INDIAN STATESEconomy and Business

Rajasthan

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INDIAN STATESEconomy and Business

Rajasthan

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CONTENTS

Executive Summary 3

Economic Snapshot 5

The State Economy 7

Infrastructure 8Social infrastructure 8Access infrastructure 8Communications infrastructure 10Industrial infrastructure 10

State Policy 13Power sector reforms 13Infrastructure policy 13SEZ policy 13IT policy 13

Business Opportunities 15Key industries 15Exports 17Investment 18Potential hubs for investment 19

Key Players 21

Doing Business in Chhattisgarh 24Obtaining approvals 24Cost of setting up business 25Contact for information 25

A report by PricewaterhouseCoopers Pvt Ltd for IBEF

RAJASTHAN PAGE 3

Executive Summary

Tourism accounts for over 15 per cent of the state’seconomy. It attracts over 10 per cent per cent of theforeign tourists visiting the country every year.

Recent discovery of oil and gas in Rajasthan isexpected to lead to the development of downstreamindustries in petroleum and chemicals. Reforms in theelectricity sector in the state are one of the mostadvanced in the country. Rajasthan is the first state inthe country to permit “open access” in its electricitysupply market.

Rajasthan’s strategic location as the corridor betweenthe wealthy north and the prosperous west enables itto provide convenient access to the two largestconsumer markets in India.

The state’s key areas of strength include mineralbased industries, textile, tourism and gems &jewellery. Rajasthan enjoys a distinct advantage inthese sectors. It is also the leading producer ofcement and metals such as copper, zinc and lead andthe largest producer of marble and stones in thecountry.

Industrial Centres in Rajasthan

RAJASTHAN PAGE 5

An Economic Snapshot

Capital Jaipur

Area (sq km) 342,239

Population (Census 2001, million) 56

Literacy Rate (%) 61

Human Development Index 0.424 (All India rank 9th)

NSDP (US$ billion) 11.5

NSDP growth (10 years) (%) 6

Per Capita Income (US$) 327

Exports (US$ million) 965

National Highways length (km) 4,081

Rail Length (km) 5,894

International Airport Jaipur

Domestic Airport Jodhpur, Udaipur

Key Industries Mineral based industriesTextilesTourismGem and jewelleryDimensional stones (marble and granite)Agro-processing

Potential Industries Oil and gasIT and ITESElectricity generation and distribution

Advantage Rajasthan

n Leading producer of cement in the country

n Second largest mineral producing state in the country, large reserves of metallic and non-metallic reserves

n Among the largest producers of cotton and wool in the country

n A well known tourist destination

n One of the most progressive states in electricity sector reforms

n Recent discovery of oil and gas reserves

n Emerging destination for IT and ITES industries

Rajasthan’s per capita income stood at US$ 327 in2003-04.The overall economic performance of thestate has been good during the last decade despitethe drought situations in some of the years.

During 1995-96 and 2001-02, while the industrialsector has grown at 6.9 per cent per annum, thegrowth rate of services was 7.4 per cent during thesame period.Among services, the share of trade andtourism in state’s GSDP stands at over 16 per cent.

RAJASTHAN PAGE 7

THE STATE ECONOMY

With a Net State Domestic Product (NSDP) of overUS$ 11.5 billion, Rajasthan’s economy is the eighthlargest in the country.

Geographically the largest state of the union, itslocation provides a significant strategic advantage tothe state. It enjoys convenient access to the wealthynorth and the prosperous west, the two largestconsumer blocks within India.

During the decade between 1994 and 2003, thestate’s NSDP grew at a Compounded AverageGrowth Rate (CAGR) of 6 per cent, increasing fromUS$ 6.4 billion to US$ 11.5 billion.

Note: the figures are at 1993-94 prices, IUS$=INR 45,Source: Government of Rajasthan

NSDP growth

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

0

2

4

6

8

10

12

14

US$

bill

ion

Composition of electricity consumption

32%

10%

20%

6%

32%

Domestic

Commercial

Agriculture

Industry

Others

INFRASTRUCTURE

of 1,600 students are functioning in Rajasthan.Thestate also has 26 management institutes, with anannual intake of 1,460 students.

The network of health facilities in the state comprises120 hospitals and 1,800 health centres.The number ofin-patient beds in Rajasthan’s hospitals is 39,000.

Access infrastructure

The total length of roads in Rajasthan stands at over140,000 km.The length of surfaced roads in the statehas increased from 65,000 km in 1993 to over 89,000km by 1999.

Year 1993 1995 1997 1999

Total length(in km) 125,797 130,085 129,608 140,856

Surfaced length(in km) 65,570 69,576 76,747 89,378

Source: Ministry of Road Transport and Highways, GoI

Rajasthan’s road density stands at 41.2 km per 100square km, as against the national average of 76.8.Thisis mainly due to a large proportion of desert area inthe state.

The total length of national highways passing throughthe state is 4,597 km.This includes the highwayconnecting Delhi and Mumbai, India’s two main businessand commercial centres. Under the on-going NationalHighway Development Programme (NHDP), a length of 1,280 km is being converted into 4-6 lane highways.Of this, over 300 km has already been up-graded.

Rajasthan has benefitted significantly from the on-going highway development programme whichinvolves developing of a high-quality highway corridorlinking Delhi and Mumbai, the two most prominentbusiness centres in the country.

