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6.5 Companies Operating at Neemrana Industrial Park

As of March 2012, 14 companies have set up operations in the Neemrana Industrial Park (Phase III for Japanese firms). While there were some cancelations by companies that had planned to set up, particularly during the economic downturn on account of the Lehman Brothers bankruptcy, site sales in the Park have since recovered is at almost full occupancy as of 2012. Companies in the Park (and those planning to set operations) hold regular meetings to share information, during which they discuss issues and solutions for building and operating factories, as well as compile requests to the state government and RIICO. These combined requests are more effective rather than an independent request. In addition, receiving approval from the administration can be extremely complicated, requiring the use of a local consultant at certain circumstances. Even in these cases, companies can share specific information on “predatory” consultants, quality of local consultants, and differences in rates—information that cannot be obtained through JETRO—making the approval process relatively easier. JETRO's investment coordinator manages negotiations with the development company regarding joint requests made at these meetings. Further, JETRO's Delhi office has opened a business support center that provides advice on Indian investments by an investment coordinator and helps solve a myriad of minor issues that arise from Japanese companies investing in India.

Below is an interview-based overview of the current status of three companies (auto parts maker Company A, auto materials maker Company B, and airconditioning equipment maker Company C) engaging in business in the Neemrana Industrial Park.

Background and Status of Expansion in Neemrana

• Company A ventured into India as a supplier of brakes, timing their entry to coincide with the release of the Honda City 2008 model. Honda has a factory in Greater Noida; therefore, the company began its search for a property in Noida and areas to the south of Noida along National Highway 8, such as Haryana, Manesar, and Bawal. The industrial park in Bawal was completely sold out as of 2006. The company received word that Phase III of the industrial park in Bawal of approximately 1,100 acres in size would be developed, thus Company A sent a letter to the development company, HISC (Haryana Industrial State Corporation), requesting the purchase of 30 acres. However, the Company A did not receive any response on the tentative time or price of purchasing the property. Subsequently, the company heard of another industrial park being built in Neemrana in the state of Rajasthan. It learned that the cost of property in Haryana was INR 1,800 per square meter, while that in Neemrana was INR 970 per square meter. The company analyzed the distance factor (Manesar was 20–30 min away from Neemrana) and lot size and decided to set up operations in Neemrana because Honda decided to build a factory in Tapukara, located in Rajasthan as well.

• On Company B's entry the Indian market, they selected a site near Delhi in the north, near Honda and Maruti Suzuki, after considering Bawal, Manesar, and Noida, but soon realized that the land suitable for an industrial park was scarce. In coordination with JETRO and RIICO, the company was introduced to Neemrana, an industrial park for Japanese companies, making Neemrana a potential candidate as their location. They selected Neemrana as it was less expensive and clearly defined property rights (provided by the state government of Rajasthan). JETRO being the intermediary to Neemrana, Company B thought of negotiations with the local government as credible.

• After thoroughly analyzing India to set up operations, including Mumbai, Pune, and Bangalore, Company C found that Neemrana was the only place they could acquire a substantial amount of property on which they could begin construction in the near future. In addition, Company C's Indian sales subsidiary was located in Gurgaon.

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