By Divya Rajagopal & Devika Rani/CNBC-TV18

The Tamil Nadu government has attracted corporate investments more than Rs 17,000 crore this year. The reason is that the state is aggressively wooing India Inc with a bagful of tax sops.

It's a state traditionally known to be an auto hub. Tamil Nadu is home to plants of companies like Hyundai, Ford, and Mahindra & Mahindra. It may even bag the Ashok Leyland-Nissan LCV plant. But now, there are new drivers steering into the state. Chief Minister M Karunanidhi has approved 13 projects worth Rs 17,400 crore and the companies include Videocon, Nerolac and the Nokia-Siemens joint venture for cell phone infrastructure. This is because the state is wooing the investors with attractive tax sops.

Tamil Nadu is offering refund of value-added tax, or VAT, as interest free loans for investment up to Rs 200 crores. In addition to that, companies investing more than Rs 50 crore will be eligible for tax deduction. Earlier, the investment had to be Rs 250 crore. To develop its smaller towns, the state is giving tax exemptions for investment of over Rs 250 crore in Tier-II cities. There are also plans of setting up foreign country-specific industrial parks, which industry officials say will help boost the foreign investments, or FDI in the state.

The FDI bus is one that Tamil Nadu does not want to miss. Of the total FDI investments made in the last three years, Tamil Nadu ranked third after Delhi and Maharasthra. It attracted FDI almost worth Rs 22 crore.

The government is on overdrive and plans to sign MoUs worth Rs 30,000 crore this year. But questions remain how much of these ambitious projects will take off from the paper, as land acquisition still remains a major issue in Tamil Nadu.