Social infrastructure

Rajasthan has achieved significant progress inimproving its social infrastructure over the yearsreflected in the 9th rank as per the HumanDevelopment Index.

Population of over 56 million (Census 2001) makes it the eighth largest state by population. Its populationdensity at 165 persons per sq km is the lowestamong the large states in the country.The populationgrowth rate in Rajasthan stood at 28 per cent during1991-2001, which is higher than the national growthrate of 21.3 per cent during the same period.Theurban population in Rajasthan stood at 132 million,representing over 23 per cent of the total.

EducationRajasthan’s education network consists of 9universities and over 250 colleges, along with 55,000primary and 7,400 secondary schools.The literacyrate grew from 38 per cent in 1991 to over 61 percent in 2001.

The state has 41 engineering colleges with an annualintake of over 11,500 students. It also has 23polytechnics and 152 Industrial Training Institutes(ITIs), providing vocational training to students.TheLN Mittal Foundation (belonging to the IspatInternational group) has recently established the LNMIndian Institute of Information Technology at Jaipur toimpart technical education in the fields of IT,communication, electronics and emergingtechnologies.This network of educational institutesmakes available a pool of qualified professionals to thebusinesses and industries located in Rajasthan.

A total of seven medical institutes in Rajasthan offerover 700 seats annually for pursuing medical degrees.In addition, 28 pharmacy institutes with annual intake

RAJASTHAN PAGE 9

The state has also been a pioneer in promotingprivate investment in development of highways, withimplementation of projects on Build-Operate-Transfer(BOT) basis.Till date, the state has completed tenBOT projects aggregating 150 km with investment ofover US$ 25 million. Further 11 projects withinvestment of over US$ 10 million are underimplementation. Prominent private investors in BOTroad projects in Rajasthan include GVK Group andTransport Corporation of India.

The total length of railway network in the state is5,894 km. Of this, almost 500 km is electrified track.At present, a large proportion of the existing railwaynetwork is based on metre gauge. Indian Railways isimplementing a major track modernisationprogramme to convert existing metre gauge routes tobroad gauge.With the completion of this programme,the broad gauge network will account for over 55 percent of the total railway network.At present, projectsaggregating 450 km are under implementation. Inaddition, Indian Railways is also implementing threeprojects for new railway lines aggregating 250 km.

To overcome the lack of a seaport in the state,Rajasthan is planning a “dry port” at Alwar.Theproject, expected to cost around US$ 40 million, shallbe implemented through Public Private Partnership.

Recently, the state has announced plans for upgradingthe state highways linking the already upgradednational highways, with an investment of over US$200 million.

Rajasthan has full fledged airports at Jaipur, Jodhpurand Udaipur, the three prominent commercial andbusiness centres and key tourist destinations. Inaddition, air strips / helipads exist at a number oflocations.The number of passengers handled at Jaipurand Udaipur airports was 419,169 in 2003-04, asagainst 366,833 in 2001-02. Jaipur airport wasawarded the ISO 9001:2000 certification for itsquality management systems in 2003.

Airport 2001-02 2002-03 2003-04@Jaipur 228,872 289,934 244,724Udaipur 137,961 153,678 174,445Total 366,833 443,612 419,169

@AnnualisedSource: Airports Authority of India

Rajasthan is implementing the Rajasthan UrbanInfrastructure Development Project (RUIDP) withassistance from the Asian Development Bank (ADB).RUIDP covers the six largest cities (Ajmer, Bikaner,Kota, Jaipur, Jodhpur and Udaipur), which are also themost important commercial and business centres ofthe state.The combined population of these six citiesis over 5.3 million, representing 40 per cent of thetotal urban population of the state.The US$ 362million RUIDP is aimed at improving urbaninfrastructure and strengthening public servicesdelivery systems in these cities. Services to becovered by the project include water and sewerage,urban transport and solid waste management.

Power

The installed electricity generation capacity ofRajasthan is 4,547 MW . In addition, Rajasthan alsohas an estimated 1,300 MW of captive generationcapacity.A large proportion (72 per cent) of thestate’s electricity generation capacity is based onthermal energy.

Electricity generation

Source: Government of Rajasthan

1999 2000 2001 2002 2003

MW

Mill

ion

Uni

ts

3,000

3,400

3,800

4,200

4,600

5,000

20,000

21,000

22,000

23,000

24,000

25,000

26,000

27,000

Installed capacity (MW)

Electricity generation (MU)

Communications infrastructure

The number of fixed wire telephone subscribers inthe state has grown from 0.4 million in 1995 to 1.6million in 2002.

Year 1995 1997 1999 2001 2002

Fixed wiretelephones (in ‘000) 394 608 927 1,326 1,591

Source: CMIE

The growth in cellular mobile telephony has beenequally strong. Since its launch in 1999, the number of subscribers has increased to over 770,000 in 2004.

Industrial infrastructure

Rajasthan has a network of almost 300 industrialestates developed by RIICO.These are spread acrossthe state, with many of them focused exclusively onhigh growth industries such as gems & jewellery,apparels, agro-processing and bio- technology.

These estates provide good quality infrastructuresupport to units locating there, includinguninterrupted electricity and water supply, sewerageand common roads.

