SEMICONDUCTOR HEAT
The Centre as well as the Maharashtra government come under heavy fire from critics as VedantaFoxconn shifts its Rs 1.54 lakh crore semiconductor project from the state to poll-bound Gujarat
NNothing could have been more embarrassing for Eknath Shinde, less than three months after he was sworn in as Maharashtra’s chief minister following a political coup that dislodged Uddhav Thackeray—the state has lost India’s biggest-ever corporate investment in a greenfield project to neighbouring Gujarat. The Rs 1.54 lakh crore semiconductor project, a joint venture (JV) between Taiwanese firm Foxconn and the Anil Agarwal-led Vedanta Group, slipped out of Maharashtra’s grasp just as it was in the final stages of negotiations with the investors. None of Shinde’s assurances of bringing in more investments in the future will douse the fire of allegations that the state government was “lethargic” in the matter and that the investment was moved to pollbound Gujarat at the behest of the BJPled NDA government at the Centre.
Maharashtra, it seems, had actually extended a more attractive offer to the JV than its neighbour. The state government had approved a Rs 40,000 crore incentive package for Vedanta-Foxconn and also identified a plot in Talegaon near Pune for the plant. Gujarat, on the other hand, has offered the company an incentive package of Rs 12,000 crore and apparently started searching for land for the project only after the Opposition in Maharashtra went up in arms against the BJP-led Centre’s ‘betrayal’. Vijay Nehra, secretary, science and technology, Gujarat, told reporters on September 18, five days after the deal with Vedanta-Foxconn, that a site may be finalised in a couple of weeks.
MISSING THE BUS
Vedanta has joined hands with Foxconn in a 60:40 joint venture to manufacture a semiconductor fabrication ecosystem in India. Semiconductor chips are essential pieces of digital consumer products from cars and mobile phones to debit/ credit cards. Their partnership is the first big venture after the Centre announced its ‘India Semiconductor Mission’ in December 2021 to “develop sustainable semiconductors”. Maharashtra, Gujarat, Karnataka, Telangana and Tamil Nadu were competing with each other to get Vedanta-Foxconn to their states.
The company had dropped Gujarat as a destination with internal reports stating that Dholera, the place earmarked as its semiconductor hub, was unsuitable as the land was barren and marshy and required high expenditure on infrastructure and civil work. ‘Water is scarce, requires additional desalination plant… stringent use of water and recycling insisted… relatively lesser availability of skilled manpower… currently no supply chain vendors and customers present near site… negligible electronics manufacturing ecosystem in the state…extreme climate…new city has to come up…,’ are some of the adverse comments in the report, a part of which india today has accessed.
On the other hand, Talegaon phase IV in Maharashtra, spanning around 10,000 acres, was planned as an electronic city and would have been most conducive for the project, according to the report. ‘Highly developed electronics and industrial clusters within 200 km radius including EMC (electromagnetic compatibility) with available component manufacturers as well as potential customers,’ it notes. After evaluating aspects such as land availability, tax incentives, uninterrupted power supply and an area free of vibrations from passing trains, Maharashtra emerged as the final choice in mid-July. On July 26, Shinde and deputy, Devendra Fadnavis of the BJP,
announced that the Vedanta-Foxconn plant was coming to Talegaon.
But things started going south soon after. The Gujarat government announced its ‘Gujarat Semiconductor Policy 2022-27’ on July 28, with the state proposing a ‘Semicon City’ as part of the ambitious Dholera Special Investment Region near Ahmedabad. At this point, the Maharashtra government offered more concessions to Vedanta-Foxconn (see The Wooing Game). A July 26 letter by Shinde to Vedanta reveals that the CM assured the company that two of its conditions— ‘alignment with the Centre’ and approval by the state cabinet—would be met soon.
Shinde had requested Vedanta-Foxconn to finalise July 29 as the date to sign the MoU. However, official records show that the company avoided a meeting. Fadnavis, who also handles the finance portfolio, said on September 16 that he had personally called Vedanta’s Agarwal on September 5 in a bid to seal the MoU. “He told me they had made up their mind on shifting to Gujarat,” says Fadnavis. Agarwal said the Maharashtra government had made a “huge effort” in July to “outbid other states with a competitive offer... but we decided on Gujarat a few months ago as they met our expectations.”
ARM-TWISTING BY CENTRE?
