After hosting its maiden investors’ summit on December 9 and being promised Rs 65,000-crore investment, Punjab has portrayed itself as a key business destination. The Tribune, in the first part of the series, gives an insight into what has been promised for various sectors of the industry and whether the state has the required wherewithal to create infrastructure for facilitating the investment.

*Source: Punjab government

Chandigarh, December 28
The Punjab Government is under the microscope to ensure that the Rs 65,000-crore investment proposals received by it actually fructify and the state is finally able to turn around its economy and move on a high growth trajectory.

With the Progressive Punjab Investors’ Summit having drawn the who’s who of the corporate world and most of the top Indian companies proposing to invest in the state, Punjab Deputy Chief Minister Sukhbir Singh Badal has managed to silence his political opponents to a certain extent.

Calling it a “historic event”, Trident Group Managing Director Rajinder Gupta said it could be a game-changer for a state that has never been eulogised as an investment hub by the industry honchos.

But, with the dust having settled after the “investor tsunami”, the stock checking has begun in earnest. The investment will lead to industrialisation, but with a host of fiscal incentives being granted to investors, the moot question is: Will it uplift the sagging economy of the state?

Former Punjab finance minister Manpreet Badal is not hopeful of any large-scale investment. Reason: Punjab performs poorly on all five indicators essential for investor confidence - a solvent state, strong physical and social infrastructure, affordable real estate, thriving small scale and cottage industry clusters and effective law and order conditions.

But, Nahar Industries’ Managing Director Kamal Oswal feels that the summit was a good start. “Bringing corporate bigwigs on one platform is not an easy task. Like other prosperous states, Punjab will also be in focus now.”

An analysis of the proposals received and 117 MoUs signed reveals that the state has not received much investment into the manufacturing sector. Being the secondary sector, it is not only the highest employer but also highest investor in terms of buying land and machinery, and goods produced also lead to additional revenue generation in the form of Value Added Tax. Even with 80 per cent VAT retention under the new policy, the state will get only 20 per cent VAT.

Barring interest shown by Arcelor Mittal in expanding the refinery in Bathinda (though an MoU has not been signed, the state claims it has received a proposal of Rs 2,300 crore) and the state’s home-grown industry —Khanna Paper Mills, International Tractors, Trident and Nahar Industries — the state has not received many proposals in the manufacturing sector.

Reason: Federation of the Association of Small Industries of India president Badish Jindal says that for an almost no-show by the manufacturing sector is that when the Goods and Services Tax (GST) will roll out by April next year or in 2015, the sop of 80 per cent VAT retention will become redundant as the GST will replace VAT.

Government officials, however, have a different stance. A senior state government official, who was one of the pioneers of the summit, said even if there were a few proposals in the manufacturing sector, the IT and ITES sector had shown a keen interest in the state. “The investment by this sector may not be much, but the service industry (tertiary sector) is again a huge employer. The state will benefit hugely from the sector, including the investments in health, tourism and education, as majority of the local youth will be employed,” he said.

But the critics are not convinced. Punjab Planning Board’s former deputy chairman RR Bhardwaj said: “The investors’ summit was just a showmanship and a gimmick without substance. The MoUs signed with the bigwigs are just on paper and nothing has been accomplished in reality so far.”

The government is also drawing flak for having passed off various old projects, which were approved by the state government earlier, as new investment proposals, especially the ones in the real estate sector.

The government, however, has defended this by saying that these developers are either expanding their existing projects or their projects are delayed because of downturn in the economy and new MoUs have been signed to give them concessions and ensure that they take off. In fact, the maximum investment proposals that the state has received are in the real estate sector (worth Rs 25,000 crore). But, with the realty sector being hit hard by the economic slowdown and showing little signs of recovery, it remains to be seen as to how fast (and if at all) the real estate projects take off. The realty sector will also not yield any direct benefit to the state, though once these projects take off, the cement, sand and steel industry will get a boost.

Manpreet Badal feels that at the most, Punjab will witness a few successes in already-developed Mohali. “We will see a fresh influx of real estate projects that could exacerbate the economic and social crisis in the state,” he said.

The good news, however, has been about the food processing sector. Being an agrarian state, Punjab can meet the requirements of this sector. It is here that the government has received 61 proposals worth Rs 6,264 crore. The first proposal to be given a go-ahead by the newly created Punjab Bureau of Investment Promotion is likely to be the cattle feed plant by Cargill India. This plant will be set up in Bathinda with an investment of Rs 70 crore so that the company can cater to the markets of Punjab, Haryana and Rajasthan. Besides, the big-ticket investors such as ITC, which is planning to set up a food park in Ludhiana, several local entrepreneurs have decided to invest in this sector.

Another sector where the investment has already started is in the telecom infrastructure space. Reliance Industries Limited and Bharti Airtel are already present in Punjab, but the two are now creating world-class 4G platform in the state, which will lead to world-class infrastructure creation in Punjab. The telecom giants are investing Rs 6,500 crore in the state.

Considering the weak economic sentiment prevailing in the country, it will actually be a tough job for the just-christened “entrepreneurial Punjab” to ensure that the memoranda of understanding actually turn into memoranda of commitment, as Chief Minister Parkash Singh Badal says.

Taking the long view

• An analysis of the proposals received and 117 MoUs signed during the two-day investors' summit reveals that the state has not received much investment into the manufacturing sector, which is not only the highest employer but also highest investor in the state
• Trident Group Managing Director Rajinder Gupta calls it a historic event and says it can be a game-changer for the state that has never been eulogised as an investment hub by industry honchos
• Former Punjab finance minister Manpreet Badal is not hopeful of any large-scale investment. Reason: Punjab performs poorly on all five indicators essential for investor confidence