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India By State - Rajasthan - Business Opportunities


Business Opportunities

 

Introduction

In Rajasthan, industries and businesses in a wide range of sectors enjoy strong domestic and international positions, as well as excellent growth prospects. Some of the key sectors in Rajasthan are agro Industry, cement products, ceramic, food processing, hand tools, tourism & hospitality, handicraft, handmade paper, gems & jewellery, marble, oil industry, stone quarrying and mining & metals.

Key Competitive Strengths of Rajasthan;

Some of the factors influencing growth and investment within Orissa are the following;

  • Leading producer of cement in the country
  • Second largest mineral producing state in the country, large reserves of metallic and non-metallic reserves
  • Among the largest producers of cotton and wool in the country
  • A well known tourist destination
  • Recent discovery of oil and gas reserves
  • Emerging destination for IT and ITES industries

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Key Industries

Automotive & Auto Components

Rajasthan provides easy access to the automotive market in Northern India, which comprises 33 percent of Automobile sales in the country.

Rajasthan's strategic location provides access to two of the areas where Automobile production in the country is concentrated (Gurgaon and Dharuhera)

Cement

Rajasthan is a major producer of Cement, with a cement production capacity of 20.3 million tonnes per annum. As a result, Rajasthan currently accounts for 15 percent of the total cement output of the country.

The Key strengths of Rajasthan's cement industry are the presence of large limestone reserves, estimated to be over 2.5 billion tonnes. The state ranks third in the list of largest cement producing states in India after Madhya Pradesh and Andhra Pradesh.

The cement industry in Rajasthan is witnessing significant growth in recent years. Fresh capacity aggregating over 10 MMTPA is under various stages of implementation. With the domestic demand for cement expected to grow at 8-9 per cent annually, cement production in India is projected to reach 160 million tonnes by 2007.

All the large cement producing companies that have significant presence in Rajasthan include AV Birla Group / Grasim Industries, Gujarat Ambuja Cement and ACC.

Chemicals

Rajasthan is a major producer of various chemicals such as fertilizers, caustic soda and pesticides, and 15 percent of India's total investment in this industry go to Rajasthan.

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

With its backward and forward linkages with other industries, the chemical industry plays a significant role in providing the necessary inputs for other key sectors of Rajasthan's economy, particularly textiles.

Prominent players having presence in Rajasthan include DCM Shriram Group, KK Birla Group and Kajaria Ceramics. DCM Shriram Group has recently announced the expansion of its chemical complex at Kota. Other chemical projects under implementation include ceramics plant expansion by Kajaria Ceramics, Glass shell project of Samcor Glass and speciality chemicals plant of SRF Ltd.

Gems & Jewellery

Jaipur and Jodhpur have emerged as the leading centres for the export of gems and jewellery. Rajasthan contributes substantially to India's total export of cut and polished stones aggregating over US$ 10 billion. Rajasthan is a leader in the coloured stones segment of the gems and jewellery sector.

The key advantage offered by Rajasthan is the availability of skilled personnel. Jaipur has also traditionally been a centre for jewellery making for the domestic market. The industry's competitive position will further strengthen with the setting up on a dedicated Special Economic Zone in Jaipur.

Mineral & Mining

Rajasthan is the second largest mineral producing state in India, with 79 varieties of minerals available.

Key minerals include silver, phosphate, fluoride, rock, phosphate, copper, ore, zinc, gypsum, clay, granite, marble, sandstone, dolomite, calcite, emeralds and garnets.

Tourism

Rajasthan has a developed tourism infrastructure, with over 6,000 hotel rooms in more than 150 hotels. Of these, over 1,400 rooms (54 hotels) belong to the heritage category. The state runs the "Palace on Wheels' luxury train, which is a famous attraction for foreign tourists.

