chapter vi industrial location policy in...
TRANSCRIPT
CHAPTER VI
INDUSTRIAL LOCATION POLICY IN GUJARAT
The separate State of Gujarat was formed in May, 1960, fOllowinq
the reorganization of tne Bombay State. The pressin~ need before
tne State Government was to develop infrastructure, particularly
roads, communications and power. The development of large-scale
industry required the provision of these facilities. At this stage,
therefore, the growth of small-scale industry, which did not require
very sophisticated facilities and wnich \\Ould utilize local entre
preneurship, was emphasized. Thus, industrial growth in Gujarat in
the 19bOs was dominated by small-scale industry. It was felt,
however, that growth of large-scale industry was required to
achieve rapid and sustained industrial development; large industry
was expected to induce a 'snowba11ing' effect. Hence, since the
1970s, the emphaSis of industrial policy in the State has been to
promote large-scale industry. The success Of this policy has
placed Gujarat as the second-largest industrial producer in the
country after Maharashtra.
The rapid growth of industry in Gujarat may be explained, to a
large extent, by the traditional importance of trade 'In the State's
economy. Many important ports dotted the long coastl'ine of Gujarat,
Cambay, Broach and Surat among them. r,ujar.ati merchants, trading
with many countries in east Africa and south-east Asia~ were major
participants in India's foreign trade. Even the bUlk of internal
161
162
trade in Western India was in the hands of mercantile communities
from Gujarat, such as the Bhatias, Voras or Bohoras and Parsis. In
Maharashtra, which had no indigenous specialized trading communities,
trade was carried on by outsiders, chief among whom were Gujarati
Vanis and Parsis; this is true to a considerable extent even today.
In the late eighteenth century, Surat, the most important port of the
Mughal empire, declined due to political instability in its hinter
land and, more important, because of the emergence of Bombay as the
dominant port in Western India during British rule. Much of Gujarat's
trade and industry shifted to Bombay. "By the beginning of the
nineteenth century, almost all of the foreign trade of western India
passed through Bombay .•.. ~rom about 1795, there was a continuous
emigration of Surat traders to Bombay."l Except for the establish
ment of Ahmedabad as a trading centre and as the 'Manchester of India '
(when it became a major centre for the cotton textile industry), the
dominance of Bombay precluded the emergence of any other rival
business centre in the Bombay Presidency earlier, and later in the
Bombay Sta te.
Due to this domination exerted by Bombay, when the separate States
were formed in 1960, regional disparities were much greater in
Maharashtra than in Gujarat. Here, though half of industry in the
State was concentrated in Ahmedabad, there were other traditional
business centres like Surat and Baroda (Vadodara).
Here it may be noted that, prior to tne reorganization of the Bombay
1. V. D. Divekar, "Regional Economy t1757-l857) : Hestern India," in Dharma Kumar, ed., The Cambridge Economic History of India, Vol. II, (Orient Longman, 19~4) p. 343
State, and even after, the regional pattern of industry has been
focussed on Bombay, not only in Maharashtra but even in Gujarat.
The city of Bombay, to which Maharashtra owes its position as the
top-ranking industrial State, was built by non-Maharashtrians, at
first the British and then, through their industrial investments,
by the Gujaratis and Parsis. When Bombay was made part of Mahara
shtra, it became necessary for the Government of Gujarat to make
special efforts to attract industry away from the Bombay-Pune belt
and towards Gujarat. Industrial policy in Gujarat, therefore, was
geared more towards weaning industry away from Maharashtra, rather
than to backward locations. This is why industrial counter-magnets
have been established in the vicinity of Bombay, such as Umbergaon
and Vapi and, a little further, Ankleshwar. As will be observed
later, this strategy has proved quite successful; many entrepreneurs
prefer locations near Bombay. Since such locations are increasingly
difficult to obtain in Maharashtra, often sites in Gujarat in the
Bombay-Ahmedabad corridor have been selected.
Evolution of Industrial Location Policy
lb3
Industrial location pol icy in Gujarat has been geared lTOy'e towards
industrial development ot the State as a whole, rather than towards
regional industrial development. However, regional development
policies have been implemented for about two decades and, since the
mid-seventi~s, when industrial development in the State has gained
ITOmentum, ITOre attention has been given to areas which were relative
ly neglected till then.
A certain regional plan has been kept in view throughout this period.
164
Industry, and especially large industry, has been discouraged from
locating near towns in order to avoid the urban congestion which
would inevitably take place. On the other hand, industrlal areas and
estates have been provided with a view to encouraging industrial
location in these specified areas so that industry does not develop
in a haphazard manner in the State. Thus, as in Maharashtra,
industrial location policy has both positive and negative aspects.
Identification of Backward Talukas
The beginnings of a reglonal policy may be traced to the mid-sixties
when the State Government undertook to identify the backward areas
in the State. The Bureau of Economicsand Statistics (BES), entrusted
with this task, came to the conclusion that a district was too la-rge
and non-homogeneous a unit for the purpose of regional policy.
Therefore, taluka was selected as the appropriate regional unit for
implementing developmental schemes. On the basis of some indicators
of development, fifty-six talukas were identified as specially
backward in 1966.2
The Hathi Committee In June, 1970, a Committee was appointed
under the chairmanship of Shri Jaisukhlal Hathi to study the problems
of regional imbalances in the State. Jhe Committee recommended that
the fifty-six talukas identified ,as backward should be earmarked for
intensive developmental programmes, and especially for the develop
ment of basic infrastructural facilities. The Committee recommended
the use of liberal incentives for attracting industry to these
talukas in view of the fact that these areas were not merely lagging
2. See Appendix VI.l for details.
regions, but because many also had large tribal pockets.
The backward talukas have been provided special assistance since
1968. Since the inception of graded incentives in the State in
197/, the backward talukas have been entitled to higher incentives
than other areas. However, there have been no acti ve efforts to
165
develop industry in these talukas. This may have been in recognition
of the fact that, as long as there were more developed locations
available in the State, these tribal pockets were unlikely to attract
industry. The policy regarding development of industry in the
backward talukas has, therefore, relied on passive measures. Industry
is offered higher incentives in these areas and it is left to the
entrepreneur to select a backward taluka with higher incentives or a
more developed location with lower incentives.
Negative Location Policy
Along with this policy of encouraging industrial development in the
backward talukas, there was at the other extreme the concept of
'banned areas'. In 1972, when the first Package Scheme of Incentives
of the State Government was introduced, certain areas around the
larger cities were declared banned areas. 3 At first, no incentives
were available to units located in the banned areas. This policy
has been gradually relaxed. In 1978, small and medium units in
banned areas became eligible for incentives at lower rates than in
other areas, subject to certain conditions. The policy relating
3. Banned areas, in 1972, covered a radius of 20 kms around Ahmedabad and Vadodara, and 10 kms around Surat, Rajkot, Bhavnagar and Jamnagar. In 1977. the banned areas were increased to 24 kms around Ahmedabad and Vadodara, and included all places having a population over 1 lakh as per the 1971 Census.
to large industry was relaxed more recentlY. under tne 1~83 scheme,
such units located in the banned areas, if they fall in the backward
districts and talukas, are eligible for incentives.
l6b
Thus, as in Maharashtra, lndustrial location policy in Gujarat has
both positive and negative aspects. The identification of backward
talukas has been more systematic, in the sense that definite criteria
have been used for the purpose. Another point in favour of Gujaratls
industrial location policy was the concept of banned areas where no
incentives would be provided. This may be justified by the view
that industry, and especially large industry, should not be located
within town limits. Also, such areas are likely to attract industry
without the provision of incentives. But, as indicated above, there
has been a gradual relaxation regarding location in the banned areas
over time.
The main positive strategies followed in Gujarat to prOlrote indus.try
in accordance with industrial location policy have been the adoption
of a growth centre approach and incentive schemes.
The Growth Centre Approach
The growth centre approach was first adopted in 197/. On the basis
of certain criteria measuring infrastructura1 availabi1"ity and
potential for industrial growth, sixty-nine towns were selected as
growth centres. 4 The growth centres were classified into three
Grades, IAI, IBI and 'C I, depending on the level of development of
their locations. Grade IAI centres were the most developed locations
4. See Appendix Vl.2 for details.
and were entitled to the lowest rates of incentives, and Grade 'C'
growth centres received the maximum incentives. In 1979, the number
of growth centres was increased to 121.
It may De noted that this growth centre policy is quite different
from that adopted in Maharashtra. In Gujarat, the policy has been
directed towards attracting industry to these growth centres through
incentives and other promotional efforts in order to achieve a
relatively planned location. Thus, the policy has Deen t~ deSignate
such places as growth centres which could provide the required
infrastructural support to industry. All the growth centres are
equipped with industrial estates and industry was to be located, as
far as possible, in these estates and outside town and city areas.
