INDIAN STATE : TAMIL NADU

General Information

Tamil Nadu is a state at the southern tip of India. The bordering states and union territories are Pondicherry, Kerala, Karnataka and Andhra Pradesh. The island nation of Srilanka lies off the southeast coast.

Tamil Nadu has a long eastern coastline dotted with enchanting beaches with Bay of Bengal in the east. Marina in Chennai is one of the longest beaches in the world. Arabian sea and the states of Kerala and Karnataka form the boundary in the west. Western Ghats have sanctuaries such as Mudumalai wildlife and The Nilgiris, the Queen of Hills. The state is bounded in the north by the states of Karnataka and Andhra Pradesh. Pulicat lake is in the extreme north.

Tamil Nadu is one of the most industrialised states in India with a high Human Development Index (HDI). Chennai (formerly known as Madras), the capital city of Tamil Nadu, is the gateway of south India with an international airport, seaports and good rail and road network connectivity. Coimbatore, Madurai and Tiruchirappalli, Salem and Tirunelveli are some of the other major towns in the state. The state has large number of good educational institutions and is one of the leaders in the field of Science and Technology and particularly in Information Technology.

Tamil Nadu is one of the well developed states in terms of industrial development and in the post liberalization era, the state has emerged as one of the front-runners by attracting a large number of domestic and foreign investments. It is one of the major recipients of outside investments, particularly of Foreign direct Investment (FDI). Several multi-nationals such a Ford Motors of USA, Hyundai of Korea, St. Gobain of France, Nokia of Finland, etc. have established their units in Tamil Nadu. Motorola of USA has signed an MOU with the State Government in June 2006 to establish a mobile phone and networking equipment manufacturing facility with an investment of Rs. 130 crore that would employ 2600 people.

The Industrial Policy of the state is now focused on stimulating industrial development and attracting FDI. It is aimed at consolidation of the existing industrial base, facilitating new manufacturing capacity and is designed to meet challenges of globalisation and demand for new areas of development.

The State has launched an initiative to engender private public partnerships (PPP) by creating a positive business and regulatory environment, enabling flow of substantial domestic and foreign capital for infrastructure building, especially in Special Economic Zones, industrial townships, satellite towns, etc.

Fact File

Geographical Area	1.30(Lakh Sq km)
Capital	Chennai
Population (2001 Census)	In lakhs 624.06
Gross state Domestic product (GSDP) at current prices in 2004-2005 (as of Feb 2006)	US$ 40.9545 bn
Gross state Domestic product (GSDP) at constant price (1993-94) in 2004-2005 (as of Feb 2006)	US$ 22.3812 bn
Net State Domestic Product at Current Prices (2004-05)	US$ 36.2405 bn
Net State Domestic Product at Constant Prices (1993-1994) for (2004-05)	90138 (Rs Crore)US$ 19.5375 bn
Per Capita Income at current prices (2004-2005)	US$ 562.778
Percentage of State Population to All India Population	6.07%
Total Investments (as on Jan 2006)	US$ 35. 9329
Literacy Rate (2001 Census) Male Female	73.45% 82.42% 64.43%
Principal languages	Tamil, English

Source: CSO Estimates

Advantage Tamil Nadu

• The State is currently ranked by studies within the first three places in the country in:
  • Industrial output
    
