Doing Business in Tamil Nadu Chennai

The state presents a compelling opportunity to its potential investors. It has highly skilled human resources available at reasonable cost, continuous supply of raw materials from its ports and railway networks, and a low cost of living. With its GDP growing at 12.1 percent, the State’s FDI investment constitutes 9.12 percent of the total FDI in the country. Comprising only 3.9 percent of the nation’s total area, Tamil Nadu is the leader in leather (with 53 percent of all leather produced in India as per the reports of Central Leather Research Institute), automobile (30 percent of India’s automobile output), auto-components (35 percent of India’s output), IT (Rs 513.7 crore - US $100 million industry in TN) and electronic hardware (host to Dell, Nokia, Motorola, Cisco, Samsung, Siemens, Sony Ericsson, Flextronics and Foxconn).Each year, the state’s strong educational system creates 100000 new engineers, 70000 technicians and 25000 other skilled workers.

Chennai, the capital of Tamil Nadu, was rated by Mercer consulting in 2007 at 137 out of 145 cities worldwide for cost of living. The state’s GSDP (Gross state domestic product) is Rs 188921 crore (US $367 billion). The per capita income for the period 2007 - 2008 for the state was Rs 43000 (US $836) ranking second among the South Indian states. It ranks third in foreign direct investment approvals (cumulative 1991-2002) of Rs 22582 crore (US $5000 million), next only to Maharashtra and Delhi. Tamil Nadu was the winner of fDi magazine’s Asian Region of the Future award 2005/06 in terms of FDIs, surpassing Australia’s New South Wales.

Raimo Puntala, Senior Vice President, Nokia, a company that has made Chennai its home, offers a strong testament to the attractiveness of Chennai as a business destination. “We visited several locations in the country before zeroing in on Chennai. Our decision has been based on three key factors: the proactive approach of the state government, overall development of the area and availability of skilled manpower.” Due to its unique location, Tamil Nadu is a natural gateway to the Middle East and South East Asian markets. Well connected to the global village by multiple airports, three major ports of Ennore, Chennai and Tuticorin, and internally by a network of roads, the state is well equipped to handle the infrastructural needs of a modern business.

Single window process

Industrial projects require a plethora of clearances and regulatory compliance like the approval of local bodies, which include site and building plan, health clearance, fire service clearance, environmental clearance from TNPCB, registration with the Inspector of Factories, registration under Boilers Act, sanction of power, water and land, and a safety certificate from the Chief Electrical Inspector. While this may sound cumbersome and protracted on paper, the government has proactively streamlined the system by creating a single window process which allows for easy establishment of business in Tamil Nadu. On an average, the single window system clears proposals in 30 days and obtains approvals of all concerned authorities as well.

SEZ

One of the greatest advantages of Tamil Nadu is the establishment of Special Economic Zones. SEZs are specially demarcated areas that offer tremendous benefits to export businesses. They were established in the year 2000 through a revision in the EXIM Policy with a view to provide an internationally competitive and hassle free environment for export production. These SEZs are virtually deemed to be a foreign territory within the country, free from all the rules and regulations governing import and export. SEZs are specifically treated as duty free enclaves for the purpose of industrial, tariff, service and trade operations with exemption from customs duties and a more liberal regime on levies, foreign investment and other transactions. As an additional incentive, these areas are provided with power and water on a high priority basis ensuring predictability in business. The industries operating in SEZs are exempted from all taxes (except sales tax and VAT when goods are produced in SEZs but sold locally). The elimination of various regulatory and infrastructural inadequacies has created an investor an industry friendly environment.

Law

The judicial system of Tamil Nadu is based on Indian law. Court cases are time consuming, but the results are mostly fair and just. Trials are held in English and Tamil. Mediation is also a preferred way of resolving disputes.

Costs

The costs of doing business in Tamil Nadu are significantly lower when compared to other places. For example, three days salary in the US can easily fetch one month or more of the equivalent labour in Tamil Nadu with equal degree of competence. This is due to the low costs of living. Costs of land is about Rs 400 (US $8) per sq metre, hotel accommodation range from Rs 2500 (US $50) to Rs 7500 (US $150) per room per night, cost of office space varies from Rs 30 (60 cents) to Rs 60 (US $1.2) per sq ft per month, while the cost of residential space range from Rs 11250 – Rs 22500 (US $225-US $550) for a 2000 sq ft residence depending on the location. The other major overhead cost, power, is available at Rs 5 (10 cents) per kWh and water is supplied at Rs 15 (30 cents) per 1000 litres (at March 2009 exchange rates). The unbeatable combination of solid infrastructure, highly affordable cost structures and abundance of skilled labour seamlessly combine to make Tamil Nadu an investors’ paradise.

www.tn.gov.in

www.sipcot.org

www.tidco.com

www.tamilnadunri.com