167
In Manarashtra, the emphasis of the growth centre stratE~gy has been to
develop industrial counter-magnets. This is why relatively larg~
towns have been selected as growth centres and the number of growth
centres has been limited in order to develop industrial concentra
tions in the selected centres. This does not appear to have been the
policy in Gujarat. txperience has shown, however, that though a much
larger number of centres has been chosen in Gujarat, the emphasis has
not been very different from that in Maharashtra. Though large towns
comparable to Nagpur and Nasik have not been deSignated as growth
centres, there has been an attempt to develop a few centres as
industrial counter-magnets, not only to Ahmedabad and Vadodara, but
even to Bombay. It has been observed that, till recently, the
promotional efforts of the State Government institutions were directed
towards growth centres like Vapi and Ankleshwar, in the Bombay
Vadodara corridor. With industrial development progressing rapidly
168
in these places,efforts are now being made to attract industry to
Kalol and Halol, which are near Vadodara but to its north. This
concentration of promotional efforts has led to the development of
industry at these centres to the near-exclusion of most other centres
in their vicinity. In fact, one adverse et"fect of having a large
number of centres close together has been that successful centres
preclude the development of other centres in their vicinity.5 For
example, Godhra in Panchmahals district has not attracted much
industry. The main reason for its failure appears to be that Kalol
and Halol growth centres, being in the same district but nearer
Vadodara, had cornered l,ocal potential. Centres which can provide
some special attraction, such as better facilities, better access
to large towns or higher incentives, seem to be successful in
attracting industry. Until al I the plots in the successful growth
centres are booked, entrepreneurs are unlikely to locate units at
less attractive locations nearby.
It is inevitable that concentrations are formed in the course of
industrial development and, in any case,it is not feasible for more'
than two or three centres to be promoted at a time. It seems,
therefore, that though the definition of a growth centre is different
in Gujarat, the promotional strategy is similar to that adopted in
Mlharashtra.
5. Gujarat Industrial Technlcal Consultancy Organization, Growth Centres for Industrial Dis ersal in Gujarat : An Evaluation and Development of an Appropr;iate Methodology Executive Sunmary, 1983)
1 b.9
The Package Scheme of Incentives
Financial incentives to promote industry in the backward ay'eas \\ere
first introduced 1n a small way in 1968 wnen concessiona1 'loans were
provided to inaustries locating in the backward ta1ukas. Since then,
the magnitude and scope of the incentives provided by the State
Government have increased to a great extent. The major incentives
available in Gujarat are the ~ales Tax incentives, the State cash
Subsidy and the octroi duty exemption. Pioneer units are given
higher incentives and. Since 1977, the incentives are graded
according to the degree of backwardness of the area. 6
Thus, tne incentive schemes are similar to those operating in Mahara-
sntra. In fact. the evolution of the schemes has been geared to
Maharashtra's Package Scheme due to the competition between the two
States in 'luring' industry. The Gujarat schemes, tnerefore, offer
similar advantages as those in Maharashtra. In bujarat. tnere has
been no incentive relating to employment. An incentive for mineral
based industries was available under the 1977 Package Scheme, but
it has been discontinued under the 1983 scheme. The only favourable
aspect in this regard is that such industries are not given lower
rates of incentives. as is the case in Maharashtra.
The main pOint of difference in the implementation of the incentive
schemes between the two States lies in the location policy. While
in Maharashtra the incentives are graded favouring the least
developed talukas, in Gujarat the incentives favour the location of
industry in the growth centres. In Maharashtra, only the Bombay and
6. See Appendix VI.3 for details.
Pune Metropolitan Regions are not eligible for incentives. In
Gujarat, all places with a population exceeding one lakh are
considered 'banned areas I and are not eligible for incentives. This
restriction, however, has been gradually relaxed.
Data relating to the district-wise distribution of assistance under
the Package Scheme. of Incentives was avai lable only for the State
Cash Subsidy. From 1977, when this scheme was introduced'? upto
lY8~83, Rs. 46 crores were sanctioned for the subsidy of which Rs.
30 crores were disbursed. The backward districts received nearly
half the total subsidy sanctioned and about 44 per cent of the
subsidy disbursed. The CIS districts received about 20 per cent.
Bharuch districts had the highest share among the backward districts
with nearly 15 per cent of sanctions and 12 per cent of total
disbursements. Of the non-backward districts, Val sad had the
highest share. AbOut one-fourth of total assistance under the
subsidy scheme was.disbursed in thls district. These two districts
have fast-growing industrial estates -- Vapi in Val sad and
Ankleshwarin Bharuch. The shares of the relatively industrialized
districts of Ahmedabad and vadodara were somewhat low because the
subsidy is not available in the banned areas.
It may be observed that the distribution of assistance under the
State Government incentive scheme in Gujarat is only a little more
favourable towards the backward districts than in Maharashtra. In
Maharashtra,· two non-backward districts of Thane and Nasik, and the
7. Though the first Package Scheme was introduced in 1972, it was discontinued in 1974. From 1974-77, there was no Package Scheme of Incentives available in Gujarat.
170
TABLE Vr.1 DISTRICT-WISE DISTRIBUTION OF ASSISTANCE UNDER THE
STATE CASH SUBSIDY SCHEME (1977-78 TO 19~2-83)
District Sanctions Disbursements
(KS. lakhs) -t %) (Rs.1akhs) (%)
Backward Districts
CIS Districts
Surendranagar 124.79 2.73 74.39 2.50 Bharuch 668.47 14.63 345.80 11 .64 Panchmaha 1 s 169.49 3.71 123.10 4.14
SUb-Total 962.75 21.07 543.29 18.28
Other Backward Districts
Junagadh 332.44 7.27 258.46 B.70 Mehsana 2b5.21 5.80 165.71 5.5~ Bhavnagar 115.92 2.~4 61.32 2.u6 Sabarkantha 83.67 1.83 59.67 2.00 Kutch 393.89 8.62 169.60 5.71 Amre1i 54.99 1.20 28.86 0.97 Banaskantha 71 .41 l.5b 31.10 l.05
Sub-Tota 1 1317.53 28.82 774.72 26.07
Total 2280.28 49.89 1318.0"1 44.35
Non-Backward Districts
Ahmedabad 135.58 2.97 79.30 2.67 Vadodara 13.54 0.30 11 .62 0.39 Surat 38.30 0.84 46.65 1. 57 Kheda 219.78 4.81 203.37 6.84 Va 1 sad 1148.12 25.12 801."15 26.96 Rajkot 7J 3.34 15.61 493.68 16.61 Jamnagar 21.08 0.46 18.16 0.b1 Gandhinagar
Total 2289.74 50.11 1653,93 55.65
GI'and Total 4570.02 100.00 2971.94 100.00
Source : Government of Gujarat s Department of Industries.
171
backward district of Kulaba: he:d v€:ry high !,hares in assistance disbur
sed under the incentive schemes. In Gujarat, too, two non-backward
districts of Val sad and Rajkot and one backward distr'ict of Bharuch
have been the largest beneficiaries under the incent-ive scheme. It
172
may be noted that both these backward districts, Kulaba in Maharashtra
and Bharuch in Gujarat, are very near the developed parts of the two
States.
Institutions for Regional Development of Industry
Several agencies have been instituted in Gujarat for assisting the
development of backward areas through industry and to ensure a more
equitable distribution of industry in the State. The three major
agencies are the Gujarat Industrial Development Corporation, the
Gujarat Industrial Investment Corporation and the Gujarat State
Financial Corporation.
Gujarat Industrial Development Corporation (GIDC)
The GIDC was established in 1962 to assist in creating an optimal
pattern of industry in the State. Like its counterpart in Maharashtra
(the MIDC), the main function of the GIDC is to develop industrial
estates in different parts of the State in order to provide
attractive locations for industry. These estates are equipped with
economic and social infrastructural facilities. Ready plots and
sheds are provided in the estates and some financial assistance is
given to industries for shifting from the developed regions to the
estates. Upto 1983, 119 GIDC estates had been established in
. which ov.er 7,000 units had been set up. It may be noted that, in
Dangs district, there is no GIOC estate.
The GIDC follows a discriminatory pricing policy for land rates
favouring the backward areas. The rates in selected estates in the
developed regions (banned areas where no incentives are provided)
173
and in the developing regions, are shown in Appendix VI.4. It may be
observed that the pricing structure is much more complex than in the
MIDC estates in Maharashtra. Land rates in most estates located in
the developed regions are over Rs. bO per square metre. In the
developing regions, land rates exceed this rate only in four GIOC
estates, among them Vapi and Ank1eshwar. On the average, the rates
in the banned areas were over three times the average rates in the
estates located in developing regions.
In consonance with the current State Government policy of promoting
large-scale industry, a special concession is offered to entrepreneurs
who require large plots. The concession offered is greater in GIOC
estates in the developing parts of the State.
Though the GIOC follows a clearly, discriminatory policy of land rates
favouring the backward areas, its expenditure on developing estates
and areas has been biased towards the non-backward districts. Of a
total Rs. 374.12 1akhs spent upto 1968-69, nearly 90 per cent was
in the non-backward districts. Ahmedabad alone received about 50
per cent of the total followed by Val sad with 30 per cent. Even upto
1981-82, over 70 per cent of GIOC's development expenditure was in
the non-bac~rd districts. Val sad district accounted for over 20
per cent, followed by Ahmedabad with 15 per cent, Vadodara with 13
per cent and Surat with 10 per cent. Uf the backward districts, only
Bharuch had a large share of 19 per cent. It may be observed that the
distribution of development expenditure between the backward and non
backward districts was very similar in Maharashtra.
