Investment Climate in Tamil Nadu

EXECUTIVE SUMMARY
Tamil Nadu is one of the most developed States in the country. The State has been successful in reducing poverty and raising the standard of living of its residents. Literacy level in Tamil Nadu is amongst the highest of all the States.1 Of late, the State has witnessed rapid industrialization with overall economic development. Tamil Nadu has emerged as one of the manufacturing powerhouses of the country, especially in automobile and textile sectors.2 The textile units of Tamil Nadu are world renowned. The State is also home to one of the largest automotive component industries in the country. A number of international auto giants including Ford and Hyundai have set up their manufacturing bases in Tamil Nadu with an investment of over Rs. 4,500 million.3 The States capital city, Chennai is often referred to as the Detroit of India. The State houses the largest trans-shipment facility in Asia.4 Chennai is ranked number one in terms of technology exposure and responsiveness and has been cited as an ideal location for software projects. 5 The State Government has taken various policy initiatives to facilitate growth in the industrial and services sectors. Several steps have been taken to upgrade the infrastructure of the State. A large number of policy measures such as single window clearance and easy entry to investors have made the State a preferred destination for FDI. Tamil Nadu is one of the first States to formulate an ITeS and biotech policy.6 The State has been proactively highlighting the business opportunities it has to offer in the biotech and IT sectors. Tamil Nadu has undertaken mega projects in partnership with the private sector to upgrade the existing infrastructure to world-class standards. The State now boasts of one of the lowest power tariffs in the country.7 Two submarine cables connecting Chennai and Singapore will substantially increase the existing bandwidth for communication, enabling Chennai to become the Connectivity Gateway of India. Some of the key initiatives taken by the State are: Policy to facilitate private investments and creation of Infrastructure Fund Stepping up the current project germination rate from the current level of 34 percent to at least 60 percent by intensive monitoring of extreme focus mega projects 8 Promoting Tamil Nadu as a Knowledge State with a strong base for technical education Disinvestment in State PSUs
1 2 3 4 5 6 7 8

Source: IBEF Report, Tamil Nadu, 2011 Source: IBEF Report, Tamil Nadu, 2011 Source: www.pppinindia.com/business-opportunities-tamil-nadu.php Source: IBEF Report, Tamil Nadu, 2011 Source: IBEF Report, Tamil Nadu, 2011 Source: www.tidco.com/tnpolicies.html Source: IBEF Report, Tamil Nadu, 2011 Source: www.tn.gov.in

EXECUTIVE SUMMARY
State Level Industry reforms Facilitation Single Window clearance and introduction of single common form to get all preproject clearances Business deregulation and Self-Certification Introduction of Annual Common Return in lieu of multiple forms under various labour laws and reduction of returns Establishment of Empowered authority in Industrial parks under Tamil Nadu Industrial Township Area Development Authority Act Upgradation of infrastructure in major Export clusters to improve export competitiveness Widening of major high density road traffic corridors into two or four lanes Upgradation of port facilities at Ennore, Colachel, Tuticorin and Cuddalore and Airport facilities Promotion of specialized Industrial Parks Establishment of Tamil NRI Consortium to attract NRI investments Road-shows / Investment Promotion Campaigns to showcase Tamil Nadu to investors.

Economic & Demographic Profile

The economy of Tamil Nadu has been consistently rated as being one of the most rapidly developing. The State is well equipped with the appropriate infrastructural support to boast economic growth and enhance industrial development. The State has maintained the optimal balance between agricultural production and industrial development.

Figure 1: Key economic indicator for the financial years 2011- 12 Key Economic Indicator GSDP at current prices for 2011-12 GSDP at constant prices (2004-05) for 2011- 12 Growth in GSDP estimated for 2011- 12 Average per capita income Exports Growth Source: FIEO and www.mospi.nic.in Value Rs. 6.35 trillion Rs. 4.28 trillion 16 percent Rs. 93,805 26 percent

Economic profile
As of 2011- 12, the State Gross Domestic Product (GSDP) at current prices is Rs. 6.35 trillion and at constant prices (2004- 05), it is Rs. 4.28 trillion. Tamil Nadu has a Per Capita GDP of Rs. 93,805. The State ranks fourth in Foreign Direct Investment (FDI) for 2011- 12, with Rs. 6.7 billion. The States FDI inflows constitute 3.85 percent of the total FDI inflows in the country.10

Figure 2: Sectoral contributions to Net State Domestic Income 2010-11

10

Source: www.mospi.nic.in Source: www.dipp.nic.in

Source: Economic Survey of Tamil Nadu 2010- 11

Demographic profile 11
Tamil Nadu is the seventh most populous State in India with a population of 72,138,958 (5.96 percent of Indias population as on 2011). It has a population density of 555 persons per square km and 44 percent of the States population lives in urban areas, the highest among other large States in India.

Figure 3: Growth of Urban Population

Source: Survey of Tamil Nadu 2010- 11 and Census 2011 (Provisional)

11

Source: Census 2011 (Provisional)

Existing Infrastructure
A major portion of the credit for Tamil Nadu being so successful may be attributed to its strong infrastructure. The States industrial, social as well as physical infrastructure is extraordinarily well developed. The State is very well focused upon its education and health care sectors. The Government of Tamil Nadu has been making concentrated efforts to encourage private sector participation in the infrastructural development. In a short span of time, there has been a rapid expansion of the physical infrastructure and the State has a wide network of roadways and railways. In addition, there has been an exponential rise in the passenger carrying capacity of the ports

37 hydro stations generating 2,122.20MW 8,384.22MW from private sector projects 3,483.37MW as Tamil Nadus share from central generating stations
Figure 4: Capacity addition plans: Year 2011- 12 2012- 13 2013- 14 Total Capacity (MW) 2,292 847 1,360 7,115 Availability to TNEB (MW) 1,948 720 1,156 5,968

