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With $2 bn in kitty, this is the next boom town

December 16, 2006 10:16 IST

If you haven't heard of Rudrapur, you've probably already missed the boat. With $2 billion in investments, this foothill town is the next big address for industry.

A little over four centuries ago, Rudra Chand, the ruler of Kumaon, laid the foundations of a town in the Terai region to defend his hill kingdom against attacks from plainsmen.

Like all narcissist rulers of his time, he called it Rudrapur. The town hardly served the purpose for which it was built the Rohillas plundered the Chand capital Almora and the adjoining areas in the 18th century.

And Rudrapur slowly became just another milestone in the foothills of the Kumaon Himalayas -- a dusty town you could zip through in five minutes on your way to Nainital.

The Rudrapur roads are still dusty and pock-marked, but the traffic has suddenly turned heavy. Trucks loaded with industrial products and buses carrying workmen routinely clog the town's small arteries.

Real estate prices have shot up 10-12 times in the last year. Billboards can be found all the way up to Delhi, 275 km away, inviting you to buy swank apartments with distinctively upmarket names like Cedar Heights.

Real estate deals running into crores of rupees are no longer uncommon in Rudrapur and in adjoining towns like Haldwani, as are extortion calls from the local mafiosi. The town, where visitors struggle to find a decent hotel room at present, could soon boast of a Radisson and a Taj Ginger.

After all, India Inc is pumping in well over $2 billion in the Pantnagar Integrated Industrial Estate on the outskirts of Rudrapur. The sugarcane and paddy fields have given way to pre-fabricated industrial structures. Sturdy Sikh farmers atop tractors have had to make way for senior executives in cars and SUVs. The buzz of a boomtown is unmistakable.

In the last two years, 397 plots have been sold at Rudrapur to set up industrial units. The list of buyers includes top companies like Tata Motors, Bajaj Auto, Escorts, Voltas, Britannia, Nestle, Parle Biscuits, HCL, Hewlett-Packard, Dabur, Kores India.

Ashok Leyland (on 175 acres) and Lenovo too are expected to be here soon. Once all the units are on steam, the town is expected to churn out products running into billions of dollars every year and provide employment to over 44,000 people.

It all started in early-2003, when New Delhi came out with a special package of fiscal incentives for the development of the northern hill states of Jammu & Kashmir, Himachal Pradesh and Uttaranchal.

Units located in notified industrial areas were offered 100 per cent excise exemption for 10 years, 100 per cent income tax exemption for the first five years and 30 per cent over the following five years, concessional central sales tax of 1 per cent for five years, and a capital investment subsidy of 15 per cent with a cap of Rs 30 lakh. These benefits can be availed by any unit that goes into production by March 2010.

The numbers were too good to be ignored, especially with the market place getting more competitive by the day.

Though companies contacted by Business Standard were unwilling to say how much cost they had managed to trim by moving to these areas, Uttaranchal officials have some numbers worked out, which they never forget to mention in their hardsell.

For example, while a case of Ciprofloxacin is produced in Gujarat for Rs 201, with the tax concessions in place it can be produced in Uttaranchal for as little as Rs 151 — a saving of almost 25 per cent.

Though businessmen had a choice of three states, Uttaranchal scored over its rivals. While most of them were apprehensive of putting their money in Jammu & Kashmir, Himachal Pradesh only had sites like Baddi and Parwanoo to offer, where, because of the hilly terrain, setting up large manufacturing units was difficult.

A presentation by Voltas shows that Uttaranchal scored over Himachal in all aspects including land, labour, power, trade unionism, water and government support, everything except staff amenities.

Around the same time, the Uttaranchal government led by its octogenarian chief minister, Narayan Dutt Tewari, decided to press home the advantage. Politically, it was heaven sent for Tewari. The state has a high literacy rate (72 per cent against a national average of 65.5 per cent), but also a high unemployment rate.

By stipulating that companies investing in the state would have to draw at least 70 per cent of its work force from locals, Tewari has brightened his prospects for the next assembly elections, which will be held some time in 2007. In Uttaranchal political circles, nobody doubts a second term for the ruling Congress party.

So, the brief for his officials was clear: go flat out to bag investors. Tewari set up SIDCUL (State Industrial Development Corporation of Uttaranchal Limited) to act as the single window facilitation cell and data bank. (Besides the state government, SIDCUL has equity participation from LIC, ICICI and SIDBI.)

"Just a year back, the whole place was one large sugarcane field. We thought it would take at least five years to develop the infrastructure here but SIDCUL did it in just about a year," says S R Bist, general manager at HCL's Rudrapur plant. "They were aggressive and everything promised has been given," adds a Voltas executive at Rudrapur.

One of the three sites chosen by SIDCUL was Rudrapur. The government owned large parcels of land here, which meant there was no chance of the kind of problems faced by Tata Motors at Singur in West Bengal and Posco in Orissa happening here.