The distribution of plots and sheds allotted in GIDC estates was
TABLE VI.2 DISTRICT-WISE DISTRIBUTION OF DEVELOPMENT EXPENDITURE
BY THE GIDC
District Development Expenditure Upto 31.3.1969 Upto 31. 3.1982
(Rs.lakhs) ( %) (Rs.lakhs) (%)
Backward Districts CIS Districts Surendranagar 147.34 1.17 Bharuch 2358.17 18.80 Panchmahal s 4.75 1.27 226.43 1.81
Sub-Total 4.75 1.27 2731.94 21.78
Other Backward Districts Junagadh 4.05 1.08 139.65 1.11 Mehsana 5.05 1.35 383.66 3.06 Bhavnagar 10.90 2.91 245.43 1.96 Sabarkantha 41.98 0.33 Kutch 13.36 3.57 54.23 0.43 Amreli 4.50 1.20 20.47 0.17 Banaskantha 38.04 0.31
Sub-Total 37.86 10.11 923.46 7.37 Total 42.61 11.38 3655.40 29.15
Non-Backward Di stricts Ahmedabad 185.37 49.55 1891.52 15.08 Vadodara 1612.23 12.85 Surat 1259.42 lU.04 Kheda 16.11 4.31 312.46 2.49 Val sad 103.54 27.68 2700.23 21 .53 Rajkot 26.49 7.08 315.77 2.52 Jamnagar 301.65 2.41 Gandhi nagar 493.16 3.93
Total 331 .51 88.62 8886.44 70.85 Dangs
Grand Total 374.12 100.00 12541 .84 100.00
Source : Gujarat Industrial Development Corporation, Annual Report (1969-70 and 1981-82)
174
similarly biased. Upto 196~-b9, 243 plots and 280 sheds were allotted,
. of which 50 per cent of plots and 30 per cent of sheds were allotted
175
TABLE VI.3 DISTRICT-WISE DISTRIBUTION UF PLOTS AND SHEDS ALLUTTED
BY THE GIDC
District Plots Allotted Sheds Allotted
Upto 1969 Upto 1982 Upto 1961 Upto 1982
(No. ) (%) (Area in (%) (No. ) (%) (No. ) (%) 1akh sq. kms.)
Backward Districts
CIS Districts
Sur.endranagar 9.14 2.72 130 1.89 Bharuch 60.25 17.96 447 6.51 Panchmaha 1 s 10.77 3.21 5 1.79 144 2.10
Sub-Total 80.16 23.89 5 1. 79 721 10.50
Other Backward Di stri cts
Junagadh 7.82 2.33 3 ~ 1.07 92 1.34 Mehsana 2U.62 6.1 f) 12 4.29 285 4.15 Bhavnagar 3 1. 23 10.56 3.1 f) 36 12.86 248 3.61 Sabarkantha 0.98 0.29 54 0.79 Kutch a.54 0.16 35 12.50 58 0.84 Amreli 0.45 0.13 9 3.~0 52 0.76 Banaskantha 1- . 1.43 0.43 64 0.93
Sub-Total 3 1.23 42.40 12.64 95 33.92 853 12.42
Total 3 1. 23 122.56 36.53 1UO 35.71 1574 22.92
Non-Backward Districts
Ahmedabad 128 52.67 44.05 13.13 83 29.64 1239 18.03 Vadodara 74.86 22.31 726 10.57 Surat 13.80 4.11 1130 16.45 Kheda 29 11 .94 10.58 3. 15 12 4.29 244 3.55 Val sad 83 34.1 b 60.49 18.U3 15 5.36 1321 19.23 Rajkot 4.47 1.33 70 25.00 328 4.77 Jamnagar 2.49 0.74 308 4.48 Gandhinagar 2.23 0.67
Total 240 98.77 212.97 63.47 180 64.29 5296 77 .08
Dangs
Grand Tota 1 243 100.OU 335.53 lOU. 00 280 lOu. 00 6870 1 UO. 00
Source: Same as Table VI.2.
176
in Ahmedabad district alone. The backward districts together accoun
ted for only one per cent of plots and 36 per cent of sheds allotted.
Their share in sheds was greater because sheds are required by small
scale units whereas large and medium scale units require plots. It
seems, therefore, that only three large units were located in the
backward districts upto 1968-69. By 1981-82, 36 per cent of plots
and 22 per cent of sheds allotted were in the backward districts.
Bharuch district accounted for 18 per cent of plots and also had the
largest share of 6.5 per cent in sheds allotted among the backward
districts. Among the non-backward districts, Val sad, Ahmedabad and
Vadodara had the large shares.
These results show that the non-backward districts have been the
greater beneficiaries of GIDC's developmental efforts. Ahmedabad
and Vadodara, where the largest industrial concentrations in the
State are to be found, have together received 30 per cent of
development expenditure. Val sad, another non-backward district, has
been highly favoured, mainly with a view to providing Bombay-based
entrepreneurs with developed locations near Bombay_ Bharuch, the
only backward district to have benefited significantly from the
GIDC's promotional efforts, neighbours Vadodara along the Bombay
Vadodara corridor. In fact, many of the industrial estates in
Bharuch and Val sad lie on the national highway or trunk line
connecting Bombay and Vadodara. The emphasis, therefore, seems to
have been to attract industry away from the Bombay-Thane belt,
rather than to develop backward areas. This is in itself justifiable;
since these two districts of Val sad and Bharuch were not well
developed industrially till promotional efforts were made, promoting
177
industrial locations in these areas was better from the point of view
of regional balance rather than leaving entrepreneurs with no option
than to locate units in the more developed parts of the State. There
is, however, no justification for spending large amounts on
developing estates around Ahmedabad and Vadodara. This has led to
relative"ly greater development of industry in areas where industry
would have been located without this expenditure.
Upto 1968-69, Rs. 12.5 crores was invested and over 7,000 persons
were employed by units set up in GIDC estates. About 70 per cent
of this total industry assisted was in Ahmedabad district, and
over 90 per cent of investment and employment created was in the
non-backward districts. By 1981-82, the situation was not much
better. Over 80 per cent of investment and employment in the
assisted units was in estates in the non-backward districts, of
which over 30 per cent was in Ahmedabad. Val sad district followed
with 24 per cent of investment and 20 per cent of employment. Of
the backward districts, Bharuch was the only district with a share
of over five per cent. This gives a clear indication that the
greatest beneficiary of GIUC's assistance has been the highly
industrialized district of Ahmedabad. The argument put forward
in support of developing estates in Ahmedabad district is that
this would prevent entrepreneurs from locating units in Ahmedabad
city, and would enable units to be shifted out of city limits. It
is felt, however, that large government expenditure is not required
to meet these objectives. There are various means of preventing
industrial location in urban areas and, if industry is to be
shifted out of urban limits, it should be provided locations in
178
TABLE VI.4 DISTRICT-vIISE STATISTICS OF UNITS SET UP IN GIDC AREAS
Di stri ct Investment Catalysed Employment Generated
Upto 1969 Upto 1982 Upto 1969 Upto 19~2
(Rs. ( %) tRs. ( %) (No. ). (%) (No. ) (%) lakhs) 1 a khs )
Backward Districts
CIS Districts
Surendranagar 857.34 1. 34 1854 1.48 Bharuch 4610.44 7.23 7349 5.86 Panchmaha 1 s 1.67 0.13 698.32 1.10 18 0.25 1666 I. 33
Sub-Total 1.67 0.13 6166.10 9.67 18 0.25 10869 8.67
Other Backward Districts
Junagadh 4.76 U.38 641 .47 1.01 24 0.33 1432 1.14 Mehsana 4.40 0.35 2272.31 3.56 93 1.29 5298 4.23 Bhavnagar 22.17 1.77 967.95 1.52 332 4.59 3543 2.83 Sabarkantha 159.09 0.25 400 0.32 Kutch 19.47 1.55 98.71 0.15 126 1.74 494 0.39 Amrel i 3.59 0.29 39.36 0.06 19 0.~6 190 0.15 Banaskantha 395.43 0.62 1017 0.81
Sub-Total 54.39 4.34 4574.32 7.17 594 8.21 12374 9.87
Total 56.06 4.47 10740.42 16.84 612 8.46 23243 18.54
Non-Backward Districts
Ahmedabad 909.31 72.46 22733.16 35.66 4870 67.39 38342 30.60 Vadodara 4223.95 6.63 -14748 11.77 Surat 4674.56 7.33 11212 8.95 Kheda 20.51 1.63 2453.25- 3.85 279 3.86 3704 2.96 Va 1 sad 185.29 14.76 15541.29 24.38 555 7.68 25595 20.43 Rajkot 83.80 6.68 1737.~5 2.73 911 12.61 5193 4.14 Jamnagar 1614.79 2.53 3237 2.58 Gandhinagar 33.25 0.05 37 0.03
Total llY8.91 95.53 53011. 50 83.16 6615 91 .54 102068 81.46 Le.ngs
Grand Total 1254.97 100.00 63751~92 100.00 7227 100.00 125311 100.00
Source: Same as Table VI.2.
less developed parts of the State rather than around the industrial
agglomerations.