  • Value addition
    
  • Number of factories
    
  • Total work force employed in factories
    
  • Foreign Direct Investments
• Stable political climate and investor friendly government.
• FDI magazine of financial times rated Tamil Nadu as the "Asian region of the future 2005-2006" with maximum FDI potential.
• High literacy rate of 73.5%.
• State Government has proposed to enact an Infrastructure Development Enabling Act together with the setting up of an Infrastructure Development Board to encourage Private Participation in Infrastructure building
• An Industrial Promotion and Business Deregulation Statute is being enacted to provide for simplification of various pre-project procedures & approvals, application forms, returns, inspection and certification routines.
• Effective Single window mechanism for investments exceeding US$ 5.41892 million. A Single common application form has been introduced to replace multiple forms. State Government has designated a single agency to facilitate and escort all such investments.
• State Government is reviewing the existing labour laws like those pertaining to layoff, retrenchment, and engagement of contract labour and flexibility of timings of work.
• In the post-project phase, to reduce paper work, State Government has introduced a single combined annual return.
• A new Special Economic Zone (SEZ) policy on the model of Government of India policy has been announced. A SEZ Act is currently under finalisation.
• Innovative IT Policy 2002 and Information Technology Enabled Services (ITES) Policy 2005 has been announced. These policies would provide with an investor-friendly environment for the IT sector.
• For assisting Small and Medium Enterprises (SMEs), a Centre in collaboration with and managed by industry will be set up to focus attention on resource based technology promotion, technology commercialization, waste management technologies and Intellectual Property Rights (IPR) protection.
• Stamp duty rates have been rationalized and reduced by 50%.
• Abundant availability of skilled manpower. Annual Turn out of Engineering Graduates in Tamil Nadu is 79,000+, the largest in India. Besides, the State produces 58,500 Diploma holders from Polytechnics.
  

Economic Infrastructure

Power

The current total installed capacity in Tamil Nadu is 10098 MW. Comprising 2970 MW from four thermal stations, 424 MW from four gas turbine stations, 2171 MW from 37 Hydro Stations, 1154 MW from Private sector Projects, 2841 MW as TamilNadu's share from central generating stations, 360 MW as external assistance and 178 from Captive Power Plants (CPP).

Generating capacity from privately owned wind farms is 3159 MW and Tamil Nadu Electricity Board (TNEB's) wind farm capacity is 19.355 MW. The installed capacity of cogeneration in sugar mills is 314.6 MW, biomass power project is 62.85 MW and through solar is 0.165 MW.

The maximum demand met so far is 8544 MW.The maximum daily consumption reached so far is 173.06 MU. The total grid consumption during 2005-06 was 56,006 MU that is around 7% more compared to that of 52,345 Million Units (MU) of energy during 2004-05.

The state continues to be in the forefront in respect of rural electrification in the country. All the 15,822 inhabited villages have been electrified.

Tamil Nadu Electricity Board (TNEB) is serving 180 lakh consumers as on 31.03.2006. The transmission and distribution network comprises 1.50 lakh circuit kilometers of extra high tension (above 33 kV) and high tension (11 kV to 33 kV) lines, 4.92 lakh circuit kilometers of low-tension lines, 1130 substations, and 1.70 lakh distribution transformers besides other assets.

In addition 17.79 lakh agricultural pump sets and 10.21 lakh huts have been given electric supply. The role of Tamil Nadu Electricity Board in improving the economy of the state of Tamil Nadu by extensive electrification of the villages, large scale energisation of agricultural pump sets and extension of electricity services to poor/backward and downtrodden sections of the society, in addition to extension of supply to large number of industries has been well recognized.

Aviation

There are five Airports (Chennai, Coimbatore, Madurai, Tiruchy and Salem) in the State. Chennai is an international airport with flight connections to all major parts of the world, domestic airlines connect Chennai with all the major cities of India.

Railways

Tamil Nadu has a rail network of 4,181 Km. Regular train services connect Chennai directly with all major cities of the country. Suburban Electric trains run from Beach station to Tambaram and from Central to Gummidipoondi and Arakonam. Centralized at Chennai, the Southern Railways present network expands over a large area of India's Southern Peninsula, covering the states of Tamil Nadu, Kerala, Pondicherry, a major portion of Karnataka and a small portion of Andhra Pradesh. Tamil Nadu has a complete railway track length of 6,693-kms and there are 690 railway stations in the state. Main rail junctions in the State include Chennai, Madurai, Tiruchirapalli, Salem, Coimbatore, etc.

