 "KCR leads Telangana's surge to the top")
The public perception about the new state of Telangana and its leadership has undergone a sea change ever since it topped the “ease of doing business” list along with Andhra Pradesh last week. What made it special was that the state was placed 13th last year on the list compiled by the Department of Industrial Policy & Promotion (DIPP) and World Bank. (Andhra Pradesh was at the second position last year.)
As Telangana leapfrogged over investor-savvy states like Gujarat, Maharashtra and Tamil Nadu, Chief Minister Kalvakuntla Chandrashekhar Rao (KCR) is being looked at with new respect. For long, KCR has had to live in the shadow of Andhra Pradesh Chief Minister Chandrababu Naidu, who is credited with turning Hyderabad into an info-tech hub and is now busy building a new state.
Not many had expected such a fast economic and administrative turnaround of Telangana. Even Union Finance Minister Arun Jaitley is said to have expressed his appreciation for KCR’s quick transformation from an agitational mindset to that of a statesman. Sibling rivalry with Andhra Pradesh, where Naidu has been busy wooing investors, could have played a role in this makeover.
In the beginning, when the state came into being in June 2014, many had said that the bifurcation would cost Telangana dearly: its infrastructure deficiencies were glaring and there was strong political intolerance towards people and businesses of Andhra origin. But KCR improved the power supply within one year and kept a firm hold on law and order. This proved the naysayers wrong.
Even before it bagged the top rank in the ease of doing business report, vindication of KCR’s pro-investor policies had come when Apple announced earlier this year that it would locate its India development centre in Hyderabad.
Arvind Kumar, principal secretary in Telangana’s industries department, says the KCR government had started the process of systemic reforms with a clear aim to attract investments into the state. The ranking system launched by the centre helped the government administration to quickly align these efforts with the ease-of-doing-business parameters. The department, he says, was disappointed with its 13th rank last year.
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“The so-called systemic reforms towards business-friendly policies and practices were going on since the state came into being. After the new industrial policy was announced in June last year, we were trying to refine the process further based on the feedback from industry,” says Kumar. “The whole idea was that we should minimise the need for physical interaction during various approvals, NOCs and permissions. The emphasis is on self-certification, which is perhaps unique in the country.”
Creating an efficient working style
The self-certification process goes beyond the ease-of-doing-business parameters and that has set the tone for the government’s subsequent actions aimed at creating a reasonably efficient and corruption-free environment for industrial approvals.
The entire process of approvals has been put online so that the investor need not meet a single officer, according to Kumar. It was a drill-down approach adopted by the government where the online form is devised in such a manner that if the investor is complying with all the regulatory requirements, the form will not go down further.
The third major effort was on reforming the system of inspections. Earlier, every department used to carry out its own inspections. The government has changed this into joint inspections. Under the new system, the department will have to give prior intimation to the company’s management about the timing of inspection. And the inspection report has to be uploaded onto the web portal within 48 hours by the team concerned.
A senior officer in the chief minister’s office says that there was a strong political mandate for bringing about change in these matters. And this political mandate came from the commitment to achieve rapid industrialisation, as the creation of jobs for the people of Telangana was one of the key drivers of the movement for a separate state.
To achieve compliance on the 340 parameters (as compared to 96 in the first year) set for 2015-16, the government had more than 60 coordination meetings involving 22 departments. This resulted in 26 amendments in legislation, 58 government orders, and 121 internal executive orders.
Some of the other changes, like validity of certain licences including from the Pollution Control Board and factory department was increased to five years from the existing one year so that industry need not visit these departments every year. NOC required from the fire service department was streamlined and here too self-certification was introduced.
Under the labour department’s new guidelines, low-risk industries employing up to 30 people will have either no inspection or once in a year. For medium-risk industries, which employ between 30 and 150 people, there would be an inspection once in three years. The high-risk ones, employing more than 150 people, will have an annual inspection.
Procedures like maintaining a number of registers by the factories under the old labour laws were also simplified. Scheduling of inspections is done online and the members of a team that is going to visit a particular firm or factory are appointed just before the scheduled visit.
A new system for granting municipal building permissions has also been put in place to provide easy and quick clearances.
The number one rank for Telangana on the ease-of-doing-business list has come at a time when competition among the states to woo investments has become intense.
The top 10 states had reached more than 90 per cent of compliance on the 340 parameters. As the entire process of ranking and compliance with regard to these parameters has been put online, and DIPP had been uploading the information received from the states for the past six months, Telangana bureaucrats were able to know which state was doing what and where they stood. Accordingly, they made extra efforts on the parameters where the other states were ahead.
By keeping the evaluation of rankings online, the possibility of subjectivity in deciding on the ranking has been minimised by the Centre. However, some officers are not happy with DIPP’s decision to stop the field verification on the compliance reports submitted by the states this time around.
With the process becoming more and more transparent, more states have joined the effort, which has generated more competition among them. “If you see the first 12 states, I would say in this year’s rankings there is very little difference in terms of compliance. So, any one of them can reach to the top next year,” Kumar says, adding that his department has already started working on the next set of steps irrespective of the new parameters that DIPP decides to add.
Thus, the Telangana government is contemplating measures like online reimbursement of industrial incentives such as capital subsidy and interest subvention to the eligible units.
Apart from this, the state government wants to establish a review system to sort out with the companies any issue they face during the project-implementation stage. A monthly meeting at the chief secretary’s level will be conducted with the officers of relevant departments to get the issues of individual companies resolved as and when they get to the government’s notice, say senior officers. This is something that is not yet a part of ease of doing business but is being done to facilitate investments in the state, they say.
Becoming an industry-friendly state
Micromax is one of the companies to have started manufacturing operations in Telangana after the state government brought in the new industrial policy.
Micromax is one of the companies to have started manufacturing operations in Telangana after the state government brought in the new industrial policy.
Micromax Vice-president SK Sharma, who heads the plant, says the company had a better experience in terms of ease of doing business in Telangana vis-à-vis other states where the company currently operates similar plants.
“The one thing I can say for sure is that this government has been very pro-active in providing necessary support for industry. Last year, we received all the approvals through the government’s single-window system within a week's time. We did not have to run to various departments for the compliance requirements and this has made our life very easy,” Sharma says.
According to Sharma, various government departments keep interacting with the company to know if it was facing any issue on the ground.
Phoenix Group director Srikanth Badiga, who is also the co-chairman of Assocham Telangana Development Council, says the government has moved in the right direction as far as creating a vibrant administrative environment for industry is concerned. However, while the government has been receptive to the needs of industry, its focus is more inclined towards the IT sector and this needs to change, he adds. “The manufacturing industry is not growing. We need to bring back the units that had migrated.”
According to Badiga, the Telangana government should also focus on areas like the availability of raw materials, human resources and logistics — the backbone of manufacturing. “The existing infrastructure is bursting at its seams and it needs to be expanded,” says he.
That will be KCR’s next challenge.