The industry assisted in GIDC estates in selected growth centres
(established in 1977) are shown in the following Table.
TABLE VI.5 INDUSTRY ASSISTED IN GIDC AREAS IN SELECTED GRUWTH
CENTRES (AS ON 31.3.1982)
Growth Cen tre
Vapi Umreth Ank1eshwar Ka1o1 (M) Mehsana Godhra Ka1o1 (P) Surendranagar V. U. Nagar
Uni ts in Production
Investment Catalysed
lNo. ) (%) (Rs.crores) (%)
680 302 257 144 104
47 51 82
165
9.32 4.14 3.52 1.97 1.42 0.64 0.70 1. 12 2.26
127.62 19.85 38.25 10.71 7.00 1. 61 4.94 4.89
16.29
20.02 3. 11 6.00 1. 68 1.10 0.25 0.77 0.77 2.56
Employment Generated (No. )
187UO 4055 6144 2233 1990 478
1129 1439 1833
{%)
14.92 3.24 4.90 1. 78 1. 59 0.38 0.91 1. 15 1.46
Notes 1. Percentage refers to share in industry assi sted in all GIDC areas.
? Ka1o1 tM) is in Mehsana district and Ka-lo1 (P) is in Panchmaha1s district.
Source :Same as Table VI.2.
179
It may be observed that the large share of Val sad district is actually
accounted for by the Vapi industrial estate. This estate had 20 per
cent of total investment cata1ysed and 15 per cent of total employ
ment generated in all GIDC areas in the State. Of the growth
centres, Ankleshwar ranked second in terms of investment and emp1oy-
ment created. In fact, the majority of industrial development in
Bharuch district appears to have been in this industrial estate. On
the other hand, growth centres such as Godhra and Surendranagar,
which are also in CIS districts (as is Ankleshwar), have not
attracted much industry. These' resul ts bear out the ear I ier propo
sition that growth centres near the developed regions, and in the
Bombay-Vadodara-Ahmedabad corr; dor, have been successfu I in
attracting industry.
Gujarat Industrial Investment Corporation (GIIC)
180
The GIIC was established in 1968 with functions similar to those of
SICUM in Maharashtra. Thus, the GIIC provides capital participation,
sponsors and underwrites new issues of shares and securities and
grants long and medium term loans to enable the assisted units to
meet their fixed capital requirements. Since April, 1979, the GIIC
assists only large and medium. scale units. Other than its financial
schemes, the GIIC promotes projects in the public, joint and
assisted sectors, and operates the State Cash Subsidy scheme of the
Sta te Government. Unl ike SICOM, the GIIC 'is not acti vel y invol ved
in the promotion of growth centres. It is also not barred from
assisting units in developed areas like Ahmedabad and Vadodara.
Data on district-wise assistance provided by the GIIC was available
only from 1977-78 onwards. However, assistance in this period
amounted to over 80 per cent of the total assistance provided since
inception, so that the data may be considered representative of the
entire period.
TABLE VI.6 DISTRICT-HbE DISTRIBUTION OF ASSISTANCE BY THE GIIC
(1977-78 TO 1982-83)
Di strict Units Assisted Assistance Assistance Sanctioned Disbursed
(No. ) ( %) \ Rs . 1 a k h s) ( % ) (Rs.lakhs) (%)
Backward Di stricts
CIS Districts
Sureridranagar 10 2.53 302.32 2.41 132.32 1.77 Bharuch 78 19.70 3127.09 24.91 1871 .44 24.97 Panchmaha 1 s 23 5.81 1070.99 8.53 444.94 5.94
Sub-Total 111 28.04 4500.40 35.85 2448.70 32.68
Other Backward Districts
Junagadh 3 0.76 217.97 1. 74 121.33 1.62 Mehsana 22 5.56 961 .19 7.66 463.76 6.19 Bhavnagar B 2.02 264.45 2.11 165.39 2.21 Sabarkantha 1 0.25 14. fJO 0.11 0.96 0.01 Kutch 14 3.54 574.54 4.58 226.39 3.02 Amreli 1 0.25 0.10 N Banaskantha 3 0.76 180.00 1.43 13.u5 0.17
Sub-Total 52 13.14 2212.25 17.63 990.88 13.22 Total 163 41.18 6712. b5 53.48 3439.58 45.9U
Non-Backward Districts
Ahmedabad 92 23.22 1792.83 14.28 1564.84 20.88 Vadodara 39 9.85 792.76 6.32 553.05 7.J8 Surat 15 3.79 703.54 5.60 436.30 5.82 Kheda 13 3.28 374.73 2.99 179.27 2.39 Val sad 50 12.62 1718.70 13.69 1034".80 13.81 Raj kat 17 4.29 297.46 2.38 225.70 3.01 Jamnagar 5 1.26 111.18 0.87 53.90 0.72 Gandhinagar 2 0.51 49.00 0.39 6.40 0.09
Total 233 5~.92 5840.z0 46.52 4054.26 54.10 Dangs
Grand Total 396 100.00 12552.85 100.00 7493.84 100. 00
Note: Data relate to assistance under GIIC's General Scheme.
Source : Gujarat Industrial Investment Corporation.
181
182
From lY77-78 to lY82-83, 39b units were assisted by the GIIC of which
about 40 per cent were in the backward districts. These ten districts
accounted for over 50 per cent of assistance sanctioned but about 45
per cent of disbursements. Bharuch district received nearly one-·
fourth of total assistance, followed by Ahmedabad and val sad. It
appears, tnerefore, that these districts nave l~eceived the most
assistance both from the GIDC and the GSFC.
The distribution of assistance by the GIDC is much more in favour of
the non-backward districts than that by the GIle. it may be
observed that the share of the backward districts in sanctions is
greater than their share in disbursements. In fact, particularly
in the non-backward district of Ahmedabad, sanctions formed 14 per
cent of the total whereas disbursements were nearly 21 per cent.
Still, of the total assistance~ about half has been disbursed in the
backward districts. This distribution between the backward and non
backward districts is similar to the distribution of SICOM's
assistance. It may be noted that the NO-Industry District of Jlings
has recei ved no assistance a ta 11.
Gujarat State Financial Corporation (GSFC)
The GSFC was established in 1960 to provide financial assistance to
medium and small industry. In Gujarat, this has been the primary
financial institution and provides assistance by way of term loans,
underwriting and guarantees. It also operates the Refinance scheme
of the lOBI.
While the GIrC had sanctioned Rs. 165 crores of assistance upto
1982-33, the GSFC sanctioned loans worth Rs. 312.60 crores. The
TABLE VI.7 DISTRICT-'HSE DISTRIBUTION OF ASSISTANCE DISBURSED
BY THE GSFC
Di strict Assistance Disbursed
Upto 31.3.1971 Upto 31.3.1983 (Rs.1akhs) (%) (Rs.1akhs) (%)
Backward Districts
CIS Di stricts
Surendrana~ar 35.U9 2.16 1096.39 4.74 Bharuch 53.47 3.29 2626.69 11.37 Panchmaha 1 s 19.69 1.2l 1528.80 6.62
Sub-Total 108.25 6.66 5251.88 22.73
Other Backward Oi stricts
Junagadh 73.44 4.51 1595.13 6.90 Mehsana 66.99 4.12 1121 .85 4.86 Bhavnagar 69.85 4.29 696.59 3. u1 Sabarkantha 19.97 1.23 327.37 1. 42 Kutch 13.29 0.82 576.99 2.00 Amre1 i 6.06 0.37 209.54 0.90 Banaskantha 12.112 0.76 148.33 0.64
Sub-Tota 1 262.02 16.10 4675.80 20.23
Total 370.27 22.76 9927.68 42.96
Non-Backward Districts
Ahmedabad 578.38 35.55 4215.42 18.24 Vadodara 125.52 7. TI 1697.76 ·7.35 Surat 200.19 12.30 1227.33 5.31 Kheda 115.57 7.10 805.67 3.49 Va 1 sad 6!:>.25 4.01 3064.12 13. L6 Rajkot 101.97 6.27 1782.71 7.72 Jamnagar 64.71 3.~8 275.72 l.19 Gandhi nagar 5.25 0.32 105.39 0.46
Total 1256.84 77 .24 13174.12 57.02
Dangs 4.57 0.02
Grand Total 1627.11 100.00 23106.37 100.00
Source : Gujarat State Financial Corporation, Annual Report (1970-71 and 1982-83)
district-wise distribution of assistance disbursed by the GSFC shows
a trend in favour of the backward districts. Upto 1970-71, 23 per
183
184
cent of assistance disbursed was in the backward districts, whereas
by 1982-~3, their share had increased to 43 per cent. This was much
greater than MSFC's disbursements in backward districts in Maharash
tra, which was below 3U per cent. upto 1970-71, none of the backward
districts had very large shares in assistance disbursed by the GSFC.