Roads

The length of road network in Tamil Nadu is nearly 1.70 lakh kms. Private bus operators link the important cities and government buses ply the entire south. The inter-state buses run by State Express Transport Corporation connects Chennai with Karnataka, Kerala, and Andhra Pradesh. Chennai being gateway to the south is connected by excellent roads to all parts of the south. taxis, auto-rickshaws and cycle rickshaws are available. All types of tourist vehicle are easily available on hire.

Canals

There are two navigational canals - Buckingham Canal and Vedaranyam Canal - identified as Inland Water Transport systems.

Ports

Major Ports	Minor Ports
Chennai Port	Cuddalore Port
Ennore Port	Nagapattinam
Tuticorin Port	Colachel
	Kanyakumari
	Manappad
	Punnakkayal

Telecommunication

Telecommunication in Tamil Nadu is on a roll. Tamil Nadu has the highest rural telephone connectivity in the country with nearly 86% of all its villages in Tamil Nadu covered. Six agencies have already been permitted on a non-exclusive basis to create high bandwidth optic fibre cable networks that will cover every single district in the state. These are M/s BPL Broadband, DishnetDSL, Bharti Telesonic, Macro net Private Ltd. (subsequently renamed as Reliance Infocomm Ltd.), Estel Communications Pvt. Ltd. and Bharti Telenet Ltd. This will make internet access possible in every corner of the state. Reliance Infocomm, DishnetDSL and Bharti Telesonic are in the process of physical implementation of their projects.

Social Infrastructure

Education

Tamil Nadu has a established education system and has been rated by the World Bank as the number one state in delivering education through government schools. It also feels pride in its well-established engineering, medical and other professional institutions.

Following initiatives have been taken in the education sector in Tamil Nadu:

• Computer Science syllabus for Classes eleventh and twelfth of the State. Higher Secondary Board has been completely revised and updated.
• As a first step to make the state students "digitally literate", an innovative public - private partnership program has been launched to make Computer Science available as an option in all Government Higher Secondary Schools in the State. 1197 schools in the State producing 40,000 students per year have been covered.
• Further, five teachers per school per year in each of these schools including the Principal, are also imparted computer literacy skills. This program is fully operational.
• Based on the success of the school program, a one-year computer literacy program for students in all 60 Government Arts and Science Colleges, all 11 Medical Colleges, the only Dental College and in all 5 Law Colleges in the State has been launched. This will cover about 30,000 students every year. This program will also include Internet skills. The program is fully operational.
  

Health

Tamil Nadu had long remained the preferred destination of health care in India. The state boasts of some world-class hospitals and specialty clinics offering super specialty health care services. Chennai is emerging as the biggest medical hub in Southeast Asia.

The state has a sweeping range of healthcare system by government and private. Its unique system of buying drugs through an exclusive agency TN Medical Services Corporation and distributing those to general hospitals has placed Tamil Nadu on the top list of public health care in India.

Big names include the Apollo and Vijaya hospitals, the Sankara Nethralaya Eye hospital, the Christian Medical college Hospital at Vellore and the affiliated hospitals of Ramchandra medical college. The Apollo Group, Sankara Nethralaya, Madras Medical Mission and MIOT group have pioneered medical treatment and they attract overseas patients quite regularly.

Naturopathy, aromatherapy, herbal therapies all have become popular among the medical tourists.

Corporate hospitals in Chennai lure foreign patients by providing a good package medical expertise, nursing care, priority treatment at reasonable costs

The provision for Health and Family Welfare Department for 2006-2007 is Rs.1951.28 crores as detailed below:

Major Industries

Cotton textiles, Hosiery and Readymade garments

The state of Tamil Nadu has emerged as one of the world's leading centres for cotton textile. The state is renowned for its spinning capacity and occupies the numero uno slot with over 40 percent of spinning capacity in the country. The competitive edge comes from the low production costs and high quality of output. Some of the leading brands of the world such as Wal-Mart, Tommy Hilfiger, GAP, Diesel etc. source readymade garments from Tamil Nadu turning the state into a major hub for textiles. Phasing out of the Agreement on Textile and Clothing (ATC) significantly positioned an increase in the textile exports in Tamil Nadu. The Textile industry in Tamil Nadu has shown a growth of 10.02% in net sales in 2006 and a tremendous growth of147% in profitability. Major part of business comes from Coimbatore and Tirupur.Karur, Madurai, Rajapalayam are other textile centres.

