The Tribune, Chandigarh, India

prime concern
ECONOMY
Punjab industry: All plan, no action
Delayed VAT returns, high power cost, non-existent single-window clearance and lack of tax sops have spelled doom for Punjab industry. Investment worth Rs 3,675 cr has moved out. The challenge is implementing what was promised and not just another policy.
By Ruchika M Khanna

Many textile and pharma units have moved to tax havens outside Punjab. Tribune file photos

Rapidly slipping down the growth ladder, Punjab needs to infuse new investment and build as well as sustain its manufacturing and services sector. For this, it may not necessarily need a new industrial policy. What it really needs is a vision to ride on the wheels of industrialisation by wooing the industry, and the political will to steer the state’s destiny from a traditional agrarian economy to an industrial economy.

Punjab has seen a sharp deterioration in industrial development. The contribution of the manufacturing sector to the Gross State Domestic Product (GSDP) has been on the decline. In 2012-13, the contribution of the manufacturing sector to the GSDP is expected to remain static at 6.8 per cent. In 2009-10, the contribution was 11.99 per cent. This slow growth in the secondary sector, coupled with a negative growth in the primary sector (agriculture and allied activities, mining and quarrying) have also led to Punjab’s overall growth rate to plummet, touching a low of 6.3 per cent during this fiscal.

With agriculture production having plateaued, the road ahead for growth lies in building the manufacturing and services sector. Over the past decade, subsequent governments have been harping on the need to promote industry. Two industrial policies were presented by the Congress and Akali-BJP governments in 2003 and 2009, respectively, but major policy decisions pertaining to the ease of doing business and getting government approvals, besides cash incentives, were never implemented.

In 2003, the Congress government drew up a policy, committing capital and freight subsidies to investors from the state’s budgetary allocations. However, with the state’s finances in disarray, no funds were provided (except for Rs 100 crore to the department for releasing capital subsidy in the late 1990s). This led to the weaning away of the investors.

In 2009, the Akali-BJP government formulated a new policy, which it claimed to be a step ahead over the 2003 mega projects policy of the Congress. However, two years after it was announced, at least 14 promises relating to waiver in change in land use charges; reimbursements of stamp duty; VAT refund and a single-window clearance; were not notified or implemented. The existing industry has been unwilling to set up green field projects and prefers MP, Gujarat and Bihar for new ventures.

Policies not implemented

The industry in Punjab has thrived solely on the ubiquitous Punjabi entrepreneurial spirit. Though historically, Punjab was envisioned to be the granary for the country because of its fertile lands, the Punjabis, known for their deft business acumen, created small industrial hubs and led the state to an era of industrialisation after the reorganisation of the states. However, little was done by successive governments to promote industry.

On the other hand, states like Haryana, Maharashtra and Gujarat continued to promote and get fresh industrial investment (Haryana because of its proximity to the national Capital and others because of their propinquity to ports). This was also the time when Punjab was ravaged by terrorist activities and many industrialists shifted base. But a major blow to the industry was the slew of fiscal incentives offered to the hill states by the Centre to promote industrialisation.

Being surrounded by Himachal and Jammu and Kashmir, and Uttaranchal not far, Punjab lost out not just on fresh investment, but it also led to the flight of industry. The government maintains that because of the tax sops in neighbouring hill states, 274 industrial units involving an investment of Rs 3,675 crore moved out of the state. Ludhiana was the worst hit with 33 units shifting to the hill states while Mohali lost an investment of Rs 742.50 crore and Gurdaspur and Batala suffered a loss of Rs 461 crore.

While many industrial units, mainly in textiles and pharmaceutical sector, moved to these tax havens, the industrial growth in the state continued to stagnate.

What must be done

Various state governments are wooing the industry, with some going out of the way to offer incentives worth much more than the actual investments because they can foresee how a big unit will lead to many ancillary units spreading out, thereby generating large-scale employment.

Punjab could emulate the Industrial Model Township (IMT) model of Haryana, where it can create model townships in huge wastelands for a lot less. Punjab will have to enhance educational qualifications and impart skills to its youth, so their skills are commensurate with the needs of the industry.

However, industrialists are skeptical the new policy will be a game changer. “It is good the government is coming up with a new policy, but the real issue is implementation. The challenge is not making the ‘best industrial policy’, but implementing it,” says SC Ralhan, president of the Ludhiana Handtools Association.

“The government should not make half-hearted attempts, but understand the inherent problems that have pulled down industrial growth. The government came up with the Punjab Infrastructure Act, but failed to come out with rules and policies for the special purpose vehicles to be created under the Act for maintenance of focal points. The government wants the industry to pay for maintenance, even when it is paying house and municipal taxes,” Ralhan rues, claiming the industry promotion boards created by the SAD government in its previous tenure had no powers to promote the industry.

SP Oswal, chairman of Vardhman Group, says Punjab must sort out the high cost of power to the industry. “Punjab offers power to the industry at the highest rate in the country. We are forced to cross-subsidise the free power being distributed to the agriculture sector. Since power is the basic raw material, the high tariff increases the input cost manifold. With power being almost Re 1 per unit more expensive (Rs 6.40 per unit) than other states, the industry is losing its competitiveness. We don’t want incentives, but efforts should be made to lighten the burden on the industry,” he says.

RS Sachdeva, co-chairman of the Punjab committee of PHD Chamber, says, “Working capital is squeezing. The government should not delay VAT refunds. It has been talking of a single-window clearance mechanism, but in vain. It needs to be cleared, or the industry will keep moving out. There is need to promote skill development for an employable workforce.”

