SACHIT JAIN/ED/VARDHAMAN SPINNING Baddi's early bird, the textile major has lined up a slew of investments worth Rs 250 crore

ONa balmy March morning, the 50,000- strong sleepy township of Baddi, nestled at the foot of the Himalayas, is waking up to the sweet smell of new investment. Amidst bushes of rhododendrons, soaring eucalyptus and the ubiquitous safeda trees, fmcg major Colgate-Palmolive has set up a small yellow hut with red roof on a four-acre piece of land. There are construction workers and site engineers scurrying about. The project manager, Deep Luthra, is wearing a bright yellow hard hat and a Cheshire cat grin. "Welcome," he says, his face beaming, as we enter the hut, which is devoid of any furniture. We decide that it's a better idea to stand and witness the 30-odd men clearing the land of weed and shrubbery, carrying loads of bricks to this barren facility so that the company's Rs 55.7- crore toothpaste manufacturing project can be set up, as our host Luthra put it, in "real quick time".

A stone's throw away, new-age masons and workers chisel away on a semi-finished structure. That's the three-acre facility of Wipro Consumer Care. We learn that Wipro has also acquired two other plots not very far from where we stand, to bolster its hardware manufacturing business. Total investment: Rs 20 crore. There's more. Drug majors Ranbaxy, Cipla, Cadila, and Wockhardt have bought 20 acres each and Dr Reddy's Labs 26 acres in the Baddi-Barontiwala-Nalagarh belt. It's boom time in Baddi, and everyone's invited.

The 23-sq km of industrial belt has attracted 745 units with an investment of Rs 1,339 crore over just the past one year. Most of the units are small, but there are some big ones as well like Godrej's, which started construction on its Rs 16.1-crore project last August, but had it up and running by January this year. Another 774 units, including FMCG giant HLL, have proposed Rs 2,592 crore of investments in the belt, which accounts for three-fourths of all investment into the state (See Beeline To Baddi). Just why is the Baddi-Barontiwala-Nalagarh belt booming?

Lured By Sops

The answer is simple. In January 2003, the Himachal Pradesh government announced a string of sops to lure industries. On offer were 100 per cent excise duty exemption for the first 10 years, 100 per cent income-tax exemption for the first five years of operations, and subsidy on capital investment in plant and machinery. Besides, power in the state is cheaper by Rs 1.88 a unit than in neighbouring Chandigarh. Says T.K. Dawar, local pharma unit head of Dabur, which first came to Baddi in 1994 and has six units in the same location, and planning another Rs 6 crore in investment: "With the excise and income-tax holiday, a pharma unit here can end up with a net gain of 11 per cent compared to another unit, say, in Maharashtra."

COLGATE-PALMOLIVE/CONSTRUCTION SITE Its Rs 56-crore toothpaste unit will offer easier access to markets in north

D.L. BIRLA/EXECUTIVE VP/BIRLA TEXTILE MILLS The company plans to spend Rs 80 crore on addtional spinning capacity

UNICHEM LABORATORIES/MANUFACTURING UNIT It is investing Rs 30 crore in expanding its tablets and capsules facility

RAJESH CHANDRA/FACTORY MANAGER/GODREJ CONSUMER PRODUCTS The company's Rs 16-crore unit was up and running in uder six months

To level the playing field, the state government has extended the benefits to existing units, provided they increase capacity by at least 25 per cent. Not surprisingly, they are game. Vardhaman Spinning, which came to Baddi way back in 1991, has lined up investments worth Rs 250 crore; Birla Textile Mills plans to spend Rs 80 crore in adding new spindles; Indo-Farm Tractors is upping capacity to 6,000 units a year at a cost of Rs 20 crore, and Unichem Laboratories is also spending Rs 30 crore on its tablets and capsules manufacturing facility. Says Sachit Jain, Executive Director, Vardhaman: "When we came to Baddi 13 years ago, there were virtually no units here."

There are two more reasons why the industrial belt is roaring. One, it is a convenient manufacturing hub that provides access to markets in northern India. In fact, Hoshedar K. Press, ed and President, Godrej Consumer Products, says that since soaps are a freight-intensive product, Baddi will give the company "an edge" over other manufacturing locations such as Assam in terms of effective distribution. A Colgate-Palmolive spokesperson also cites easy access to northern markets as one of the reasons why the company is building a unit in Baddi.

The other advantage, companies here say, is an "approachable" government. A friendly and popular bureaucrat, Chand Sharma, heads the Single Window Clearance Agency. In fact, Cipla had come to check out Baddi with Uttaranchal as an alternative in mind. But last winter, Cipla's director Devender Singh met with Sharma and representatives from another pharma company that has investments in the belt, and signed up in just two days. Today, Cipla is investing Rs 55 crore in Baddi. Also, there is no known blue-collar militancy in the area. Says L.K. Pradhan, GM, Unichem Laboratories: "We have 150 people working in our unit here, but there's no labour issue."

But the industrial belt isn't without its share of problems. The terrain is rocky, the water table can drop as low as 450 feet. Besides, reaching Baddi is a nightmare. One has to take the National Highway 21 that leads to Shimla and turn left on nh-21A, a narrow 20-km stretch of potholed and unlit roads. But the state's Additional Chief Secretary, Renu Sahni Dhir, assures that "80 per cent of the alternative road route is complete" and work on the remaining stretch, which comes under Punjab's preview, is being pursued by the Himachal Chief Minister personally. What also affects units in the area is the truckers' mafia. According to D.L. Birla, Executive Vice President, Birla Textile Mills, the freight rates are higher by "one rupee per kilo of yarn".

But as we hit the highway back to Delhi, we see at least another dozen projects in various stages of completion. Obviously, the infrastructure hassles are nothing that a generous state can't get companies to live with.