Leather

The state has 70 per cent of the tanning capacity in India. Tamil Nadu is making a dominant presence in the leather and leather-based industries. Government has set up Industrial estates and common effluent treatment plants to provide possible infrastructure support and capital subsidies.

Agro-based industries

Tamil Nadu posses ideal climatic conditions for a strong agro based food industry. It also provides favorable climatic conditions for the cultivation of a variety of fruits and vegetables in the Madurai-Dindigul belt. Tamil Nadu has also proved itself as a world leader in agricultural production with a high yield per hectare of sugarcane, rice and groundnut. with the area around Coimbatore (identified as an intensive floriculture zone), Dharmapuri and the Nilgiris being earmarked as ideal locations for the cultivation of flowers such as rose and chrysanthemum, the floriculture industry is likely to get a boost. Its long coastline (1000 Kms) offers opportunities for marine products based industry. Overall growth of net sales in 2006 has shown a growth of 23.30% and a remarkable net profit growth of 47.21 percent.

Chemicals and Petrochemicals

The chemical industry is a prominent industry in the state of Tamil Nadu mainly situated in Manali (situated on the outskirts of Chennai) Cuddalore, Panangudi (Nagapattinam) and Tuticorin. The chemicals industry in Tamil Nadu has shown a robust growth of 20 percent in the year 2006.

Mineral-based industries

The mineral wealth of the state comprises granite, limestone and lignite. There are 12 major cement plants functioning in the state. The major players are Tamil Nadu Cements (TANCEM), Dalmia Cements, Madras Cements, India Cements, Grasim Industries, Associated Cement Companies and Chettinad Cements. The mineral products has shown a growth in net sales of 28 percent in the year 2006.The growth in net profit has shown a robust growth of around 70 percent in the same year.

Automobile ancillaries

Chennai, the "Detroit of India" is emerging as a major export hub for cars in South East Asia. Major automobile manufacturers like Ford, Hyundai, HM-Mitsubishi, Ashok Leyland, TAFE, etc.have their manufacturing base in Tamil Nadu. The main thrust to the auto industry has come because of skilled manpower coupled with the states strong engineering industry background. Adding to this the ports of Tamil Nadu at Chennai and Tuticorin help facilitate the export and import of the desired materials for the auto industry thereby reducing the cost of transport. The net sales of the auto industry has grown over by 13 percent in the year 2006 showing a profitability of over 54 percent in the same year.

Information Technology

Tamil Nadu has emerged as a center for IT investments in IT services and IT Enabled Services (ITES) as it possess key resources of skilled and educated manpower, higher standard of educational institutions, good infrastructure, effective cost of operation and a committed Government .

The state has been working towards an IT revolution. IT has pervaded all the key segments. Tamil Nadu was the first state to introduce an IT policy. It has also created an IT friendly environment for all stakeholders of the new digital economy.

In the year 2006 overall growth in net sales is 19.48 percent and overall growth in net profit is 354.35 percent in Information and technology sector.

Information Technology Enabled Services (ITES) This sector holds immense scope for the common person as it provides employment to technical and non-technical graduates. Besides, this sector has the potential to generate enormous foreign exchange flow in the country.

Tamil Nadu is very well positioned to capture a substantial share of the ITES market. It possess excellent physical, civic and social infrastructure and a large pool of talented, educated, hardworking, English-speaking workforce making it a potential destination for generating massive employment opportunities.

The ITES market globally is expected to grow to USD 142 billion by 2008. As per Nasscomm-Mckinsey report, the Indian ITES industry can attain export revenues of USD 21-24 billion by 2008. Tamil Nadu will strive to achieve 20% share of this market by promotion of Chennai as well as other Tier-II cities and Tier-III cities as preferred ITES destinations.

