Harsh Pati Singhania, Director, JK Organisation and VC & MD JK Paper, shares his views on the aspects that can redefine the investment climate in India.
What needs to be done in the infrastructure space to spur manufacturing growth?
Investment in new infrastructure in India failed to keep pace with high pace of economic growth during most of the last decade, putting enormous pressure on the existing capacities, whether it is roads, ports, or power. This has had an adverse impact on the manufacturing sector by way of the country losing the competitive edge through higher input costs, viz., electricity and logistics, besides poor deliveries/delays due to poor roads & ports as well as surging raw material costs due to poor linkages with natural resources.
So investments in new infrastructure need to be fast-tracked, especially expediting the work on the Dedicated Freight Corridors as well as pursuing an integrated approach to transportation, particularly rail networks connecting hinterland to ports and inland waterways for last-mile connectivity. While the government has already approved the long-pending gas pricing policy, we have to wait for the impasse over coal block allocation to be resolved at least till the year-end as the ordinance signed by the President has to be passed by Parliament. These initiatives would help to improve on our competitiveness and push for a manufacturing-led growth in the country as envisaged by PM Modi's "Make In India" initiative.
What can be done to facilitate the ease of doing business in the country?
a) Land acquisition is a major bottleneck for business. Besides escalating costs, the long delays in getting land to set up plants and/or to start projects (roads, etc.) makes the whole process very cumbersome. Not only domestic businesses are facing problems on this, over¡seas players too - POSCO, Arcelor-Mittal, who are yet to secure land even after 10 years of signing the MoU.
b) Large number of regulatory clearances/permits is a major hindrance for project execution. To enable single-window clearance system, there must be a mechanism for a combined application form that encompasses approvals required for various departments. Further if such a procedure is followed uniformly across all States, India could ultimately have a 'common market' blurring the State borders.
c) Assured linkages to raw materials /natural resources - whether it is coal (for power) or iron ore (for steel) or wood (for paper) or limestone (for cement), all manufacturing companies have been suffering from high cost of production due to supply constraints/ unavailability of linkages to resources.
d) Taxation issues often leads to inter-State barriers whether it is tax on inter-State trade of goods (CST) or octroi/ entry tax. To ensure a common market for free movement of goods across State borders it is essential we have a common tax û the long awaited GST needs to be imple¡mented at the earliest.
e) Outdated and numerous labour laws often hinder smooth functioning of business. To address some of those issues, the government has ushered in some measures under an umbrella program, Pt. Deen Dayal Upadhyay Shrameva Jayate. But these changes will matter little if State governments do not upgrade their labour laws on those lines. Also the new measures are geared to help workers while the major contentious issues concerning businesses like Minimum Wages Act and the Contract Labour Act need to be resolved to improve the ease of doing business in India.
What are the concrete steps taken by the government to help the infrastructure sector grow?
a) The new government is in the process of making environment clearance for infrastructure projects much simpler. The time-line has been cut down to 60 days from 100 days earlier with the ministry to give the clearance directly without seeking the opinion of environment appraisal committee that only delayed the whole process.
b) The entire process of departmental clearances is being shifted to a single window platform from a total of 59 clearances required at present. An e-Biz platform is being set up as a one-stop shop for all clearances which is set to be complete by end of March 2015.
c) FDI rules have been relaxed for construction activities. While the minimum built-up area required for FDI was earlier 50,000 sq metres, it has been reduced to 20,000 sq metres. Also the minimum size of the FDI commitment has been reduced from $10 million to $5 million to make construction more attractive to foreign investors.
What steps are being ignored by the government to facilitate growth in the infra sector?
The government, no doubt, has shown a business-friendly attitude by ushering in a string of policy changes/amendments in the existing strictures. But it still needs to do more especially regarding the land acquisition problem. The government has initiated an inter-departmental discussion to ascertain the concerns with the current Act that has raised hopes of reaching a resolution soon, especially on contentious issues like social impact assessment and compensation.
Considering the difficulties in getting a consensus on GST from all the States, there is also a feeling that this process too is taking too much time and the delays in their implementation is preventing the economic recovery to gain a foothold despite the upswing in business sentiments post the formation of the new government.
Which are the global examples of more preferred investment destinations in the infrastructure sector from which India can take a cue from?
While the level of urban infrastructure in most of our metropolitan cities has improved in the past decade, particularly airports, road & highways as well as ports, we still lag far behind other emerging economies from Asia and Latin America, not to mention China. They have been relentlessly pursuing improvement in infrastructure whether through proper maintenance or through significant upgradation.
Taking a cue from these destinations, the new government has ushered in various initiatives to improve not only the urban infrastructure (through smart cities, bullet trains etc.) but also revitalise the rural infrastructure and bridge the gap between rural and urban not just through higher urbanisation (i.e., more people residing in cities) but through an integrated "rurban" approach.