Madhya Pradesh: Means Business

1. Madhya Pradesh: Means Business Agriculture/ Agro Processing Industry

2. Overview Overview Madhya Pradesh (MP) – State that means business • MP is the second largest State in the Country stretching over 308,000 sq kms. • The State is blessed with large mineral resources of coal, diamond, limestone, methane etc. • MP is among the top 4 states of the Country for industrial investments. Economic Snapshot Madhya Pradesh is emerging as a key growth center for the Country • Per capita GSDP USD 369** • Manufacturing sector USD 8.5 bn** (Registered & Unregistered) • Gross state domestic product (GSDP) USD 23,983.63 Mn** • Average growth rate 5.5% per annum Advantage MP Madhya Pradesh has one of the upcoming industrial base in India • The State is centrally located • Investor friendly Government policies • Total electricity generation capacity 6,449.25 MW* • India’s first greenfield SEZ Indore SEZ • Industrial Centers 8 Power Electricity generation capacity at present is 6,449.25 MW and estimated to rise to a surplus in 2008-09 • MP is rich in low grade coal suitable for power generation. • Potential of hydro-energy generation. • Installed power capacity (MP’s share) • Hydel Power Generation: 852.7 MW* • Thermal Power Generation: 2,147.5 MW* *Ministry of Power (powermin.nic.in) **Source: Indiastat.com (as on 23 Feb 2006)

3. Enabling Infrastructure • The State is well connected with the rest of India with almost 425 trains passing through the State on a daily basis. Of these 175 trains pass through the State capital Bhopal alone. MP IS CENTRALLY LOCATED AND WELL CONNECTED WITH ALL MAJOR CITIES IN INDIA RAILWAY NETWORK • 25 airstrips.** • Convenient air links from key Indian cities like Delhi & Mumbai to Bhopal, Jabalpur, Gwalior, Indore and Khajuraho. • 5 operational airports. • Indore airport has the capability of handling international cargo. • An international airport proposed in Bhopal. GWALIOR KHAJURAHO AIRPORTS INDORE BHOPAL JABALPUR • The total length of roads spanning MP is 67,600 kms.** • National highways of 5,200 kms run through the State.* • 18 National highways including trunk routes of Delhi-Mumbai, Delhi-Chennai, Delhi-Bangalore, Delhi- Hyderabad. • The total length of State highways in the State is 9,885 kms.** • Convenient linkages to western ports i.e. Kandla Port, Jawahar Nehru Port Trust. ROAD NETWORK *Source: Department of Road Transport & Shipping (morth.nic.in) **Source: www.destinationmadhyapradesh.com

4. Madhya Pradesh: A Preferred Investment Destination 31% of the State under forest cover with a largely unexploited species of rare, valuable medicinal- herbal plants Over 2,000 kms of roads being developed with Private Partnership (BOT) Offers diverse tourists destinations catering to various segments of tourism such as religious (Bhojpur), eco/ adventure (Panchmari), heritage (Sanchi, Khajuraho) tourism etc. India’s 1st operational Greenfield SEZ at Indore Third largest producer of cement in India* Over 100 agricultural farms with an area of over 20,000 acres is available on lease to investor Favourable climatic conditions for cotton and over 40,000 power-looms are driving the textile industry Various blocks available for power, cement, iron and steel units Largest producer of pulses and oilseeds in the Country (~75% of soyabean production) Over 18,000 technical graduates and 230,000 graduates add to workforce each year 12 blocks with reserves totalling 2,585 million tons of coal has been identified Over 144 BCM of coal bed methane reserves available Availability of coal and natural gas (G.A.I.L pipeline) along with support from Government to make investment in Thermal Power Plants lucrative *Source: www.mpsidc.org & Brochure: MP Means Business

