved the way for clinching the deal. As per government records, HPC gave its nod on July 15 and thereafter the CM and DyCM held a meeting with Vedanta Foxconn on July 26 rolling out the red carpet.
The Shinde-Fadnavis government blamed the MVA government for delaying the clearance while Mr Fadnavis claimed that Gujarat offered a more lucrative package than the previous government. On the other hand, MVA partners have accused the Shinde-Fadnavis government of protecting the interests of Gujarat and not Maharashtra. This verbal duel will not bring back the lost project. The opposition has sniffed at the role of the BJP-led government at the Centre in shifting the project to Gujarat with an eye on the upcoming assembly elections.
The project has gone, though Mr Agarwal has said that they will create a hub in Maharashtra as a part of forward integration. This is clearly a consolation prize and not the gold medal to which Maharashtra was the natural claimant. Maharashtra has potential to attract global players in the setting up of anchor units in Talegaon in electronics and chip manufacturing that will also help the state contribute to the India Semiconductor Mission launched by the Centre. Moreover, the state government in order to retain its pre-eminence will now have to drastically change the decision-making process by bringing in efficiency, improve the single window clearance system by reducing multiple tables, remove procedural delays by curbing red tapism and tweak the package of incentives to beat the rivals. The industry department will need to improve transparency and provide the letters of intent to the investors in three to seven days instead of keeping them lingering.
This is not all, Mr Fadnavis in particular will have to take the initiative so that the ‘’double engine’’ government (with the BJP government at the Centre and the Shinde camp-BJP alliance rule in Maharashtra) can in future outpace other competitive states in attracting domestic and foreign investments. Besides, the government will have to make a strong case for the implementation of competitive federalism in its true spirit so that not just a particular state but all states including Maharashtra will become torch-bearers of inclusive and sustainable development.
Sanjay Jog is Political Editor at The Free Press Journal