Among the non-backward districts, Ahmedabad had the highest share of
over one-third of the total fallowed by Surat. In 19~2-83, among
the backward districts, Bharuch had the highest share of over 11 per
cent. In fact, the CIS districts together accounted for more than
half the total assistance disbursed in all the backward districts.
Ahmedabad continued to have the largest share of over 18 per cent
followed by Val sad with more than 13 per cent.
These results show that the assi stance provi ded by a 11 three State
Government institutions, the GIDC, GIIC and GSFC, has been mainly
received by three districts -- Ahmedabad, Val sad and Bharuch. As
argued earl ier, though the pr:omotion of industry through financial
and non-financial assistance in Val sad and Bharuch may be justified
on economic and regional grounds, the diversion of resources to
Ahmedabad is considered undesirable.
Industrial Extension Bureau (iNDEXTb)
Special mention is necessary regarding the activities of the iNDEXTb.
The main role of this organization is to provide an entrepreneur with
a 'Single-point contact' where all information required for setting
up an industrial unit may be obtained, and to co-ordinate the
fac.ilities provided by the various agencies. Though it does not
provide financial assistance, it has proved beneficial and attractive
185
to entrepreneurs. In facts after observing the success of this organ
ization in promoting industry in Gujarat s the 'Udyog Mitra' was set
up in Maharashtra with a similar functional role.
Central Government Incentives
Upto 1983 s three districts were eligible for the Central Government
incentive -- the Capital Investment Subsidy -- and ten, in all, for
the other schemes. Under the 1983 scheme, all ten districts are
eligible for the Central Government incentives and one more district,
. [)angs, has been added to the 1 ist of centrally-declared backward
districts and given the designation of a 'No-Industry District'.
Capital Investment Subsidy Upto 19~2-83, 321b units had been
sanctioned assistance amounting to Rs. 2719.46 lakhs under this
scheme, and Rs. 1687.53 lakhs had been disbursed. More than half
this assistance was in Bharuch district. Of total disbursements,
57.53 per cent was in Bharuch, 23.47 per cent in Panchmahal sand
19 per cent in Surendranagar.
Schemes of Concessiona1 Finance Under its Project Finance Scheme,
the lOBI sanctioned Rs. 1940.30 lakhs upto 30.6.1Y82, of which Rs.
991.18 lakhs had been disbursed. Bharuch received nearly one-third
of assistance sanctioned and 45 per cent of disbursements. Panch
mahals was the second largest beneficiary with 18 per cent of
sanctions and 15 per cent of disbursements. Under the Concessional
Refinance Scheme of the lOBI, 4934 units had been sanctioned
assistance worth Rs. 15315.09 lakhs upto 30.6.1982, of which Rs.
~318.86 lakhs had been disbursed. Bharuch again had the single
largest share of about 40 per cent. Other districts with fairly
large shares of 10-\5 per cent were Panchmahals, Junagadh and
Mehsana.
Therefore, Bharuch district seems to have benefited the most from
the Central Government incentive schemes. Panchmahals, another CIS
district, has also received considerable amounts of assistance
under these schemes.
Industrial Licences Before summing up the distribution of
-government assistance, it may be worthwhile to observe how far the
Central Government pol icy of assisting backward areas is reflected
in the grant of industrial licences and letters of intent between
the backward and non-backward districts. There was a clearly
marked difference between the district-wise distribution o'f
industria'\ 1 i cences duri ng 1960-70 (prior to the impl ementa tion of
the Central Government schemes for backward areas} and during the
later period from 1972-84.
In the earlier period. the backward districts received barely 10
per cent of total industrial licences in Gujarat whereas, in the
next decade, they accounted for about one-fourth of licences.
Though still a low share, this was a marked improvement over the
previous period. The CIS districts received less than two per
cent of licences from 1960-],0 and about 14 per cent in the next
period. This was mainly because Bharuch district received about
nine per cent of the tota I.
During 1960-70, Ahmedabad received more than one-third of total
licences granted in the State, followed by Vadodara with nearly
30 per cent. Thus, over 60 per cent of total licences were given
186
TABLE VI.S DISTRICT-WISE DISTRIBUTION OF INDUSTRIAL LICENCES
AND LETTERS UF INTENT
District
Backward Districts CIS Districts Surendranagar Bharuch Panchmaha1 s
Sub-lotal Other Backward Districts Junagadh Mehsana Bhavnagar Sabarkantha Kutch Amreli Ba na s ka n tha
Sub-Tota 1
Total Non-8ackward Districts Ahmedabad Vadodara Surat Kheda Va 1 sad Rajkot Jamnagar Gandhinagar
Total Dangs Location not specified
Grand Total
Industrial Licences
1960-70 1972-84
Letters of Intent 1972-84
(No.) (%) (No.) (%) (No.) (%)
3 3 1 7
9 7 9 1 3
29
36
128 105 43 10 23 11 11
331
0.tl2 12 0.82 84 0.z7 35
1.91 131
2.45 22 1 .91 31 2.45 20 0.27 5 0.82 19
5 4
7.90 106
9.81 237
34.tl8 189 28.61 224 11 .12 60
2.72 59 6.26 102 3.00 21 3.00 23
8
90.19 686
1.27 22 8.86 128 3.69 50
13.82 200
2.32 19 3.27 27 2.11 19 0.53 4 2.00 45 0.53 6 0.42 7
11 .18 127
25.00 327
19.94 130 23.63 186 6.33 49 6.22 43
10.76 104 2.22 12 2.43 19 0.84 24
12.37 567 19
1.80 10.49 4.10
16.39
1. 56 2.21 1. 56 0.33 3.69 0.49 0.5/
10.41
26.80
10.66 15.25
4.U2 3.52 8.52 0.98 1.56 1. 97
46.48
1. 56
25 2.63· 307 25.16
367 100.00 948 100.001220 100.0U
187
Source : 1. Government of Gujarat, Directorate of Industries, Industries in Gujarat : Handbook of Information
2. Industrial ~xtension Bureau.
in these two districts. During 1972-34, the share of these two
developed districts declined to about 45 per cent. It may be noted
that the rapid industrialization of Val sad in this period is borne
out by its large share in industrial licences of over 10 per cent
in recent years. This is also true of Bharuch which had the highest
share among the backward districts.
A similar distribution was observed regarding the letters of intent
granted during 1972-84. The backward districts together accounted
for over one-fourth of letters Of intent and the non-backward
districts for over 45 per cent. Among the backward districts,
Bharuch had the largest share of over 10 per cent. Vadodara had
the highest share of over 15 per cent among all districts, fOllowed
by Ahmedabad and Val sad. Thus, even in the distribution ot
licences and letters of intent, the largest shares are of the
developed districts of Ahmedabad and Vadodara. The only other
districts with substantial shares are Val sad and Bharuch.
The regional distribution of assistance to the backward and non-. backward di stricts may be better observed by c1 ubbing together the
assistance provided by all the agencies. Total assistance disbursed
upto 1970-71 relates only to assistance disbursed by the GIDC and
GSFC. The other sources of assistance are excluded in this period
because the GIIC started operations only in December, 1969, and the
incentive schemes were not provided at this time. Total assistance
upto 1982-83 includes disbursements by the GIDC, GIIC, GSFC and
under the State Cash Subsidy and Capital Investment Subsidy schemes.
Upto 1970-71, the backward districts received only 20 per cent of
l8ts
189
TABLE VI.9 DISTRICT-WISE DISTRIBUTION OF TOTAL ASSISTANCE DISBURSED
District Upto 1970-71 Upto 19~2-83
Total Per Total Per Capita Capita
(Rs.1akhs) (%) (Rs.) (Rs.lakhs) (%) (Rs.)