5. Delhi (740 Kms) (MPV - 789.5) Ahmedabad (570 Kms) (MPV - 220.63) Kolkata (1350 Kms) (MPV - 613.19) Mumbai (780 Kms) (MPV - 1000) Pune (800 Kms) (MPV - 206.51) Hyderabad (840 Kms) (MPV - 257.9) Key Markets (Distance From Bhopal) MPV – Market Potential Value Chennai (1430 Kms) (MPV - 362.84) Bangalore (1400 Kms) (MPV - 254.52) MP: The Right Place with the Right Environment Savings in Office Space Rates (A comparison of rates in Central Business Districts) DESTINATION MADHYA PRADESH Fastest mover* in overall performance among the big States in the Country. Fastest mover in agriculture Fastest mover in infrastructure development. Bhopal and Indore have substantial cost advantages, even when compared to other Tier III and IV cities. Savings in Land Cost Ranks 2nd in terms of governance. (Estimated Values for Multi-product SEZs) Ranks 3rd in terms of law & order Cost of skilled labour is USD 2.4/day vis-a-vis USD 3.5 – USD 4.0/day in metros The cost of land is one of the lowest in the Country. Even central hubs such as Indore and Bhopal fare well against other cities in terms of low land cost. MP is centrally located. The State is at an easy distance from all the key consumer markets in the Country. * Fastest mover is the State where the rate of improvement between 2003 & 2006 was greater than that between 1991 & 2003 **Source: India Today (September ‘06 Issue) - Distances rounded off Source: (Reference: RK Swamy)

6. Industrial Policy: Catalyst for the Investments • The Government of MP has devised an investor friendly industrial policy, which is aimed at achieving global competitiveness. The policy emphasizes on industrial growth in the state through adopting cluster approach, establishing specialized infrastructure and offering favourable incentives. • The main thrust of this policy is: • Establishment of a Madhya Pradesh Trade and Investment Facilitation Corporation which would take decisions about rationalization of taxes, facilities of mega projects and other related matters. • Enacting an Industrial Facilitation Act and to change the rules of business with a view to make single window system decisive and result oriented. • Developing infrastructure for supporting the identified industrial clusters • Reviving closed down/ sick industrial units by granting special packages. • Attractive incentive schemes. SPECIAL INCENTIVES • Special package for Mega Projects on project basis by apex level investment promotion empowered committee headed by the Chief Minister. • Industrial investment promotion assistance – 50% to 75% of commercial tax for 3-10 years • Concessional registration charges and stamp duty exemption for Term Loans. • Interest subsidy on term loan for 5 – years @ 3% to 5%. • For thrust sector industries, 25% capital subsidy would be provided limiting up to a maximum of USD 56,000 • Land on 75% concessive rate for Mega Projects limited to USD 4.4 million. • Entry tax exemption for 5 years. • 5 years electricity duty exemption on captive power generation • 15% capital subsidy to SSI up to USD 33,000 in backward areas • Infrastructure grant up to USD 0.22 million crore for developing private sector industrial parks • Partial reimbursement for Project report, ISO Certification, Patent and Technology Purchase cost • CLUSTER APPROACH • Indore – Pharmaceutical, Textile, Food Processing, IT, Auto Components • Bhopal– Engineering, Biotechnology, Herbal, IT, Food Processing • Jabalpur– Garment, Mineral, Forest & Herbal, Food Processing • Gwalior– Electronics, IT, FMCG, Engineering, Food Processing • Rewa– Refractories, Lime Stone, Forest Based • Sagar– Mineral Processing SPECIALIZED INFRASTRUCTURE

7. Doing Business Made Easy Through MPAKVN In a bid to build a competitive environment; industries and their ancillaries would be promoted in clusters based on the availability of raw materials, skilled labour andmarket potential. Under this Industrial Policy through Madhya Pradesh Audyogik Kendra Vikas Nigam Ltd (MPAKVNs) scheme, the State Government, has identified industrial clusters. Many of the industrial giants have their establishments in these areas, however 44% of developed area is still untapped and open for investment. Area Developed: 2,262 Hectares Allotted: 800 Hectares Units established: 326 Major Groups: JK, Surya Roshini, Godrej, Grasim, Cadbury, Hotline, Crompton Greaves Special Infrastructure: ICD, Food Park Area Developed: 790 Hectares Allotted: 125 Hectares Units established: 52 Major Groups: Raymond, Hindustan Petroleum, PBM, Ayur Special Infrastructure: Stone Park, Food Park Area Developed: 273 Hectares Allotted: 115 Hectares Units established: 121 Major Groups: Birla, Jaypee Special Infrastructure: Integrated infrastructure development centres (IIDC) Area Developed: 1,330 Hectares Allotted: 618 Hectares Units established: 286 Major Groups:HEG, Crompton Greaves, P&G, Godrej, Lupin, IFB, Oswal, Nahar Special Infrastructure: ICD, Food Park JABALPUR AKVN REWA AKVN GWALIOR AKVN BHOPAL AKVN Area Developed: 2,492 Hectares Allotted: 1431 Hectares Units established: 575 Major Groups: Tata, Ranbaxy, Eicher, Bridgestone, Hindustan Motors, Kinetic, SRF, S Kumars, Gajra, Nicholas Piramal, Indorama, IPCA, Bhilwara Special Infrastructure: SEZ, Crystal IT Park, Food Park, Apparel Park Malanpur, Malanpur Phase II, Banmore, Chainpura, Siddhgawan, Pratappura Rewa, Waidhan INDORE AKVN Mandideep, Pillukhedi, Mandideep Phase II Borgaon, Maneri, Purena Pithampur, Kheda, Dewas, Maksi, Megh Nagar Source: MPSIDC