Physical Infrastructure
Power Tamil Nadus power is generated by the Tamil Nadu Electricity Board (TNEB) and by independent power producers (IPP) such as GMR, Bhoruka and Jindal. Tamil Nadu is one of the few States which has an integrated utility structure, i.e., power generation, transmission and distribution are all handled by a single, Stateowned entity: Tamil Nadu Electricity Board (TNEB). Central sector generators such as Neyveli Lignite Corporation and Nuclear Power Corporation also have their power plants in the State. Renewable energy is a growing sector in the States rural areas. The Tamil Nadu Energy Development Agency (TEDA) is the nodal agency of the Ministry of New and Renewable Energy (MNRE), Government of India, for promoting renewable energy schemes in the State. TEDA has taken up research and development projects, jointly, with the Anna University; the total outlay is Rs 40 million. The installed power capacity in Tamil Nadu has increased by 5,700.75 MW over the last 5 years. The breakup of the total installation capacity of the State is as follows: 12 4 thermal stations generating 3, 493.20 MW 4 gas turbine stations generating 523.20 MW 4,327 MW from wind mills

Source: Tamil Nadu Electricity Board

12

Source: CEA data, 2012

Ports At present, there are seven Governmentowned and 17 captive ports in the State.13 According to the Tamil Nadu Maritime Board, 1.6 million tonne of cargo was handled by these ports in 2010-11, as compared with 1.17 million tonnes a year ago.14 Tamil Nadu has numerous ports, of which 3 major ports are located at Chennai, Ennore, and Tuticorin. These 3 ports account for about 87 million metric tonnes of cargo (22 percent of Indias cargo handling capacity of major ports).15 The ports have all the container handling facilities and are directly linked to 48 ports in Asia and Europe.16 Chennai container port is considered as the most efficient port with a ship-turn-around time of less than a day. Besides this, there are 17 minor ports which are managed by the Tamil Nadu Maritime Board (TMB).17 Of this, 10 ports are captive ports.18 TMB has announced a Minor Port development Policy that offers the minor ports to private sector for upgradation. Three greenfield ports and five minor ports with total cargo handling capacity of 150 million tonnes per annum, have been proposed for which budgetary funds of Rs. 150 billion have been approved.19 The Chennai port mainly, handles container cargo while the Ennore and Tuticorin ports handle coal, ores and other bulk minerals. The State Government of Tamil Nadu has proposed to construct five minor ports in the State, which will have a combined cargo handling capacity of 150 million tonnes.20 These ports would be developed under a public-private partnership (PPP) model. The Kattupalli Port, developed by Larsen & Toubro, is expected to promote the shipbuilding industry and also facilitate the import of liquified natural gas. Budgetary sanctions have already been accorded for developing the Nagapattinam Port at a cost of Rs. 3.80 billion on Public Private

Partnership (PPP) basis.21 The work related to the development of the Cuddalore Port is expected to commence shortly. With all these initiatives, the Government is trying to position the State as a leader in port development and ship-building. The State Government is planning to develop five minor ports with a cumulative capacity to handle 150 million tonne of cargo a year. Development of these ports will cost around Rs 150 billion.22 The total investment expected to flow into the State for infrastructure development is around Rs 1,500 billion, while the energy sector will take away the major chunk of around Rs 450 billion. This is followed by the transport sector with a share of Rs 370 billion, out of which ports will attract a huge sum.23

World Bank-funded project at a cost of Rs 500 million. Under Phase-I, Rajiv Gandhi Salai (IT Corridor) was developed as a six lane road of International standards from Madhya Kailash to Siruseri for a length of 20.10 km. In the second phase, the Government has proposed to construct a six lane road for a length of 25 km from Siruseri to East Coast. Road near Mamallapuram, under a viable financial arrangement through Public Private Partnership. The rough cost estimate for the project is Rs. 5.5 billion. To ease the traffic congestion in the Southern part of Chennai, the Government has sanctioned formation of Southern Sector of Inner Ring Road starting from Km 14/1 of NH-45 to join at Km 13/4 of Old Mamallapuram road for a length of 9.40 km. In the first phase 4.40 km length of road works and Road under Bridge (RUB) in Nanganallur road has been completed. Under the Comprehensive Road Infrastructure Development Programme, sanction had been accorded in the second phase comprising 14 works of 123.20 km for the work of formation of Radial road to Madurai at a cost of Rs. 0.71 billion. Golden Quadrilateral Program: Under this scheme, up gradation of 342 km length of roads have been completed at a cost of Rs. 11.93 billion

Roads Tamil Nadu consists of a wide network of roads that link it to major urban centers, rural habitations, and agricultural markets. The State Express Transport Corporation (SETC), formerly, known as Thiruvalluvar Transport Corporation provides road transport services within the State. Tamil Nadu is one of the terminus points for the Golden Quadrilateral project. The total road length of Tamil Nadu is 1,94,087 km.24 Tamil Nadu has 24 National Highways traversing it.25 The State is also an important terminus for the Golden Quadrilateral road link of the National Highway Authority of India (NHAI).The district centers are linked through 187 State Highways.26 Tamil Nadu is one of the first States in India to have achieved 100 percent metalled road connectivity even in the rural areas.27 Key proposed/pipeline investments:28 To upgrade road infrastructure, the State Government is implementing a

Figure 5: Parameters for road infrastructure Road Type National Highways State Highways Major District Roads Other District Roads Road Length (in km) 4,873 9,384 11,288 36,096

Source: Industries Department, Government of Tamil Nadu

14

23 Source: www.tnmaritime.com Source: Tamil Nadu, Vision 2023, Government of Tamil Nadu 24 Source: www.tnmaritime.com Source: www.tn.gov.in 15 25 Source: IBEF report, Tamil Nadu, 2011 Source: IBEF report, Tamil Nadu, 2011 16 26 Source: IBEF report, Tamil Nadu, 2011 Source: IBEF report, Tamil Nadu, 2011 17 27 Source: www.tnmaritime.com Source: IBEF report, Tamil Nadu, 2011 18 28 Source: www.tnmaritime.com Source: Tamil Nadu, Vision 2023, Government of Tamil Nadu 19 Source: www.planningcommission.nic.in 20 Source: www.tnmaritime.com 21 Source: Tamil Nadu, Vision 2023, Government of Tamil Nadu 22 Source: Tamil Nadu, Vision 2023, Government of Tamil Nadu 13