JaipurJaipur is the capital of Rajasthan and its largest city. Ithas a population of approximately 2.3 million. It is wellconnected to Delhi and other major cities acrossIndia. Its international airport offers direct flights toSouth-east Asia and the Middle East, as well as tomany other cities across India. It is a primedestination for domestic and foreign tourists in thecountry.

Jaipur has 19 industrial areas with product baseincluding gems & jewellery, marble, granite andengineering items. It is also a potential destination forIT and ITES industries coming to the state.

The consumption of electricity increased from 7,990million units to over 14,200 million units in 2001-02,thus indicating an average annual growth rate of over7 per cent.Agriculture and industry represent thelargest consumer categories, followed by domesticconsumers.

On a per capita basis, electricity consumption inRajasthan stands at 334 kWh per annum, lower thanthe national average of 355 kWh per annum.

The following projects are in various stages ofimplementation, aggregating 975 MW capacity.

Project Capacity (MW)

Under implementation

Ramgarh gas power project – extension 75

Suratgarh thermal power project – Unit V 250

Kota thermal power station – Unit VI 195

Planned

Girna lignite thermal project 125

Dholpur gas power project 330

Total 975

Composition of electricity consumption

32%

10%

20%

6%

32%

Domestic

Commercial

Agriculture

Industry

Others

RAJASTHAN PAGE 11

KotaKota is a prominent business and industrial centre inRajasthan. It has a population of 0.7 million. It islocated on the main railway line connecting Delhi andMumbai.

Kota has 14 industrial estates and a number of largechemical units. Products from these units includefertilizers, caustic soda, cement, copper based items,stones & tiles, PVC items and tyre chord fabric.Theareas surrounding Kota also have large limestone andsandstone deposits.

STATE POLICY

necessary to achieve the target set for economicgrowth.

Rajasthan government has initiated steps aimed atstreamlining the approval processes, promote exportand knowledge intensive industries and provide betterquality infrastructure.The main objective of theseinitiatives is to improve the investment and businessclimate in the state.The Economic Policy and ReformsCouncil acts as the think-tank on key economic andbusiness matters.The council provides strategic inputsto the state government for increasing private sectorparticipation, creating resources, capabilities,infrastructure and systems so that economic activitiescould flourish in the state.The council comprisesmembers from the fields of business and economics,with CEO of Shell India,Vice Chairman of HSBC inIndia and Chairmen of ITC, HDFC, NIIT Ltd andGujarat Ambuja Cement.

Government of Rajasthan has established the Boardof Infrastructure Development and Investment (BIDI),

The government has committed to enact a fiscalresponsibility and budget management legislation, toimprove government’s fiscal position.This will enableit to make larger investment in developing physicalinfrastructure in the state.

The government shall also review the existing sectorspecific policies of the state (particularly the ones forIT sector and mining sector), to provide betterincentives and concessions to the industry, to enhanceRajasthan’s competitive position vis-à-vis otherbusiness destinations within India.

Rajasthan aims to increase its NSDP by 5.5 times by2025.The proposed economic agenda of Rajasthanfocuses on the following four sectors, contributingover two-thirds to the state’s economic output:

n Agriculture and animal husbandryn Manufacturingn Miningn Tourism

The key strategic thrust areas for each of thesesectors are:

Agriculture and n Increase in productivityanimal husbandry n Shift in cropping pattern

n Develop animal husbandry potential

Manufacturing n Further development of select existing industries

n Revitalization of other poorperforming industries

n New industries – attracting MNCs

Mining n Focus on high value mineralsn Strengthening mining infrastructuren Focus on exports

Tourism n Domestic tourismn Increased spending

Based on the above strategic framework, Rajasthanhas identified immediate and long-term actions

Rajasthan: Recent initiatives on improving

investment & business climate

n Establishment of Economic Policy & Reforms

Council

n Establishment of Board for Infrastructure

Development and Investment

n Further strengthening and deepening of electricity

sector reforms

n Approval of SEZ policy

n Establishment of a venture capital fund for

promoting technology and knowledge intensive

businesses

n Establishment of Investment Commissioner office

in New Delhi, to facilitate better interface with

industry & business

RAJASTHAN PAGE 13

government in order to successfully structure andimplement infrastructure projects on a public-privatepartnership basis. It also advises the government forpolicy and institutional changes.

PDCOR has developed a 25-year vision forinfrastructure development in the state.This visionoutlines the projects and investment requirements insectors such as energy, transportation, water andsewerage and tourism infrastructure.

The projects currently under implementation throughPDCOR include:n Integrated parking infrastructure project for Jaipurn Development of “Jal Mahal Palace” in Jaipurn Development of bus terminals across different

cities in Rajasthann Industrial area development project in Bhiwadi

Special Economic Zone (SEZ) Policy

The Government of Rajasthan has adopted the SEZpolicy for developing Special Economic Zones in thestate.The SEZs, earmarked as duty-free enclaves, willhave a relaxed and business friendly policy regime,aimed at promoting rapid industrial development andemployment generation.The approved policy regimeincludes:n Exemption of all state and local taxes and levies for

transactions with the SEZ and for supply fromdomestic tariff areas to the SEZ

n Exemption from stamp duty and registration feesn Grant of labour and environment related permits

and approvals through a dedicated single windowmechanism

n Permission to generate electricity for ownconsumption

n Expeditious process for land acquisition to set upSEZs

IT Policy

Rajasthan has taken steps to spread adoption of information technology in various aspects

with an objective to accelerate private investment inindustry and related infrastructure. BIDI is responsiblefor the formulation of perspective plans for differentregions, inter-sector co-ordination and effectivemonitoring for timely provision of facilities inindustrial areas.As a part of the single-windowclearance process in the state, BIDI is responsible forgranting approvals to projects with investment aboveUS$ 25 million.

