Karnataka plans to roll out GST

Chief minister Siddaramaiah expects that state will become power surplus by 2017

Siddaramaiah, Chief Minister of Karnataka today said, introduction of the Value Added Tax (VAT) has reformed the state’s commodity taxation to a large extent. The introduction of Goods and Services Tax (GST) is the next big step which his government is planning to take. He was addressing Ficci’s National Executive Committee Meeting (NECM) here today.
 
Siddaramaiah said, “We have extended our consent for bringing FDI in retail. This will be implemented in-line with the norms prescribed by the central government. It will give a major fillip to economic growth and employment creation” .
 
He underlined the need to remove impediments in doing business and called for a more effective single window system. The departments would be required to provide all clearances in a timely manner so that projects can be implemented expeditiously. The State Commerce and Industries Department has already implemented the e-Udyami project, an online system for project approval and close monitoring of implementation.

 

“My focus has been to ensure welfare of the poor which will be taken care of by providing good drinking water, quality roads, proper infrastructure, quality education and good law and order,” Siddaramaiah said.
 
He further added, “To give growth the required buoyancy, infrastructure requires immediate attention. We will ensure that power projects both in conventional and non-conventional sectors, will be implemented faster. We are in the process of getting coal block allocation. We expect Karnataka to be a power surplus state by 2017. We will make all efforts to supply quality power to industries.”
 
To provide adequate infrastructure, especially in Bangalore, projects close to Rs 6,000 crore are proposed to be taken up to improve the quality of infrastructure in the city. Nearly Rs 32,000 crore will be invested in metro and sub-urban railway in the coming years. At the same time, we will also develop quality infrastructure, to make tier II towns attractive investment destinations.

 
Speaking on the availability of skilled manpower in industry and services sector, he remarked, Karnataka has already constituted a Skill Development Mission and established Karnataka Vocational Training and Skill Development Corporation to spearhead all the skill development initiatives. “We wish to train about 6 lakh people annually and also strengthen the training infrastructure, especially ITIs,” Siddaramaiah said.
 
The Government of Karnataka had proposed establishment of a National Investment Manufacturing Zone (NIMZ), as envisaged in the National Manufacturing Policy in Tumkur District. The central government has granted approval to establish a NIMZ spread over 12,000 acres near Tumkur. “We are also trying to get approval for two more NIMZs, one each in Gulbarga and Kolar,” he added.

 
Karnataka is the information technology (IT) capital of India and the largest exporters of IT services, accounting for one-third of the country’s exports. “We would be establishing ITIR Park (Information Technology Investment Region) near Devanahalli (near Bengaluru International Airport), in about 10,000 acres, to give further momentum to the growth of IT sector in State,” Siddaramaiah explained.
 
The Industrial Policy in force needs some modifications to further catalyse the manufacturing sector.
 
While addressing the NECM, Ms Naina Lal Kidwai, President of Ficci, said, “The growth of the State Gross Domestic Product and that of manufacturing sector in the state is very low. However, under the similar external variables, some states have done exceptionally well and achieved a growth rate of over 9% in the last five years. Unfortunately, Karnataka did not fare well on this count. The Compounded Annual GOP Growth (CAGR) of Karnataka has been 5.86% between 2007-08 and 2012-13 compared to the national average of 7.16%. Similarly, manufacturing sector grew at a CAGR of 4.09% in the State, much below the national average of 5.74%. For Indian economy to grow at a reasonably good pace, states like Karnataka will have to lead the way.”

 
She added that the transaction costs associated with regulations and administrative procedures are quite high in the state. In fact, Bangalore stands at the 13 th position among 17 cities in India in terms of ease of doing business by Word Bank Report. According to Ficci's Empowering India report, despite having the single window clearance facility, Karnataka still needs to go a long way to make it as effective as in Rajasthan and Andhra Pradesh. Separate clearances from various departments still need to be taken causing delay and increasing costs.
 
Also, the land acquisition for industrial projects is increasingly becoming a challenging task.

 
There have been a few instances of protests against the land acquisition in Karnataka. Recently, South Korean steel major, Posco, pulled out of its investment worth Rs 31,800 crore ($5.3 billion) for establishing steel plant in the state due to delays in land acquisition.
 
“Infrastructure for industrial development also needs to be strengthened. In Karnataka, power shortage is one of the important issues affecting industrial growth. In 2012-13, the peak deficit was 13.5% compared to national average of 9%. Karnataka has a tremendous scope in the renewable energy segment, especially in wind, small hydro plant, solar and biomass energy with a potential of over 18,000 MW. This should be exploited,” Kidwai emphasised.

 
She urged the Chief Minister to consider reduction in VAT. The tax has been kept at 14.5% for consumer goods and 5.5% for industrial inputs. The rates were raised last year by the government from 14 and 5%, respectively, to raise the additional resources needed for the waiver of crop loan to farmers, and for drought relief measures and industry was expecting a reduction (in the State’s Budget) this time.