Airports Tamil Nadu has international airports at Chennai and Trichy; it has domestic airports at Chennai, Coimbatore, Tuticorin and Madurai. 7 international airlines run 28 exclusive cargo flights every week, and an Electronic Data Interchange (EDI) facility is provided for the clearance of customs.29 An import cargo complex has come up in a 27,000 sq m area at the Chennai airport.30 The Chennai international airport was the first in the country to get ISO 9001-2000 certification. Construction work has begun on a new passenger terminal at the Chennai international airport. The terminal, with a capacity of 10 million domestic passengers was completed in 2011. Chennai airport has an Air cargo complex with a capacity to handle about 0.11 million metric tonnes.31 Key proposed/pipeline investments: 32 Construction work has commenced on a new passenger terminal at the Chennai International Airport. The terminal, with a capacity of 10 million domestic passengers is scheduled for completion by 2012 A new integrated terminal building has been constructed at Madurai Airport

Nadu as of March 2010. The State has a tele-density of 30.81. In terms of average wireless connectivity per 100 persons, Tamil Nadu stands above the national average; it accounted for 10 percent of Indias net wireless user base, as of March 31, 2010.35 The Bharti-Sing Tel submarine cable link between Chennai and Singapore has a bandwidth of 8.4 terabits per second; a second submarine cable of 5.12 terabits per second bandwidth has been commissioned by Tata Communications Limited (formerly, VSNL) between Chennai and Singapore
Figure 6: Key Telecommunication Infrastructure indicators Indicator GSM cellular subscribers Internet/ broadband subscribers Post offices Wireless connections Wire-line connections Telephone exchanges Value (Nos.) 36,117,977 644,912 15,619 53,682,712 3,573,016 2,147

Railways Tamil Nadu has a 5,924 km rail network, with a track density of 32.2 km per 1,000 sq km; the State has 541 railway stations.33 Tamil Nadus railway network falls under the jurisdiction of the Southern Railways, which covers Tamil Nadu, Kerala, Pondicherry and a small part of Andhra Pradesh. It has six divisions, four of which are in Tamil Nadu; they are Chennai, Tiruchirapalli, Madurai and Salem. Coimbatore is also a key railway junction. Chennai has a well-established suburban railway network that connects it to the suburbs and the neighbouring cities. The mass-rapid-transit system (MRTS) is an elevated line of the suburban railway in Chennai; it runs from the Chennai beach to the Velachery suburb, covers a distance of 25 km and has 21 stations.34 Telecom Tamil Nadu has a well developed telecommunications infrastructure. The State has made remarkable progress in this segment. According to estimates by Telecom Regulatory Authority of India (TRAI), there were 53.7 million wireless connections and 3.6 million wire-line connections in Tamil
Source: IBEF Report, Tamil Nadu, 2011 Source: IBEF Report, Tamil Nadu, 2011 31 Source: IBEF Report, Tamil Nadu, 2011 32 Source: www.pppindia.com 33 Source: IBEF Report, Tamil Nadu, 2011 34 Source: IBEF Report, Tamil Nadu, 2011 35 Source: IBEF Report, Tamil Nadu, 2011 36 Source: www.pppindia.com
29 30

Source: Telecom Regulatory Authority of India, Ministry of Communications & Information Technology

Key proposed/pipeline investments are: 36 Bharti is the Single Tel Submarine cable link between Chennai-Singapore with bandwidth of 8.4 terabits per second. A second submarine cable with 5.12 terabits per second has been commissioned by VSNL A third submarine cable project is currently under implementation Internet Leased Line with port speeds from 64K to 155 Mbps (STM-1) Value-added services are being provided to meet needs of software / BPO companies

Social Infrastructure
Health Tamil Nadu is well equipped with all the health care facilities and the State is increasingly being recognised as the medical hub of South Asia. Some of the well known hospitals in Tamil Nadu are Apollo Hospitals, MIOT Hospital, Malar Hospital, Ramachandra Medical College & Hospital, Vijaya Hospitals, the Sankara Nethralaya Eye Hospital, the Cancer Hospital, Madras Medical Foundation, Chettinad Hospitals, Christian Medical College Hospital at Vellore and the affiliated hospitals of SRM Medical College. The State Government is concentrating on bringing about improvements in the general health, access to health care services and effective control and prevention of communicable diseases.37 Chennai is popularly known as Health Care Capital of India.
Figure 7: Key health indicators

Figure 8: Health infrastructure Indicators Birth rate (per thousand) as per 2011 Census Death rate (per thousand) as per 2011 Census Sex ratio Infant mortality rate Source: Census 2011 (Provisional) Value 15.3/ 1000 7.6/ 1000 987 31

Education The State boasts of an extensive educational infrastructure. In the year 2010-11 almost 4.8 million students were enrolled at the primary school level. There is a vast network of institutions for imparting higher education, especially technical education.38
Figure 9: Key Education infrastructure in Tamil Nadu Institution Primary Schools Middle Schools High Schools Higher Secondary Schools Number 33.326 9.966 4,996 5.343 65 20 456 578 366 9

Modern Medicine Hospital Dispensaries Other Medical Institutions Primary Health Centres Health Sub Centres Indian Medicine Hospitals Dispensaries & Mobile Medical Units Wings attached to Medical College Hospitals, District Head Quarters Hospitals, Taluk & Non Taluk Hospital Wings attached to Primary Health Centre Homeopathy Hospitals Dispensaries & Mobile Medical Units Wings attached to Medical College Hospitals, District Head Quarters Hospitals, Taluk and Non-Taluk Hospital

Count 315 213 29 1417 8683

4 54 325 426

Universities Medical Colleges Engineering Colleges Arts and Science Colleges Polytechnics Law Colleges

1 5 39

Source: Tamil Nadu Statistical Hand Book 2011

Source: tnhealth.org

37 38

Source: Public Private Partnerships, India Source: Economic Survey, Tamil Nadu, 2010- 11

The State Government has set itself the objective of raising the gross enrolment ratio in higher education to 25 percent by 2020 from the present level of 11.73 percent.39 The State has successfully mobilized investment in primary and higher education. Its focus on primary education has ensured that as much as 99 percent of the States population has access to primary education. Participation by private firms in technical & vocational education is encouraged by the State. Vocational education was introduced in higher secondary schools during the 10th Five Year Plan period.