Power sector reforms

Rajasthan has been one of the most successful statesin implementing wide-ranging reforms in theelectricity sector.With support from the World Bank,the state has made significant improvements in theperformance of its electricity utilities.

The Plant Load Factor (PLF), a measure of theefficiency of generation plants, has increased from 74per cent in 1995-96 to over 88 per cent in 2002-03.Rajasthan has achieved 96 per cent metering acrossall consumer categories.The state electricity utilitieshave managed to increase the collection efficiency toover 98 per cent. Gross revenue collection grew by60 per cent between 1999 and 2003.

Rajasthan is the first state in the country to introduce“open access” in its electricity markets.With thisprovision, any consumer with over 15 MVA load canselect its supply company.The state is set tointroduce private participation in the electricitysector.Towards this end, the government has recentlyproposed a new enabling legislation.

Infrastructure Policy

Project Development Corporation Ltd (PDCOR) is apartnership between Government of Rajasthan andHDFC/ILFS.The mandate of PDCOR is to facilitateprivate sector investment in infrastructure relatedactivities in Rajasthan.

PDCOR provides institutional support to the

of governance.The state has one of the largest non-telecom fibre-optic networks covering 407 villagesand providing Internet, cable television and e-governance services.

The state has introduced “Lokmitra” and “Janmitra”,two web enabled payment services for electricity,water and phone bills.A computerised registrationsystem for property transactions has beenintroduced.

The state has taken lead in computerizing landrecords in the state.The programme has alreadycovered 226 of the 241 land record units in the state.

The transport department has introduced onlinevehicle registrations, licenses and other certificates inJaipur, Jodhpur and Sikar.These cities also have onlinefacilities for issue of birth and death certificates.

The Government of Rajasthan, in association withprivate investors, has established the RajasthanVenture Capital Fund (RVCF), with the objective ofpromoting companies in IT, bio-technology and othertechnology driven businesses.The fund is looking forprojects offering potential for an attractive growthand earnings located in and around Rajasthan.RVCF would undertake individual investment upto US$ 1 million.

RAJASTHAN PAGE 15

BUSINESS OPPORTUNITIES

Mining and metalsRajasthan is the second largest mineral producing statein India. It has a share of over 90 per cent in mineralssuch as zinc ore, copper ore, gypsum, phosphorite,asbestos, rock phosphate, calcite and dolomite.

The following table shows Rajasthan’s position interms of reserves and annual production of keyminerals.

Mineral Proven reserves Production(million tonnes) (million tonnes)

Rajasthan India Rajasthan India

Copper ore 35 185 0.98 3.50

Lead & Zinc ore 75 89 2.64 2.74

Gypsum 70 89 2.86 2.89

Limestone 1,990 21,861 21.19 129.77

Rock phosphate 60 89 1.18 1.29

Source: Indian Bureau of Mines, Reserves as on 2000, Production in 2001-02

Rajasthan is the largest producer of non-ferrousmetals such as copper and zinc in India. It accounts for40 per cent of India’s copper production, 100 per centof the zinc production and 85% of lead production.

In 2001-02, the total production of these metalsin Rajasthan was as follows.

Metal Production (Tonne)

Copper concentrate 63,865

Zinc concentrate 398,600

Lead concentrate 44,230

The mineral industry is also an important sourceof revenue for the state government. Rajasthangovernment earns annual revenue of over US$ 100million as mineral royalty.To facilitate fasterexploitation of its mineral wealth, the state governmenthas reduced the royalty rates on several minerals.

Key industries

Based on the competitive strengths of Rajasthan,industries and businesses in a wide range of sectorsenjoy strong domestic and international position, aswell as excellent growth prospects.

CementRajasthan is the largest producer of cement in India.With a capacity of over 13 million tonnes per annum,Rajasthan accounts for over 15% of India’s cementproduction.

The cement industry in Rajasthan is witnessingsignificant growth in recent years. Fresh capacityaggregating over 10 MMTPA is under various stagesof implementation.With the domestic demand forcement expected to grow at 8-9 per cent annually,cement production in India is projected to reach 160million tonnes by 2007.

The key strength of Rajasthan’s cement industry is thepresence of large limestone reserves, estimated to beover 2.5 billion tonnes.

All the large cement producer companies havesignificant presence in Rajasthan.These include AVBirla Group / Grasim Industries, Gujarat AmbujaCement and ACC.

The proposed projects in cement industry include thefollowing:

Company / Location Investment (US$ million)

Grasim Industries / Kotputli 75

Shree Cement / Pali 100

Gujarat Ambuja Cement / Nagaur 75

Source: Government of Rajasthan

investment of over US$ 600 million is required in thetourism industry in Rajasthan over the next ten years.It is estimated that the private sector’s share of investment can be upto US$ 200 million.

Area Investment upto 2020(US$ million)

Hotels and restaurants 230

Tourism related transportinfrastructure / services 260

Other facilities / services 145

Total 635

Source: Government of Rajasthan

Tourism has a significant multiplier effect on theeconomy. It is estimated that every rupee spent by a tourist changes hands 13 times, and that every hotelroom generates direct employment to three personsand indirect employment to eight persons. InRajasthan, tourism is the third largest employer afteragriculture and textiles sector.

