The Maharashtra government faced a major setback after Indian mining giant Vedanta and Taiwanese electronics manufacturer Foxconn backed out of a deal to set up their new semiconductor chip plant in the state, and instead signed a Memorandum of Understanding (MoU) with the Gujarat government on Tuesday, 13 September.
After a meeting between Vedanta-Foxconn and Maharashtra Chief Minister Eknath Shinde and Deputy CM Devendra Fadnavis in July, the investment deal, worth a whopping Rs 1.54 lakh crore, was almost through.
However, the last-minute backing out by the company has raised questions regarding what exactly went wrong – something that Shinde and Fadnavis have failed to explain so far.
Explained | Why Did Maharashtra Lose Out on Vedanta's Chip Project to Gujarat?
1. What Is the Vedanta-Foxconn Semiconductor Project?
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.
To sweeten the deal, the Maharashtra government had offered a capital subsidy of upto 30 percent for manufacturing the plant in the state's Talegaon area.
Expand2. 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.
A comparative study conducted between Gujarat’s Dholera and Maharashtra’s Talegaon by the latter's industries department had also revealed that Gujarat relatively had a lower proportion of skilled manpower for the project.
It also stated that the land in Dholera was barren and marshy, and would require high expenditure on infrastructure and civil work. On the other hand, the Talegaon Phase IV in Maharashtra, spanning around 10,000 acres, was planned as an electronic city and would be conducive to the project.
Expand3. What Were Requests Made by Vedanta-Foxconn to Maharashtra?
In July this year, Vedanta-Foxconn had held a meeting with CM Shinde and deputy CM Fadnavis to work out the finalities of the deal.
After the meeting, Maharashtra Industrial Development Corporation had said in a press release: "With a high concentration of skilled manpower, connectivity to the port, seamless domestic supply chain and highly developed industrial infrastructure, Talegaon in Pune had emerged as a prominent option for the company to set up the project."
The release further said that the company and the state government had held several discussions in the past and that the former had also conducted site visits and found the area to be suitable for the plant.
Further, a letter written by CM Shinde to the chairman of the Vedanta group revealed that the the business venture had made two specific requests to set up the plant in the state: Cabinet approval for the project in Talegaon and central government alignment, as per The Indian Express.
In the letter, Shinde said: "(Your) two key requests from the state are to seek central government alignment and cabinet approval. You will be pleased to know that on both fronts, the state is already in advanced stages and is moving ahead expeditiously."
He also invited Vedanta-Foxconn for an MoU-signing ceremony on 29 July, assuring the company that a "high-powered committee" had in principle approved the incentive package, and that the same would be given the go-ahead by the Maharashtra Cabinet.
However, he made this assurance at a time when the Maharashtra Cabinet comprised of only two members, Shinde and Fadnavis.
Regarding alignment with the Centre, Shinde wrote, "We are also seeking alignment with the highest levels at Government of India to request for unfettered support in ensuring the project receives due support."
Expand4. 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.
Expand5. 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 semi-conductor 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 neighbouring state to the west.
Expand6. What Have Uddhav Faction, Opposition Alleged?
Attacking CM Shinde's government for losing out on the deal, the Shiv Sena alleged in an editorial in Saamana that the deal went to Gujarat because the BJP and CM Shinde had made a barter.
The party claimed that the BJP offered to make Shinde the chief minister of Maharashtra following weeks of political turmoil in the state, in return for the semiconductor project being given to Gujarat.
"This is not an allegation but our conviction. The way Fadnavis sent the international finance hub from Mumbai to Gujarat, Eknath Shinde has just allowed the Foxconn-Vedanta deal to go to Gujarat. Tomorrow, they will sell Mumbai too," the Sena alleged.
Former Maharashtra minister Aaditya Thackeray also expressed "shock" over the incident, and claimed that the previous Uddhav Thackeray-led MVA government had brought the deal to its final stages.
"Our MVA government had brought this to the final stage. The current dispensation has lost the confidence of potential investors, hence such mega projects are not coming here," he said.
Sena MP Priyanka Chaturvedi also slammed the Shinde government, saying that the deal had been finalised by the then MVA Industries Minister Subhash Desai and Environment Minister Aaditya Thackeray, but the "ED [Eknath-Devendra] sarkar claimed credit for it and used it for PR [public relations] in July."
Nationalist Congress Party (NCP) leader Ajit Pawar also expressed concern saying that Maharashtra was the first preference for the stakeholders and that the project was moved out of the state "due to political pressure."
Surprisingly, Maharashtra Navnirman Sena (MNS) chief Raj Thackeray, who is usually at loggerheads with the Uddhave Thackeray's Shiv Sena, also slammed the Maharashtra government, and demanded a probe into how and why the state lost the deal.
"Maharashtra was the priority state for investors. It is not a good sign that the investment reversed from Maharashtra. We should go beyond politics and look at this issue," he said in a tweet in Marathi.
