Financial Daily from THE HINDU group of publications
Saturday, Apr 13, 2002
Business-friendly Gujarat: A paradox?
In Ahmedabad, after the communal violence... `Operation Damage Control' to put business in Gujarat back on its feet has begun, but only perfunctorily.
THIS is definitely fire-fighting of a different kind. `Operation Damage Control', to put the business house of Gujarat in order, sputtered to a start just a few days ago, just before the Chief Minister, Mr Narendra Modi, left for the Bharatiya Janata Party's national executive meeting in Goa. Needless to say, the meeting between the Chief Minister and representatives of the State's business houses went according to script.
The only tangible outcome was the decision to set up the Gujarat Industrial Promotion Board, under the chairmanship of the Chief Minister. The stated purpose was to bring under one umbrella all the clearances necessary to boost investment in the State. This notwithstanding the existence of the Industrial Extension Bureau (iNDEXTb), set up some years back for precisely this reason single-window clearance to boost industrial investment in the State.
True, not much criticism was expected of the atrocities the State witnessed, as dissent with the political system has remained out of the lexicon of these businessmen. The platitudes flowed, as it was left to their counterparts outside the State to come down heavily on the government's handling of the month-long frenzy. All were in agreement that the fair name of Gujarat was being sullied by a host of people, at the same time that the image of the State needed a face-lift.
But one wonders whether a cosmetic face-lift alone will heal the scars of India's `most business-friendly State'. The State which, according to the March report of the Centre for Monitoring Indian Economy (CMIE), stood first not only in investment proposals, but also for investments under implementation. At Rs 84,947 crore and 12.8 per cent of total investments under way in the country, one is not just talking about destination Gujarat, but a chunk of destination India.
Meanwhile, a number of companies are threatening to take their merchandise elsewhere, be it fresh investments or expansion mark-ups, if the law and order situation does not improve dramatically. Definitely not making matters easier for the State's business climate is the fact that there are no visible efforts as yet to put those small businesses that were snuffed out during the violence, back on their feet.
At one end is the State Government sending out statements pointing out that market indices are the sure-fire barometer to gauge investor sentiment vis-à-vis Gujarat. The press communiques provide one with the comparative share prices of a handful of Gujarat-based companies, which have registered 52-week highs on April 8 and registered significant growth in the post March 28 phase. Thus, it was a refreshing change when Business Line came across two businessmen who had painstakingly built their first generation enterprises in Gujarat. Significantly, they were willing to go record and spell out clearly why they were calling it quits in this `suddenly violent' part of the country.
Mr K. P. Mohan, who came to Gujarat over two decades ago from Kerala, has built a Rs 4.5-crore business with Philmek Engineering Ltd employing some 650 workers. Being the first private entity to take up the operations and maintenance (O&M) contract of running the Gandhinagar power plant of the Gujarat Electricity Board (GEB) in 1987, he strung together a success story that included many other power plants, the latest being the 250 MW BSES thermal power plant at Dahanu in Maharashtra.
"I have been gripped with a sense of insecurity ever since violence erupted in the state over a month ago. There have been communal troubles before, but not of this kind, where business establishments were targeted. Many of us, who have adopted this state for so many years, are no longer sure that it may not be our turn in the coming years. I may not get the kind of business opportunities as in Gujarat back home in Kerala. But then, I also need not be afraid of everything going up in smoke", Mr Mohan said.
He is planning to let each of the one-year O&M contracts at the various power stations across Gujarat lapse and, by not re-bidding, ensure that his workers continue with the new contractor. However, Mr Mohan plans to retain his Dahanu assignment for at least another couple of years as he feels 42 is too young an age to retire.
The story of Mr M. M. Varghese, who has put in 41 long years in the State, is quite similar but for the finer details. Though he started Power Mould Engineering Ltd only seven years ago, Mr Varghese's exposure to the business of heavy electrical equipment installation began when he helped the Mumbai-based Reunion Engineering to establish itself in Gujarat before deciding to branch out on his own.
"I am planning to forsake a thriving business where I employ 65 workers and had a Rs 2.5 crore turnover last year as I have been badly hit due to the riots. We had to stagger business during the last month, as only some 12 workers could make it to the factory in the outskirts of Ahmedabad. I have decided to ship the entire installation, put up at a cost of Rs 1.5 crore, to Kochi", Mr Varghese said.
Though a final decision on the modalities of transporting heavy duty equipment, such as baking chambers, cranes and impregnation plants, will be taken only over the next couple of months, there is no changing the resolve to turn his back on a State where he spent almost a lifetime.
There are also many hailing from outside the State who are seeking transfers.
Then, again, there are those who had purchased apartments in Ahmedabad and Vadodara who now rue their decision.
The real estate business, which had witnessed a massive slump following the earthquake, seems destined to continue in its depressed state, as it remains a buyers' market, though buyers are none-too-visible today.
There seems no immediate reprieve in sight in the paradox called business-friendly Gujarat, which is just limping along. And it seems to be a pretty bleak future tat looms large for the hapless people of this State, what with another calamity called water scarcity staring them in the face.
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