Business Today

Chennai: Can it cope?

India’s southern-most metro has been receiving lots of IT and auto industry investments.The big question: is the city capable of handling such explosive growth?

N. Madhavan | Print Edition: September 7, 2008

The nondescript office in Chennai’s Egmore area that houses the Guidance Bureau, the single-window investment facilitation office of the Tamil Nadu government, has never seen as much activity since its inception in the early 1990s as it has over the last 26 months. During this period, foreign direct investment worth Rs 25,683 crore has found its way into Tamil Nadu (mostly in and around Chennai). That apart, projects worth Rs 16,000 crore have been finalised and are awaiting official announcements.

Infrastructure investment: A grid separator under construction in Guindy to ease traffic congestion
Infrastructure investment: A grid separator under construction in Guindy to ease traffic congestion
For M. Velmurugan, Director, Guidance Bureau, and his staff, it has been a period of extended office hours and lost weekends. “We close a minimum of one project worth at least Rs 400 crore every week,” says Velmurugan, who is also the point-person for hard-selling Tamil Nadu as an investment destination.

Among the big-ticket investments his department has bagged are the Rs 4,500-crore Renault-Nissan car project, the Rs 3,000-crore Daimler-Hero commercial vehicle facility, Hyundai’s Rs 4,000-crore second-phase expansion, Moser Baer’s Rs 2,000-crore photo voltaic manufacturing plant, Apollo Tyres’ Rs 500-crore radial tyre plant and Nokia-Siemens’ Rs 300-crore telecommunications equipment manufacturing facility.

But Velmurugan prefers to showcase the state of existing investments to highlight Chennai’s competitive edge. Nokia’s India operations, he says, began in January 2006 with just over 500 employees.

 Fact file

Area: 1,189 sq. km

Population: 7.5 million

Main industries: Information Technology, ITES, Auto, Telecom Hardware

Per capita income: Rs 21,885 per annum

Rents (commercial): RS 60-90 per sq. ft

Peak power demand: 9,267 MW

Peak power supply: 8,800 MW

Power deficit: 467 MW

Power tariffs domestic: Rs 1.85-2.90 per unit

Power tariffs commercial: Rs 5.05-6.00 per unit

Power tariffs industrial: Rs 3.30-4.05 per unit

Total water supply: 950 million litres per day

Per capita water supply (City): 147 litres per day

Public transport: Buses, Suburban Trains, Taxis and Autorickshaws

Today, its staff strength is 8,000 (its vendors in the Nokia SEZ employ another 15,000 people). In fact, Nokia’s Chennai facility has overtaken the one in China and is now its largest manufacturing facility in the world in terms of volume.

Similarly, Hyundai, which started with a capacity of 100,000 cars in 1996, has expanded its output to 630,000 cars and has designated its Chennai plant its global small car hub. “These expansions are a clear indicator of the extent of competitiveness Chennai offers to investors,” he says with more than a hint of pride.

Inherent strengths

A strong educational system has been one of Tamil Nadu’s traditional strengths. There are, according to Velmurugan, 333 engineering colleges, 230 polytechnics and over 1,200 industrial training institutes churning out close to 300,000 technically qualified students every year. “Tamil Nadu produces 25 per cent of the country’s engineering graduates.

Moreover, the work culture is very attractive. People here are eager to learn and have a higher sense of loyalty,” says R. Chandrasekaran, Managing Director & President, Cognizant Technology Solutions, which houses about 35 per cent of its 59,000-strong workforce in Chennai.

Automotive hub: The BMW plant
Automotive hub: The BMW plant
“Chennai’s other strength is its connectivity to all parts of the country not just by rail, road and air but also through two major ports, Chennai and Ennore. The former, in fact, is India’s secondbusiest container terminal. Also, undersea cables to Singapore (13.2 terabits capacity) connect us to our mainframes and servers around the world,” says Michael Boneham, President & Managing Director, Ford India.

Ford, which recently announced a $500-million (Rs 2,150 crore) programme to double its capacity and set up an engine manufacturing facility, was one of the first global automobile majors to zero in on Chennai.

The city’s other advantage is its low rentals. “Though nearly 16 million square feet (sq. ft) of office space has been absorbed in the city over the last three years, Grade A office rentals in the central business district is just Rs 60-90 per sq. ft compared to Rs 350-600 per sq. ft in Mumbai,’’ points out Ramesh Nair, Managing Director, Jones Lang LaSalle Meghraj, a real estate consulting firm.

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