Backward Districts
US Districts
Surendranagar 35.09 1. 75 4.15 1813.22 3.77 175.33 Bharuch 53:47 . 2.67 4.82 8308.25 1 7.29 640. 85 Panchmaha 1 s 24.44 1.22 1.32 2804.75 5.84 120.81
Sub-Total 113.00 5.64 3.43 12926.22 26.90 312.33
Other Backward Districts
Junagadh 77 .49 3.87 4.68 2114.57 4.40 100.66 Mehsana 72.04 3.60 3.44 2134.98 4.44 83.76 Bhavnagar 80.75 4.04 5.75 1168.73 2.43 62.19 Sabarkantha 19.97 ·1.00 1.68 4·29.98 0.89 28.62 Kutch 26.65 1.33 3.14 1027.21 2.14 97.81 Amre1i 10.56 0.53 1.24 258.87 0.54 23.99 Banaskantha 12.42 0.64 0.98 230.52 0.49 13.82
Sub-Tota 1 299.88 15.01 2.99. 7364. ~6 15.33 58.69
Total 412.88 20.6!) 3.12 20291.08 42.23 134.78
Non-Backward Districts
Ahmedabad 763.75 38.16 26.24 7751.08 16.13 199.99 Vadodara 125.52 6.27 6.34 3874.66 8.06 151. 47 Surat 200.19 10.00 11. 20 2969.70 6.1~ 119.11 Kheda 131 .68 6.58 5.37 1500.77 3.12 49.78 Val sad 168.79 8.4311.81 7600.30 15.80 428.39 Rajkot 128.46 6.42 7. ~1 2817.86 5.86 134.63 Jamnagar 64.71 3.23 5.82 649.43 1. 35 46.6·2 Gandhinagar 5.25 0.z6 2.62 604.95 1.26 209.26
Total 1588.35 79.35 9.66 27768.75 57./6167.41 Dangs 4. ~7 0.01 4.02
Grand Total 2001 .23 100.00 5.71 48064.40 100.00 141.64
Source: Same as Tables VI.l, VI.2, VI.6 and VI.7.
total assistance disbursed, while Ahmedabao alone received nearly
40 per cent. Average per capita assistance in the backward districts
was one-third the average in the non-backward districts, and per
capita assistance in Ahmedabad was over four times the averaqe of
all the districts. uther districts with large shares in this period
were Sura t and Val sad.
By 1~82-83, the position of the backward districts improved to a
considerable extent. These districts then received over 40 per
cent of assistance, of which over 25 per cent was in the CIS
districts. In fact. Bharuch district had the single largest share
of 17 per cent among all districts. Among the non-backwarp
districts, Ahmedabad had the largest share, followed by Val sad and
Vadodara. In terms of per capi ta ass istance, Bharuch hel d the top
position, followed by Val sad. Though per capita assistance in the
backward districts, on the average, was still lower than that in •
the non-backward districts, the difference was no longer as great
as that in 1970-71. Thus, while upto 1970-71 Ahmedabad and Surat
were the greatest beneficiaries of government assistance, by
1982-83, Bharuch held top position, followed by Ahmedabad and
Val sad.
Conc1 uSion
Industrial location policy in Gujarat may be divided into three
stages. From the mid-sixties to the early seventies, the emphasis
was on developing small-scale industry in the State. From the
early seventies, when the Central Government provided incentives
for industrial development of the backward areas, upto 1977, the
major thrust of the location policy in the State was to restrict
industrial growth in and around the larger cities. It was only
190
after 1977 that a concerted effort was made to promote regional
balance using a system of graded financial incentives.
Location policy has consisted of both positive and negative approa
ches. Certain areas around cities and towns were declared 'banned
areas' where no incentives would be provided to industry. This
may be termed a policy of 'passive discouragement'; if entrepreneurs
considered the banned location attractive despite the non-avail
ability of financial incentives, they could set up units there. At
the same time, a positive location policy was followed. Financial
incentives were provided and industrial estates were developed to
provide alternative locations for industry away from towns. The
idea seems to have been to prevent industry from locating within
town limits in order to avoid the congestion that would inevitably
follow and, Simultaneously, to encourage industry to locate in
certain earmarked areas, the industrial estates.
Industrial development in Gujarat has been rapid in recent years,
and especially in the 1980s. This process has been considerably
assisted by the promotion of industry, and particularly of large
and medium industry, in well-located industrial est~~es, as well
as by the provision of financial incentives on par with those
available in Maharashtra. fhe location policy regarding industrial
estates has been influenced by the fact that industry had to be
'lured' away from the neighbouring State of Maharashtra, and from
Bombay in particular. This problem was tackled by establishing a
number of large estates near Bombay and along the Bombay-Ahmedabad
route. Mention may be made of two industrial estates which have
been very successful due to their locational advantage -- Yap; in
191
192
Valsad district and Ank1eshwar in Bharuch district. A factor which
has proved beneficial for the development of industry in these estates
has been the restrictions placed on industrial location in and
around Bombay. Therefore, to some extent, Maharashtra's policy of
industrial dispersal seems to have resulted in 'pushing' entrepreneurs
to establ ish units in Gujarat. This is borne out by the fact that,
in the case of most large industrial units in the estates of Vapi and
Ankleshwar, the head offices are based in Bombay.
In Gujarat, as in Maharashtra, attempts have been made to promote
industry, and especially large and medium industry, in relatively
backward areas which have a certain requisite level of infrastructure.
The choice of such 'intermediate' areas makes better economic sense
because development there requires relatively fewer. resources for
initial investments. Thus, when a backward district was to be
chosen for the Capital Investment Subsidy scheme of the Central
Government, Bharuch district was selected. This was not the
industrially most backward district but had a tribal belt and could
be considered a lagging region. The State Government felt that
this district would be able to respond to preferential treatment
quickly, because it was located in the Bombay-Vadodara corridor and
was well-connected by road and rail. Subsequently, when two more
districts were to be selected for the CIS scheme, the districts
chosen were backward (again, not the most backward) but had a good
potential for industrial growth. Therefore, Surendranagar in
Saurashtra region was selected to satisfy an 'area approach J, and
Panchmahals, a tribal district, selected because it was well
connected to large cities by road and rail. (The rail trunk route
from Bombay to Delhi passes through this district.)
On the other hand, the industrially most backward district in the
State, Dangs, was not designated a centrally backward district till
1983, when it was identified as a NO-Industry District. This was
mainly because industrial development was not considered feasible
in this district even if incentives were provided. This district
193
is largely tribal and forested so that setting up even small-scale
units constitutes a problem. Permission from the Central Government
is required to clear forest. areas and is relatively diffi,cul t to
obtain. This provides a good example of the type of locational
problems that handicap certain backward areas and render them
unsuitable as locations for large industry. ~1any of the districts
which have been deSignated as INo-Industry Districts I suffer from
similar locational or geographical handicaps due to which they have
been unable to attract large and medium industry. Here,economic
development should not be attempted through large industrial growth.
Instead, the focus should be on the development of basic facilities
and cottage and small industries based on Tocal resources and crafts.
It was earlier noted that Dangs has been completely neglected in
terms of assistance for industrial development because of its
special problems. There is no GIOC estate and, even upto 1982-33,
this district had received less than Rs. 5 lakhs by way of financial
assistance for industrial development.
Today, in Gujarat, though Ahmedabad and Vadodara continue to be the
industrially most developed districts, much of the recent .industrial
development has been taking place in the Bombay-\fadodara corridor,
and especially in the districts of Val sad and Bharuch. Attempts are
being made to develop industry north of Vadodara in Panchmahals
district. These attempts to achieve a balance between regional and
efficiency considerations form the basis of industrial location
policies in Gujarat and in Maharashtra.
194
APPENDIX VI.l A NOTE ON THE BACKWARD TALUKAS
In 1966, eleven criteria were used for identifying the backward
talukas. These were:
1) Literacy rate in rural areas (persons in age groups of five and
above);
2) Percentage of workers in the tertiary sector to total workers;
3) Percentage of agricultural workers to total workers;
4) Net area sown per agricultural worker;
5) Percentage of gross area irrigated to gross area sown;
195
6) Percentage of area sown more than once to net area sown;
7) Hospital beds per lakh population;
8) Percentage of urban population to total population;
9) Percentage of area under food crops to area under all crops;
10) Cultivable area per agricultural worker; and
11) Density of population per square mile.
These criteria were chosen as the most appropriate in view of the
data available at the taluka level. The 185 talukas in the State
were ranked on the basis of each indicator. The total of all the
ranks was obtained for each taluka and this total was used for
giving the final rank to each taluka. In May, 1966, the State
Government defined 30 per cent of the talukas, i.e., 56 talukas,
as backward on the basis of this identification methodology.
In 1968, the State Government provided that the Gujarat State Finan
cial Corporation waul d grant financial assistance upto Rs. 75,000
(and, in exceptional cases, upto Rs. 1 lakh) at a concessional rate
of interest of 5 per cent to small-scale units in the 56 backward
taluka.s. In 1971, on the basis of the Hathi Committee report, the
196
GSFC was empowered to grant loans upto Rs. 5 1akhs at this concessional
interest rate to all units in the ten districts identified as backward
by the Central Government and to small-scale units in the backward
ta1ukas. From 1972, when the all-India financial institutions
started providing concessiona1 finance and refinance to industry in
the centrally-declared backward di stricts, on1 y tal ukas whi ch were
not in these districts were made eligible for the,concessiona1 loan
of the State Government. Thus, small-scale units in only 21 talukas
remained eligible for this loan. In 1983, when Dangs was declared a
No-Industry District, this ta1uka was also dropped 'from the list.
Today, only 20 ta1ukas are classified as backward for the purpose
of State Government assistance.
The criteria used for defining the backward tal ukas have undergone
modifications over time. Now, '25 criteria relating to economic and
social indicators of development are used for identifying the
relatively backward ta1ukas.