Figure 10: Special Economic Zones in Tamil Nadu 2011 Type of SEZ approval SEZ approved before SEZ Act of 2005 Notified SEZs In- principle approval Number 5 49 17

The State Government has proposed to implement projects under PPP in the education sector. A computer-based education project would be implemented in 1,880 higher secondary schools and 461 high schools over the next five years.40 The project would be a continuation of the IT literacy programme in schools, wherein computers would be supplied to high school students. The Government has also ordered release of Rs. 2.67 million as the first instalment towards starting smart schools in five Government higher secondary schools in the State.41 Besides this, the Government has accorded permission for starting the schools at the Government Higher Secondary Schools at Thirusendurai, Ayilapettai, Somarasampettai, Ettarai and Inamkulathur in Tiruchirappalli district at a cost of Rs. 12.5 million. 42 Industrial Profile The State has developed several Industrial parks /estates which have helped significantly in boosting industrialization. At present, there are 18 Industrial parks of the State Industries Promotion Corporation of Tamil Nadu (SIPCOT), 87 Industrial estates of Small Industries Development Corporation Limited (SIDCO) and 95 Special economic Zones spread all over Tamil Nadu. In addition, , the Government has also promoted other industrial parks including Rubber Park, Apparel Parks, Floriculture Park, TICEL Bio Park for Biotechnology, TIDEL IT Park, ASCENDAS International Tech Park, Siruseri IT Park and Agro Export Zones amongst others.43 The Government of Tamil Nadu has established the Madras Special Economic Zone (MEPZ) to promote Foreign Direct Investment (FDI) in the State. It is one of the seven Export Processing Zones (EPZs) set up by the Government of India. It has been designed as a Multi-product zone, housing more than 100 functional units.44 At present, 91 SEZs have been given approval by Government of India. Of these, 49 have been notified.45

Formal approvals (Out of this, yet to be notified)

69 20

Total number of SEZs in Tamil Nadu

91

Source: TIDCO and www.sezindia.nic.in

The Government of Tamil Nadu has set up two Apparel parks, one at Tiruppur and the other at Irungattukottai near Chennai. The Government has also decided to set up Hi-Tech Weaving Parks namely: Cauvery Hi-Tech Weaving Park Kumarapalayam, Vaigai Hi-Tech Weaving Park Andipatti and Palladam Hi-Tech Weaving Park, Palladam.

Source: Economic Survey, Tamil Nadu, 2010- 11 Source: www.pppindia.com 41 Source: www.pppindia.com 42 Source: Economic Survey, Tamil Nadu, 2010- 11 43 Source: Tamil Nadu: State Economy Government of Tamil Nadu 44 Source: http://www.amrlsez.com/tidco.html 45 Source: http://www.amrlsez.com/tidco.html
39 40

Two main reasons why we chose Tamil Nadu over other states in the south are the supplier base and the ease of catering to export markets from Tamil Nadu
Hiroyuki Suzuki, CEO and managing director, India Yamaha Motor

Figure 11: Existing industry clusters in the State

Land Availability
Agriculture Land Analyzing the land use pattern of the State, it may be determined that 43 percent of Tamil Nadus geographical area is under agriculture with a per capita figure of 0.098 ha of agricultural land. Out of the total geographical area of 13.03 million hectares of the State, the gross cropped area was 5.82 million hectares during 2008-09, which worked out to 44.7 percent. The net area sown had witnessed a gradual decline from 5.64 million hectares in 1950s to 5.63 million hectares in 1990s and further declined to 5.04 million hectares in 2008-09. When compared to the previous year, the net area sown had perceived a marginal decline from 505.06 million hectares in 2007-08 to 5.04 million hectares which was due to the increase in fallow lands and land put to non-agricultural uses.

46

Source: www. moef.nic.in

Figure12: Land use pattern in Tamil Nadu

(Area 00000 hectares) 130.27 21.06 4.92 21.73 3.33 1.10 2.59 10.13 14.97 50.43 7.81 58.24

Number Geographical area Area under forests Barren and uncultivable land Land put to non agricultural uses Cultivable waste land Permanent pastures and grazing land Land under miscellaneous tree crops and groves Current fallows Fallow land Other fallows Net area sown Cropped area Area sown more than once Gross cropped area Other uncultivated land

