August 25, 2013

West Bengal has to go miles before industrialisation in reality can begin

By Sutanuka Ghosal & Atmadip Ray, ET Bureau Aug 11, 2013, 04.00AM IST

It had taken no less than half-a-dozen industry interfaces before the first glimmer of hope came in Mumbai on August 1. That hope, in the context of a severely battered Mamata Banerjee government, has a name: Mukesh Ambani. That is because the elder Ambani brother turned up at the World Trade Centre industry meet organised by the West Bengal government.

The younger Ambani sibling, Anil, did not turn up although Mamata had gone to Mumbai, reportedly armed with a project clearance certificate for the proposed Rs 600-crore cement plant of Anil Ambani in Purulia district's Raghunathpur.
Not many in Mumbai's super league turned up; but some 45-odd did, a few out of curiosity. "I went because I was curious to find out whether she is any different from what I see on television. Not that I plan an investment in Bengal soon," said one industrialist on condition of anonymity.
Despite some high-voltage post-event drumbeating in Trinamool Congress circles, the fact is that the jury is still out on what the claimed success of the August 1 meeting would translate to in reality. Would one meeting lead to thousands of crores of investments being pumped into an industry-starved Bengal?
Viewed differently, Mamata has reasons to cheer. Even if Bengal is incidental to Mukesh Ambani's countrywide 4G rollout, it will still shore up her rapidly eroding image should Bengal be part of the 4G networking as it certainly would.
Her publicity machinery would take care of the rest, and she would undoubtedly be touted as a chief minister who has been able to rope in the biggest corporate figure of all! If Anil Ambani comes in too, Mamata can justifiably claim success for having roped in India's largest business conglomerate.
However, let's be modest about it because the ground reality in Bengal shows that the state will have to go miles before industrialisation in reality can even begin to happen. Here is why.

In Mumbai, Mamata indicated she would be able to provide land in a limited way from the state's land bank. However, that bank actually shows a kitty of some 10,000 acres, which unfortunately is largely made up of small, non-contiguous parcels of land that can hardly be home to big projects.
Besides, Mamata has made it very clear that her government will not act as a facilitator in procuring land. The industrialists would have to negotiate on their own with farmers for that purpose. That is hardly going to be a turnon because few would have the time or patience to negotiate with smalltime farmers for land.
The government has initiated timebound steps to modernise infrastructure facilities and create new clusters and growth centres. Since infrastructure creation involves considerable investments, the state has decided on public-private participation.
However, the PPP model has not attracted any major investment so far. The government's reluctance about giving special economic zone status to any new project in the state is an additional turn-off.
A long list that includes Wipro, Infosys, JSW Steel, NTPC among others. It is not that all these projects are in the lurch because of Mamata. Still the fact is that industry-wise, new projects intended to come up and change Bengal's skyline aren't taking off for one reason or the other.
Then there are those that have remained in the ideas-stage only. A whopping 25 health projects announced in October 2011 have never come up. Darjeeling, instead of becoming Bengal's Switzerland, now threatens to go away to another state altogether if Gorkhaland becomes a success in future.
Kolkata is still not London and not one among the 56,000 sick units that Mamata had vouched to revive, have fared any better.
This is something that Mamata herself says. How can a state that has to pay a stupendous Rs 25,000 crore this year to service its burgeoning debt afford an investible surplus? And this debt-servicing burden will only increase every passing year as the government, facing a debt-trap like situation, is forced to borrow from the market at exorbitant rates.
There is one silver lining though. The state's finance department under Amit Mitra has managed to increase revenue by 30% in the last fiscal, exceeding the 25% growth target. But the growth in tax collection may not sustain in agrarian Bengal, if industry activity does not grow in the state.
This is a rare deemed positive feature of Bengal. The state has come up with better growth numbers in 2012-13. Its GDP grew 7.6% as against the national average of 4.96%; agriculture and allied sectors grew 2.56% compared with the countryi¦s 1.79% (based on advance estimates). The statei¦s industry sector grew 6.24% against the national average of 3.12%. But truth is that while these numbers are impressive, it is largely because the base is low.
This is a real positive. In her two-year stint, Mamata has used central funds very smartly in building rural infrastructure, which probably helped her party win the panchayat polls. Village roads are being built at a brisk pace using the Pradhan Mantri Gram Sadak Yojana. The government has taken up an aggressive rainwater harvesting project by digging 50,000 ponds across the states using labourers under the National Rural Employment Guarantee Act.
Mamata is at least making some noises correctly. She has, for instance, just announced a 100% tax waiver on aviation turbine fuel (ATF), which will reduce the cost of airline operators by at least 8%. She has also announced plans to come up with a fresh industrial policy by the month end to woo investors. One hopes that industry is impressed enough to accept her offer, but that is an unfolding story yet.

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