Quid Pro Grow

Contracts, legal immunity, lasting policy changes: Everything electoral bonds can buy

Prime Minister Narendra Modi at the SemiconIndia summit 2023 in Gujarat’s Gandhinagar. Modi’s government decided to bear half the cost of Vedanta’s ultimately unsuccessful bid to produce semiconductors in Gujarat, after the corporation had donated electoral bonds to the BJP. SAM PANTHAKY / AFP / Getty Images
31 March, 2024

JULY 2022 WAS a mixed bag for the government of Maharashtra. On the one hand, the state was in a political quagmire, with the Bharatiya Janata Party having successfully broken the state’s two largest opposition parties—the Shiv Sena and the Nationalist Congress Party. Uncertainty loomed over whom the BJP would crown as the chief minister of India’s richest state. On the other hand, the state had finalised a major deal, with a joint venture between the mining conglomerate Vedanta and the Taiwanese manufacturing giant Foxconn being announced at the Talegaon Industrial Area, on the outskirts of Pune.

The venture was to manufacture semiconductors—a critical component in electronic devices, whose production and supply chain has deep geopolitical implications. The two foreign firms had wriggled a great deal out of the Maharashtra government, with heavy subsidies on land and water, and access to the region’s superior domestic supply chain, industrial infrastructure and skilled workforce. Eknath Shinde, who had taken over as chief minister after engineering a split in the Shiv Sena, said that all that the project was awaiting was “central government alignment,” which was “already in advanced stages and is moving ahead expeditiously.” Two months later, Vedanta dropped a bombshell.

In September, the Vedanta CEO, Anil Agarwal, met the union information technology minister, Ashwini Vaishnav, and announced that the project, costing Rs 1.54 trillion, was being shifted to a bit of barren and marshy land near the sleepy Gujarati town of Dholera. The decision seemed economically inexplicable, but Gujarat—whose much-advertised business successes had paved Narendra Modi’s path to prime ministership—was going to the polls soon after. In campaign rallies, Modi touted the two hundred thousand jobs the venture would bring Gujarat. In little over a week, the union cabinet, headed by Modi, decided to bear half the cost of the semiconductor fabrication facilities. More benefits came Vedanta’s way, including a 75-percent subsidy on 200 acres of land—along with a 50-percent subsidy on any additional land the company needed—a refund on stamp duties and registration fee, a power subsidy and complete exemption on electricity duty. This was still far less than what Maharashtra had offered.

But Vedanta had won more than land and water with the change of locale. The Modi government had launched SemiconIndia, eyeing a grand entrance to the $588 billion global market in semiconductors that had been cornered by an increasingly hostile China. It had earmarked Rs 76,000 crore for the scheme, in late 2021, to offer fiscal support ranging from thirty to fifty percent of the costs of fabrication facilities.