Will projects under Karnataka’s next investor meet really take off?

Bengaluru: As Karnataka readies for the next edition of the global investor summit in February 2016, which is expected to bag ₹ 5 trillion in investments, an analysis of official data show a stark difference between commitments and realisation.

The projects committed to at investor summits, in which states reach out to domestic and foreign investors and record figures in trillions as capital inflows, rarely take off.

A minuscule percentage of projects finalised in the past two investors’ meets in Karnataka have been realised.

Only 68 out of the 751 projects, or 9%, of the commitments at the state’s 2012 Global Investors Meet have been realised on the ground, show data from the Karnataka industries department, which is tasked with holding the meet. The data have not been shared with the media so far.

While investors dropped 58%, or 439 projects, they committed to the 2012 meet, the remaining 244 are still under implementation, the data show.

The low success rate of the previous meet is because they were big projects, said K. Ratna Prabha, additional chief secretary at the industries department. Unlike small projects, it may take three to four years for them to be realized, she said.

While that might be true, the implementation rate of even the first meet, held in 2010, is only 28%, official data show. Only 108 out of 389 projects have taken off so far. Investors dropped 118 projects (30%) committed in that meet.

“The bulk of the investments in that meet was from iron and steel sectors, which later went into a downturn, so nobody wanted to put up new capacities,” said Gaurav Gupta, Karnataka’s commissioner for industries and commerce department.

While replying to a question in the state assembly on 26 November, R.V. Deshpande, Karnataka’s industries minister, said less than 15% projects cleared by the state in the last seven years saw the light of day.

Investors said they have always cast doubts on the significance of such summits, without addressing basic concerns such as infrastructure and power woes, especially in Bengaluru.

“A major issue with Bengaluru is infrastructure. And nobody cares. Recently, I was coming from Yelahanka side, where a railway overbridge, completed two months ago, is yet to be opened to public because they couldn’t find a VIP to inaugurate it,” said the managing director of a Bengaluru-based realtor, who has projects across India. He requested anonymity.

The railway overbridge he referred to is a shortcut to reach Yelahanka, a north Bengaluru suburb that is fast developing, from the Kempegowda International Airport road. The project, which was inordinately delayed, was completed two months ago but hasn’t been inaugurated yet as ministers were busy with legislative sessions, Bengaluru mayor B.N. Manjunath Reddy told the Economic Times on 24 November.

Incidentally, Karnataka has been reportedly losing out on big-ticket projects in the past due to delays in land acquisition and government approvals. While two-wheeler maker Hero MotorCorp chose neighbouring Andhra Pradesh for setting up a factory instead of Karnataka to invest ₹ 2,200 crore, Korean steelmaker Posco scrapped its plans to build a $5.3 billion steel plant in the state due to delays in land acquisition in 2013.

E-commerce firm Amazon.in also decided to set up its warehouse in Telengana after it was unable to resolve tax disputes with the Karnataka government.

The decision-making process is slow in the state and there are too many authorities to deal with, said the realtor mentioned above. Poor land management is an issue across the country, but it is much more in Karnataka.

“There have been cases where three or four private parties claimed ownership to the same piece of land and the government could not establish whose land it really is,” he said.

It remains to be seen what really happens in the next investors’ summit.

The meet will attract investments of ₹ 5 trillion, Karnataka chief minister Siddaramaiah said on 14 October, while unveiling the logo of the February summit in Bengaluru.

Investments are likely to come from manufacturing, aerospace, automobile, textiles and agriculture sectors, said Ratna Prabha.

“We have already received proposals worth ₹ 62,770 crore for the meet, out of which ₹ 24,577 crore has been cleared. The rest is in the pipeline. Our aim is to get ₹ 40,000 crore or so in the next 40 days to reach a realistic target of ₹ 1 trillion in this meet,” she said.

“We are focussing on projects that are more realistic in the next meet,” said Gaurav Gupta. “What happened in the past will not set the direction for the future.”

Sharan Poovana provided inputs.