8. Agriculture/ Agro-Processing

9. Sector Profile: Agriculture/ Agro Processing

10. Agriculture: Evolving Landscape • Agriculture in India has always been the most important economic sector. The sector accounts for around 24% of the GDP, it plays a fundamental role in the Indian economy whereby it employs 65% of the working population. • Agriculture is fundamental to the Indian social structure, political stability and industrial growth. • KEY FEATURES of INDIAN AGRICULTURE INDUSTRY • Agriculture sector alone accounts for 18% of the total value of the country's exports. • Apart from being the largest producer of pulses, tea and milk, 51 major crops of the world are also produced in India. • India is also the second largest producer of wheat, rice, fruits, vegetables, ground nut and sugarcane. • India is the world's second largest producer of food and agricultural produce after China and has the potential of being the largest agricultural Country. • India is one of the world’s major food producers and accounts for almost 1.5% of international food trade. • The Indian agriculture industry is on the brink of a second round of revolution. This will be driven by two key factors: • Modernization of the entire food chain • Doubling the total food production in the next ten years • Understanding the large social impact that agriculture has on the society, the Government has taken several initiatives to promote the growth of the sector. • Over the next two decades, the National Policy on Agriculture aims to attain: • A growth rate in excess of 4% per annum in the agriculture sector; • Growth that is based on efficient use of resources and conserves soil, water and bio-diversity; • Growth with equity i.e. growth which is widespread across regions and farmers; • Growth that is demand driven and caters to domestic markets and maximizes benefits from exports of agricultural products. • Growth that is sustainable technologically, environmentally and economically. • Agro Processing Sector in India • Employs over 12 million persons • Constitutes for 13% of manufacturing GDP. • India’s Competitive Advantage • Diverse Agro climatic conditions • Sufficiency of inputs/ raw materials • Cost effective labour • India has • Total Geographical Area – 328 Million Hectares • Net Area Sown – 142 Million Hectares • Gross Cropped Area – 190.8 Million Hectares

11. MP: Background of Agriculture • MP is the second largest state in the Country with an estimated population of about 60 million. Agriculture is predominant sector in the state with 75% of rural population largely dependent on it. This results in wide availability of manpower at a reasonable cost. • The agriculture sector forms almost one-third of the GSDP and forms the backbone of the MPs economy • The State has 5 crop zones, 11 agro climatic regions and 4 soil types, which add to the biodiversity in the State and acts favourable for the production of various crop types. • Madhya Pradesh is the largest producer of pulses and oilseeds in the country. The State also shares a major share of the National agriculture production. About 25% of pulses and 40% of grams are grown in the state. • The State is the largest producer of soya bean and gram and the second largest producer of jowar and masoor in the Country • The agricultural land in the district Narsinghpur is considered to be the most fertile land all over Asia. The district is famous for its rich agricultural production. Table 1: Major Agriculture & Horticultural Crops in MP Source: www.mpmandiboard.com

12. MP: Background of Agriculture • Out of the total gross cropped area 59% is sown in the Kharif season and 41% in the Rabi season. • The statistical data about the position of MP with respect to the major crops in comparison to the other states is shown in Table 2. The percentage share refers to the contribution of the State towards the total national production of the respective commodity. • It can be seen that state stands first in production of soyabean and gram, second in the production of jowar and masoor and is third for the production of arhar and masoor. • Madhya Pradesh leads in spices production with the largest production of garlic, accounting for 37% of the total national production • The state is the second largest producer of Coriander in the country. • Malwa potato grown in the western part of the State (malwa region) has a quality that has been proven useful for the potato chips processing*. • MP’s share in the total national production of Pea is 15 %. In the State, the multiple cropped area is about 24% which can be exploited for cultivation at any time of the year irrespective of the season Source: www.mpmandiboard.com