Prominent tourism industry players with strongpresence in Rajasthan include The Indian Hotels,ITC-Sheraton,The Oberoi and Holiday Inn.

Gems and jewelleryJaipur and Jodhpur have emerged as the leadingcentres for the export of gems and jewellery.Rajasthan contributes substantially to India’s totalexport of cut and polished stones aggregating overUS$ 10 billion.

Rajasthan is a leader in the coloured stones segmentof the gems and jewellery sector.

The key advantage offered by Rajasthan is theavailability of skilled personnel. Jaipur has alsotraditionally been a centre for jewellery making forthe domestic market.

The industry’s competitive position will furtherstrengthen with the setting up on a dedicated SpecialEconomic Zone in Jaipur.

Prominent mining / metal industries in Rajasthaninclude Hindustan Zinc, a part of the VedantaResource group and Hindustan Copper Ltd, a GoIenterprise.

The projects in mining / metal industries in Rajasthaninclude capacity expansion by Hindustan Zinc, India’slargest producer of zinc.

TourismIn 2002, Rajasthan attracted over 620,000 foreign andover 7 million domestic tourists. Rajasthan’s share inIndia’s foreign and domestic tourist arrivals stands at11.2 per cent and 3.3 per cent respectively. (Source:Department of Tourism, Government of India)

Popular tourist destinations in the state includehistoric cities (Jaipur, Udaipur), wildlife centuries(Sariska, Ranthambore) and desert locations (Jodhpur,Jaisalmer).

Rajasthan has a developed tourism infrastructure, withover 6,000 hotel rooms spread over more than 150hotels. Of these, over 1,400 rooms (54 hotels) belongto the heritage category.

Rajasthan also runs the “Palace on Wheels’ luxurytrain, which is well known attraction for foreigntourists.

India has been identified by the World TourismOrganization and World Travel and Tourism Council as a country with high growth potential. Domestictourism has been growing at over 10 per cent perannum over the last decade.The number of foreigntourists visiting India is expected to grow by over 7 per cent per annum over the next decade.

To provide further fillip to tourism industry in thestate, Rajasthan government has reduced the luxury taxapplicable to the tourism industry from 10 per cent to 8 per cent.

The Tourism Department has estimated that

RAJASTHAN PAGE 17

With its backward and forward linkages with otherindustries, the chemical industry plays a significantrole in providing the necessary inputs for other keysectors of Rajasthan’s economy, particularly textiles.

Prominent players having presence in Rajasthaninclude DCM Shriram Group, KK Birla Group andKajaria Ceramics.

DCM Shriram Group has recently announced theexpansion of its chemical complex at Kota. Otherchemical projects under implementation includeceramics plant expansion by Kajaria Ceramics, Glassshell project of Samcor Glass and speciality chemicalsplant of SRF Ltd.

Exports

Between 1994 and 2002, exports from Rajasthan havemore than doubled from US$ 450 million to overUS$ 960 million.

The main components of Rajasthan’s exports includetextiles, gems & jewellery, agro & food products andhandicrafts.

TextilesTextile is an important industry for Rajasthan,representing over 20 per cent of the investmentmade in the state.

Rajasthan contributes over 7.5 per cent of India’sproduction of cotton and blended yarn (235,000tonnes in 2002-03) and over 5 per cent of fabrics (60 million sq meters).

The key factor responsible for development of textileindustry in Rajasthan is availability of cotton and woolin the state. Production of cotton in Rajasthan has,however, declined from over 1.4 million bales in 1996-97 (approx. 10 per cent of India’s production) to 0.7million bales 2003-04.

Wool production in Rajasthan has grown from 16 million kg in 1992-93 to around 20 million kgcurrently, representing over 40 per cent of India’swool production.

Abundant availability of this key raw material hasprompted many textile units to locate in the state.With a network of backward and forward linkage,Rajasthan’s textile industry offers significantcompetitive advantage to the industry.

Availability of trained labour is another factorcontributing to the success of the industry in the state.

Prominent players in the textile industry withpresence in Rajasthan include Rajasthan Spinning & Weaving Mills, JK Synthetics, Nahar Internationaland BSL Group.

ChemicalsChemical industry in Rajasthan accounts for 15 percent of the total investment. Major chemical produced in Rajasthan include fertilizers, caustic soda and pesticides.

The principal industrial complexes for chemicals areat Jaipur, Kota, Udaipur and Bhilwara.

Composition of exports

26% 21%

16%

18%10%

9%

Textiles

Agro and Food Products

Gem and Jewellery

Handicrafts

Readymade Garments

Others

As on 2003, investment projects totalling over US$ 6billion were in different stages of implementation.Asector-wise breakdown of these projects indicates awide distribution of investment across infrastructure,manufacturing, mining and services.

Within manufacturing, key sectors include cement,metals, chemicals and electronics.Among services,transport and construction have the dominant shareof investment

Foreign Direct InvestmentBetween 1996 and 2003, Rajasthan attracted over US$ 670 million of foreign direct investment. Rajasthanstands 12th among the Indian states. Its share in India’stotal FDI in 2002 stood at 3.2 per cent.