Expand7. What Did Maharashtra Govt Say About Losing the Project?
On the other hand, Fadnavis hit out at the Opposition's claims as being "negative, false and baseless," and alleged that they were being made to "hide their own incompetence."
"My advice to these leaders is to focus on becoming competent and efficient and not negative and desperate," the deputy CM said.
(With inputs from The Indian Express.)
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)
Expand
What Is the Vedanta-Foxconn Semiconductor Project?
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.
To sweeten the deal, the Maharashtra government had offered a capital subsidy of upto 30 percent for manufacturing the plant in the state's Talegaon area.
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.
A comparative study conducted between Gujarat’s Dholera and Maharashtra’s Talegaon by the latter's industries department had also revealed that Gujarat relatively had a lower proportion of skilled manpower for the project.
It also stated that the land in Dholera was barren and marshy, and would require high expenditure on infrastructure and civil work. On the other hand, the Talegaon Phase IV in Maharashtra, spanning around 10,000 acres, was planned as an electronic city and would be conducive to the project.
What Were Requests Made by Vedanta-Foxconn to Maharashtra?
In July this year, Vedanta-Foxconn had held a meeting with CM Shinde and deputy CM Fadnavis to work out the finalities of the deal.
After the meeting, Maharashtra Industrial Development Corporation had said in a press release: "With a high concentration of skilled manpower, connectivity to the port, seamless domestic supply chain and highly developed industrial infrastructure, Talegaon in Pune had emerged as a prominent option for the company to set up the project."
The release further said that the company and the state government had held several discussions in the past and that the former had also conducted site visits and found the area to be suitable for the plant.
Further, a letter written by CM Shinde to the chairman of the Vedanta group revealed that the the business venture had made two specific requests to set up the plant in the state: Cabinet approval for the project in Talegaon and central government alignment, as per The Indian Express.
In the letter, Shinde said: "(Your) two key requests from the state are to seek central government alignment and cabinet approval. You will be pleased to know that on both fronts, the state is already in advanced stages and is moving ahead expeditiously."
He also invited Vedanta-Foxconn for an MoU-signing ceremony on 29 July, assuring the company that a "high-powered committee" had in principle approved the incentive package, and that the same would be given the go-ahead by the Maharashtra Cabinet.
However, he made this assurance at a time when the Maharashtra Cabinet comprised of only two members, Shinde and Fadnavis.
Regarding alignment with the Centre, Shinde wrote, "We are also seeking alignment with the highest levels at Government of India to request for unfettered support in ensuring the project receives due support."
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 semi-conductor 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 neighbouring state to the west.
What Have Uddhav Faction, Opposition Alleged?
Attacking CM Shinde's government for losing out on the deal, the Shiv Sena alleged in an editorial in Saamana that the deal went to Gujarat because the BJP and CM Shinde had made a barter.
The party claimed that the BJP offered to make Shinde the chief minister of Maharashtra following weeks of political turmoil in the state, in return for the semiconductor project being given to Gujarat.
"This is not an allegation but our conviction. The way Fadnavis sent the international finance hub from Mumbai to Gujarat, Eknath Shinde has just allowed the Foxconn-Vedanta deal to go to Gujarat. Tomorrow, they will sell Mumbai too," the Sena alleged.
Former Maharashtra minister Aaditya Thackeray also expressed "shock" over the incident, and claimed that the previous Uddhav Thackeray-led MVA government had brought the deal to its final stages.
"Our MVA government had brought this to the final stage. The current dispensation has lost the confidence of potential investors, hence such mega projects are not coming here," he said.
Sena MP Priyanka Chaturvedi also slammed the Shinde government, saying that the deal had been finalised by the then MVA Industries Minister Subhash Desai and Environment Minister Aaditya Thackeray, but the "ED [Eknath-Devendra] sarkar claimed credit for it and used it for PR [public relations] in July."
Nationalist Congress Party (NCP) leader Ajit Pawar also expressed concern saying that Maharashtra was the first preference for the stakeholders and that the project was moved out of the state "due to political pressure."
Surprisingly, Maharashtra Navnirman Sena (MNS) chief Raj Thackeray, who is usually at loggerheads with the Uddhave Thackeray's Shiv Sena, also slammed the Maharashtra government, and demanded a probe into how and why the state lost the deal.
"Maharashtra was the priority state for investors. It is not a good sign that the investment reversed from Maharashtra. We should go beyond politics and look at this issue," he said in a tweet in Marathi.
What Did Maharashtra Govt Say About Losing the Project?
On the other hand, Fadnavis hit out at the Opposition's claims as being "negative, false and baseless," and alleged that they were being made to "hide their own incompetence."
"My advice to these leaders is to focus on becoming competent and efficient and not negative and desperate," the deputy CM said.
(With inputs from The Indian Express.)
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)