FE Editorial : Driving an economy

Written by The Financial Express | Updated: Dec 29 2012, 08:28am hrs
Haryanas loss could be Gujarats gain

Back in the early 1980s, when Japanese two-wheeler major Suzuki first came to India as a junior partner in a passenger car venture with the government of India, Haryana was seen as one of the more progressive states in the country. Over the years, as Maruti Udyog Limited began to indigenise production, a series of Suzukis Japanese vendors set up shop in Haryana as joint ventures with local partnersthey produced electrical harnesses, steering systems, shock absorbers ... As Suzukis Japanese-style manufacturing practices began taking root, Japanese management and quality practices also got popular. Over the last decade, more than half the worlds Deming awards (the Oscars for quality systems) have been won by Indian firms. Cashing in on this Haryana quality boom, Marutis expansions were all planned in the state and after Suzuki took control over Maruti, it announced a new plant in the state along with a state-of-art R&D centre complete with a test track.

Over a period of time, however, with reports of labour unrest in the state, some of its allure vanished. While some majors like Hyundai chose to locate at Chennai, others set up base in Maharashtra. In October last year, Suzuki set the cat among the pigeons when it announced the setting up of a one million car facility in Gujarat, a state to which some months before this, Ratan Tata had said he was shifting his Nano project to. With this, the number of automobile firms who had announced Gujarat plans rose to 6. This, however, happened before the violence at Marutis Manesar plant which saw one official burnt to death and another 100 in hospital, including 8 in the ICU. Maruti, FE reported Thursday, is now planning more production facilities in Gujarat. In another 8 years, if all goes to plan, the overall investments made by Maruti and its vendors in the state will cross R20,000 crorethis compares with R16,000 crore invested in the Haryana plants by the auto major. As a result, by 2020, Maruti will have the capacity to produce 15 lakh cars a year in Gujaratwhile 640 acres of land for one plant has already been acquired, another 700 acres are to be bought around 30 km away from the first siteas compared to 12.5 lakh cars between the two plants in Haryana.

For a state that has more or less kept pace with Gujarat in terms of industrial growth over the past 6-7 years, the fact that major automobile expansions are taking place outside the state cant be good news. While Suzukis top management has publicly been appreciative of the cooperation by the Haryana government, the post-murder situation has really hurt Haryanas attractiveness as an industrial destination. This is something the chief minister needs to introspect over.