Sanand MSMEs to Wait & Watch as GIDC Agrees to Reevaluate Fines

Around 200 entrepreneurs in Gujarat have threatened to move operations out of the state over exuberant penalties.

5 min read
A canning factory (small enterprise) based at Gujarat Industrial Development Corporation in Sanand.

Gujarat’s capital Gandhinagar is playing host to PlastIndia 2018, an international plastic expo that aims to bring 10,000 micro, small, and medium enterprises (MSMEs) who are into manufacturing and marketing of plastic products in Gujarat under one roof. However, hardly 50 km away in Sanand, around 200 industrial units have surrendered plots and are mulling on moving operations to Indore, Madhya Pradesh.

The MSMEs represented by Sanand Industries Association (SIA) have alleged that penalties are being levied by the Gujarat Industrial Development Corporation (GIDC) for not starting production two years after industrial land was allotted to them. The SIA claims that production could not be started as basic infrastructure that is needed to build a factory and operate had not been made available even almost three years after the allotment of plots by GIDC.


These 200 units have also alleged that they were denied the lease deed and other land documents by the GIDC, which is necessary to procure bank loans to run their companies. This penalty, together with the interest, was estimated at Rs 300 crore in 2015. Interestingly around 121 plot owners had already surrendered their plots to the GIDC in the past.

The SIA have also alleged that interest of Japanese companies operating in the GIDC are entertained, while local industries suffer.

Lack of Infrastructure

Sanand GIDC had allotted 612 plots to MSMEs in 2012, for setting up industries. However, until 2015 basic infrastructure such as roads and water and power supply were not made available, which the MSMEs cite as a reason for not constructing their factories. Atul Shah, who was allotted land in January 2012 explains to The Quint why local industries in Sanand GIDC are facing problems.

“I was allotted 5,300 square metres of land to build a factory. Sadly, there was no road, or water and power supply provided to the plot allotted to me. All these services were started in 2015. As per GIDC guidelines, I must produce the plan of my proposed industry and submit it before them, which I did in 2015; the approval came in mid-2016,” Shah said.

Although basic infrastructure is now available, water tankers are still being used by units such as this one in Sanand GIDC
Although basic infrastructure is now available, water tankers are still being used by units such as this one in Sanand GIDC
Rahul Nair @The Quint
After the plan was approved by GIDC, I applied for permission from the Pollution Control Board, I applied for a power connection and even applied for a loan in the bank. My plot was fully paid up and I needed money to build the factory and start production. The bank asked for the lease-deed to mortgage the land, but the GIDC refused to transfer the title to the bank. They claimed that I had to pay a penalty, because the GIDC rules mandate that I had to start operation in 2014, two years after the land was allotted; instead I started operations in 2016.
Atul Shah

Exorbitant Penalty

An annual non-utilisation penalty – 2% of current land allotment price – was imposed on MSMEs that had not begun production on allotted plot within 3-5 years, depending on plot size. Atul Shah was penalised around Rs 40 lakh, which he hasn’t paid.

An exasperated Shah further explains his dilemma, “How is this my fault, when basic infrastructure is delayed by the GIDC. We do not have lakhs to pay as penalty for their negligence and bureaucratic failures. I applied for my plan approval in 2015 and it was approved a year later by the GIDC, and for their delay I have to them penalty.”

GIDC Favours Japanese Companies, Allege Businessmen

PM Narendra Modi with Japanese PM Shinzo Abe.
PM Narendra Modi with Japanese PM Shinzo Abe.
(Photo: AP)

Ajit Shah, president of Sanand Industries Association that represents the MSMEs operating in the Bol industrial estate which houses the Tata Nano and Ford Motor units, says that the rules for Indian and Japanese companies are different.

He said, “Japanese companies are being offered land a 10 percent discount at Hansalpur (36 kilometres from Sanand), while MSMEs had to pay rates decided by the GIDC. Even if we sublet an allotted plot, the GIDC charges us a premium of three percent of the allotment price of the plot, whereas Japanese companies are only charged 1 percent.”

The state government and the GIDC is laying out a red carpet for Japanese industries, but local units are getting no benefits... We do not have any problem with the Japanese. All we are saying is that we should not be discriminated and should be offered similar discounts.
Ajit Shah, president, Sanand Industries Association (SIA)

The SIA has dragged GIDC to court demanding that the allotment date of plots be changed to circumvent the penalty.


GIDC Offers Conditional Relief

(Centre) Chintan Akhani, Divisional Manager, Ahmedabad, GIDC addresses the media on Friday, 9 February at Sanand GIDC office
(Centre) Chintan Akhani, Divisional Manager, Ahmedabad, GIDC addresses the media on Friday, 9 February at Sanand GIDC office
Rahul Nair @The Quint

The GIDC has offered to evaluate the cases on an individual basis. “We will evaluate cases individually and MSMEs will get mortgage permission and lease-deed documents only if they sign an undertaking assuring that if the High Court decision favours the GIDC, the industrialists will pay the applicable amount of penalty,” said Chintan Akhani, divisional manager, Ahmedabad, GIDC.

“Of the 612 plots allotted to MSMEs, 108 plots are functional, while 103 are under construction. Around 87 individuals who are part of the SIA who have not utilised their plots and have been penalised for the same,” he added

Akhani said that plots within the Sanand GIDC-II are being offered at a concession rate of Rs 3,010 per square metre to MSMEs. “This is less than the allotment price of Rs 3,750 per square metre. We are also offering plots at a concession rate of Rs 2,100 per square metre in the women entrepreneur’s park within Sanand GIDC,” said Akhani. He denied that the government was providing special benefits to the Japanese firms.

MSMEs Calls Truce for Two Months

Meanwhile, SIA officials called of their meeting with the Madhya Pradesh government, which was scheduled for Friday, 9 February, and have decided to wait for two more months, in order to resolve the issue with GIDC. “We decided not to travel to Indore after officials from the GIDC assured us that they will look into our demands and sort it out within two-three months. In a meeting held on Thursday, officials told us that they will look into our demands case-by-case, which includes changing the date of allotment of plots that will waive off the penalty imposed on us and providing a plot for the SIA to set up its office,” said Ajit Shah, president of SIA.

(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)

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