Export performance

1994 1995 1996 1997 1998 1999 2000 2001 2002400

600

800

1000

1200

US$

mill

ion

Investment

To facilitate the investment process, Rajasthan has set upan office in New Delhi.The senior officials of stategovernment are available in this office so that theinvestors need not visit the state for obtaining approvals.

With an objective of accelerating private investmentin the state, the state government recently adoptedan Investment Policy.The policy provides taxincentives and financial support for industries withhigh growth and employment generation potential,including tourism and information technology.

In the past, Rajasthan has attracted industrialinvestment in sectors such as minerals & mining,textiles and chemicals.These three sectors representalmost three-quarter of the existing industrialinvestment in Rajasthan.

Share of industries in capital investment

28% 36%

21%

15%

Minerals

Textiles

Chemicals

Others

Cumulative FDI

1996 1997 1998 1999 2000 2001 200200

200

400

600

800

US$

mill

ion

Year

Distribution of investment

14%17%

30%

27%

Manufacturing

Mining

Electricity

Services

Irrigation

12%

RAJASTHAN PAGE 19

This bodes well for the prospects of developing theoil & gas based industry in the state in coming years.

The availability of oil & gas in the state will alsoprovide opportunities for oil refining, gas based powerstations, gas distribution (including city gasdistribution networks), petrochemicals and otherdownstream chemicals.

This is expected to complement the existingindustrial base of Rajasthan and also enhance thecompetitiveness of industries located in Rajasthan,with access to cheaper sources of energy and rawmaterials.

IT and IT enabled servicesWith the decision of GE Capital Corporation toestablish its latest contact centre in Jaipur, Rajasthan is set to emerge as the latest destination for IT andITES industries.

Jaipur and other cities in the state offer the benefitsof qualified talent pool (annual addition of over11,500 engineers and over 200,000 graduates acrossthe state) and lower costs.

The cost of comparable office space is estimated tobe upto 20 per cent lower in Jaipur, compared toother IT/ITES destinations such as, say, Gurgaon.

Easy access and availability of ready businessinfrastructure are some of the added advantagesenjoyed by Rajasthan’s leading cities.

The state government is taking steps to provide acompetitive policy framework to potential investorsin the sector.A review of the existing IT policy hasbeen announced to attract more IT/ITESorganizations to Rajasthan.

Rajasthan has two Software Technology Parks at Jaipurand Jodhpur, established by Government of India.TheseSTPs offer the necessary infrastructure for IT/ITESunits, including high speed data communication facilities.

Potential hubs for investment

In addition to its present areas of strength, a numberof sectors are emerging with substantial potential forprivate investment and business.The most prominentamong them are oil & gas, electricity generation and distribution, IT and IT enabled services and roads & highways.

Oil & gasThe recent discovery of oil & gas reserves inRajasthan provides a significant business opportunityto establish a number of upstream and downstreambusinesses in the state.

The Scotland-based Cairn Energy has recentlyannounced two discoveries aggregating in placereserves between 580 and 1570 million barrels.

At present, the exploration activity in Rajasthan is limited to the following four blocks.

Basin Block No. Area Allotted to(sq. km)

Barmer-Sanchore RJ-ON-90\1 4970 Cairn Energy

Bikaner-Nagaur RJ-ON-90\5 3967 Essar Oil – Polish Oil& Gas Co.

Shahgarh RJ-ON-6 5390 Phoenix Overseas consortium.

Bangewala area RJ-ONJ-94\1 1572 Oil India –PDVSA (Venezuela)

Source: Government of Rajasthan

The area currently under exploration aggregates just15,899 square km.This represents around 13 per centof the area in the Rajasthan basin (aggregating around126,000 square km).

A large part of Rajasthan’s geographical area stillremains unexplored. It is anticipated that in theupcoming rounds of bidding for exploration rights,the level of interest of global oil & gas majors shouldsubstantially increase.

Roads and highwaysRajasthan provides an opportunity for privateenterprises to develop and maintain highways, bridgesand bypasses.The state has a successful track recordin implementing such projects through Build-Operate-Transfer (BOT) approach.

The state government has identified a number of roadprojects aggregating US$ 100 million to beimplemented through private sector participation.

The recent government announcement to establish adedicated road fund for financing of road projects isexpected to give a fillip to similar projects.

RIICO has also developed IT Parks at Jaipur, Kota,Udaipur and Jodhpur, with proposal to develop newIT park at Bhiwadi (Alwar).These IT parks offer fullydeveloped infrastructure by way of developed plots,continuous power and High speed datacommunication facilities through Satellite EarthStation, Roads etc.

Incentives available to IT industry in Rajasthan include n Land charges rebate upto 60 per cent n Exemption from stamp duty for land registration n 50 per cent Exemption from electricity duty for 7

yearsn Simplified labour regulations and procedures

Electricity generation and distributionRajasthan has over 1.5 billion tonnes of lignitereserves suitable for electricity generation. It isestimated that these reserves can support over 2,000MW of electricity generation.

With the enactment of new national electricity sectorlegislation, inter-state supply and trading of electricityhas been permitted. Lignite based electricitygeneration plants in Rajasthan can supply electricity topower deficient markets in north and west India.

Neyveli Lignite Corporation has announced its plansto set up a 250 MW lignite based power generationunit in Barmer district.

Rajasthan Vidyut Utpadan Nigam is also setting up alignite based electricity generation plant in Bikanerdistrict.