Tourism

The tourism sector in Tamil Nadu has great potential to create employment and thus contribute meaningfully to economic development. Tamil Nadu is known for various tourist attractions, allures a large number of tourists. The colossal temple towers, palm-fringed beaches, cool and salubrious hill destinations, man-made marvels etc. are the primary attractions of this state. Besides, the culture, handicrafts, eco-tourism, health tourism, village tourism, etc., make this state as a peaceful domain for the visitors to sojourn in Tamil Nadu. Attractive handlooms and handicrafts in various hues and colours speak about their own intricate workmanship. Health tourism has opened up new vistas as there are numerous high -end medical care facilities are available in the state, which are cost-effective.

Tamil Nadu is being promoted as an “enchanting” destination for holidaying in Southern India through massive publicity and marketing and provision of infrastructural facilities and basic amenities at potential tourist spots. Private sector participation is being encouraged in development of tourism. A three pronged approach is being adopted to promote tourism in the State: (i) major publicity campaigns, (ii) creation of infrastructure at tourist spots and (iii) offering attractive packages.

Major initiatives taken by the Government to boost Tourism industry in Tamil Nadu:

• Tourism has been declared as an Industry in Tami Nadu. Ten percent capital subsidies up to Rs.10 lakhs are given to tourism projects in TamilNadu with a capital investment not exceeding one crore rupees. Besides 15 percent of capital cost up to Rs.5 lakhs as subsidy for the purchase of Generators.
• To encourage private investment in tourism projects, the Department of Tourism co-ordinates with different departments for early clearance of the projects.
• Preparing plans to improve infrastructure facilities in Tourist centres obtaining central assistance through the State Government, and securing the active participation of the local public by providing better economic avenues are the priorities of this department.
• The Tamil Nadu Tourism Development Corporation is operating 36 hotels and is providing maximum comforts to the tourists at low tariff.
• The Tamil Nadu Tourism Development Corporation is providing well-planned travel circuit plan with care and comfort to the tourists coming from other States and abroad.
• The corporation is maintaining youth hostels, children parks, boathouses, and telescope houses for the entertainments of the tourists.
• Every year, tourist and Industrial Fair are conducted at Island grounds at Chennai for information dissemination on the achievements of the government and to promote tourism.
• The Director of Tourism, Chennai recommends for the sanction of FL 3 permits to private tourist hotels and also recommends projects of the private tourism promoters to obtain loan from the financial institutions.
• Approvals of shops and classification of hotels for awarding Star Category are being certified by the Department.
• Sound and light programme is conducted at Thirumalai Naickar Mahal. Efforts are being taken to establish similar Programmes at Thanjavar Big Temple and at Fort Saint George, Chennai.
  

Investment Incentives

• Considering that the focus is on investments to promote infrastructure and common facilities, the state plans to restructure incentives and subsidies in the following manner:
• Government will at its discretion offer specific packages to single investments exceeding US$ 65.0196 million made in eligible fixed assets within a period of not more than three years from the date of project approval.
• Incentives for new units investing in eligible fixed assets will be restricted to the following:
  • US$ 10.83 million and above and below US$ 21.6761million would be eligible for a capital subsidy of US$ 54,201.03 and exemption from electricity tax for the first three years of commercial production.
  • US$ 21.6761 and above and below US$ 43.3521 million would be eligible for a subsidy of US$ 108386.66 and exemption from electricity tax for the first four years of commercial production.
  • US$ 43.3521 million and above would be eligible for a subsidy of US$ 216,780 and exemption from electricity tax for the first five years of commercial production.
• This subsidy will be payable after commencement of commercial operations. Location in a Government promoted Industrial Park will
  entitle new units to 150% of the above standard capital subsidy.
• One time reimbursement for patent registration after 1.1.2004 up to 50% of expenses or US$ 2170.02 (whichever is lower) to any production unit in Tamil Nadu.
  
