Posted 2022-09-18 by Dholera Greenfield Smart City

Why Did Maharashtra Lose Out on Vedanta's Chip Project to Gujarat?

Vedanta had formed a partnership with electronics giant Foxconn in a 60:40 joint venture to manufacture a semiconductor fabrication ecosystem in India.

Semiconductor chips, or microchips, are essential pieces of many digital consumer products – from cars and mobile phones to ATM cards.

The company had been holding discussions with the Maharashtra government over the last few months to set up the plant.

What Subsidies Was the Maharashtra Govt Offering?

As per documents of the state's industries department, the Maharashtra government had offered an “extremely lucrative incentive package” to the company, The Indian Express reported. Several other incentives were also announced, such as:

  • A power tariff subsidy of Rs 1/unit
  • Support to Vedanta to manufacture a 750 megawatt solar power plant
  • Subsides on land, power, water
  • Exemption from electricity duty

The deal would have led to major economic opportunities in the state, and was estimated to bring in around Rs 26,200 crore in State Goods and Services Tax (SGST), create close to two lakh direct and indirect job opportunities and $21 billion direct and $5-8 billion additional investment.

Several other states were also in competition for the investment-heavy project, like Tamil Nadu, Telangana, Karnataka, and Gujarat.

Why Did Gujarat Get the Deal Instead?

However, the deal was finally gifted to the Gujarat government, as announced on Tuesday.

An MoU was signed between the Gujarat government and the company in the presence of Chief Minister Bhupendra Patel, Union Information Technology Minister Ashwini Vaishnaw and chairman of the Vedanta Group, Anil Agarwal.

Agarwal later said in a tweet that the decision to choose Gujarat over Maharashtra was an independent one, based on "professional and independent advice."

"We decided Gujarat few months ago as they met our expectations," he said, adding that the Maharashtra government had made a "huge effort" at their meeting in July to "outbid" other states with a competitive offer.

The reason behind Maharashtra losing out on the deal might have been that Gujarat offered a more profitable proposition to the company with regard to land-related incentives, The Indian Express reported, quoting sources.

Did the Centre Play a Role in the Project Going to Gujarat?

The Opposition in Maharashtra, however, has said that Shinde bowed before Prime Minister Narendra Modi as Assembly elections are scheduled to be held in Gujarat this year, and getting the deal would bode well for the electoral chances of the ruling Bharatiya Janata Party (BJP) state government.

During the MoU-signing ceremony, Vedanta's chairman also thanked the Union IT minister for helping the company "tie things up so quickly," indicating a role played by the Centre in this regard.

Congratulating the Gujarat government, PM Modi said, "This MoU is an important step accelerating India’s semiconductor manufacturing ambitions."

He further added, "The investment of Rs 1.54 lakh crore will create a significant impact to boost economy and jobs. This will also create a huge ecosystem for ancillary industries and help our MSMEs."

Meanwhile, the Shinde government claimed that the reason behind Maharashtra losing out on the lucrative deal was that the the previous Maha Vikas Aghadi (MVA) alliance did not provide adequate incentives to Vedanta-Foxconn, leading to them choosing the neighboring state to the west.