I Economic Indicators
A Agricultural :
List of Indicators
1 Net cropped area per agricultural worker
2 Percentage ot area sown more than once to net area sown
3 Percentage of gross irrigated area to gross cropped area
4 Number of electric pump sets and diesel engines per 1,000 hectares
of gross cropped area
5 Number of tractors per 1,000 hectares of gross cropped area • 6 Percentage of villages having milk co-operative societies to total
inhabited villages
B Non-Agricultural
Urbanization:
7 Percentage of urban population to total population
Industries :
8 Number of registered factory workers per lakh population
197
~ Number of registered Small Scale Industrial units per lakh population
10 Percentage of workers in household industries to total workers
11 Percentage of secondary and tertiary workers to total workers
II Infrastructural Indicators
A Power :
12 Percentage of population of electrified villages and towns to total
population of taluka
B Transport and Communications
13 Length of surfaced roads per lakh of population
14 Length of surfaced roads per 100 square kms of area •
15 Percentage of villages having all-vJeather State Transport facility
to total inhabited villages
16 Number of Post & Telegraph offices per 100 square kms of area
17 Number of bank offices of scheduled commercial banks per lakh of
popul a tion
18 Number of co-operative banks and primary agricul tural co-oper'ative
credit societies per lakh of population
III Quality of Life Indicators
A Educa tion :
19 General literacy rate of taluka
20 Female literacy rate of taluka
21 Rural literacy rate of taluka
22 Number of secondary and higher secondary schools per lakh of
population
B Health
23 Number of hospital beds per lakh of population
198
24 Percentage of villages having an allopathic or ayurvedic doctor to
total inhabited villages
20 Percentage of villages having drinking water facility to total
inhabited villages
APPENUIX VI.2 A NOTE ON THE SELECTION Or GROWTH CENTRES
In 1977, growth centres were selected on the basis of 16 criteria.
These were as follows.
-----------------------------------------------------------Indicators Weightage
Functional CategDries 8 Important commodities manufactured 8 Distance (in kms) from railway station 6 Distance (in kms) from district headquarter 6 Number of industrial connections 6 Population 5 Growth rate of population b Distance {in kms) from ta1uka headquarter 4 Percentage of industrial connections to total connections 4 GIDC's estate details 3 College facility 2 Cinema facility 1
. Protected water supply 1 Firefighting service 1 Medical facility 1 Telephone connection 1
Total 62
199
On the basis of these criteria, 69 towns were selected out of a total
of 216 towns having a population exceeding 10,000 as per the 1971
Census. In 1979, two more criteria were added :
1) Distance (in kms) from state or national high~y (with a weightage
of 3); and
2) Commercial importance of a place (with a weightage of 2).
It was considered that distance from a highway was as important a
measure of transport facilities available as distance from a railway
station. Therefore, the weightage of 6 previously assigned to the
latter indicator was divided equally between both these indicators.
Commercial importance of a place was included because it was felt
that, if a town was a market centre, it was more likely to attract
industry. On the other hand, distance from taluka headquarter was
200
not regarded as very important, since it was found that entrepreneurs
usually preferred to go to the district headquarter to solve any
problem. Therefore, the wei~htage of 4 was equally divided between
these two indicators. Thus, in 1979, eighteen criteria were used
with a total weightage of 62, and the number of growth centres
i ncrea sed to 121.
List of Growth Centres
Ui stri ct Growth Centre
Growth Centres Selected in 1977
Val sad Surendranagar. Kheda
Kheda tvEhsana Panchmahal s Va 1 sad
Surendranagar Bharuch Panchmahal s Junagadh
Mehsana Bhavnagar
Grade IA I
Va 1 sad Surendranagar Nadiad
Grade IBI
Anand, Vidyanagar Mehsana, Kalol, Patan, Sidhpur Godhra Navsari, Bilimora
Grade IC I
Dhrangadhra, Wadhvan, Thangadh, Limbdi' Bharuch, Rajpi pl a, Ankl eshwar Da ho d , Ka 1 0 I
Junagadh, Porbandar, Keshod, Patan, Una, Bantwa, Vanthal i, Manavdar Visnagar, Kadi, Unjha Mahuva, Sihor, Botad, Talaja, Savarkundla
201
Sabarkantna Idar, Hima tnagar, Modasa Kutch Gandnidham, Bhuj, Anjar rinreli Amreli ~naskantha Pa 1 anpur, Oeesa Ahmedabad Viramgam, Bavla, Oehgam, Oho 1 ka Vadodara Padra, Kar jan Surat Bardoli, Vyara Kheda Khambat, Petlad, Kapadwanj Val sad Gandevi, Vapi, Pardi, Umbergaon Rajkot Gondal, Wankaner, t-brvi, Jetpur, Ja sdan,
Ohoraj i, Up 1 eta Jamnagar Khambal ia
Growth Centres Added after 1977
Surendranagar Bharuch Panchmahals
Junagadh Mehsana Bhavnagar
Sa barkantha Kutch Amreli Banaskantha Ahmedabad Vadodara Surat Kheda Val sad Jamnagar Gandhinagar
Grade 'e'
Bamanbore Palej, Hansot, Jambusar, Amod, Zagadia, Vagra Lunawada, Halol, Oevgadhbaria, Piplod, Baska, Panelav Mangrol, Gadu, Kutiyana, Talala Saij Palitana, Vallabhipur, Gariyadhar, Gadhada,Vartej, Umrarala, Budhel, Chitra (GIOe estate) Ta 1 od , Pranti j Mandvi, Bhachau, Mundra Bagsara, Chital, Chalala, uamnagar Ambaji Sanand Dabhoi, Bodeli, Chhotaudepur, Vaghodia Kathor, Sandhir, Sayan Umreth, Mehmedabad, Antarsuba, Kanjari, Borsad Oungri Dhrol Gandhinagar
APPE~D1X VI.3 A NOTE ON THE PACKAGE SCHEME OF INCENTIVES
The first Package Scheme was adopted in 1972. The incentives
provided were :
1) Interest-free sales tax loan;
2) Octroi duty exemption tor five years;
3) Electricity duty exemption for five years;
4) Aid in industrial housing;
5) Other incentives like technical and marketing guidance and
preference in government purchase.
The most important of these incentives was the sales tax incentive.
The loan was granted equal to the amount of sales tax paid by an
industrial unit in the previous three years, limited to 2U per cent
of the capital outlay of the unit. Ihe loan was repayable in 10
equal annual instalments commencing from the sixth year.
202
Ihis scheme of incentives was in torce till 1974, when it was discon
tinued. From 197~-77 there were no State Government incentives
available, and the only incentives given to industry in the backward
areas were the Central Government incentives and the concessional
loans provided in the backward talukas. The octroi duty and electri
city duty were continued.
In 1977, a new Package Scheme was introduced which was provided in a
graded manner. The backward areas of the State were divided into
three Zones, I,ll and III. Zone I consisted of the three CIS
districts. Zone II consisted of the other seven districts eligible
for Central Government incentives, and Zone III of the 21 backward
ta1ukas. The growth centres selected at this time were classified
203
into Grades 'A', 'BI and 'C'. The Sales Tax Incentive and State Cash
Subsidy were provided at graded rates. The Sales Tax Incentive was
available in the form of an exemption for smal-I-scale units. For
large and medium units, an interest-free sales tax loan was provided
equal to the amount of sales tax paid on the sale of finished goods
during the first five years. It may be noted that mineral-based
industries in the large and medium sectors were eligible for the
State Cash Subsidy at the highest rate of 15 per cent, except in
Zone I.
Till 1978, these incentives were -available only to units located
outside the banned areas. In 1978, small and medium units located in
growth centres in the banned areas were made eligible for the State
Cash Subsidy at the full rate in all the Zones, and at half the scale
of non-banned areas in growth centres outside the Zones (i.e., in the
non-backward areas). lhis relaxation was subject to the condition
that these units did not create air and water pollution.
In 19~0, the sales tax incentives were made comparable to those
available in Maharashtra. Ihe incentive could be availed of by way
of exemption or deferment. The concept of 'Pioneer Unitl was intro
duced whereby such units were eligible for incentives at higher rates.
There were two categories of Pioneer Units. category I Pioneer Unit
was defined as one involving fixed investment of at least Rs. 50
lakhs or employing 100 permanent workers and located outside the
banned areas. Further, more than two other pioneer units should not
have been located in an area of 8 kms around it. Category II
Pioneer Unit was defined as one which satisfied the conditions of
Category I, and was located beyond 24 kms from the National Highway
from the Maharashtra border upto Ahmedabad, or 8 kms from any other
National Highway. Further, the unit should not be power or water
intensive and should be free from pollution. ,~ategory II Pioneer
Units were e'l igible for higher rates of .incentives than those in
Category 1.
The latest Package Scheme was announced in 1983. The incentives are
unchanged but the classification of areas in the Sta,te Ijls been
IOOdified. There are now six categories of areas. Categories I, II
and III areas are identical to the earlier Zones I, II and III.
Category IV consists of GIOC estates in areas outside the banned
areas and not located in the first three Categories. Category V
consists of GIDC estates located in the banned areas in Category II
districts, and Category VI consists of GIDC estates located in the
banned areas in Category III talukas. The major incentives
available are as follows.
