Karnataka turning industry unfriendly: CII

Karnataka turning industry unfriendly: CII
Indo-Asian News Service

After IT, it is the turn of industry in general to cry foul on heavy taxation and mounting infrastructure problems that are making Karnataka an investor-cum-industry unfriendly state.

Listing the problems faced by the manufacturing and services sector in the state, especially in Bangalore, the Confederation of Indian Industry (CII) declared here Monday that the signals to investors were disturbing due to lack of response from the state government.

"The perception of Karnataka becoming industry-unfriendly is gaining credibility due to heavy taxation and poor infrastructure in the state.

"Not only are prospective investors looking at other states but existing industries in Karnataka are wary of making fresh investments.

"At this rate, we are afraid there could be a flight of capital from Karnataka in the near future, affecting job creation," contended CII Karnataka chairman K.K. Swamy.

Though Karnataka has been ranked as the second most attractive state in southern India next to Tamil Nadu for investments, including foreign direct investment, a slew of retrograde measures on taxation and power tariffs have severely affected the industry's growth prospects.

A CII study said that FDI approvals during August 2002-December 2003 for Karnataka was Rs.213 billion against Rs.231 billion for Tamil Nadu, Rs.127 billion for Andhra Pradesh and Rs.15 billion for Kerala.

At the all-India level, Karnataka ranked third in attracting FDI with a share of 10.8 per cent during August 1991-April 2004 after Maharashtra (17.2 per cent) and Delhi (12.05 per cent).

"But anti-industry measures such as 13.8 per cent special entry tax on goods, withdrawal of 4 per cent tax concession on diesel sets for captive power generation, highest sales tax on IT products in the country and expensive power tariff have rendered the industry un-competitive and un-remunerative," Swamy lamented.

The special entry tax on 23 items came into force from this month. As a result, diesel sets, furnace oil, lubricating oil and tyres and tubes are taxed twice with entry tax and special entry tax.

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