Talk of the Union government ‘convincing’ Vedanta-Foxconn to move to Gujarat began when Agarwal thanked Union information technology minister Ashwini Vaishnaw for helping the company “tie things up so quickly” at the signing of the MoU. Soon after, Prime Minister Narendra Modi tweeted, “This MoU is an important step in accelerating India’s semiconductor manufacturing ambitions. The investment of Rs 1.54 lakh crore will create a significant impact to boost the economy and jobs.” Agarwal later tweeted the decision to choose Gujarat was based on “professional and independent advice”.
Opposition parties in Maharashtra have gone to town over the loss to Gujarat. Former CM Prithviraj Chavan alleged that the Union government shifted the project against Agarwal’s wishes. “Vedanta was told to shift if they wanted incentives from the Centre,” Chavan told reporters on September 15. “Fadnavis can’t utter a word
once PM Modi issues an order.” Uddhav Thackeray blamed the present government for its lethargy. “We made a lot of effort to bring the project to Maharashtra,” he told officebearers of his Shiv Sena on September 17. “They (BJP and Sena turncoat Shinde) are playing politics over it now. ” A source in the Maharashtra government says the Centre has not given its nod for projects worth Rs 3 lakh crore in the state despite several presentations in the past two years.
Gujarat government sources say a subsidy provision on land purchase in its semiconductor policy made Vedanta-Foxconn choose the state. Under this, eligible projects will be given 75 per cent subsidy on purchase of the first 200 acres of land to set up manufacturing units. There is also a capital subsidy of 50 per cent if the investor builds its own desalination plant in five years. “Maharashtra was offering a power tariff subsidy of Re 1 per unit. Our policy has a provision for power tariff subsidy of Rs 2 per unit for the first 10 years after going into production. Such projects can also claim exemption from paying electricity duty,” says the source. Gujarat also agreed to reimburse 100 per cent of stamp duty for the land taken on lease, sale or on land transfer, besides facilitating adequate redundancy in the power grid to ensure quality power supply.
Fadnavis now claims that VedantaFoxconn will be setting up an ancillary unit in Maharashtra. “Gujarat is our younger brother. It is not in Pakistan. We will get bigger projects,” he said in Mumbai on September 16. Shinde is still clutching at straws. “If Vedanta-Foxconn changes their mind, they are welcome in Maharashtra,” he said in Mumbai on September 18.
GAINS AND LOSSES
The proposed semiconductor plant has the potential of bringing Rs 27,000 crore to the Gujarat exchequer in the form of the State Goods and Service Tax (SGST). It is also likely to generate 200,000 direct and indirect jobs as well as additional direct investment of $21 billion (Rs 1.7 lakh crore) and indirect investment of $5-8 billion (Rs 40,000-64,000 crore). Incidentally, this was not Maharashtra’s first brush with Foxconn. In 2015, the company had signed an MoU, pledging to invest Rs 40,000 crore over five years, to set up an electronics manufacturing facility. However, the project fell through due to differences over tax concessions. It later moved the plant to Tamil Nadu.
Political observers believe the assembly election in Gujarat due later this year is the reason why the Centre fasttracked approvals to Vedanta-Foxconn to shift to Gujarat. The investment plan may give the BJP and CM Bhupendra Patel some much-needed optics there, but the party is likely to face the music in Maharashtra, especially in Mumbai and Pune, where municipal polls are due later this year. In Mumbai, the Thackeray-led Shiv Sena group and the Raj Thackeray-led Maharashtra Navnirman Sena (MNS) have already started painting the BJP as “anti-Maharashtra”.
The Maharashtra Congress also blames Shinde for sitting on proposals of land transfer to industries. Proposals worth Rs 12,000 crore were cleared on June 1, but Shinde had stayed the land allotment. Facing sharp criticism, the CM finally lifted the stay on September 19, paving the way for the clearing of land allotment to 183 out of the 191 business proposals.
This is not the first time Mumbai has lost out to Gujarat. In 2015, the BJP-led Centre had shifted the International Financial Services Centre (IFSC) from Mumbai’s Bandra-Kurla Complex to Gujarat International Finance Tec-City (GIFT) near Gandhinagar. Fadnavis took a lot of flak then for being a mute spectator. With history repeating itself, the Mumbai voter may find it difficult to forgive the BJP. ■
“Maharashtra government had made a huge effort in July to outbid other states. We decided on Gujarat a few months ago as they met our expectations”
— ANIL AGARWAL
Chairman, Vedanta