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