Rudrapur was also well connected by rail and road. The airport at Pantnagar too was close to the industrial estate.

What also helped was that there were already a few industrial units in and around Rudrapur: state-owned Bhel's factory, Honda Power's genset plant, a cooperative sugar mill, and a Century Pulp & Papers plant. Soon, companies started making a beeline to Rudrapur and, within months, the entire industrial area of 3,339 acres was sold out.

Bajaj Auto chairman Rahul Bajaj, never one to mince words, had vociferously denounced the incentives, saying it made no sense for him to come to the northern states as he already had a strong production base, including a whole army of vendors, in Maharashtra.

Still, Bajaj Auto is setting up a two-wheeler unit at Rudrapur spread over 300 acres. The estimated investment is to the tune of Rs 300-500 crore. (Arch rival Hero Honda has bought 275 acres at Haridwar and will put up a plant at a cost of Rs 400 crore. TVS has gone to Himachal Pradesh.)

Rudrapur has already become the largest production facility for Dabur, which was among the first to set up shop there. Dabur insiders say the 17.5-acre plant will clock a Rs 200 crore turnover this fiscal.

HCL is making an investment of Rs 30 crore for its plant in Rudrapur and is looking at a total capacity of 3 lakh units a year. Right now they are operating at only 20 per cent of their total capacity, says Bist. It is also asking some of its vendors to come to Rudrapur.

Delta Computers, which makes power supply equipment for computers, has already approached SIDCUL. It could be a vendor for both HCL and Hewlett-Packard, which is constructing its plant at the moment.

But the name that really put Rudrapur on the country's industrial landscape was Tata Motors, which has acquired 1,000 acres — three acres more than the land it is seeking to acquire at Singur near Kolkata amidst stiff political protest.

It will use about 650 acres for a facility to produce the hugely popular Ace mini-truck, while the balance 350 acres is being bought by 57 of its vendors making critical components for it. In fact, the buzz is that Tata Motors could also use the facility to roll out its Rs 1-lakh small car.

All the industrial activity has fired the real estate market in and around Rudrapur. Residential real estate prices have shot up to Rs 1,750 per square foot. Some builders are selling flats at Rs 3,000 per square foot, which is comparable in price with Delhi suburbs like Noida.

With so many industries coming in, and with them the senior staff, there simply isn't enough housing in the area.

In fact, at the moment there is an acute shortage of quality housing in Rudrapur and companies are having a hard time finding accommodation for their senior staff. Whatever is available is either too shabby or too expensive -- Rs 10,000-12,000 a month to even Rs 45,000 a month at some places.

It is expected that by 2010, the requirement for housing will go up to 20,000-25,000 flats. According to Darbara Singh, the president of the Kumaon Garhwal Chamber of Commerce and Industry, there are over 20 residential colonies being developed in Rudrapur.

Some of the bigger builders who have decided to put their money in Rudrapur include Omaxe, Assotech, Samiah and Alliance. Together, they are estimated to be investing over Rs 500 crore in developing residential apartments at Rudrapur.

As projects are being announced by developers, investors from as far as Delhi are coming in for their share of the pie. The apartments in the Omaxe and Assotech/Supertech projects have received a great response from the public (mostly investors from Delhi and neighbouring cities). Parle Biscuits has booked 30 apartments in Assotech's Metropolis for its senior staff.

Also on the drawing board are some top names in the hospitality business. The Tata-promoted Indian Hotels is bringing in its budget brand, Ginger, to town. It has got an acre of land close to the SIDCUL office in Rudrapur for its Ginger property. If the proposed Radisson comes in too, at least senior executives will breathe a sigh of relief.

There are no clubs at Rudrapur. Luckily for people, Nainital is close by (just 73 kilometres) and so are weekend getaways like Bhimtal and Corbett National Park.

Now, SIDCUL will set up some kind of a 7-acre entertainment and recreation centre within the industrial area with banks, restaurants and possibly a hotel. Another evening picnic spot is being created on 12 acres close to the industrial area.

With growing prosperity, the law and order situation has worsened at Rudrapur in the last two years, admits SSP Amit Sinha.

In 2006 itself, there were 54 murders in Rudrapur of which, he says, 25 per cent are directly or indirectly connected to land deals or previous disputes.

At the moment, few are complaining at Rudrapur with money for landowners, jobs for the unemployed and more customers for local businessmen. But what will happen once the tax concessions run out in 2020?

In the past, the Centre had given tax concessions to companies that invested in backward areas; once the concessions were withdrawn, these industrial towns started languishing.

Uttaranchal officials say some movement could happen post-2020 but companies that have a large establishment (vendors, capital equipment and so on) will find it hard to move.

"Most of the units are more than just assembly lines," says a senior official. In other words, the party could go on forever.

Ravi Teja Sharma