Rajasthan is also preparing for introduction of privateparticipation in distribution of electricity.The draft ofan enabling legislation for facilitating this process isalready under discussion.This move is expected tothrow open the electricity market in the state tocompetitive supply, thus offering significant businessopportunities for private companies.

RAJASTHAN PAGE 21

PROFILE OF KEY PLAYERS IN RAJASTHAN

Indo Maroc Phosphore SA (IMACID), CFCL’s jointventure phosphoric acid plant in Morocco,successfully commenced commercial production inNovember 1999.The US$ 204 million joint ventureproject, in equal participation with Office CherifienDes Phosphates (OCP) of Morocco, produces330,000 tonnes per annum of merchant gradephosphoric acid (54 per cent of P2O5).

OCP is the largest producer of phosphoric acid in theworld. Phosphoric acid is a major raw material forproduction of DAP and other complex fertilisergrades. Zuari Industries Ltd buys its entire phosphoricacid requirements from IMACID.

This arrangement ensures an uninterrupted supply ofphosphoric acid to the Company to produce DAPand also helps bridge the gap between demand andsupply of phosphoric acid, since India imports over 80 per cent of its phosphoric acid requirement.

JK Synthetics LtdJK Industries Ltd is the flagship of the HS Singhaniagroup of companies. In Rajasthan, it has a presence incement and tyre manufacturing. JK Tyre is the largestexporter of tyres from India, accounting for 30 percent of total tyre exports. Globally, it is sixteenthlargest tyre manufacturer, with annual production ofover 5 million tyres. JK Cement has cementmanufacturing plants at Mangrol and Nimbahera inRajasthan.

The Indian Hotels CompanyThe Indian Hotels Company (IHC) is the hospitalityarm of the Tata Group, India’s largest private sectorbusiness group. In Rajasthan, IHC operates six hotelsand resorts in Jaipur, Udaipur, Jodhpur andRanthambore National Park, with over 400 rooms.IHC had a consolidated income of over US$ 220million for the year ending 31 March 2004.

Grasim Industries LtdGrasim Industries is the flagship of the AV BirlaGroup, one of the most prominent Indian businesshouses.With the recent acquisition of cementbusiness of L&T, Grasim has become the largestproducer of cement in India. Grasim is also the eighthlargest cement producer in the world. Grasim hastwo cement units in Rajasthan with annual capacity of1.9 million tonnes per annum. Grasim produces bothgrey and white cement in Rajasthan. It is also planningto set up a new cement plant at Kotputli withproposed investment of over US$ 150 million.

Gujarat Ambuja Cement Ltd (GACL)Gujarat Ambuja Cement Ltd is India’s third largestcement producer, with a capacity of over 12.5 milliontonnes per annum and revenue of over US$ 500million. Its plants in Rajasthan have an annualproduction capacity of 1.5 million tonnes.

Hindustan Zinc Ltd (HZL)Hindustan Zinc Ltd is a part of the Vedanta ResourcesGroup, a diversified metals and mining group withworldwide presence. HZL is India’s largest zincproducer, catering to around two-thirds of the totaldomestic requirements. HZL was privatized by theIndian government in 2002.

HZL is implementing a substantial expansionprogramme by installing 170,000 MT zinc smelterwith mining capacities and a captive power plant of150 MW.The expansion is scheduled to be completedby early 2005.

Chambal Fertilizers and Chemicals Ltd (CFCL)Chambal Fertilizers and Chemicals Ltd operates twohi-tech nitrogenous fertilizer plants near Kota inRajasthan. It is the largest fertilizer complex in privatesector in India, with a capacity of over 1.7 milliontonnes per annum of urea.

GE Capital International ServicesGE Capital International Services (GECIS), asubsidiary of General Electric, is the largest remoteprocessing (BPO) organization in India. It employsover 11,500 people in four different locations acrossIndia.

In 2003, GECIS decided to establish its latest contactcentre in Jaipur.The current staff strength in theJaipur contact centre is around 200, which isexpected to go upto 500 by end of this year.

Pramod Bhasin, President, GE Capital India

“I think the town (Jaipur) itself is very attractive. It'sclean, it's very well-maintained; the infrastructure inthe town is very good; it's open; plus, we have a lot ofgraduates and a lot of excellent colleges to pickfuture employees from.... So, all these things puttogether have made Jaipur very attractive for us.”

Gillette IndiaGillette entered Rajasthan through takeover of theIndian Shaving Products Ltd (ISPL) in 1999. Gillettehas its manufacturing unit in Bhiwadi, Rajasthan.Gillette has identified Bhiwadi as its mainmanufacturing set-up in India for the production ofblades and razors.

Gillette India’s currently expanding its Bhiwadi facilityto increase capacities of twin shaving systems up-gradation of technology.The expansion is expected tocost US$ 12 million.

Pran Dang, Managing Director, Gillette India

“The peaceful industrial climate, the support of thegovernment, a willingness to keep pace with changingtimes through reforms and supportive agencies, havemade Rajasthan very conducive to industry.Theinfrastructure in the State continues to be among thebest.”

Climate Systems IndiaClimate Systems India (CSI) has been promoted byFord Motor Company with a 56 per cent stake.