Popular tourist destinations in the state include historic cities (Jaipur, Udaipur), wildlife centuries (Sariska, Ranthambore) and desert locations (Jodhpur, Jaisalmer). India has been identified by the World Tourism Organization and World Travel and Tourism Council as a country with high growth potential. Domestic tourism has been growing at over 10 per cent per annum over the last decade. The number of foreign tourists visiting India is expected to grow by over 7 per cent per annum over the next decade.

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

The Tourism Department has estimated that investment of over US$ 600 million is required in the tourism industry in Rajasthan over the next ten years. It is estimated that the private sector's share of investment can be up to US$ 200 million.

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Area

Investment up to 2020(US$ million)

Hotels and restaurants 230
Tourism related transport infrastructure / services 260
Other facilities / services 145
Total 635

Source: Government of Rajasthan

Tourism has a significant multiplier effect on the economy. It is estimated that every rupee spent by a tourist changes hands 13 times, and that every hotel room generates direct employment to three persons and indirect employment to eight persons. In Rajasthan, tourism is the third largest employer after agriculture and textiles sector.

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

Oil & Gas

The recent discovery of oil & gas reserves in Rajasthan provides a significant business opportunity to establish a number of upstream and downstream businesses in the state. The Scotland-based Cairn Energy has recently announced two discoveries aggregating in place reserves between 580 and 1570 million barrels.

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

Basin

Block No.

Area(sq. km)

Allotted to

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 just 15,899 square km. This represents around 13 per cent of the area in the Rajasthan basin (aggregating around 126,000 square km).

A large part of Rajasthan's geographical area still remains unexplored. It is anticipated that in the upcoming rounds of bidding for exploration rights, the level of interest of global oil & gas majors should substantially increase. This bodes well for the prospects of developing the oil & gas based industry in the state in coming years.

The availability of oil & gas in the state will also provide opportunities for oil refining, gas based power stations, gas distribution (including city gas distribution networks), petrochemicals and other downstream chemicals.

This is expected to complement the existing industrial base of Rajasthan and also enhance the competitiveness of industries located in Rajasthan, with access to cheaper sources of energy and raw materials.

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IT & IT Enabled Services

With the decision of GE Capital Corporation to establish its latest contact centre in Jaipur, Rajasthan is set to emerge as the latest destination for IT and ITES industries.

Jaipur and other cities in the state offer the benefits of qualified talent pool (annual addition of over 11,500 engineers and over 200,000 graduates across the state) and lower costs. The cost of comparable office space is estimated to be up to 20 per cent lower in Jaipur, compared to other IT/ITES destinations such as, say, Gurgaon.

Easy access and availability of ready business infrastructure are some of the added advantages enjoyed by Rajasthan's leading cities. The state government is taking steps to provide a competitive policy framework to potential investors in the sector. A review of the existing IT policy has been announced to attract more IT/ITES organizations to Rajasthan.

Rajasthan has two Software Technology Parks at Jaipur and Jodhpur, established by Government of India. These STPs offer the necessary infrastructure for IT/ITES units, including high speed data communication facilities.

RIICO has also developed IT Parks at Jaipur, Kota, Udaipur and Jodhpur, with proposal to develop new IT Park at Bhiwadi (Alwar). These IT parks offer fully developed infrastructure by way of developed plots, continuous power and High speed data communication facilities through Satellite Earth Station, Roads etc.

Incentives available to IT industry in Rajasthan include

  • Land charges rebate up to 60 per cent
  • Exemption from stamp duty for land registration
  • 50 per cent Exemption from electricity duty for 7 years
  • Simplified labour regulations and procedures

Electricity Generation & Distribution

Rajasthan has over 1.5 billion tonnes of lignite reserves suitable for electricity generation. It is estimated that these reserves can support over 2,000 MW of electricity generation.

With the enactment of new national electricity sector legislation, inter-state supply and trading of electricity has been permitted. Lignite based electricity generation plants in Rajasthan can supply electricity to power deficient markets in north and west India.

