India’s Gujarat State Plans Big Burst of Development
India's Gujarat state in western India may have only 5% of the country's population, but it has big ambitions for growth, aiming to become a leading center of industry, finance and economic activity over the next decade. Gujarat, which envisions billions in building and infrastructure projects under way by 2020, moved to propel the effort recently by becoming the first state in India to enact a legal framework for public-private partnerships.
The moves prompted a Washington Post columnist's recent reference to Gujarat as the “China of India,” but the state's mammoth undertaking is not without challenge and setbacks.
Gujarat has an abundance of natural resources and already accounts for 15% of India's industrial production, 18% of capital investment and 22% of exports, according to government statistics. Its 1,600-kilometer coastline, the country's longest, has 42 ports that now handle 30% of India's total cargo. The Gujarat Maritime Board is aiming for 20% growth in 2012.
Gujarat also has a political administration and business environment conducive to outside investment. Narendra Modi, Gujarat's s hard-charging chief minister since 2001, has served in that role longer than any in India and is touted in local media as a candidate for prime minister. The Washington Post referred to him as “efficient, autocratic and incorruptible.”
In mid-2010, Modi released a “blueprint for infrastructure” that envisions an integrated investment plan across 19 infrastructure sectors. To overcome the bureaucratic delays and red tape typical in India, he set up the Gujarat Infrastructure Development Board to facilitate the flow of funds and deal with risk allocation in planned PPP projects.
While some construction industry executives says PPP roles remain somewhat ambiguous, the uncertainty has not stopped major companies—such as Gujarat-based Adani Group—from making major investments in two new ports at Hazira and Dholera and expanding others. Mumbai-based construction giant Larsen & Toubro is investing $3 billion in a planned renewable-energy park in the state, while Hindustan Construction Co. plans a $2-billion investment there. L&T ranks at No. 34 on ENR's list of the Top 225 Global Contractors, with $7.7 billion in 2009 total global revenue. All but $1.5 billion is from work in India.
In its most ambitious undertaking, the Gujarat government has linked with Infrastructure Lease and Financial Services, one of India's leading development and project finance firms, on Gujarat International Finance Tec-City (GIFT), a 500-acre, high-tech financial and IT services hub that is set to rival or exceed those in Mumbai and Shanghai, its boosters say. The developer also has investors based in Japan and Abu Dhabi.
The estimated $16-billion project is located between Gujarat's commercial hub of Ahmedabad, India's seventh-largest city, and its capital, Gandhinagar. The East China Architectural Design & Research Institute and Fairwood Consultants India, a joint venture, completed the master plan for the entire project, including the design of an estimated 62 million sq ft of space supporting transportation and other infrastructure. Covering 10 million sq ft, the first of three phases is set for completion in 2014, says an April 16 published report in India.
“GIFT is a vertical city of financial hubs that will thrive on an economy of agglomeration,” project director R.K. Jha told ENR. “The PPP is working fine, since the government has provided us with land and connectivity.”
But all is not smooth sailing in Gujarat, as firms scramble to find enough engineering and craftsworkers to meet deadlines while competing with the Middle East. “We are trying to make use of computerization and modular construction,” says Sugata Bhattacharya, L&T's head of engineering. Executives of Indian firms concede that, despite global experience, they still need to reach competence levels of their Western competitors.
Jha says the GIFT project will involve significant prefabrication and added investment in new training for construction workers. Officials are negotiating to import piling rigs, construction hoist booms, concrete pumps and a batch plant to produce 200 cu m per hour of higher-grade concrete than is traditionally found in India, he adds.
While slow-moving federal environmental clearances for planned power projects have generated substantial schedule delays, officials in Gujarat are moving to iron out the bureaucracy. “Getting clearance for projects in Gujarat has become easier with a single-window clearance,” says Atul Patel, CEO of AKP Infrastructure.
Frequently, land acquisition turns out to be an obstacle. “Since Gujarat does not follow compulsory land acquisition at lower prices, it makes land even more expensive,” says Pankaj Saran, CEO of Gujarat Vittal Innovation City, a $2-billion project being developed by state officials and the Korea Land Corp., an entity owned by the Korean government. “Fortunately for us, 50% of the land is government-owned.”
The project would feature the first Korean industrial park and technology zone in India. The zone would include Korean companies relocated from China, Saran says.