THE SECONDARY SECTOR

50.   The secondary sector mainly comprises manufacturing, electricity and construction industry.  The manufacturing sector in Tamil Nadu performed poorly during 1996-2001.   Except in 1999-2000, the growth rate has either been negative or very low.  This Government proposes to address the structural constraints restricting growth in this sector through second generation reforms. These include:

• Reduction of transaction time and costs at Ports & Customs.

• Interest rate corrections.

• Global integration.

• Labour reforms and labour productivity.

• Simplification of procedures and deregulation.

• Provision of quality infrastructure.

• Quality Energy Supply.

• Technological modernization & upgradation.

• Reforms in State level taxation

51.    The first four issues have to be dealt with by the Government of India. We would urge the Union Government to take all measures necessary to eliminate impediments that constrict growth in the manufacturing sector. This Government proposes to address all other issues falling within its ambit. The Hon'ble Chief Minister, in her recent speech at the CII conference, has delineated the blueprint for the second generation reforms to be undertaken in Tamil Nadu.  I would like to briefly touch upon them.

52.    As part of our efforts to simplify administrative processes, a common application form has been designed to meet the information requirements for pre-project clearances and infrastructure support, except in respect of the pollution clearance by the Tamil Nadu Pollution Control Board (TNPCB).  A Common Return Form integrating 51 different items is also being attempted to eliminate paper work and save managerial time.  A High Level Committee under the Hon'ble Chief Minister will monitor the progress of clearances by the TNPCB. 

53.    This Government proposes to facilitate establishment of new power generation projects in order to meet the growing energy demand. Energy availability will be guaranteed.  Due attention is also being paid to improve the quality of energy supply.  With the introduction of the availability based tariff system from 1.1.2003, the operating frequency in the system is being maintained between 49.5 hertz to 50.5 hertz.  This is a major improvement. We shall continue to invest in transmission and distribution to further improve the quality of energy supply.

54.    Technology absorption, modernisation and upgradation will be encouraged.  We shall initiate a new policy to help units, which are planning to upgrade.  This will be with emphasis on improving their competitiveness in the global market.

55.    Reforms in State level taxation are being examined by the Tax Reforms and Revenue Augmentation Commission headed by Dr. Raja J. Chelliah. It has recommended transition to a system of State VAT.  We shall do so based on the national consensus. Though this system entails substantial revenue loss for the Government, it surely will be a boon for the manufacturing sector as the tax on inputs will be set off and the ill-effects of cascading removed completely. We are taking stock of other recommendations made by the Commission and they have been covered in other sections of this Budget.

56.    Provision of quality infrastructure is another focus area.   I am dealing with this separately as we are taking several new initiatives to provide quality infrastructure.  This Government will take particular care to ensure that the infrastructure is upgraded to world class standards where export‑oriented units are located.  At the same time, the general infrastructure consisting of highways, ports, power and urban infrastructure will receive special attention.  In addition, there will be a new thrust on the development of the Chennai Metropolitan Area.

57.    The ASIDE programme of the Government of India will be utilised to improve the infrastructure where export-oriented units are located.  The Industrial Infrastructure Development Programme of the Union Government will also be utilised for development of other clusters such as leather, textiles, pumps and motors, automobile components, machine tools, household appliances  etc., for improving their productivity.

58.   Tamil Nadu being a coastal State has to set out on an export-led growth strategy.  The Hon'ble Chief Minister has recently approved the State's policy on Special Economic Zones.  This will enable the formation of Special Economic Zones at Tuticorin, Ennore and Chennai, adjacent to the existing ports.

59.    The Government has identified leather, textiles, automobile, automobile components, rubber and agro-processing as thrust areas for rapid growth.  We propose to establish separate missions to take up accelerated development of these segments of industry.  This will be done in partnership with the industry groups.

60.   Work will commence in the coming year to establish a Biotechnology Park in technical collaboration with Cornell University.  An Eco-enterprises Park will be established in Dindigul district.

61.    Small and medium entrepreneurs in Tamil Nadu have to be encouraged.  The lesson from China is that a vibrant small and medium enterprises sector is vital for the robust growth of the economy and for increasing employment opportunities.  The Budget includes a provision of Rs.2 crores for Technology Upgradation and Modernisation Scheme.  Under this scheme, the Government will provide back ended interest subsidy in order to enable SSI units to upgrade their units and compete in the market.  Likewise, for SSIs started under the National Equity Fund Scheme, back ended interest subsidy will be extended.  The Budget provides Rs.1 crore for this purpose. 

62.  For the tiny sector, a similar scheme will be launched.  A provision of Rs.25 lakhs is made in the Budget.  The Budget also includes a provision of Rs.25 lakhs to support SSI units to obtain ISO certification and engage in research and development initiatives.  These measures will go a long way in giving a fillip to small scale and tiny industries in Tamil Nadu.

