Will FM do a remix for state?

Will FM do a remix for state?
Tamil Nadu, Other States Are Cornering Manufacturing Ventures
The Times of India

Bangalore: If he hasn’t yet given this a thought, deputy CM and finance minister B S Yediyurappa would do well to do so before he finalises his budget speech for March 16. The fact that almost every major manufacturing venture that has chosen southern India in recent times, has preferred to locate itself in Tamil Nadu — including Nokia, Dell, Flextronics, Motorola, Samsung, BMW and the M&MRenault-Nissan joint venture.
The fact that during this same period, Karnataka has not won any major manufacturing project, except for the public sector ONGC’s refinerycum-petrochemicals complex in Mangalore. Toyota may announce a major expansion here, but it wouldn’t be without some reluctance. Biocon’s Rs 1,000-crore biopharma plant has gone to Andhra Pradesh. Companies in apparel manufacturing, a big business in Karnataka for long and which generates massive employment, continue to invest in the state, but many increasingly find states like Andhra far more inviting.
“Considering the JD(S)-BJP’s professed concern for jobs for the masses, it is surprising manufacturing gets so little attention. For manufacturing is what will create such jobs,” says an industry analyst.
Venkat Kedlaya, president, Bangalore Chamber of Industry & Commerce (BCIC), notes that Tamil Nadu has been very proactive, and the entry of some big projects into the state is having a “snowballing effect”, attracting a range of others. “Karnataka should develop SEZs quickly, ensure plenty of power, and lay good roads. These will take time, and some of these may not be just budget issues. But to the extent that the budget is an expression of intent of the government, the FM should say something about it,” he says.
R C Purohit, president, Federation of Karnataka Chamber of Commerce & Industry (FKCCI), says two of the biggest issues for manufacturing in Karnataka are the complicated land acquisition process and the inordinate time it takes to get clearances for projects. “Karnataka’s single window clearance mechanism is bogus,” he says. “In Gujarat and Madhya Pradesh, the single window is a real single window. You can start work there in two months. In Tamil Nadu, you can do it in three months. In Karnataka, the average time it takes to start work is 12 months. Because, even after the ‘single window’ meeting with all departments collectively, you have to go to each department to get its clearance. And there are some 17 such clearances required.”
In the matter of land acquisition, while states like Tamil Nadu allow industry to buy directly from farmers/landlords, in Karnataka, this can only happen through the state-owned Karnataka Industrial Areas Development Board. That involves a gazette notification, public hearing and red tape, all of which delays the acquisition process.
While all that raises costs, there are also a number of other factors that make Karnataka more expensive to operate from, compared with other states. There’s the special entry tax of 12.5%, something that most states have eliminated. In real estate, VAT, stamp duty, service tax and other governmental fees and cesses work out to more than 30% of the cost of property, according to Karnataka Ownership Apartments Promoters Association president Balakrishna Hegde. “The effective stamp duty is more than 8% in Karnataka, while it is 6% in many states including Tamil Nadu,” he says.
Biocon’s reasons for setting up its manufacturing unit in Andhra, and not Karnataka, included the fact that things like captive power generation, effluent treatment were all more costly in Karnataka.
Looks like Yediyurappa needs to work on reducing the costs of doing business in the state.