Telangana pips Karnataka in ease of doing business score

In the months after YS Rajashekhar Reddy’s death in 2009, Andhra Pradesh in general and Hyderabad in particular had come to a standstill. Even as people mourned the death of a mass leader, businesses were uncertain of the future. The Centre was deciding on the demand to bifurcate Andhra Pradesh into Telangana and residual Andhra; investment sentiment in the Telugu heartland was at abysmal levels and businesses were weighing the options of investing in Bangalore.

Cut to 2016.

In the ease of doing business rankings released on Monday by the Department of Industrial Policy and Promotion and the World Bank, Andhra and Telangana came out trumps. Karnataka, however, slipped from number 9 in 2015 to No. 13 in 2016. While it is easy to ferret out the reasons why Karnataka fared so poorly (poor infrastructure, problems with land acquisition and power supply), it is interesting to figure out the reasons for Andhra and Telangana’s success.

So let’s go back to 2014 for a bit.

Soon after Telangana was born, the leadership team set a goal for itself: to beat Bangalore in investments in five years. “Congested Bangalore has reached its saturation point and we are the immediate and the best choice for any new or existing player to establish or expand its presence,” IT secretary Jayesh Ranjan told Bangalore Mirror.

That, and the fact that Telangana’s policies of rolling out the red carpet for the investor seem to have done the trick for it. Recently, when Apple CEO Tim Cook visited Hyderabad, I-T minister KT Rama Rao (son of Chief Minister K Chandrashekhar Rao) explained to him how the state was doing all it could to become investor-friendly (chief among its initiatives is the 15-day window period for granting licence to a new business. If there is no response in the 15 days of its application, the business is deemed to have been granted a licence).

It’s no wonder then that Apple, Google, Microsoft, Amazon, Flipkart, Uber and Ikea are just among a handful of global majors that have chosen to make Hyderabad their Indian home.

Why Karnataka fails to deliver…

“Karnataka has all the policies in place, but the implementation is poor. The bureaucrats in the state are most accessible, and a lot more improvement is needed at the grassroots level so that industries thrive in the region,” said MC Dinesh, president of the Federation of Karnataka Chambers of Commerce and Industry (FKCCI).

“The top three aspects that the state-government needs to work on at the earliest are land acquisition, power and transport so that the state can cope with the growing infrastructure. We have come a long way, but now the main thrust is on setting up manufacturing units and the two new states of Andhra-Pradesh and Telangana have gone all out to attract this sector,” he added.

D Muralidhar, an industrialist and former board member of FKCCI said, “At a time when each state is trying to attract industries, the state needs to improve a lot and come up with a robust policy, which should not only be on paper but implemented too.” Industrialists in Karnataka Industrialists in Karnataka say that the state has grown around Bengaluru and has failed to decentralize its industrial base and create better Tier-II cities due to its three-pronged problem: power, water and connectivity.

The state’s dependence on hydel power has also resulted in the stunted growth of the industry as 2015 was a nightmare due to water shortage that subsequently resulted in power shortage and the micro, small and medium enterprises (MSME) sector bore the brunt of it. Due to deficient rainfall, 2017 is going to witness a similar problem, say experts.

“Water is becoming a major hindrance to the growth of the state. It should be known that 90 per cent of our manufacturing imports go from the port of Chennai and the 21 days of Cauvery tension resulted in huge losses. The state government should mull over ways to develop its 138 km of coastline, if we want to be in the race of attracting more industries,” said MC Dinesh.

The Peenya Industries Association members, who were the worst hit due to the power crisis and the Cauvery row, said that the bureaucracy in the state is in a state of slumber and is still banking on the growth of the information technology sector. “If they don’t come up with a plan of action, the government will soon start losing both IT and manufacturing sectors to other states.

Girish, an Industrialist at Peenya said, “We have trucks going from Tamil Nadu till Amritsar, but the drivers are scared of entering Karnataka and especially Bengaluru. The first and foremost reason is traffic and second is corruption. Few of my drivers say that after Bihar it is Karnataka that is the most corrupt.”