13. II IV I III I II Medium & Deep Soils Alluvial Soils Shallow & Medium Black Soils III IV Black Soils Location Analysis - Soils of MP • The State has 4 different soil types available in four distinct parts. The western and central regions are covered by medium and deep soils constituting 53% of the soil area. The eastern part of the State is primarily covered by black soils which comprises of 25-26% of the total geographical area. • Most of the State’s potential in agriculture lies in the central and western zones. These zones are rich in medium and deep soils consisting of several agri export zones and would be ideal for setting up industrial ventures. SOIL TYPES IN MP Source: www.mp.nic.in/agriculture/soils.htm

14. Wheat/Jowar Cotton/Jowar Rice Zone Wheat Zone Wheat/ Rice Zone Location Analysis - Crop Zones of MP • Different crops can be grown in different parts of the State during different seasons, thereby having uninterrupted agricultural activities throughout the year. • The distribution of different crop zones across whole of Madhya Pradesh reflects the bio diversity of the state. COTTON/ JOWAR Cotton/ Jowar crops can be grown in the western, north-western and south-western part of MP. Such crops are grown in the regions having medium & deep soils. WHEAT/ JOWAR Wheat/ Jowar crop zones are predominant in the northern strip of the State. Some southern areas of the State can also be tapped for such commodities. It is evident that these crops have the potential of growing in all the soil types prevalent in the State. RICE ZONE This zone is confined to the eastern part of the State where black soil type present. Only five districts/ centers produce this crop. WHEAT/ RICE ZONE These crop zones are present in the eastern part of MP where the soil type is black soil WHEAT ZONE This crop zone is in the central part of the state. Again it is evident that these crops have the potential of growing in diverse soil types. Source: www.mp.nic.in/agriculture/acr.htm

15. Wheat Seed Spices, Coriander & Fenugreek Oranges Potato, Onion & Garlic Pulses Location Analysis - Agri Export Zones* in MP • To facilitate promotion and development of specific products, several AEZs (Agri Export Zones) have been identified in the State of Madhya Pradesh. These zones have been set up for facilitating export of specific products from a geographically contiguous area. • The AEZs are present at such a location that it is easy to source the raw materials and hence developing the final product. • The concentration of AEZs is more towards the Eastern and North eastern parts of the State and the investors can look forward to tap these regions of the State for their investments. Especially MNCs who have operations abroad and want to grow in terms of international trade can harness opportunities in these areas. • The commodities that can have an immense potential are potato, spices (in the western parts), pulses (in the central part of the State), wheat (in the western and central regions) and oranges (south districts). AGRI EXPORT ZONES IN MP FOR VARIOUS PRODUCTS/ CROPS * With the objective to promote agricultural exports from the country and remunerative returns to the farming community, the concept of the Agri Export Zones (AEZ) has been initiated by the Government under all aspects of efficient agri practice such as production, R&D, post harvest management, packaging, leading to final exports. Further market promotion and development are also undertaken in the AEZs. Source: Brochure from MPSIDC

16. Advantage MP • MP is the most biodiverse state in the country with 11 agro climatic zones, 5 crop zones and 4 zones varying in soil types. • The soil and agro climatic conditions are suitable for rapid agricultural development. • The state has a strong base in horticulture. • The state is set in centre of the nation’s commercial activities. It is located at an easy distance from all the major agricultural markets in India. • About 75% of the population of the state is largely dependent upon agriculture for their livelihood. This ensures easy availability of manpower at a relatively lower retention cost. • The State has a large network of primary agricultural co-operative societies playing a crucial role in supplying agricultural inputs including seed, fertilizer and pesticides in the far flung areas. • The State has sufficient notified agricultural market yards and sub market yards which provide facilities for sale of agricultural produce. • Farm mechanization is being promoted in the state by the Directorate of Agricultural Engineering. • Despite the potential the state has, the rate of prime land in the State is amongst the lowest in the country, thereby offering an advantage to the investor by reducing their capital investment cost. Distances Rounded off

