State of States of the Nation

Almost every Indian chief minister vied to “rescue” the Tatas’ small-car project from the siege of Singur. On offer — from Jharkhand, Haryana, Uttarakhand, Orissa, UP and others — was all that an investor caught in a political maelstrom could possibly ask for — hassle-free land deals, tax benefits, power, infrastructure and an investor-friendly industrial policy.But promises, as Ratan Tata has doubtless discovered after the Singur standoff, don’t always reflect reality. While these states may boast their advantages, which of them really passes the test? Where should investors head with their cheque books and business plans? Who’s Best For Business? According to Assocham, India’s premier chamber of commerce, which releases its half-yearly ‘India Inc Investing’ report in 10 days, Maharashtra is the most favoured destination with investment worth Rs 1,20,065 crore. The report adds up investment earmarked for various states from January to June this year. Maharashtra is wooing investors with policies that are hard to resist. Recently, the government drafted a package of incentives for mega projects, exempting investment above Rs 500 crore from stamp and electricity duties. It’s paying off. Tata Power has announced Rs 25,000 crore to raise generation capacity while Reliance Industries will set up semi-conductor plants for Rs 21,666 crore. Global players are interested too. In the past two years, Maharashtra has attracted FDI worth $5,650.1 million.Close behind is Andhra Pradesh, with investment worth Rs 1,06,242 crore till June The line-up includes Reliance Industries Hindujas, Videocon and GAIL. What works for the state is its huge mineral base, power supply and infrastructure. It has also adopted a proactive industrial policy that aims to smooth the way for investors. Home to huge iron and coal reserves, Assocham says Orissa has emerged as the third preferred destination with Rs 88,902 crore worth of investment. No wonder chief minister Naveen Patnaik lost no time in inviting the Tatas to drive in as Singur flared up. Already, Vedanta Resources Sterlite Industries and Nalco have announced impressive investment proposals for the state.Up next, West Bengal, despite Singur and the bad press it’s receiving for playing politics with economics. Tata’s emotional press conference in Kolkata on August 22 may have caused jitters, but some industrialists still believe West Bengal’ fundamentals have not changed. India Inc has already committed Rs 83,287 crore to the state this year and more is on its way. The Videocon Group for example, has lined up Rs 20,000 crore (more than four times the combined investment proposed by Tata Motors and its ancillaries). ‘‘Our commitment to Bengal remains as strong as ever,’ says chairman Venugopal Dhoot.The top 10 list also includes Rajasthan with Rs 68,400 crore, followed by Chhattisgarh ,Haryana, Karnataka and Gujarat. Who’s worst? What deters an entrepreneur from pledging money to a state? ‘‘Overbearing labour laws and an unfriendly industrial climate are two major bug bears,’’ says Sajjan Jindal, industrialist and Assocham president. Add to this law and order problems and erratic power supply. Experts say a state beset by constant power cuts can never hope to attract investors. Perhaps that is why some of the biggest states such as Uttar Pradesh and Bihar score so low. This is reflected in the statistics pro vided by the Secretariat for Industrial Assistance (SIA), Department of Industrial Policy and Promotion.UP lags, not because it lacks resources, but be cause it’s plagued by the politics of brinkmanship. Almost a year after the Mayawati government took office, the state is yet to frame a new industrial policy. As the head of a prominent business house says, ‘‘The will to implement policies has been lacking.’’ The sops offered by the Mulayam Singh government to Anil Ambani and others remain paper deals. Meanwhile, the govern ment is still to resolve the knotty issue of farm land acquisition in Greater Noida for the Ganga Expressway project. Hardly a sign of a state government that’s open for business. Kerala fares badly because its hyperactive labour unions put off potential investors. In Goa, land acquisition is seen as a major hurdle The law and order situation in the seven north eastern states and Jammu & Kashmir keeps investors at bay. Surprisingly, Meghalaya does better than Kerala in the SIA analysis. Assam too is emerging from its strife-torn past as it sets out to woo bad ly needed investment. Dhoot, who is setting up two Special Economic Zones (SEZs) in Guwahati says he hasn’t had a problem getting clearances and acquiring land. The Right Mix ‘‘Law and order, uninterrupted power supply, good infrastructure, labour productivity and a clean record on labour unrest is what clicks for me,’ says Jindal, adding that West Bengal, Karnataka, Tamil Nadu and Andhra Pradesh score high on all of these. Gujarat, number 10 on the list, has managed to retain its position owing to its strategic loca tion and well-advertised industrial peace.Despite the 2002 riots and the terrorist attack on Akshardham, industrial growth has been in double digits. As Narendra Modi’s economic adviser, S K Shelat, puts it, “Unlike most states where decisions on private participation in infrastructure projects depend on the whims of CMs, there is no ad-hocism in Gujarat, thanks to the transparent bidding process under the Gujarat Infrastructure Development Act, 1999.” Neighbouring Rajasthan too is projecting itself as the next big auto hub after Haryana. The state’s policies have been rejigged and special provisions made under the investment policy of 2003 to attract big auto-makers The new policy lays emphasis on upgrading