WITH more and more leading industrial giants quitting Maharashtra to set up base in neighbouring states, where the policies are more conducive to industry growth, Maharashtra government might have been forced to come up with a new all-things-to-all-men industrial policy. But will the policy really change ground realities? We spoke to several industry players among large corporates and smaller and medium sized companies to get their frank opinion of what is good about the policy, what was lacking in it and why they would not trust there will be any significant change.
The raison d’etre of the policy has been the swift erosion of Maharashtra’s leading position as an industrialised state to Gujarat, Tamil Nadu, Karnataka, Bihar, Rajasthan, Punjab and new kids on the block like Jharkhand and Uttarakhand. It had become almost a ritual for industry players to sing paeans to Gujarat’s incredible growth model. Gujarat’s industrial policy has been all-inclusive in the sense that it involved people’s participation in the development strategies. With people becoming a stakeholder it was much easier for industry houses to carry on business and the local population always got a fair deal. Even in the last state elections its industrial policy was widely credited to be the clincher in the massive victory of incumbent Chief Minister Narendra Modi in his third straight win.
Maharashtra’s new industrial policy has been named ‘Magnetic Maharashtra, Brand Maharashtra,’ which aims to boost the growth of micro, small and medium enterprises (MSMEs). The policy was cleared by the state cabinet on January 2. The highlights of this policy are: it offers MSMEs waiver from tax on electricity consumption, stamp duty and local taxes like octroi. It also offers MSMEs one rupee concession per unit in electricity tariff if they set up units in the state’s backward regions such as Vidarbha and Marathwada. Many of the MSME owners have noted quite succinctly that incentives such as power tariffs and concessional levies are good as long as the environment provided by the government is good. Many of the industry houses, especially those involved in construction business like infrastructure and real estate, often state that the see-no-evil-hear-no-evil policy when it comes to persecution of immigrant workers has led to sudden stoppage of crucial projects adding to their interest cost and risk weightage by investors.
Another big issue faced by industry, which has plans to set up base in the backward regions is about supporting infrastructure being almost non-existent in such places. The state government policy envisages 5 per cent subsidy on capital investments for MSMEs in taluks classified as C and D for development purposes. Maharashtra government has classified all 357 taluks in the state in five categories on the basis of industrial development—A, B, C, D and D+. Unlike a state like Gujarat where the government priority, when it came to power a decade ago was to provide three phase uninterrupted power supply to all villages in the state, Maharashtra has no such facilities. There are huge IT parks built in backward regions of Maharashtra that remain unoccupied for years because the IT industry finds it difficult to access the place.
“The roads are bad. The power supply is erratic and the quality of power has its effect on the life of costly equipments. Worst, IT white and blue collar workers are highly paid and hence expect a lifestyle where they work. If the IT park is situation in the middle of nowhere and the government does not build any social infrastructure or allow private sector to build them, obviously the park will not be occupied,” said a highly placed IT company HR vice president seeking anonymity.
The new policy allows special economic zone (SEZ) developers whose projects have got stuck in the land acquisition imbroglio, ever-changing central tax laws and tax holidays, etc. to have an exit route. The SEZ developers can now choose to develop their land as an integrated industrial township project. They can utilise their land in 60:40 ratio, meaning the SEZ developer will have to use 60 per cent of total land in possession for industrial purposes; the rest can be used for residential and commercial purposes. Now the problem with this policy is that most of the companies which have bought non-contiguous parcels of land have lined up investors who are adept at managing SEZ or similar projects. Most often the investors would prefer to quit the project than change their portfolio. The central environment ministry has been occupied by cabinet ministers who have huge egos and their own political games. Industry does not want to become a ping-pong ball in these games. Lavasa near Pune and Adarsh Society in Mumbai are classic examples of ministries waking up to find out violations, after the projects have become on-stream.
There of course is a huge power game played between Chief Minister Prithivraj Chawan and state industries minister Narayan Rane. Over 27,500 hectares has been acquired for SEZs. As the state was finding it difficult to address the issue of land acquired for SEZs, industrial policy got delayed by more than one year. But the inside story is that the debate in the cabinet and the lack of a common ground between the two strong political players in the state has delayed the policy for a year. The last 5-year industrial policy announced in November 2006 aimed at attracting mega projects from other states, expansion plans and green field projects with a minimum investment of Rs 500-crore. On the other hand, the new industrial policy of Maharashtra ostensibly aims to attract Rs 5-trillion investments over five years and create two million jobs. But that is far easier said than done.