Bangalore: The mineral-rich areas of northern Karnataka, including mining capital Bellary, have emerged as the favourite destinations of investors looking to set up businesses in the state, stealing the show from technology hub Bangalore in the upcoming Advantage Karnataka—Global Investors’ Meet (GIM) in June.
Of the Rs3 trillion of investment promised so far, steel and cement companies such as Lafarge India Pvt. Ltd, ArcelorMittal India Ltd and Posco-India Pvt. Ltd occupy the largest share. More than half of this is in northern Karnataka, said senior state government officials.
In the previous Karnataka GIM, held in 2000, one-third of the promised investment of Rs29,000 crore went to information technology (IT) and was Bangalore-centric.
Of the 70-odd projects cleared for the GIM now, only about 20% are in and around Bangalore.
ArcelorMittal, for example, is planning a 4,000-acre steel plant accompanied by a 500-acre township and another 500 acres of ancillary industries in Bellary.
“The project is as important to ArcelorMittal as it is to the Karnataka government,” said a senior ArcelorMittal executive, who didn’t want to be named.
Among other large investments committed so far are a Rs32,336 crore steel plant by Posco-India and Lafarge’s proposal for a Rs1,500 crore cement and thermal plant.
“Steel and cement are significant lead investments in a state because they propel the growth of support servicing industries. So the rate of follow-up investments goes up,” said Aroon Raman, chairman of the Confederation of Indian Industry (CII), Karnataka chapter. “Investors are more serious this time and even if a good proportion of the Rs3 trillion of promised investments happens, it is good enough.”
Bellary accounts for one-fourth of the country’s iron ore produce.
The aerospace sector takes the third slot in investments, after steel and cement. The proposed investments in aerospace include a Rs465.8 crore project by Dynamatic Technologies Ltd and a Rs127 crore venture by StarragHeckert Machine Tools Pvt. Ltd, both to make components in north Bangalore.
IT-focused investments planned in Bangalore include a Rs477 crore IT special economic zone (SEZ) by Wipro Ltd, India’s third biggest IT company, and a Rs486 crore hardware park by Tata Elxsi Ltd.
What, however, needs to be seen after such events is the conversion of commitment into actual investment.
“The average conversion rate in such meets are 30-35%,” said V.P. Baligar, principal secretary (industries), Karnataka government.
As per the state government’s estimates, the 2000 meet saw a 55% conversion rate. In other times, typically, one-fourth of the Rs1-1.5 trillion of investments promised every year is executed, said another senior state official.
The dropouts are usually because of problems in finding a suitable location, acquiring land or better offers by other states, the official said.
Karnataka’s latest meet is essentially an effort to catch up with states such as Gujarat that are highly focused on attracting investments.
The Vibrant Gujarat Global Investors Summit in January 2009 saw about Rs7.5 trillion of investments promised.
Government officials and urban affairs experts say land acquisition will be the biggest challenge for investment coming into Karnataka, particularly for large projects.
The state government, said Baligar, has notified about 50,000 acres across Karnataka to be made available for projects, of which 14,000 acres have been handed final notifications, after which the acquisition process begins.
“The challenge of acquisition depends on whether government land is available or private land needs to be acquired, which is more difficult,” said A. Ravindra, consultant to the Karnataka chief minister on urban affairs, and former city commissioner of Bangalore.