Neyveli Lignite Corporation has announced its plans to set up a 250 MW lignite based power generation unit in Barmer district. Rajasthan Vidyut Utpadan Nigam is also setting up a lignite based electricity generation plant in Bikaner district.

Rajasthan is also preparing for introduction of private participation in distribution of electricity. The draft of an enabling legislation for facilitating this process is already under discussion. This move is expected to throw open the electricity market in the state to competitive supply, thus offering significant business opportunities for private companies.

Roads & Highways

Rajasthan provides an opportunity for private enterprises to develop and maintain highways, bridges and bypasses. The state has a successful track record in implementing such projects through Build-Operate-Transfer (BOT) approach.

The state government has identified a number of road projects aggregating USD 100 million to be implemented through private sector participation. The recent government announcement to establish a dedicated road fund for financing of road projects is expected to give a fillip to similar projects.

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Key Players

Cairn Energy Plc

Cairn is an independent Scottish oil and gas exploration and production company listed on the London Stock Exchange. Cairn specializes in exploration in South Asia. Cairn is involved in a big way in Rajasthan in oil & gas exploration. It is currently involved in an extensive exploration and appraisal programme across its 5000 sq km onshore exploration block (RJ-ON-90/1) in the Rajasthan basin.

In 2004, Cairn struck oil in two different fields with estimated in-place reserves between 580 and 1570 million barrels of oil. Cairn also plans to commence additional infill development drilling on the Sangu field early in 2005 with a view to increasing production levels from the field to help meet growing domestic demand.

Chambal Fertilizers and Chemicals Ltd (CFCL)

Chambal Fertilizers and Chemicals Ltd operate two hi-tech nitrogenous fertilizer plants near Kota in Rajasthan. It is the largest fertilizer complex in private sector in India, with a capacity of over 1.7 million tonnes per annum of urea.

Indo Maroc Phosphore SA (IMACID), CFCL's joint venture phosphoric acid plant in Morocco, successfully commenced commercial production in November 1999.The USD 204 million joint venture project, in equal participation with Office Cherifien Des Phosphates (OCP) of Morocco, produces 330,000 tonnes per annum of merchant grade phosphoric acid (54 per cent of P2O5).

OCP is the largest producer of phosphoric acid in the world. Phosphoric acid is a major raw material for production of DAP and other complex fertiliser grades. Zuari Industries Ltd buys its entire phosphoric acid requirements from IMACID.

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

Climate Systems India

Climate Systems India (CSI) has been promoted by Ford Motor Company with a 56 per cent stake. Other investors in CSI include Maruti Udyog, a subsidiary of Suzuki Motor Corporation and Sumitomo Corporation. CSI has set up a plant to manufacture 600,000 mechanically assembled aluminium radiators and controlled atmosphere brazed radiators at Bhiwadi.

DCM Shriram Consolidated Ltd

DCM Shriram Consolidated Ltd (DSCL) is a USD 300 million company with interests in chemicals, cement and sugar. DSCL has a 50,000 tonnes per annum of caustic soda plant at Kota, as part of the integrated vinyl production complex. DSCL is one of the lowest cost producers of caustic soda in India. DSCL's cement plant at Kota produced around 300,000 tonnes of cement in 2003-04.

Federal Mogul Automotive Products

Federal-Mogul Automotive Products (India) is a 100 per cent subsidiary of Federal-Mogul USA, a USD 7 billion auto ancillary corporation. It has set up a plant for manufacture of automotive spark plugs at RIICO Industrial area at Bhiwadi. Federal-Mogul is an OEM supplier to several domestic automobile manufacturers and has also exports to the Asia-Pacific region

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GE Capital International Services

GE Capital International Services (GECIS), a subsidiary of General Electric, is the largest remote processing (BPO) organization in India. It employs over 11,500 people in four different locations across India.

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

Gillette India

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

Gillette India is currently expanding its Bhiwadi facility to increase capacities of twin shaving systems up-gradation of technology. The expansion is expected to cost USD 12 million.

