Odisha steals march over other states in cost of doing business: ADB study

State wins hands down on all key parameters, viz. skilled labour wages, power tariff and land costs, which the study used

Last Updated : Mar 24 2018 | 1:51 PM IST

'Ease of doing business' might be the buzzword for attracting investors as states scramble to improve their rankings. But, Odisha is quietly stealing the show with its competitive advantage in the cost of doing business.

A study by the Asian Development Bank (ADB) has rated Odisha as the most cost competitive state when judged by the criteria of cost of setting up and running a business. The report has dwelt on key parameters – wage rate of skilled labour, industrial power tariff and land costs. In all the selected parameters, Odisha wins it hands down on cost when compared with states like Andhra Pradesh, Maharashtra, Gujarat, Tamil Nadu and West Bengal.

The findings of the study establish that Odisha has the lowest wage rate of skilled labour among the surveyed industrialised states.

“A low wage rate is a positive factor for the setting up of businesses from the perspective of industry since it drastically reduces the operating expenditure of any business”, the study says. The wage rate of skilled labour in Odisha is Rs 6,240 per month and next to it is Maharashtra (Rs 8,739) and West Bengal (Rs 8,888). Andhra Pradesh with a wage rate of Rs 9,818, has the highest cost of labour. The other two industrially leading states- Gujarat (Rs 9,414) and Tamil Nadu (Rs 9,115) also have wage rates significantly higher than Odisha.

Power surplus Odisha also boasts of the lowest industrial power tariff amongst the six chosen states. At Rs 4.20 per unit, Odisha’s tariff has wide differential with Maharashtra (Rs 7.20) and West Bengal (Rs 6.60). Low power tariff leads to lower operating expenditure, making Odisha more competitive.

Sanjeev Chopra, principal secretary (industries) with the Odisha government said, "Odisha’s low cost of doing business is one of the key strategic advantages which attract manufacturing companies to the state. Industrial power tariff, labour wages, cost of living and land rates are highly competitive in Odisha vis-à-vis other states. With a stable, proactive and industry-friendly government machinery, Odisha makes a compelling value proposition for the investors. We have received encouraging response from both domestic and foreign investors.”

Cost of procuring land is another key area where Odisha trumps Gujarat and Maharashtra. Land cost in key industrial locations in Odisha is in the range of Rs three-six million per acre. Compared with this, Gujarat’s land rates at its industrial locations of Vadodara, Surat and Bharoch is more than double in the band of Rs eight to 10 million per acre. In Maharashtra, the cost is even higher as land rates hover between Rs eight and Rs 16 million an acre.

Using Odisha’s cost in labour, tariff and power, the study goes on to say that an industry in casting and forging hoping to generate $1 billion in revenue, can save Rs 26.2 million in power costs if it chooses Odisha over Andhra Pradesh. The savings for the industry are twice at Rs 52.2 million if Odisha is preferred over Maharashtra. For an apparel maker who opts for Odisha, the savings in power costs could range from Rs 3.5 million to Rs 10.6 million over other states.

A report by industry body Assocham says at the end of March 31, 2017, Odisha has attracted live investments worth Rs 13.2 trillion, the third highest in the country with a share of 7.2 per cent. The state has the fastest implementation rate of projects as projects valued at Rs 6.4 trillion are in various stages of implementation.

Odisha is positioning itself as an investment hub and has staged roadshows in Mumbai and Bengaluru, culminating its showpiece summit- Make in Odisha in December 2016. From the three events, the state received 124 investment intents, 76 of which have translated into firm commitments.