• Critical infrastructure subsidy of 25% of capital cost or US$ 54,201.03 (whichever is lower) for setting up Effluent Treatment Plants/Waste Disposal Sites.
• For approved private industrial parks irrespective of location, a back-ended subsidy claim of 10% of the investment subject to a maximum of US$ 21.676 million will be entertained subject to the location of 50 units or more and provision of employment to at least 2500 persons.
  
• For assisting SMEs, a Centre in collaboration with and managed by industry will be set up to focus attention on resource based technology promotion, technology commercialization, waste management technologies, technical problem solving, technology upgradation (unit level and sectoral), promoting innovation, IPR protection facilitation and IPR awareness/training. Government will provide a one-time Corpus and reimburse a part of the running costs of such a Centre for three years.

Policy Framework

Industrial Policy 2003

The objectives of the Industrial Policy of 2003 are:

• Target a growth rate of the order of 8 percent over the Tenth Plan period.
• Government will reorient its strategy to facilitate new manufacturing capacity building based on improved competitiveness. The state will promote Foreign Direct Investment in to new manufacturing capacity.
• Assist the existing industrial base to consolidate its gains and promote its efficient growth in the highly competitive domestic and export markets.
• Engender private public partnerships and create an environment that enables the flow of substantial domestic and foreign capital for infrastructure building.

Full text of the policy

IT Policy 2002

The objectives of the IT Policy of 2002 are:

• To establish Tamil Nadu as the destination of choice for IT investments.
• To upgrade the quality of life for the citizens through e-governance and IT applications in Government.
• To empower people in the rural areas so as to bridge the Digital Divide
• To develop research and development initiatives
• To promote use of Tamil in Information Technology

Full text of the policy (.pdf)

ITES Policy 2005

Objectives:

• To get the maximum global ITES investments to Tamil Nadu
• To develop Human Resources specific to ITES Sector
• To create world class infrastructure for IT & ITES and an enabling frame work for protection of intellectual property and data
• To generate employment and other ITES opportunities in major cities in Tamil Nadu
• To provide a conducive environment for the sector by reducing regulations and increasing opportunities
  

Full text of the policy

Investments Opportunities

• Engineering, Automobiles and Components
• Software & ITES
• Bio technology, Pharma and Herbal based products
• Agro and Food Processing
• Health care
• Tourism related projects
• Infrastructure
• Chemicals and petro-chemicals
• Textiles, garments and home furnishings
• Leather products

Industrial Parks

Bargur Industrial Park	Manamadurai industrial park
Cheyyar Industrial Park	Nilakkottai Agro Park
Cuddalore Industrial Park	Oragadam Industrial Park
Gangaikondan Industrial Park	Perundurai Industrial Park
Export Pomotion Industrial park at Gummidipoondi	Pudukkottai Industrial Park
Gummidipoondi industrial Park	Ranipat Industrial Park
Hosur Industrial complex	Siruseri IT Park
Industrial complexes of SIPCOT	Sriperumpudur Industrial Park
Irungattukottai industrial park	Thoothukudi Industrial Park
Mahindra City (Mahindra Industrial Park Ltd.)	Tidel Park

Key players in Tamil Nadu

• Bharat Heavy Electricals Ltd (BHEL)
• Caltex
• Caterpillar India Pvt Ltd (CIPL)
• ABN AMRO
• Amalgamations Group
• Ashok Leyland
• EI DuPont India (EIDI)
• Electronic Data Systems (EDS)
• Ford Motor Company India
• .Hyundai Motor India Ltd
• Chennai Petroleum Corporation Ltd (CPCL)
• Cognizant Technology Solutions India Pvt Ltd
• Computer Associates (CA)
• Lakshmi Machine Works (LMW)
• Madura Coats Ltd (MCL)
• Matsushita Electric

Useful Web links

• Government of Tamil Nadu
• Tamil Nadu Industrial Development Corporation Limited