Why Karnataka remains one of India’s top investment destinations

R.V.Deshpande, Karnataka’s minister for large and medium scale industries, talks about the infrastructure push in Tier II/III cities to woo investors to the state


Investors do not look at what is happening today but only towards the future, says Karnataka’s minister for large and medium scale industries, R.V.Deshpande. Photo: Pradeep Gaur/Mint
Investors do not look at what is happening today but only towards the future, says Karnataka’s minister for large and medium scale industries, R.V.Deshpande. Photo: Pradeep Gaur/Mint

Bengaluru: As one of the more industrialized states, Karnataka has enjoyed a sizeable chunk of investments into various sectors such as information technology, steel and mining, aviation and biotechnology. But many of the big ticket projects in recent times have diverted their investments away from Karnataka for better offers in neighbouring states like Telangana and Andhra Pradesh among others.

With concerns like delays in clearance of files, land acquisition and project implementation, Karnataka has lost out on lakhs of crores of manufacturing opportunities and potential job creation.

R.V.Deshpande, Karnataka’s minister for large and medium scale industries, said that despite losing business in some sectors, the state continues to remain one of the top investment destinations in the country.

Excerpts from an interview:

What is happening with the Tata Metallics and other big ticket steel projects?

In 2007-08 many steel projects were cleared by the governments with good intentions, they were promised mining leases. Now the Supreme Court has said that mining leases can only be done through auctions and those who have an established steel industry can participate in the auction.

We had even cleared Lakshmi Mittal’s project. I met Lakshmi Mittal a year ago in London and discussed the plan. Even the Tatas. They are very keen. But the point is: they ask us if we can give them mining leases and we have to say no. They understand our situation.

We met with the Chinese delegation recently and they said that for the next 10 years forget about investments in steel. On the face of it, it looks very difficult in the present environment for which we can’t blame anybody.

What are the investors’ concerns in Karnataka?

There will always be concerns but not with us alone.

From January to June, Karnataka has been ranked number one in investment intentions. (Karnataka received Rs67,757 crore in the first six months of 2016). Even in the second half (of the year) we are far ahead of the others. There are no much reservations, otherwise we would not have got Havells to invest Rs700-800 crore in Vasantnarasapura, GlaxoSmithKline, Asian Paints (in Nanjangud) and Coca-Cola in Yadgir. It is a continuous process. We are also trying to facilitate the ease of doing business.

There have been no takers for your Tier II/III city schemes?

Bengaluru may have a cosmopolitan culture, but these cities (Tier II/III) are certainly not bad.

They have got good talent, excellent educational institutions. Though they are tier-II cities; they have good road and air connectivity.

We are trying to improve our state industrial infrastructure estates and develop critical infrastructure. The power situation is not bad. We are requesting the bigger industries, IT/BT (to relocate). But they are reluctant and want to be based in urban areas. We are trying to tell them go to Devanahalli as a 3,000- acre park is being developed there.

Some of them are going, but some (mostly IT) feel that Marathahalli, Ring Road, Whitefield are the locations to be in. But ultimately they have to shift there.

Has there been an impact of the drought on the industry?

They are separate things. Karnataka has been facing drought for many years (but) ultimately the investor will not look whether there is a drought-like situation. He will see the strength of the state, resources, policy, human resources, infrastructure, law and order and stable government among other things. These are all temporary shortfalls.

Investors do not look at what is happening today, but only towards the future.

The power situation is also not bad. Unfortunately. there are problems in the transmission line. This year because of the drought and our hydel dependency, there are some problems. We may require to buy power this year as there may be some shortage due to the severe drought.

Are you happy with the hit rate for Invest Karnataka?

It was good. (But) I was actually hesitant to sign these Memorandum of Understanding (MoU); am still hesitant though we cleared Rs1.76 lakh crore proposals. They are taking shape and many MoUs have been converted into investments.

But a lot has to be done. I always think that I got less and should get more. I believe in results.

Are there complaints from investors about inadequate infrastructure in Bengaluru?

This is a perception. Nobody could be blamed here. If you have to blame anybody, you have to blame industry, state and Union government and other stakeholders.

In 1997, IT department revenue were Rs500 crore with 5,000-6000 people working in it. Today, there are 1.4 million alone in the IT industry.

Infrastructure should have taken place on par with industry, which has not happened.

Now we are trying to get elevated, peripheral roads etc. We are looking at business parks, second runway for the airport will be laid in the next 4-5 months; a lot is happening.

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