Land not available for cultivation

Source: Government of Tamil Nadu, Land Survey 2009- 10

Industrial Land47 Tamil Nadu Industrial Investment Corporation Limited (TIICL) is the agency which allots land to various industrial units in the State. To make adequate supply of developed land available for manufacturing and quality space for high technology industries and start-ups, a land bank of 10,000 acres for industrial parks will be developed across the State over the next five years with quality infrastructure facilities, including social infrastructure like skill development centers, housing, business centers, restaurants, financial services, schools and hospitals. At least 10 percent of area in industrial parks developed by SIPCOT and TIDCO would be set apart for such social infrastructure. This land bank will be mostly developed in dry and barren lands. Prime agricultural lands would thus be avoided. New industrial parks/SEZs or expansions of industrial parks promoted by SIPCOT or TIDCO will have reserved 20 percent of allocable area for SMEs, including SME vendors to major industries in the same park. Back-end Industrial Park Infrastructure Grant of Rs 20 million or 25 percent of the investment in eligible fixed assets, whichever is less, would be granted only for approved industrial parks 50 km away from Chennai city limits. Such industrial parks must attract at least 20 new units with investments primarily in manufacturing with a total direct employment of at least 2000. This grant may be used to fund common internal infrastructure like roads, water supply, Common Effluent Treatment Plant (CETP) or Common Hazardous Waste Treatment, Storage and Disposal Facility (HWTSDF). Environment Protection infrastructure have to be approved by TN Pollution Control Board. Manpower Availability / Quality of Workforce48 The manpower of the State is renowned for its diverse skills, professional expertise and possessing the ability to communicate in several local languages in addition to English. The total work force in Tamil Nadu is about 25 million constituting 44 percent of State Population. The organized sector employs more than 9 million people. The industrial climate in the State is peaceful, with the attitude of the workforce that may be considered positive and competent. The number of man days lost due to unrest is the lowest in the country (less 0.25 percent of total man days) all these factors contribute to making Tamil Nadu, the ideal platform for industry to grow at a rapid pace. The State of Tamil Nadu invests highly on education and ranks the third highest in terms of total expenditure on education clearly indicating the

thrust on creating a sound Human Capital Base. The literacy level of the State is 62.6 percent and 44 percent of the State population. At a stage when the emphasis is gradually shifting to knowledge and technology based industries, this human resources base combined with a favourable labour climate offers ideal conditions for economic growth. There has been a rapid growth in the number of institutions imparting education at the college level. Today, there are 19 universities; in addition, there are 102 Engineering Colleges, 135 polytechnics, 526 Industrial Institutes, 244 Arts and Science Colleges, 27 Colleges of Education, 15 Oriental Colleges, 5 Physical Education Colleges and 2 Schools of Social Work. Of late, all universities offer courses in management science. The total number of engineering graduates produced every year in different disciplines is well over 23,000.49 Apart from this, skilled labour produced is 65,000 every year.50 The National vocational training system seeks to provide training for developing the skills for production in those entering the labour force. Two major resources for such training are the Industrial Training Institutes (ITIs) and the 25,000 Industrial establishments that take part in the Industrial training. The State operates the ITIs and the central Government trains the instructors at the Advanced Training Institute. Women constitute a significant part of the workforce. Special attention is given to the modernization and establishment of Women Industrial Training Institutes under the World Bank aided Skill Development Project. Tourism in Tamil Nadu Tourism is a major contributor to the States economy and Tamil Nadu is being promoted as an ideal holiday destination in southern India. More than 25 million domestic tourists and 1.8 million foreign tourists visit the State every year. 51 Statistics show that 30 percent of the foreign tourists visiting India also visit Tamil Nadu.52 Tamil Nadu Tourism is keen on implementing innovative strategies to improve the Tourism growth of the State. The Tamil Nadu Tourism Development Corporation (TTDC) did business worth Rs. 1 billion in 2011.53 TTDC today operates 53 hotels, nine boat houses and 25 luxury buses across the State.54 Tamil Nadu is keen to promote eco-tourism, rural and heritage tourism. In co-ordination with the forest department, the State is also working to popularise Kalakkad

47 48

Source: www.tn.gov.in/policynotes/pdf/industries.pdf Source: www. dcmsme.gov.in 49 Source: http://laghu-udyog.gov.in/publications/traderep/sptnadu.pdf 50 Source: http://laghu-udyog.gov.in/publications/traderep/sptnadu.pdf

Source: IBEF Report, Tamil Nadu, 2011 Source: IBEF Report, Tamil Nadu, 2011 53 Source: www.tamilnadutourism.org/ 54 Source: www.tamilnadutourism.org/
51 52

Tamil Nadu ranks No. 2 in India (after Maharashtra) in attracting foreign tourists and No. 3 in domestic tourism (after Tirumala and Agra) -Mr V. K. Jeyakodi, Principal Secretary to Government Tourism and Culture
Department, Tamil Nadu Government

The Tourism Department, Government of Tamil Nadu is planning to spend close to Rs 600 million on various activities to showcase Tamil Nadu as a vibrant tourist spot.

To position Tamil Nadu as the most attractive investment destination To facilitate industry capturing a larger share of world trade in goods/services To reform regulatory processes and remove procedural hurdles in business To enable integration of existing industrial clusters with global supply chains To build efficient and dependable industrial infrastructure To develop human resources and intellectual capital to world standards To encourage symbiosis with SMEs in major industry clusters

State Policies, Incentive Schemes and Taxes

Industrial Policy 2003 To strengthen the infrastructure and boost different sectors, the Government of Tamil Nadu has drafted its Industrial policy in 2003. The policy was revised with New Industrial Policy 2007, which aims to develop quality infrastructure including social infrastructure like skill development centres, business centres, housing, restaurants, financial services, schools and hospitals. As per the provisions of the new policy, to bring about equitable regional development, proposals for SEZs in industrially backward areas shall be given priority. Key features of the Industrial Policy, 2003, of Tamil Nadu are: Target a growth rate of the order of 8 percent over the Tenth Plan period Strategy to facilitate new manufacturing capacity building based on improved competitiveness. The state will promote Foreign Direct Investment in to new manufacturing capacity Assist the existing industrial base to consolidate its gains and promote its efficient growth in the highly competitive domestic and export markets. Engender private public partnerships and create an environment which enables the flow of substantial domestic and foreign capital for infrastructure building.

