“In Uttaranchal we are committed to giving our people the best in quality of life and environment; enable every one of our children to aspire for the best in the world, every hand gainfully employed and every mind free from the shackles of ignorance. In short, we want to achieve the best Human Development Indices for our citizens. And we are aware of the “Herculean” task ahead of us.

While we understand our limitations, we also appreciate our strengths, and with our Infrastructure Plan we intend leveraging them to deliver the commitments to our people. We intend to Enable with Infrastructure. We will catalyze socio-economic development in Uttaranchal through world class infrastructure”- Shri Narayan Datt Tiwari, Chief Minister, Uttaranchal.

Uttaranchal has emerged as the numero uno investment destination, not only in India, but in the entire South Asia, because never has any region in the subcontinent attracted this volume of investment in such a short time period. Many have attributed this to the Concessional Industrial Package and the Industrial Policy of the state, but then this package has been in existence for the North East for over six years, and in J&K for over four, but the total investment attracted there is in the range of a thousand crores only. Infact, of the entire investment coming to the North east and North west Himalayan states as a result of the CIP, nearly fifty percent has been taken by Uttaranchal alone, and this has become possible only on account of highlighting the distinct competitive advantages of Uttaranchal. Today as we have confirmations of over eight thousand crores, we can reflect on the factors that have led us to this triumph, and also critically assess the lessons from the tribulations, besides of course, evolving a strategy to accelerate the pace of development beyond the period of concessions.

There is also the question of addressing the concerns of entrepreneurs from the state who feel that the investments coming from the established industrial groups, both from within the country and FDI, has effectively ‘crowded out’ the spirit of local enterprise, and from the larger sections of unemployed youth who feel that industrialization should have led to an immediate creation of job opportunities, commensurate to the existing levels of skills in society. It has to be acknowledged and accepted that the state had to anticipate, and upgrade the level of technical skills to ensure that the local youth have a competitive edge. As such, the process of industrialization has not been without its share of trials and tribulations, and many issues continue to pose a challenge: while allotments of land have been made, infrastructure development has not kept pace, the requirement of power is higher than expected, and the establishment of power grids is taking longer on the ground than on paper; newer alignments change the perspective and newer environmental regulations pose a challenge. Another sensitive issue is that of the time lags of twelve to eighteen months between the announcement of the investment decision and the tentative employment figures, and the fact of actual investment/ employment.

Moreover, when the skeptics cannot find fault with hard investment figures, and actual payments made for reserving the land in the IIEs, they point out that most of the factories and manufacturing facilities will close shop after the ten year concession period is over. They also point out to the problems that emanate from the Finance Minister’s announcement regarding the reduction in the time period from ten years to 31st March 2007. In effect, what it implies that the ten-year window of opportunity has been telescoped to four years, and unless industry can start commercial production before the appointed date, the benefit of fiscal incentives will not be applicable.

As such, the questions that this essay will address are the following:

What happens when the concession period is over? Will the industry shift out? In other words, do we have a strategy in place for the post-concession period? The answer is yes.

How will Uttaranchal maintain this pace of investment? The answer is by ensuring that technology incubation centres leverage its HR advantage.

How will the infrastructure needs be met? By ensuring that the Infrastructure Development Board encourages PPP initiatives in all sectors of infrastructure development, and creates world class facilities before the concession period is over.

Will jobs be lost as the concession period is over? What will be the social and political implications on the state? Jobs will not be lost- on the contrary, additional jobs will be created because the implementation of VAT, and transparent, e-enabled g to b transactions will mean more business opportunities, especially as the organic growth of markets will take place before the end of the concession period, there will be more jobs in the private sector than in the government, and this will give a new dynamism to the employment scenario. Moreover, a special scheme to advance supplementary credit to successful entrepreneurs will be taken up to ensure rapid expansion of micro and very small enterprises to small and medium enterprises.