17. Contract Farming…. Future Trend in Agriculture • Contract farming is an emerging concept in MP that provides vast opportunities for potential investors wherein the production and supply of agricultural/ horticultural produce are pre agreed under forward contracts between producers/ suppliers and buyers. The contract details the type of agri commodity required at a time and a price, and in the required quantity. • Contract farming provides a proper linkage between the farm and the market • BASIC ELEMENTS OF CONTRACT FARMING • Pre-agreed price • Quality or acreage (minimum/maximum) • Time BASIC PROTOCOL FOR CONTRACT FARMING • BENEFIT TO THE FARMER • Assured market for their produce • Adequate & quality agri input supplies • Free technical know-how CONTRACT FARMING IN MP (A Case Study) SPONSORS • Hindustan Lever Ltd. (HLL), Rallis and ICICI have come together to undertake contract farming in MP. The role of each company is as follows: • Agri inputs and the technical know-how to the farmers are provided by Rallis • The financial support to the farmers is provided by ICICI (farm credit). • HLL is the buyback client as the farm produce is used as the raw material by the company for its food processing industry. MANAGEMENT & ADMINISTRATION BENEFIT TO HLL Contract farming assures supply chain efficiency and hence there are no delays or obstacles in their food processing industry operations BENEFITS OF CONTRACT FARMING TECHNICAL STAFF BENEFIT TO RALLIS & ICICI The two companies are benefited through assured clientele for their products and services • Production determinants: • Climatic factors • Farmers response • Quality of management • Quality of technology • Financial incentives • Government support • External influences THE PROJEC T FARMERS The consortium is now planning to rope in other specialist partners including insurance, equipment and warehousing companies.

18. FARMING PROCESSING PACKAGING DISTRIBUTION BHIND PROPOSED FOOD PARKS MANDSAUR MANDLA HOSHANGABAD KHARGONE CHHINDWARA Way Forward…MP as an Investment Destination • Presence of AEZs in the state provide favourable grounds for investors to tap the opportunities. • The concept of contract farming is being recognized in MP as the most promising opportunity for an investor. • The state has identified around 100 agricultural farms with an area of over 20,000 acres which is available on lease to investor. • State has the potential to develop and increase the production of horticulture crops for each of the 11 Agro-climatic sub-zones. • Many opportunities are also available at each part of the value chain in agro – processing industries. • Ministry of Food Processing Industries sanctions the projects within the Food Parks. Further to this, the monetary support from the Government of India is 50% of the proposed investment, limited to a maximum of USD 0.8 million. • The State Government offers special incentives for the investors looking forward to invest in the State. The project clearance with approvals are granted within 15 days of application or submission of project reports and the Government also offers customized package of concessions on mega ventures. • A green field Special Economic Zone (SEZ) has been developed as a globally competitive investment destination at Pithampur in Indore. Land allotment has already begun with several units starting commercial production. Again this SEZ may act as a single point investment destination for various agro processing companies. Indore, thereby facilitating their growth along with the growth of the State. MP: OFFERING SPECIFIC INCENTIVES • The other facilities and concession offered by the government include:- • State capital subsidy for SSI up to ~USD 11,000 • Central Capital subsidy up to ~USD 100,000 • Entry tax exemption up to five years • ISO-9000 certification cost reimbursement up to ~USD 17,000 • Project report cost reimbursement up to ~USD 6600 • Interest subsidy up to ~USD 89,000 • The sanction for 6 food parks for the state has already been obtained. The proposed food parks are coming up in Mandsaur, Khargone, Hoshangabad, Chhindwara, Mandla and Bhind. The main objective of the state and central government in setting up these parks is to help establishment of food processing industrial estates/ infrastructures by providing assistance for the common facilities such as research laboratories, cold storages, warehousing facilities etc.

19. Way Forward…MP As An Investment Destination • Eyeing the business opportunity in one of the most bio diverse and strategically located states the players in the agriculture sector will look forward to MP as the next haven for investment. • A fair amount of leverage can also be gained by the identified Agri Export Zones across the state. Some of the key opportunities in the sector have been listed below.

20. Connecting Further Madhya Pradesh State Agricultural Marketing Board www.mpmandiboard.com Department of Agriculture www.mpkrishi.org MARKFED www.mp.nic.in/agriculture/markfed.htm MPAgro www.mp.nic.in/agriculture/mpagro2.htm Directorate of Agricultural Engineering www.mp.nic.in/agriculture/agengg.htm MP State Seed Certification Company www.mp.nic.in/agriculture/seed.htm