Grasim Industries Ltd

Grasim Industries is the flagship of the AV Birla Group, one of the most prominent Indian business houses. With the recent acquisition of cement business of L&T, Grasim has become the largest producer of cement in India. Grasim is also the eighth largest cement producer in the world. Grasim has two cement units in Rajasthan with annual capacity of 1.9 million tonnes per annum. Grasim produces both grey and white cement in Rajasthan. It is also planning to set up a new cement plant at Kotputli with proposed investment of over USD 150 million.

Gujarat Ambuja Cement Ltd (GACL)

Gujarat Ambuja Cement Ltd is India's third largest cement producer, with a capacity of over 12.5 million tonnes per annum and revenue of over USD 500 million. Its plants in Rajasthan have an annual production capacity of 1.5 million tonnes.

Hindustan Zinc Ltd (HZL)

Hindustan Zinc Ltd is a part of the Vedanta Resources Group, a diversified metals and mining group with worldwide presence. HZL is India's largest zinc producer, catering to around two-thirds of the total domestic requirements. HZL was privatized by the Indian government in 2002. HZL is implementing a substantial expansion programme by installing 170,000 MT zinc smelter with mining capacities and a captive power plant of 150 MW. The expansion is scheduled to be completed by early 2005

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JK Synthetics Ltd

JK Industries Ltd is the flagship of the HS Singhania group of companies. In Rajasthan, it has a presence in cement and tyre manufacturing. JK Tyre is the largest exporter of tyres from India, accounting for 30 per cent of total tyre exports. Globally, it is sixteenth largest tyre manufacturer, with annual production of over 5 million tyres. JK Cement has cement manufacturing plants at Mangrol and Nimbahera in Rajasthan.

Motor Industries Company

Motor Industries Company Ltd (MICO) is a part of the Bosch Group, Germany, and world's second largest supplier of automotive technology. MICO has set up a unit for manufacture of auto components in Jaipur, with an investment of approx. USD 50 million. It has over 1,000 employees in Jaipur. The unit was awarded QS 9000 certification in 2000.

Rajasthan Spinning and Weaving Ltd

Rajasthan 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 for manmade fibres, yarns and fabrics, as well as their blends with cotton and wool. RSWM is an ISO 9001:2000 company, with exports to 59 countries including Europe and USA. RSWM has a technical tie up with Germany based TREVIRA for import and conversion of flame-retardant fibres. LNJ Group is shifting focus from export of yarn or fabric into readymade garments by investing USD 33 million in the current year.

Samcor Glass

Samcor Glass, situated at Kota, is a joint venture of Corning Inc, USA, Corning Korea and the Samtel Group of India. It manufactures glass parts for black and white television picture tubes and monochrome monitor tubes. The company has an installed capacity of 5.5 million sets per annum.

The Indian Hotels Company

The Indian Hotels Company (IHC) is the hospitality arm of the Tata Group, India's largest private sector business group. In Rajasthan, IHC operates six hotels and resorts in Jaipur, Udaipur, Jodhpur and Ranthambore National Park, with over 400 rooms. IHC had a consolidated income of over USD 220 million for the year ending 31 March 2004.

 

Export Profile

Rajasthan's exports increased at a CAGR of about 27.7 per cent between 2001-02 and 2007-08. The state's major exports include textiles, handloom, handicrafts, gems and jewellery, minerals and auto components. In order to boost exports from Rajasthan, the State Government is laying emphasis on developing export promotion industrial parks (EPIP).

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

Share of industries in capital investment

With an objective of accelerating private investment in the state, the state government recently adopted an Investment Policy. The policy provides tax incentives and financial support for industries with high growth and employment generation potential, including tourism and information technology. In the past, Rajasthan has attracted industrial investment in sectors such as minerals & mining, textiles and chemicals. These three sectors represent almost three-quarter of the existing industrial investment in Rajasthan.

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