63.   It is necessary to upgrade Industrial Estates such as those   at Guindy and Ambattur.  After detailed deliberations, we have worked out an investment plan of Rs.6 crores for each of these Estates.  This will enable provision of quality infrastructure such as roads, lighting, sewerage, drainage etc.  They will be restored to their premier position in the coming year. We would like to encourage new units to be established in these Estates.  These projects will be executed on a public‑private partnership model.  A revenue sharing arrangement between the local body and SIDCO together with the Estates' Association will be worked out to facilitate the investment plan.

64.   I would now like to turn to the textile industry.  We will have a separate Mission for the textile industry.  Tamil Nadu is traditionally very strong in this industry.  This industry, both knitwear and woven, is passing through very difficult times.  The Hon'ble Chief Minister believes that we should look forward and reorganise ourselves to avail of the opportunities in the future.  The new Textile Mission will examine all aspects of the industry and undertake programmes to facilitate the revival of the industry.  This would include the following initiatives.

• Focus on quality cotton production to improve availability and ensure backward integration of the industry. 

• Establishment of a Textile Industrial Training Institute in association with SIMA, to focus on training programmes and techniques in modern upgraded production systems.  This facility will also be used to retrain labour so that they can be absorbed again in the industry.

• Making arrangements with technical institutions to launch a retraining programme so that trained labour are available for the modernised industry.

• Encouraging entrepreneurs to go in for new technology based weaving capacity.

• Modernisation of the existing spinning capacity.

• Encouraging power loom complexes with shuttleless weaving looms.

• Establishing Apparel Parks near Chennai and Tiruppur.

65.   I am confident that in the coming year we will be able to address most of the issues relating to the textile industry in a satisfactory manner to give a big push to this industry as it prepares itself for the year 2005, when the WTO regime will come into operation.

66.   Hon’ble Members are well aware of the efforts made by the Hon'ble Chief Minister to ameliorate the condition of weavers in Tamil Nadu.  The innovative market based scheme of low priced sarees and dhotis has helped to reduce the stocks considerably.  We shall implement in 2003-2004 a major scheme to modernize the production processes employed by these weavers and shift them to better value added products.  The Budget 2003-2004 has a provision of Rs.83 crores for marketing incentives and handloom rebate.

67.   Members of the House are aware that the construction industry is a major contributor to growth.  Easy availability of building materials will greatly facilitate the growth of this industry.  The Hon'ble Chief Minister has issued instructions for improving the availability of building materials and this will control costs and spur demand.  There are still some difficulties relating to availability of sand and other materials.  We shall constitute a High Level Committee headed by the Chief Secretary to go into all aspects regarding the supply of building materials and proper regulation of the industry.  The Committee will be required to give its report in a period of 3 months and suitable action will be taken thereafter.

68.    This Government firmly believes that the quality of life of labour has to be improved. This has to come through enhanced labour productivity and through better incomes.  During the year 2002-2003, the Tamil Nadu Construction Workers Welfare Board has disbursed Rs.2.56 crores to 4889 beneficiaries.  We shall undertake training programmes, in partnership with industry, to retrain labour for modernised production systems.  Members of the House will be glad to know that we plan to ensure that at least 2000 new houses for Beedi workers are constructed in the coming year.  Tamil Nadu has been a haven of industrial peace.  We shall ensure that good industrial relations prevail in Tamil Nadu during 2003-2004.  We have constituted a Special Industrial Tribunal to go in to the wage issues of textile workers. 

INFRASTRUCTURE DEVELOPMENT

69.   One of the major thrust areas in the Budget for 2003-2004 is the accelerated development of quality infrastructure.  It is widely accepted that provision of quality infrastructure helps in the growth of the entire economy. Without compromising on the quality standards of infrastructure, we have to ensure that they are made available at affordable costs.  This calls for looking at the whole issue of infrastructure development and its financing in a holistic manner.  In my last Budget Speech, I had indicated that the surcharge on sales tax will be used for an Infrastructure Development Fund.  In a State VAT System, there is no place for a surcharge.  We have, therefore, decided to constitute the Infrastructure Development Fund with a specific allocation from the Budget.  A provision of Rs.200 crores has been made in the Budget for establishing this Fund.

70.    Provision of quality infrastructure requires massive capital investment. It is not possible for the Government alone to undertake this stupendous task.  Earlier, private capital was unavailable for infrastructure development as returns on investments were very inadequate. This issue has now been addressed world over through the concept of public-private partnerships based on concession agreements and user participation through levy of affordable user charges. In the Union Budget for 2003-2004, the Government of India has unveiled the concept of viability gap funding to facilitate a higher level of investment in infrastructure development. After examining this and other mechanisms available, we propose to enact a new law providing for public-private partnerships in infrastructure development in Tamil Nadu, in the current session of the Legislature. This legislation will provide the basis for developing concession agreements, sharing of risks, and procedures for project development and implementation.