Proposed new policy
Waiver in CLU charges, stamp duty and electricity duty for minimum investment of Rs 40 crore (Rs 10 crore in border areas)
Single-window clearance; in case of failure to implement it within a specified time, deemed approvals to be granted
VAT refund within 30 days
Develop leather cluster in Jalandhar; textile in Malwa region
Textile policy with interest subsidy, incentives in VAT; power duty linked to fixed capital investment
Land banks to be created; policy to ensure land is not allotted for real estate purposes
Mean business, this time
The industrial growth has been slow, but this will change. The previous industrial policies could not be implemented. The new policy is likely to come into effect next month and will, for the first time, incentivise fresh investment and offer fiscal benefits to the industry. On offer is a land bank, exemptions in taxes and duties, and single-window clearance. I have met industrialists and small businessmen for their feedback on how to take the industry on a growth trajectory. We have studied incentives and industrial policies of Gujarat, MP, Haryana and Rajasthan. We cannot offer cash subsidies, but we will give incentives.
— Anil Joshi, industries minister

last word
Omar Abdullah
Tweet, tweet, Chief Minister calling
Pulled by many strings, here’s a Chief Minister who speaks for the people of J&K and New Delhi at the same time — not a position to envy.
By Arun Joshi

As Chief Minister of Jammu and Kashmir, life for Omar Abdullah is an unending leap from one crisis to the next. Just as he was looking to consolidate his success of the past two years of peace in the state — having despatched his Tourism Minister to Germany to woo tourists — terrorists shattered his dream by resurrecting the black days of terror and reversing many of the gains in the Valley.

Even as he was trying to figure out as to what went wrong, a youth stated to be a close associate of Legislative Assembly Speaker Mubarak Gul was killed in firing by the Central Reserve Police Force (CRPF). The Speaker vouched for the innocence of the deceased and the provincial president of his party (NC) Nasir Aslam Wani described it as a “cold-blooded murder.” The CRPF on its part maintained it had fired on a stone-pelting crowd and the youth was among the stone throwers.

The distress started for Omar immediately after he took as Chief Minister, be it the alleged rape and murder of two women in Shopian in south Kashmir or the vicious cycle of violence that rolled on for a major part of 2010, leaving 120 dead.

With strings pulling him in various directions, Omar’s challenge has been in making up his mind on what he stands for, feel his critics. They cite a number of examples in which he — according to his political convenience — has assumed conflicting positions: seeking a “unique solution” for the Kashmir problem; shying away from accepting the finality of the state’s accession to India; and then lavishing praise upon people at the helm of affairs in New Delhi.

Others, who had seen in him a ray of hope for the youth and a man who could usher in a new era of development and peace in the trouble-torn state — which lost most of its infrastructure during the peak of militancy — believe he has carried the state a long distance in development, but has failed to convert that into political dividend.

Omar’s mantra is he doesn’t want to blow his own trumpet: “I work silently.”

On the ball

Omar may at times seem engrossed in his BlackBerry or I-Pad while in public, but at another level he is also keenly taking note of all that is spoken by people around him or across the table. That’s the way he works, though that at times leaves people wondering if he paid attention to what they said.

In Kashmir — a little political cosmos of its own — people expect undivided attention from their leaders, especially when the narrative revolves around the Valley. On the other hand, Omar seems to believe that his ever increasing number of followers on Twitter — 2,45,761 at last count — are the ones with whom he should be communicating first. However, the fact is more than 90 per cent of them are from outside the state.

Often, Omar — who has been accorded the sobriquet of “Twitter Chief Minister” by his bitter rival and Peoples Democratic Party president Mehbooba Mufti — finds himself in hot waters because of his tweets. The one on Parliament attack convict Afzal Guru, asking if the country would respond in the same manner if someone in J&K was to move a resolution on the pattern of Tamil Nadu Assembly seeking amnesty for Rajiv Gandhi’s assassins, had triggered a virtual riot in social and electronic media. Cue, in any case, was taken by an Independent member, Engineer Rashid, who moved a resolution to that effect. However, that created such a ruckus in the state Assembly that it could never come up for discussion.

Regardless, Twitter continues to be his favourite medium of communication, knowing full well that his tweets make news, and it is the best way to tell the world how he sees things. After a passionate speech regarding the killing of a youth in Baramulla in firing, he reverted to his signature theme of revocation of the Armed Forces Special Powers Act (AFSPA). He is aware that with the threat of NATO forces leaving Afghanistan in 2014 and militants there then shifting focus to Kashmir looming large, no one at the Centre would be amenable to his suggestion. When his plea for return of Afzal Guru’s body to the family was rejected outright by Home Minister Sushilkumar Shinde, the revocation of AFSPA is tall order.

English Vinglish

Reasonably at home among the masses in Kashmir, Omar, however, is unmatched when the turf is a conference room filled with the elite. The power and sense of urgency in his thoughts come out best when addressing seminars or international meets — in English, i.e., for that is the language he can use to maximum effect, making him a much applauded orator. At public rallies in the Valley, however, he chooses Urdu, which robs him of the punch he can deploy with English.

In 1984, when Jammu and Kashmir was ruled by his uncle Ghulam Mohammad Shah, then Health and Medical Education Minister Mehboob Beg had told this writer that if Farooq (Abdullah) were to become Chief Minister again, then no one would be able to stop Omar from becoming Chief Minister subsequently. The prophecy came true on January 5, 2009, when Omar became the youngest Chief Minister of the state ever. He had set eyes on the seat in 2002 itself, when his father announced retirement from politics (though the retirement only lasted six months).

As a child, Omar was fond of making paper planes. He had a dream of becoming a pilot one day. While that could never be realised, Omar has had the thrill of piloting the state through turbulent weather for sure. The weather continues to be stormy, and the plane has held the course — thus far.