Web Link: http://www.dcmsme.gov.in/policies/State/tamilnadu/ TAMILNADU2003New.pdf http://investingintamilnadu.com/tamilnadu/doc/policy/Tamil_ Nadu_Industrial_policy_2007.pdf

Tax Structure Salient features of the tax structure in Tamil Nadu are: 55 In Tamil Nadu, the Southern Districts have seen less Industrial activities in the past. On an analysis of the investing companies, it was noticed that investment of more than Rs. 2.50 billion are generally done by the multinational companies or top-level national companies. Since the investment commitment is high, they never like to try a place, which is considered as backward. The Government, is therefore of the view that if some attractive incentives are given for investment less than Rs. 2.5 billion in the Southern Districts, the impact of such intervention will be much better and it is more likely to give the desired

Key features of the New Industrial Policy, 2007, of Tamil Nadu are:

55

Source: www.tnvat.gov.in

Accordingly, the Government offer the following Special Package of Incentives for investments less than Rs. 2.5 billion to be made in new manufacturing facilities or expansion projects within the Southern Districts of Madurai, Theni, Dindigul, Sivagangai, Ramanathapuram, Virudhunagar, Thirunelveli, Thuthukudi and Kanyakumari: New manufacturing facilities or expansion projects with an investment in eligible fixed assets of less than Rs. 2.5 billion in a period of 3 years from the date of sanction order, Memorandum of Understanding or any other date to be fixed by Government (investment period), will be given a soft loan equivalent to the net output VAT + CST paid to the Government. The New Industrial Policy 2007 treats expansion units on par with new units for the purpose of incentives, subject to the production volume / value in the older unit being preserved. Therefore, for expansion projects set up in Southern Districts, the ceiling on cumulative availability of soft loan will be fixed at 100 percent of the investment made in eligible fixed assets during the investment period on par with new project. In case of expansion projects, availability of output VAT and CST incentive is generally restricted to certain percentage of the output VAT and CST paid in a year as per a sliding scale. As part of Special Package, this sliding scale will not be applied to the expansion projects set up in Southern Districts mentioned above. However, the Base Volume Principle will be applied.

Labour Laws and Regulations

Tamil Nadu is considered progressive and investment friendly. As one of the early States to be industrialised, it has a well developed labour market and strong industrial relations institutions characterized by a long history of union movement and collective bargaining, and a strong labour administration. The Factories Act, 1948 and the Tamil Nadu Shops and Establishments Act, 1947 are two generic labour laws that seek to define and regulate working conditions in factories, shops and establishments in the organized sector. They are generic in the sense that the provisions of several labour laws apply to factories and establishments covered by these two laws, especially the Factories Act.

Investment Scenario (investments made and in those in pipeline) Key Investment/Projects Implemented in the State56
Thervoy Kandigai Industrial Complex The Government issued orders alienating of Poramboke land in favour of State Industries Promotion Corporation of Tamil Nadu (SIPCOT) is developing a new Industrial Complex in Thervoy Kandigai village in Thiruvallur District over an area of 1,127 acres.

Mappedu Industrial Complex 125 acres of Poramboke land in Mappedu village of Thiruvallur Taluk in Thiruvallur District has been taken possession of by SIPCOT for creating a new industrial complex.

For all investments above Rs. 2.5 billion in eligible fixed assets within 3 years period as well as super-mega projects in Southern Districts, refund of output VAT + CST paid to Government will be given instead of soft loan based incentive. Other norms of Structured Package will be followed. The ceilings now prescribed will not change. The above Special Package will be considered along with the capital subsidy, electricity tax exemption, environment protection infrastructure subsidy etc., to which the new or expansion units in Southern Districts will be eligible as per the New Industrial Policy 2007.

Foot Wear and Leather Products SEZ at Irungattukottai SIPCOT is developing a Footwear and Leather Products Special Economic Zone over an extent of 153.65 acres at Irungattukkottai Industrial Park. Out of 83.33 acres of allocable extent, the Corporation has so far made in principle allotment to 12 units covering a total extent of 29 acres. This zone will have special infrastructure facilities, viz., working women hostel, training centre, convention centre and design centre. Further, 15 acres of land has been allotted here free of cost to Foot Wear Design and Developmental Institute (FDDI), a premier national training institute.

Tamil Nadu State - Building Bridges for Business

N. Sundaradevan, principal secretary of the industries department, Tamil Nadu

56

Source: www.sipcot.com

Madurai Tuticorin Industrial Corridor In order to give impetus to the industrial growth of southern districts and to create a new Industrial Park in Madurai District, SIPCOT has identified 1,478 acres of land in Thirumangalam Taluk of Madurai District. Further action to acquire the land is in progress.

The SPV Company has completed the land procurement of around 2,880 acres through private negotiations. Ministry of Commerce and Industries, Government of India, has given formal approval for this SEZ. Petroleum Chemicals and Petrochemicals Investment Region58

Tuticorin Industrial Park SIPCOT has also identified about 1,533 acres of land in Ottapidaram Village in Ottapidaram Taluk, Thoothukudi District to develop an industrial complex.. Coimbatore Salem Industrial Corridor For the development of this region and also pursuant to the Government announcement, SIPCOT has proposed to expand its existing Industrial Complex at Perundurai in Erode District in an extent of 1,257 acres. The Corporation is also taking action to identify few more sites in this region for setting up of new Industrial Complexes. Chennai Ranipet Hosur Industrial Corridor This region is being developed in two phases, viz., Chennai Ranipet and Ranipet Hosur. For the development of Chennai Ranipet region, SIPCOT has already taken up expansion of its existing Industrial Complexes at Oragadam, Irungattukottai and Cheyyar. While Oragadam and Irungattukottai Industrial Complexes in Sriperumpudur Taluk are expanded in an extent of about 1,200 acres each, the Cheyyar Industrial Complex in Cheyyar Taluk, Thiruvannamalai District, is being expanded in an extent of 2,300 acres. Apart from the above, acquisition of 2,583 acres of land in Sriperumpudur Taluk has recently commenced. Further, SIPCOT has proposed to promote a few more Industrial Complexes in this region including Ranipet Expansion IV (1,082 acres) in Wallajah Taluk. For the development of Ranipet Hosur region, SIPCOT has proposed to expand its existing Industrial Complex at Hosur in Krishnagiri District with two more expansions, viz., Expansion III and IV over an extent of 2,306 acres in total covering Addagurukki, Nallaganakothapalli, Doripalli and Marudandapalli villages in Hosur Taluk and action has been taken to acquire the lands. Perambalur SEZ Project57 TIDCO is setting up a multiproduct SEZ in Perambalur District in association with M/s. GVK Group of Hyderabad. A special purpose vehicle (SPV) JV company, viz., GVK Perambalur SEZ Private Limited has been incorporated to implement this project.
Source: www.sipcot.com Source: www.sipcot.com Source: www.sipcot.com 60 Source: IBEF Report, Tamil Nadu, 2011
57 58 59