Can we look at the state’s competitive advantages other than the fiscal incentives offered by the Government of India? Yes, of course, and by ensuring its long-term competitiveness in quality power at affordable tariff. Moreover, in the post WTO regime, the opening up of the trade to Pakistan and Central Asia and to Tibet will give a new opportunity to Uttaranchal’s industry. Forward linkages on account of surplus power and the advantages of being the pioneer state in knowledge industry will enable the state to stand on its own feet and generate adequate resources to undertake a long-term development vision.

The post-concession period

In fact, now that the shock of the reduction in concession period has set in, it is time to take a re-look at the strategy that we must formulate now to ensure that the industry does not move out. Realistically speaking, unless these, or similar concessions are offered for manufacturing in neighbouring states, industry will not move out on account of the high relocation costs. If we have, over the next ten years ensured services and government support of a high order to the manufacturing units, there will be a natural tendency to expand in- situ, rather than move out. Power will continue to be an advantage, but in addition to this, if we can move to a regime of self-certification in the regulatory aspects, and eliminate the inspector Raj, industry will continue to regard it as a preferred destination. Participation with the industry in welfare, health and life insurance schemes for workers employed in the industrial estates, and a joint consultative mechanism will also ensure this. Involvement of industry leaders in the formulation and implementation of a forward-looking industrial policy will also be of help. We should also have industrial estates ready for immediate possession by this time, because now involves a lead time of at least two to three years on account of the new guidelines of the Ministry of Environment and Forest.

Maintaining the pace of investments

New investments in the conventional manufacturing sectors in which excise component played an important role may not have the additional advantages as today. As such, we have now started looking towards technology incubation centres because we should now start asking the question: can we look at a new range of services, or examine options of creating a new regime of value products based on frontier technologies. Thus, the proposed clusters on survey and scientific instruments at Roorkee, or gems and jewellery at Haldwani, or miniature bulbs at Dehradun and food processing at Haldwani will respond to the requirements of the state-of-the-art production systems. Given the fact that some of the top-end knowledge centres — both in the government and private sectors — are situated within the state, we can develop production facilities, which will bring the enterprise and academia in a symbiotic relationship. Already, UPES and ICFAI are supporting the state government in the effort to establish R&D centres and specialized business districts.

The challenge of infrastructure

One of the steps, which the Government of Uttaranchal has taken recently, is the establishment of the Infrastructure Development Board under the Chief Minister to address the issues that are critical for the creation of both ‘necessary’ and sufficient conditions for the development of industry. The vision is quite clear and explicit. In the words of the Infrastructure Development Commissioner and Additional Chief Secretary, the idea is, “to achieve, within a period of ten years, a level of economic development for the state that will provide opportunities for its people to achieve a good quality of life and social progress while preserving the pristine beauty and natural wealth of the state.” To achieve this vision, there is equal emphasis on stimulating all the three sectors of the economy- agriculture, industry and services to perform to their optimal level and in tandem with the geographic profile of the state. The idea is to double the per capita income in the next ten years, while at the same time reducing the BPL population to half. The strategy for achieving this is by ensuring that government provides institutional support for a trained and skilled workforce, offers the appropriate policy environment and strengthens public and social infrastructure in both urban and rural areas. The government and the private sector will jointly make efforts to create the growth pillars- roads, aviation and power infrastructure, irrigation systems et al and ensure investments in tourism, industry, agribusiness, IT and biotechnology sectors. This will ensure that even when the concession period is over, investment flows will continue to Uttaranchal.

Employment opportunities

Another new initiative that Uttaranchal is taking is the PMRY Plus programme for enhanced lending and employment generation. The idea emerged from one of the review meetings of the IDC in which he wanted us to ensure that credit flows to the smaller entrepreneurs was not crowded out on account of the brand name syndrome — with leading FIs chasing the larger corporate and ignoring smaller players. The fact that the performance of the state in the Credit Guarantee Scheme of the SIDBI was rather dismal drew the comments of the CM at the SLBC.

Under this scheme, we propose to cover all the successful PMRY entrepreneurs in the state. This scheme, which was launched in the mid 90s, has been very successful in Uttaranchal — in fact, Uttaranchal’s performance has been the best in the country in this.

*(The author is Secretary, Industries and Information Technology, Government of Uttaranchal, India)

--By Dr. Sanjeev Chopra*