DCM Shriram Consolidated LtdDCM Shriram Consolidated Ltd (DSCL) is a US$ 300million company with interests in chemicals, cementand sugar. DSCL has a 50,000 tonnes per annum ofcaustic soda plant at Kota, as part of the integratedvinyl production complex. DSCL is one of the lowestcost producers of caustic soda in India. DSCL’scement plant at Kota produced around 300,000tonnes of cement in 2003-04.

Rajasthan Spinning and Weaving LtdRajasthan Spinning and Weaving Mills Ltd (RSWM) is the flagship company of the LNJ Bhilwara Group.It is one of the largest textile groups in India formanmade fibres, yarns and fabrics, as well as theirblends with cotton and wool. RSWM is an ISO9001:2000 company, with exports to 59 countriesincluding Europe and USA. RSWM has a technical tieup with Germany based TREVIRA for import andconversion of flame-retardant fibres. LNJ Group isshifting focus from export of yarn or fabric intoreadymade garments by investing US$ 33 million inthe current year.

Cairn Energy PlcCairn is an independent Scottish oil and gasexploration and production company listed on theLondon Stock Exchange. Cairn specializes inexploration in SouthAsia.

Cairn is involved in a big way in Rajasthan in oil & gasexploration. It is currently involved in an extensiveexploration and appraisal programme across its 5000sq km onshore exploration block (RJ-ON-90/1) in theRajasthan basin.

In 2004, Cairn struck oil in two different fields withestimated in-place reserves between 580 and 1570million barrels of oil. Cairn also plans to commenceadditional infill development drilling on the Sangu fieldearly in 2005 with a view to increasing productionlevels from the field to help meet growing domesticdemand.

RAJASTHAN PAGE 23

Other investors in CSI include Maruti Udyog, asubsidiary of Suzuki Motor Corporation andSumitomo Corporation.

CSI has set up a plant to manufacture 600,000mechanically assembled aluminium radiators andcontrolled atmosphere brazed radiators at Bhiwadi.

Federal Mogul Automotive ProductsFederal-Mogul Automotive Products (India) is a 100 per cent subsidiary of Federal-Mogul USA,a US$ 7 billion auto ancillary corporation.

It has set up a plant for manufacture of automotivespark plugs at RIICO Industrial area at Bhiwadi.Federal-Mogul is an OEM supplier to several domesticautomobile manufacturers and has also exports tothe Asia-Pacific region.

Samcor GlassSamcor Glass, situated at Kota, is a joint venture ofCorning Inc, USA, Corning Korea and the SamtelGroup of India.

It manufactures glass parts for black and whitetelevision picture tubes and monochrome monitortubes.The company has an installed capacity of 5.5million sets per annum.

Motor Industries CompanyMotor Industries Company Ltd (MICO) is a part ofthe Bosch Group, Germany, world’s second largestsupplier of automotive technology.

MICO has set up a unit for manufacture of autocomponents in Jaipur, with an investment of approx.US$ 50 million. It has over 1,000 employees in Jaipur.The unit was awarded QS 9000 certification in 2000.

DOING BUSINESS IN RAJASTHANObtaining approvals

An indicative list of approvals with timeframe for setting up business in Rajasthan

Department

Environment

Industries

Incentives

Medical and Health

Power

Revenue

RIICO/RFC

Timelines

n Site/environment clearance: 90 daysn NOC to establish: 45 daysn NOC to operate: 30 daysn Renewal of consent: 30 days

n Letter of intent/industrial license: 15 daysn Sponsoring for essential raw materials: 30 days

n District level clearance: 30 daysn State level clearance: 45 days

n Drug License: 45 days

n Loads up to 60 HP: 66 daysn Loads above 60 HP and up to 300 KW: 90 daysn Loads above 300 HP and up to 3000 KW: 180 daysn Load above 3000 KW and up to 33KV: 375 days

n Land conversion up to 20 hectares: 30 daysn Land conversion above 20 hectares: 60 daysn Land allotment: 30 daysn Land allotment if government approval is required: 60 days

n Sanction of loan: 60 daysn Allotment of plot in industrial areas: 15 days

RAJASTHAN PAGE 25

Contact for information

State Government Websitewww.rajasthan.gov.in/

Rajasthan State Industrial Development andInvestment Corporation (RIICO)Udyog Bhavan,Tilak MargJaipur 302005INDIATel : +91 141 2380751/2/3/4/5Fax : +91 141 5104808E-mail: riico@riico.comWebsite: www.riico.com

Confederation of Indian Industry (CII)Information on markets and opportunities forinvestment in Orissa can also be obtained fromConfederation of Indian Industry which works withthe objective of creating a symbiotic interfacebetween industry and government.

Confederation of Indian Industry State Office

D-24, Subash Nagar1st Floor, C-SchemeJaipur 302 001Tel +91 141 2370349 / 2365844Fax +91 141 5118389Email makarand.nirmal@ciionline.orgWeb www.ciionline.org

Cost of setting up business

An indicative table on cost of setting up business in Rajasthan

Indicator Value (in US$)

Industrial land (per sq mt) Jaipur – 13 - 30Kota – 4 - 10

Udaipur – 2 - 10

Office space rent (per sq ft per month) Jaipur – 0.50

Residential rent (for a 2,000 sq ft house, per month) 500

5-star hotel room (per night) 50

Electricity (per kWh) Industry – 0.10Commercial / Office -

Water (per 1000 litres) 0.25 - 0.35

Note: Exchange rate used is INR 47 per US$.

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