infrastructure to attract and sustain clusters. Bhiwadi is being projected as India’s third auto cluster after Pune and Chennai. All this has not gone unnoticed. “We found the bureaucracy very approachable and approvals were quick,’’ says B K Subbiah, chief operating officer, Mahindra World City which has set up a 3,000-acre SEZ in Rajasthan. Within 11 months, Subbiah was able to complete Phase I of the project. Unlike many other states land acquisition has not been a problem in Rajasthan. “The government gives land for land and it’s up to the farmer whether he wants developed land in a residential or industrial area,’ says Subbiah. Industrial peace is crucial too. As West Bengal might do well to remember, it lost out for two decades due to labour unrest and lockouts. Meanwhile Gujarat gained because of its business friendly labour policies. The number of man days lost on account of strikes and lockouts has been lowest in Gujarat, and has been pro gressively falling since 2004 — from 1.42 lakh to 87,451 in 2007. Most southern states have also done well for themselves. ‘‘Andhra Pradesh scores with its business-friendly bureaucracy. Also, the economies of scale favour the state because of closeness to resources, good infrastructure, stable power supply and nearness to ports,’’ says Charan Wadhwa former president of the Delhi-based Centre for Policy Research. Tamil Nadu too is advertising itself. ‘‘Our single-window clearance policy has successfully convinced many overseas investors to invest here,” says a government official. Add to this, incentives such as exemption from entry tax and VAT on capital goods. Karnataka’s biggest asset is its talent pool and policies. The state has the highest number of engineering institutes in the country and a world-renowned science institute (IISc) This, combined with two decades of being known for its IT skills, has turned Bangalore into India’s high-tech capital with international R&D centres and lots of investment.
Size Doesn’t Matter... While big states might think they have the edge the newly carved smaller ones are now giving them a run for their money. Uttarakhand, for instance, offered to provide 100 acres in Pantnagar at concessional rates if Ratan Tata wanted to relocate the Nano project. Unsurprisingly, Tata Mo tors is contemplating Plan B and could even roll out the world’s cheapest car from there to meet their October deadline. The state is offering 100% excise duty exemption for 10 years from the date of commencement of commercial production and 100% income-tax exemption for the first five years. ‘‘Smaller states generally have a more aggressive policy and offer more incentives to attract business. Chhattisgarh, Jharkhand and Uttarakhand are doing exactly that,’ says Wadhwa. ...But Resources Do Together, Chhattisgarh and Jharkhand have signed or issued 164 letters of intent, direct industrial licences and industrial entrepreneur memoranda in the last year. Were all of these to be honoured, the two would emerge as India’ most business-friendly states, with Rs 1,35,666 crore investment. So what’s going right for them Resources, say experts. ‘‘People choose locations not states,’’ says Vinayak Chatterjee, chairman of infrastructure consultancy firm Feedback Ven tures, adding, “Resource-based industries and units supporting them have little choice but to be located near the mineral base.’’ Mineral-rich Chhattisgarh and Jharkhand have the edge. A point echoed by Mohit Burman director, Dabur Industries, ‘‘We don’t really go statewise when it comes to investment Dabur has plants all over — be it Himachal Pradesh, Uttarakhand or even West Bengal. Unlike large manufacturing units, our plants are not labour or land-intensive. But being in a raw material-intensive business, we prefer staying close to the resources.” Most states are bending over backwards to rejig industrial policy to suit big investors. But it’s not a clear road ahead for many who have already pledged capital. In Orissa, ranking number three in the Assocham list, land acquisition troubles have held up key ventures such as the Rs 51,000-crore Posco project. Earlier this month, the Supreme Court stepped in to clear the way and the South Korean steel major was given permission to build its plant and a port in Paradeep. The court also cleared the proposal to earmark around 1,253 hectares of forest land for the plant. ArcelorMittal’s Rs 40,000-crore steel project in Jharkhand is also battling protests in the tribal area with local villagers refusing to part with even an “inch of land”. The trouble began shortly after the company applied for more than 11,000 acres for a plant and rehabilitation colony.Similarly, more than a dozen projects in Assocham’s top performer Maharashtra hang fire. They would mean Rs 1 lakh crore and 25 lakh jobs, but local farmers are protesting. At least seven SEZs and four power projects are currently on hold in the state. “If we are unable to tackle the protests, most entrepreneurs will not hesitate to shift to Andhra or Karnataka,’’ says a senior official of Maharashtra’s industry department.In Gujarat, the threat of terrorist attacks has caused some investors to shelve their plans. Karnataka is losing out to neighbouring states due to bad infrastructure. Narayana Murthy’s acid remarks on the sorry state of Bangalore roads underline the extent of Karnataka’s problems. What’s more, power is in critically short supply in Bangalore, but there’s been no serious attempt to build infrastructure in other towns in the state.Of course, if Singur is not sorted out to the Tatas’ satisfaction — and that’s looking improbable at the moment — West Bengal’s rating too will dip. The state is set to attract Rs 100 lakh crore in investment, but this