Sales Tax Incentives
204
There is an option provi ded between Sal es Tax Exemption and Sales Tax
Deferment, for new units and units undertaking expansion/diversifi-
cation.
~ales Tax Exemption Ihis scheme exempts a unit from payment of
sales taxon purchase at' raw materials within the State and util ized
for manufacture within the State. Sale of finished goods from
Gujarat is also exempted from sales tax.
Location New Industries Existing Industries
Grade 'A' 40% of FCI or Rs.60 35% of FC! or Rs.50 Growth Centre lakhs, whichever is lakhs, whichever is
less. less.
Period
5 years from date of production.
205
Grade '8' 45% of FCI or Rs.70 40% of FCI or Ks.60 6 years from Growth Centre lakhs, whichever is lakhs, whichever is date 6f
Grade 'C' Growth Centre
less. less. production.
50% of FCI or Rs.80 45% of FCI or Rs.70 lakhs, whichever is lakhs, whichever is less. less.
7 years from date of production.
All other locations which are not in banned areas.
Large and Medium industries as per Grade 'A' growth centres, and small-scale industries as per Grade 'C' growth centres.
Pioneer Un it Category I
category II
60% of FCI or Rs.90 lakhs, whichever is less. 90% of FCI with no ceiling.
Sales Tax Deferment Sales tax may be deferred for 12 years.
Location New Industries Existing Industries Period
Grade 'A' , 25% of FCI or Rs.40 20% of FCI or Rs.30 5 years from Growth Cen tre lakhs, whichever is lakhs, whichever is date of
less. 1 ess. production.
Grade '8' 30% of FCI or Rs. 45 25% of FCI or Rs.40 6 years from Growth Centre lakhs, whichever is lakhs, whichever ils date ot
less. less. production.
Grade 'C' 35% of FCI or Rs.50 30% of FCI or Rs.45 7 years from Growth Centre lakhs, whichever is lakhs, whichever is date of
1 ess. 1 ess. production.
All other locations which are not in banned areas.
Large and medium industries as per Grade lA' growth centres, and small-sca'ie industries as per Grade '8' growth centres.
Pioneer Unit category I Category II
45% of FCI or Rs.60 lakhs, whichever is less. 90% of FC! with no ceiling.
(Note: FCI Fixed Capital Investment.)
Interest-Free Sales Tax Loan This loan is offered in lieu of the
sales tax deferment to Pioneer Units Category II. with a fixed capital
investment over Rs. 25 crores. These units can obtain an amount
equivalent to 40% of their FCI as an interest-free loan, subject to a
ceiling of Rs. 1 crore; the balance can be utilized as sales tax
deferment. Ihe loan is repayable within 12 years from the date of
disbursement in six equal annual instalments.
206
State Cash Subsidy
Loca tion
Category I Districts
Small-Scale Industries
10% of FCI or Rs. 2.5 lakhs, whichever is less.
Large/Medium ~ndustries
Maximum of Rs.10 1akhs, providing the total Central and State Subsidy does not exceed 15% of FC!.
Ca tegory II . Districts
Ca tegory II I Ta 1 ukas Category IV
Category V
15% of FCI or Rs.5 lakhs, whichever is less . 20% of FCI or Rs. 7.5 lakhs, whichever is less. 15% of FCI or Rs. 7.5 lakhs, whichever is less. 10% of FCI or Rs.5 lakhs, whichever is less.
5% of Fcr or Rs.15 lakhs, whichever is less. 15% of FeI or Rs.25 lakhs, whichever is less. 15% Of FCr or Rs.25 1akhs, whichever is less. 5% of FC! or Rs.15 lakhs, whichever is less.
Category VI 20% of FCI or Rs. 7.0 15% of FCI or RS.25 lakhs, 1akhs, whichever is less. whichever is less.
Pioneer Unit 15% of FC! or Rs.25 lakhs, whichever is less. (The total Central and State Subsidy should be 15%.)
Octroi Duty Exemption
A number of municipalities and GrDC estates exempt new units from
payment of octroi duty for the first five years.
tlectricity Duty Exemption
New industries are exempted for the first five years (from the date
of commencement of production) from payment of electricity duty. A
unit which generates energy is exempted for 10-15 years depending
on the process of generation used.
Cost of Approach Roads
For large and medium scale units, the cost of approach raods to the
unit is shared on a 5U:50 basis by the State Government and the unit
concerned. For small-scale units, the State Government bears 75%
of the cost.
Cost of Feasibility Study
For units with investment upto Rs.50 lakhs, the State Government
provides a subsidy of HO% of the cost; for larger projects, 50%.
APPENDIX VI.4 LAND RATES IN GIDC AREAS
Plots in the GIDC estates are leased out for 99 years. An annual
lease rent is charged and the premium price is recovered in instal
ments. In backward areas, the initial payment for a plot/shed
amounts to 20 per cent of the total price and, in other areas, 25
per cent of the total price is payable initially. There is a
moratorium of two years during which only interest on the balance
is to be paid. The interest rates are differential, favouring the
backward area,s. In estates in the banned' areas, the interest rate
is 17 per cent, in non-backward areas 15 per cent and, in backward
areas, the rate is 14 per cent.
207
A special concession is offered for large plots. The concessions are
In non-backward areas :
For the first 20,000 sq. m.
For land over 20,000 sq. m. but less than 30,000 sq. m.
For land over jO,OOO sq. m. but less than 40,000 sq. m.
For land over 40,000 sq. m.
In backward areas :
For land over 12,000 sq. m.
Premium Rates for Land in GluC Estates
District GIUC Estate
Developed Regions Ahmedabad Naroda, Odhav, Va twa , Behrampura
No concession
5.5 %
7.5 %
10 %
10 %
Rate (Rs. per sq.m.)
100.00 lcontd .. )
208
Oehgam 20.00 Sanand 6.25
Vadodara Makarpura 100.UO Nandesari 90.00
S.urat Pandesara, Katargam, Khatodara 100.,)U Sachin 65.00
Kheda V V Nagar 60.uO Nadiad 18.00
Val sad Navsari 3U.00
Rajkot Bhakti nagar 125.00 Aji 95.00
Jamnagar Jamnagar 60.UO
Gandhi nagar Gandhi nagar 70. U)
Average 61.75
Develo~ing Regions
Ahmedabad Dhol ka 25.00
Vadodara Sankheda 20. UO Dabhoi 8.50
Surat Bardo1 i 14.40 01 pad 11.50
Kheda Umreth 30.0U Petlad 20.00 Kapadwanj 18.00 Khambat 7.50 Ba1asinore 4.80
Val sad Vapi 80.00 Sari gam 65.00 Pardi 57.00 Umbergaon 55.00 Va 1 sad 50.00 Bil imora 30.00 Unai 5.00
Rajkot Morvi 50.00 Gondal 15.00 Jetpur 12.0U Jasdan 6. UO Wankaner 4.50
Jamnagar Arambadha ' 30.00 Jamkhamba -I i a 5.25
Junagadh Vera val 32.00 Porbandar 25.00 Junagadh 15.00
Mehsana Chatra1 70.00 Mansa 42. uO Mehsana, Kalol, Kad; 40.00
209
Visnagar 16.00 Balisana 15.00 Kukarwada tl.OO Patan b.OO Lunva 3.00
Bhavnagar Sihor, Vithal wadi 30.00 Chitra 25.00 Mahuva 6.00
Sabarkantha Modasa 16.00 Idar 12.00 Himatnagar 11 • uO
Kutch Bhuj 35.00 Gandhidham I 12.00 Gandhidham II 10.00 Madhapur 6.00
Amrel i Amreli 10.00 . Rajula 3.60
Banaskantha Deesa 22. uO Pa 1 anpur 19.00 Ambaji 6.00
Surendranagar Surendrallftgar 35. UO Bamanbore 12.00 Thangadh 7.00 Lumbdi 5.~5 Dhrangadhra 5.00
Bharuch Ankleshwar 65.00 Bharuch, Pano 1 i 45.00 Palej 35.00 Raj pi pla 5.00
Panchmahals Halol 40.00 Dahod 28.00 Godhra 15.00 Kalo1 10.00
Average 24.61
Average of All Rates 33.30
r'l AP VT . '1
5UJARAT GROW TH CENTRES AND
CLASSIFICATION OF AREAS FOR INCENTIVES
n"._ • .A ........ -'-. --'
..... ·IES ;mel _._.- ._.-DISTltfCT- ·_ · - . - . -TAUNt-----
::',Gurc e
INDEX
r--1 DI STRICTS GETTING INCENTIVES AS r-...I APFI...ICABlf 10 CATEGan' I
~~~tiiEGfuT~~I'VES AS o TAlll<S GE TTING IKENTlVES AS APPLlCAaf 10 CATEGORY III
• GROWTH CENTRES A • GROWT~ CENTRES 8 • GROWTH CENTRES C
Pased on : T l l rlu~tri81 T.'ytE': !,":I n ' ' :)IJ r e [nl , GU,l ara t prese>i ts t h e \\ll:JY l l n :r c c rrl h inat1oT' .
210