The newly approved Petroleum, Chemicals and Petrochemicals Investment Region for Tamil Nadu, set up at Cuddalore and Nagapattinam, has received Government support of Rs. 51.2 billion. This will be part of investments in external infrastructure of Rs. 138 billion, and over and above an estimated investment of Rs. 997.5 billion. Coimbatore TIDEL Park 59 TIDEL Park Coimbatore Limited has been incorporated with ELCOT, TIDCO, TIDEL and STPI as promoters to construct an IT Park with built up area of 1.7 million sq. ft. at the IT-SEZ, Coimbatore, at an estimated cost of Rs. 3.7 billion. The employment potential through the units to be located in this IT Park is around 12,000 IT professionals. IT-ITES SEZ at Taramani The proposal is to develop a State-of-the-art IT - ITES SEZ with about 4.00 million sq ft built up space on 26.64 acres of land at Taramani in Chennai in Mylapore-Triplicane Taluk, Thiruvanmiyur village and Tambaram Taluk, Kottivakkam Village with all supporting infrastructure. M/s.DLF Limited has been selected as the Joint Venture Partner for development of the above project. The estimated cost of the project is Rs. 15 billion.

Single Window Facilitation60

Single-Window Clearance Mechanism has been established to avoid procedural delays and accord all pre-project clearances at the State Government level: The structure for the Single Window Facilitation system is as: Project Approvals Authority (PAA) under the Chief Secretary to Government to monitor and hasten projects with investments less than Rs. 1000 million. State-level Investment Promotion Board (SIPB) under the chairmanship of the Chief Minister of Tamil Nadu to monitor and expedite all mega projects exceeding Rs. 1000 million. Common Application Form (CAF): The Government of Tamil Nadu has introduced a CAF to be filled and filed by investors with the Documentation and Clearance Centre (DCC) in the Guidance Bureau.

Areas of Competitive Advantage/ Key Sectors for Attracting Investments

Key Facts Automobile and Auto Components Tamil Nadu has the largest auto components industry base. Currently, Tamil Nadu accounts for above 32 percent of Indias production capacity. Automobiles operate just in time avoiding inventory costs Abundant availability of skilled manpower in automobile engineering largest turn out of skilled manpower in India Excellent port logistics- two modern ports in Chennai and one in Tuticorin, providing a gateway for exports and imports. Chennai container terminal is the most efficient in India. Chennai port has dedicated berths for automobile exports Hyundai has made Chennai as the Global Export hub for Small Cars. Project National Automotive Testing R&D Infrastructure Project (NATRIP) in Oragdam near Chennai at a project cost of about Rs. 4.5 billion Ford, BMW, Nissan, Daimler, Renault, Caparo, Hyundai, Tafe, Ashok Leyland, Delphi, Visteon, Same, Saint Gobain, Bosch, Royal Enfield, Mahindra, Allison, MRF Tyres, Caterpillar, Schwing, Hwashin, Komtasu, Asahi Glass, Apollo Tyres, TVS, Unipres, Terex Recent Investments Dominant Industries/ Players

Chemicals and Petro Chemicals Tamil Nadu has 3 major chemical clusters namely Manali in Chennai, Cuddalore and Tuticorin Tamil Nadu has manufacturing facilities for fertilisers, paints, carbon black, pesticides, pharmaceuticals, organic and inorganic chemicals, polymers, caustic soda, soda ash, etc. Chennai is set to emerge as the largest glass hub in India Saint Gobain, France has established two float glass plants in Sriperumbudur with an installed capacity of 0.4 million metric tonne per annum, the largest facility in India Asahi Glass, Japan has established a facility for making automotive glass Harsha, UAE is currently in the process of establishing a float glass project with an investment of Rs. 15 billion in Chennai neighbourhood Saint Gobain, Asahi Glass, Harsha, CPCL, Nagarjuna

Key Facts Electronic Hardware Chennai has emerged as the largest electronic hardware manufacturing and exporting hub in India Nokia plant in Chennai is the worlds largest mobile handsets manufacturing projects

Recent Investments

Dominant Industries/ Players

Some of the Fortune 500 companies which have set up manufacturing facilities in Chennai neighbourhood include: Nokia, Motorola, DELL Computers, Samsung, Foxconn, Sanmina-SCI, Flextronics, and Nokia-Siemens besides more than 30 components suppliers.

Alcatel, Honeywell, Nokia, Dell, Foxconn, Samsung, Ericsson, Perlos, Flextronics, Siemens, Moser Baer, Motorola, Laird, Panasonic, Salcomp

Agro and Food Processing Tamil Nadu with seven agro climatic conditions and varied soil types is better placed for production of fruits, vegetables, spices, plantation crops, flowers, medicinal and aromatic plants Tamil Nadu is one of the largest producers of agro and horticulture products in India Textile Textile mills and engineering industries are present around the city of Coimbatore. It is home to textile, automotive spare parts and motor pump manufacturing units. Cities of Tirupur and Erode are the countrys largest exporters of knitwear. They are well known for textile manufacturing industries. 56 percent of Indias total knitwear exports come from Tiruppur & Karur make above 60 percent of Indias Home Textiles. The region around Coimbatore, Tiruppur, Karur and Erode is referred to as the Textile Valley of India with the export from the Tiruppur to Rs. 5 billion and Karur generates around Rs. 3.55 billion an year in foreign exchange. 40 textile parks are being set up which will attract investment of Rs. 19.71 billion Centwin Hosiery, AVt fabrics, KMJ exports, S P Garments, Newrama Exports, PSM Textiles, CPS Textiles, Primex Clothing, Raj Handlooms, Shri Kandhan New schemes with an outlay of Rs.4.83 billion under the National Agriculture Development Programme (NADP) Aavin , Madura sugars

