Investing in Odisha State in India: Economic Outlook and Opportunities

Odisha is a coastal state situated in the eastern part of India with a coastline of 480km. It is bounded by the Bay of Bengal on the east, Chhattisgarh state on the west, and Andhra Pradesh state to the south.

Given the state is well connected to major trade and manufacturing hubs in Asia, the Odisha government pitches the state as a gateway to the ASEAN region. Odisha hosts the Paradip port, eastern India’s largest port, which connects the state to Southeast Asian markets.

Odisha possesses significant mineral reserves, including 28 percent of India’s iron ore, 24 percent of its coal, 59 percent of bauxite, and 98 percent of chromite deposits. This abundance of resources has drawn the interest of numerous mining and metallurgical firms.

Economic profile of Odisha

The sector-wise contribution to Odisha’s economy was estimated to be 29 percent for the agriculture sector, 31 percent for the manufacturing sector, and 40 percent for the services sector in 2021-22, at current prices.

Mineral sector

Odisha possesses a distinctive advantage in enticing investments in ancillary and downstream metal industries. A resource-rich coastal state in India, Odisha holds the distinction of having the highest mineral production in the country.

The state government has taken proactive measures to attract more investments. In 2023, it introduced the Long Term Linkage (LTL) policy. The policy is offering long-term ore linkages for iron ore, chrome, bauxite, and limestone produced by the Odisha Mineral Corporation (OMC). This linkage will be available to investors establishing end-use plants, with provisions for greenfield or expansion projects, regardless of whether they have mechanized evacuation systems.

Several companies have made significant investments in Odisha, with one of the most notable being the JSW Group. They are currently in the process of establishing an integrated steel manufacturing complex in Paradip, Odisha, with an estimated investment of INR 650 billion (US$ 7.84 billion). Others who are investing are the Kalyani group, ArcelorMittal Nippon Steel (AMNS), etc.

Food processing sector

Odisha stands out as one of India’s agriculturally rich states, renowned for its abundant production of fruits, rice, pulses, and other major crops. With 363,000 hectares dedicated to agriculture and horticulture, this sector continues to expand steadily. The state boasts a thriving poultry industry, recognized as a significant agricultural activity, alongside promising opportunities for value-added dairy products.

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Recognizing the potential in food processing, Odisha has identified it as one of the six key focus sectors. To support this, the state introduced an exclusive Food Processing Policy in 2022, offering competitive incentives to encourage units to establish themselves within its borders. Benefiting from robust logistics infrastructure, including access to Paradip and Dhamra ports, Odisha enjoys seamless connectivity to both domestic and international markets. This strategic advantage has attracted several major players in the food processing sector, including ITC, Coca Cola, Britannia, Parle, Indo-Nissin, Anmol, and Surya Foods, among others, who have chosen to set up operations in the state.

As part of the Central government’s initiatives for supply chain modernization, Odisha state has established two Mega Food Parks. The Mega Food Parks Project seeks to create modern infrastructure for food processing along the entire value chain from farm to market, with robust forward and backward linkages through a cluster-based approach.

Semiconductor sector

Odisha state is working to set up a semiconductor base, which is currently at an early stage of development. To capitalize on the Central government’s initiatives aimed at attracting semiconductor manufacturers to the country, Odisha has introduced its own package of incentives to make the proposition more appealing under its Semiconductor Manufacturing and Fabless Policy-2023.

According to the policy, Silicon, Compound, Display, and Advanced Technology Manufacturing Plants (ATMP) will receive attractive incentives of 25 percent, in addition to the 50 percent incentive offered by the Government of India. Fabless product/IP companies will also enjoy a significant 20 percent incentive. Furthermore, Odisha will aid 25 undergraduate and 25 postgraduate institutes, supporting their research and development (R&D) activities as well as capacity building efforts.

In February 2024, the policy underwent further amendments to enhance the incentives provided to manufacturers. The amendments to fiscal support mechanisms include interest subvention, Production Linked Incentives (PLI), and investments in R&D and skill development training.

• The amended Semiconductor Manufacturing and Fabless Policy-2023 allows mega projects with investments exceeding INR 5 billion to easily access an upper limit of INR 250 million per year for 7 years towards interest subsidy. The previous 5 percent cap on interest subvention has been removed.
• Furthermore, these mega projects are eligible for reimbursement of R&D expenses up to INR 20 million annually for a decade.
• Regarding the PLI incentive, all units can now apply for the incentive for a continuous period of 5 years within the initial 7-year production period.
• In terms of skill development, eligible units will receive reimbursement of up to INR 20 million per year for 5 years to support the training of their core operations employees.

Textile sector

In recent years, Odisha has become a key center for textile production in eastern India. This development is credited to the supportive policies enacted by the state government, which have drawn significant apparel and textile companies such as Welspun, while also generating interest from entities like Mas Holding to make substantial investments in the sector.

In an effort to attract manufacturers to the region, the Odisha government introduced the Apparel and Technical Textile Policy 2022, which presents a range of incentives and measures aimed at promoting investment and expansion in the sector, including:

• Capital Investment Subsidy: Eligible new industrial units can receive a 40 percent capital investment subsidy on actual investment made in Plant & Machinery, up to a maximum of INR 500 million, disbursed over a period of 5 years.
• Employment Cost Subsidy: New industrial units are eligible for subsidies on employment costs, providing INR 6000 per female worker and INR 5000 per male worker per month for a period of 5 years.
• Market Development Initiative: Reimbursement of 50 percent of the actual cost incurred for participating in domestic and international exhibitions/trade events, capped at INR 300,000 per unit for domestic events and INR 600,000 per unit for international events.
• Environment-Friendly Infrastructure Incentives: Benefits as per the Industrial Policy Resolution (IPR) 2022.

IT sector

Odisha is positioning itself as an emerging base in the IT sector. The state hosts leading IT companies – Infosys, TCS, IBM, and Tech Mahindra have set up in capital Bhubaneswar. Additionally, initiatives such as the establishment of IT parks, customized incentives for IT companies, and industry-friendly policies are cumulatively creating a conducive environment for IT firms.

The introduction of the Odisha IT Policy 2022, with competitive incentives and a focus on cutting-edge technologies like artificial intelligence and cloud computing, further enhances the state’s attractiveness as an IT destination. Moreover, the state’s commitment to skill development, exemplified by initiatives like the Nutana Unnata Abhilasha (NUA) Odisha Scheme, underscores its focus to preparing a skilled workforce.

Investor facilitation in Odisha

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The Odisha Industrial Policy Resolution 2022 is a key policy initiative aimed at positioning the state as a leading industrial center in Eastern India. This flagship document outlines the state government’s vision for industrial transformation and highlights priority and thrust sectors in Odisha that will receive focused attention and incentives, both fiscal and non-fiscal, to spur growth and development.

Odisha has implemented business-friendly reforms to enhance the state’s business environment. This includes the establishment of Go Swift, a Single Window Clearance system as mandated by the Odisha Industries (Facilitation) Act 2004, with the goal of simplifying the process for obtaining approvals and clearances for industrial projects. To implement this, an online Combined Application Form (CAF) has been introduced, which all relevant departments and authorities are obligated to accept and handle.

The government has also created Investment Facilitation Cells at both the state and district levels as part of its efforts to improve the investment climate and support industrial development. These cells, operating under Industrial Promotion and Investment Corporation of Odisha (IPICOL) at the state level and District Industries Centers (DICs) at the district level, aim to facilitate land allotment and approvals, ensuring timely processing of applications, conducting awareness programs for investors, and following up on approvals within specified timelines.

With inputs from Melissa Cyrill.

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