Why Telangana is speeding past Karnataka

Earlier this year, the Bengaluru head of an MNC was in Hyderabad for a meeting. When he was introduced to the local officials, he remarked that double the space and infrastructure was available in Hyderabad for the same price as in Bengaluru. And it wasn’t only housing that he was referring to.  There’s more: Hyderabad constructed its 12-lane Outer Ring Road (ORR) 10 years ago; Bengaluru is still trying to iron out the issues in the Peripheral Ring Road (which was announced during SM Krishna’s tenure) and the Outer Ring Road projects (which has a major bottleneck in Goraguntepalya).

Hyderabad built 11.6-km PV Narasimha Rao Elevated Expressway to the airport which lets motorists surpass almost two dozen bottlenecks. In Bengaluru, the airport expressway has resulted in a major bottleneck at Hebbal and Mekhri Circle for which the government wants to axe 800+ trees and build a steel flyover despite stiff opposition from citizens.

“We are approaching every company to invest in Hyderabad or Telangana. Our approach is very simple. If the company does not have its presence in India, we are asking them to come straight to Hyderabad. If the company already has its units elsewhere in the country, be it Bengaluru or Gurugram or Pune, we request them to look at expanding their base in Hyderabad,” said Telangana’s tech-savvy IT secretary Jayesh Ranjan.

Officials say since the launch of the new industrial policy last year, the state has received 2,550 investment proposals worth Rs 60,000 crore.

They claim that commercial production has also started in 1,200 units.

Telangana State Industrial Project Approval & Self-Certification System (TS-iPASS), which is backed by a legislation, has made the entire process of industrial approvals transparent, smooth and seamless.

According to state Industry Secretary Arvind Kumar, the main reform brought under the policy is the online application system. An investor sitting anywhere in the world can have access to all the information like availability of land for setting up an industry and its price. The industrialist can apply online and get all approvals within 15 days.

“There is no need for him to meet any official. This has helped in doing away with red-tapism and corruption,” said the secretary.

Hey Ram

The driving force behind Telangana’s growth is KT Rama Rao (fondly called “Ram” in the tech and social media circles), who has set a target of creating 10 lakh jobs by 2020. Rao, who studied in the US and worked as a project manager for an MNC there, returned home only to become a part of the separate Telangana movement.

KTR, who shies away neither from receiving or seeing out a potential investor, nor from seeking advice from people (sample this tweet which earned him a lot of respect and followers: “Need some out of the box solutions for improving roads in Hyderabad. Conducting a workshop day after. Any suggestions/advice tweeple?”).

Compared to any other minister, he obviously has the advantage as he’s the CM’s son. “The way he promises to the investors to do anything out of the way really amazes us,” says an official in his department. “He has the guts to convince the CM for relaxations from the rules”. A task master, KTR is keen that MoUs should not be made for namesake and the department should do everything possible to see that every MoU materializes. He has only one mantra for his department: “Walk the Talk”.

“This is lacking in Bengaluru, where the government exhibits the attitude that it is doing a favour to the investor. Our approach is quite opposite”, said a young techie working closely with KTR in promoting T Hub (Technology Hub that is also called as Telangana Hub).

“My understanding is that there will be international laws soon insisting that the data collected in one country should be preserved in the same country for security reasons. With this vision, we are going to develop a huge data centre campus in Hyderabad, the first of its kind in the country,” the 40-year-old told Bangalore Mirror in a recent interview.

Asked when he reckoned Hyderabad would overtake Bengaluru, KTR remarked: “We are not at all competing with Bengaluru. For that matter, we are not competing with or comparing ourselves to any Indian city. We are competing at a global level with the global image we have established”.

However, his task to the officials is to bear in mind that Hyderabad should be ahead of Bengaluru by 2020.

Two states, two worlds

Soon after the Ease of Doing Business (EoDB) report was out, Ram tweeted: “Now we will start focusing on bringing down the cost of doing business & improving the quality of doing business.”

In contrast, Karnataka Chief Minister Siddaramaiah’s official handle (@CMofKarnataka) put out only two tweets on Monday: one remembering former prime minister Indira Gandhi on her 34th death anniversary and the other a tribute to Sardar Patel on his 141st birth anniversary.

Credits Bangalore Mirror

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