LOOKING AHEAD
In this environment of fiscal consolidation, four areas which are of critical importance to Tamil Nadu include health, education, tourism and biotechnology. employment opportunities for people in rural areas. Improving infrastructure, marketing campaigns and involving the private sector are key components in expanding this cluster. in R&D activities. Tamil Nadu has taken positive steps in devising biotechnology friendly policies, and creating a biotechnology park in Taramani. To complete the cluster, the Government will have to create stronger linkages with Tamil Nadus university system, and address issues such as import tariffs, intellectual property and market access for private companies.

Tamil Nadu has a large array of natural resources and national monuments, with over 100 miles of prime beachfront scenery and 300 religious temples. The tourism industry has the ability to attract increased private sector investments and bring in much-needed foreign capital through increased international visitors. Moreover, the tourism industry has the ability to employ human capital and create

Biotechnology is an emerging field that could thrive in a skill-based State of Tamil Nadu. With an increasing demand for genetically engineered products for health care, agriculture and the textiles industry, biotechnology represents a huge growth potential in the next 10-15 years. Biotechnology is a knowledge based cluster and requires heavy investments

Annexure
Annexure I: Policies
Infrastructure Policy
The State Government envisages making Tamil Nadu an attractive destination for the investors by developing its infrastructure. The policy encourages the participation of private players in the infrastructural development. As per the provision laid down under the policy, the Government established Infrastructure Fund in order to facilitate public- private partnerships in this sector. The Government of Tamil Nadu has established single window system to accord all pre- project clearances at the State level. The key features of the policy are: Custom made packages for investment in fixed assets Capital subsidies and exemption in Electricity Tax to companies investing in fixed assets. Exemption from entry and sales tax on imports of manufacturing units Greater Subsidy for newly established industrial units located in government industrial parks Grant of incentives for registration of patents through one-time reimbursement

Web Link: http://www.smeindia.net/export_schemes/IP-High/Row%2027/27D.pdf

SEZ Policy 2003 The Government has laid down guidelines regarding the Special Economic Zones (SEZs) in its policy as per which the State envisages to provide legislative support to the SEZs. It also aims to ensure that the supply of power and water to these SEZs is adequate and also that single window clearance system is implemented with respect to all the SEZ units. Web Link: http://investingintamilnadu.com/tamilnadu/doc/policy/Tamil_Nadu_SEZ_Policy_2003.pdf ITES Policy 2005 Tamil Nadu with its excellent physical, civic and social infrastructure and a large pool of talented, educated, hardworking, English speaking workforce is well positioned to capture a substantial share of the ITES market thereby generating massive employment opportunities in ITES sector in Tamil Nadu. The State Government has come up with ITES policy to harness the opportunities in the IT sector. The key features of the policy are: To encourage investments by foreign players in the ITES sector in Tamil Nadu To build the capability of Human Resources specific to ITES sector To create world class infrastructure for IT and ITES To provide a framework for protection of intellectual property and data To create more jobs in the ITES sector To provide a conducive environment for the sector by reducing the ambiguities in regulations and increasing opportunities Web Link: http://www.tn.gov.in/documents/policies/ITES2005-TN.pdf

Textiles Policy 2007 The State Government has formulated textile policy to boost its textile sector and to bring about greater quality to meet the global standards. The policy aims to give thrust to exports and encourage textile clusters. The key features of the policy are: To enhance the quantity and quality of textiles and meet the needs of both domestic as well as overseas market, taking into consideration the industrys potential for employment To identify markets, products for each market, inputs required, technology, human and financial resources required to meet the growth in the industry.

Web Link: http://www.tn.gov.in/policynotes/archives/policy%202006_2007/hhtk_2.htm Tourism Policy 2010 The tourism department of Tamil Nadu has come out with its tourism policy with the aim to retain the tourists for a longer period, attract new tourists and to make systematic effort to upgrade the infrastructural facilities. The key objectives of the policy are: To participate in International Travel Marts to attract tourists To promote rural tourism To select certain tourism destinations and improve their infrastructure To develop Eco-Tourism circuit To establish sculptors park for sculptors and artisans in Mamallapuram. To introduce Hop on - Hop off tours in Chennai

Web Link: http://www.tn.gov.in/policynotes/archives/policy2009_10/pdf/tourism.pdf

Micro, Small and Medium Industries Policy, 2008 The policy focuses on the development of MSMEs in the State by way of infrastructure development, incentive schemes, technology development, and subsidy schemes for units located in industrially backward areas, skill development, marketing support, deregulation and simplification, administrative reforms and rehabilitation of sick enterprises. Key features of the policy are: To revive the Micro, Small and Medium Enterprises in the State and enable them to become competitive in a WTO compliant global market and become world leader in select segments. To reduce regional imbalances in the industrial development within the State and to facilitate setting up of Micro, Small and Medium Enterprises in backward areas of the State. To encourage modernization and up gradation of technology in traditional sectors for having competitive edge in the wake of liberalization and globalization. To create employment opportunities particularly to the vulnerable sections of the society and rural people, ensuring inclusive development. To provide skill development and training for educated youth to develop entrepreneurial skills and make them self-employed. To create infrastructure facilities, provide incentives and marketing as well as technical support to the Micro, Small and Medium Enterprises. To cater to the quality testing requirements of Industries in general and to Micro, Small and Medium Enterprises in particular. To reduce procedural formalities to speed up industrialization.

Web Link: http://www.indcom.tn.gov.in/msmi_e_2008.pdf

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