71.  Hon'ble Members of the House are aware of the special emphasis we have placed on the development of the energy sector.  The Hon'ble Chief  Minister,  Puratchi   Thalaivi   J Jayalalithaa has taken special steps to promote the development of new generation capacity in the State.  A Memorandum of Understanding (MoU) between TNEB and the National Thermal Power Corporation for setting up a 1000 MW plant was signed in July 2002.  The project cost is estimated to be Rs.4000 crores and this will come up in the North Chennai area.  The detailed project report is under preparation. Upon completion, it will be a major new addition to the generation capacity in the State. I am also glad to announce that the Neyveli Lignite Corporation and the TNEB will promote a joint venture to establish a new 1000 MW coastal thermal power station at Tuticorin at a cost of Rs.4000 crores.  We shall urge the Government of India for the early establishment of the 2000 MW power station at Koodangulam.  The total cost of this project will be Rs.13,000 crores.  We shall also take up with the Government of India the inclusion of 2000 MW of additional capacity at this site. Adequate thrust and attention will also be paid towards promotion of non-conventional energy sources such as wind energy, solar energy and biomass based energy.  Together with the availability of energy from the Central grid and the Independent Power Plants (IPPs), Tamil Nadu will continue to be energy self-sufficient in the foreseeable future. 

72.   Members of the House will be happy to note that despite the failure of two monsoons and a consequent shortage of hydel energy, there have been no power cuts in Tamil Nadu.  Our focus is now more on the quality of energy supplied.  The frequency of supply has been stepped up considerably.  We shall continue to invest substantially in system and grid improvements. The Plan outlay of the TNEB for the year 2003-2004 is Rs.1287 crores.

73.   Hon'ble Members of the House may recall that Tamil Nadu achieved 100% electrification of all villages as early as 1992 against the All India target of 2007.  This achievement was realised when this Government was in office.   We are now aiming at 100% electrification of all households along with the assurance of stable and quality energy supply by 2007.  Tamil Nadu will be the first State to achieve this distinction.

74.   I am glad to announce that the long delayed Tamil Nadu Road Sector Project, which was drawn up when this Government was in office in 1995, will now be taken up for implementation at a cost of Rs.2118 crores.  It is really unfortunate that the previous Government lost out when other States bagged many externally funded projects including the Road Sector project. Our Hon'ble Chief Minister, Puratchi Thalaivi  J Jayalalithaa has taken firm and positive action to bring this project back on track.  The project is now at an advanced stage of negotiations with the World Bank and we hope that the agreement will be completed by June, 2003.  This project will enable the development of 732 Kms of road network.  The major components will be the development of the East Coast Highway from Nagappattinam to Tuticorin, the State Highway from Arcot to Tiruvarur and 14 crucial by-passes.

75.    We have also examined how to encourage the public private partnership model in road development.  The Union Finance Minister in his Budget speech for the year 2003-2004 has announced that a new viability gap funding model will be adopted for accelerated development of National Highways throughout the country.  Basically, this involves the utilisation of private capital in road development in association with Government funding support for the viability gap with minimum toll charges.  It is necessary that we take up the development of several State Highways and major district roads on similar lines. 

76.   Under the Hon'ble Chief Minister's Highway Development Programme, about 1800 Kms. of State highways and Major District Roads will be taken up under an accelerated development programme and completed in a period of 3 years.  The plan is to identify individual sectors and upgrade these roads to a minimum of double lane with paved shoulders together with special services such as accident and trauma services, highway patrolling etc.  The estimated cost of this project is Rs.1500 crores. The Government will provide capital support to the extent needed and the balance will be through private sector participation. The Government support will be given as viability gap funding on the model evolved by the Government of India.   I am sure that this will give a completely new look to the roads and highways in Tamil Nadu making these comparable to the best in the world.

77.    Maintenance of existing road and highway networks will also receive special attention in 2003-2004. The Budget provides a special allotment of Rs.180 crores for relaying 5000 Kms. of roads during 2003-2004. The outlay will be further stepped up in future years.  In order to protect the maintenance of the core road networks comprising State Highways and Major District Roads, we have decided to constitute a Road Maintenance Fund in the Public Account with a corpus of Rs. 120 crores. This fund will be utilised only for the maintenance of the core road networks in the State.

78.   The Tamil Nadu Maritime Board has worked out development plans for the Cuddalore and Nagapattinam minor ports.  The Nagapattinam Port has recently been expanded by Chennai Petroleum Corporation Limited at a project cost of Rs.100 crores.  This facilitates the arrival of 0.5 million tonnes of crude oil.  Development of Cuddalore Port at a cost of Rs.250 crores is being worked out under the public-private partnership model. We will urge the Union Government to take up work on the Sethu Samudram Project without further delay.

79.   We are disappointed that upgradation of Chennai Port and construction of the second airport at Chennai do not figure in the Union Government's Budget for 2003-2004. The operations of the Chennai Port need to be completely modernised in the context of our export led growth strategy.  The Government of India will be urged to expeditiously take up the modernisation of the Chennai Port. The Government of India has to urgently take a decision on the construction of a second airport at Chennai.