Friday, January 29, 2016

Invest Karnataka 2016 - Interview with Gaurav Gupta, Commissioner for Industrial Development

Seasonal Magazine interviewed Gaurav Gupta, IAS, Commissioner for Industrial Development, and Director of Industries & Commerce, Government of Karnataka, to know more about the state’s new plans for industrial development, in the wake of the upcoming ‘Invest Karnataka 2016’, a Global Investor Meet scheduled for 3rd to 5th February 2016. 

For Chief Minister Siddaramaiah, Industries Minister RV Deshpande, and the whole of Karnataka Government, ‘Invest Karnataka 2016’ is destined to be an acid test on whether they can take the traditionally industrialised state to the next orbit of growth and prosperity.

The responsibility for ensuring the success of this Global Investor Meet sits heavily on the shoulders of a few key senior bureaucrats led by new Chief Secretary, Arvind Jadhav; Additional Chief Secretary to Commerce & Industries Department, K Ratna Prabha; Commissioner for Industrial Development, Gaurav Gupta; and other senior officers at the helm.

Gaurav Gupta, hailing from Uttar Pradesh, is an IAS officer who has made Karnataka his home for decades now. A Karnataka cadre officer, he was appointed as Commissioner for Industrial Development, and Director of Industries & Commerce, barely 16 months back.

When we met him for this interview, we couldn’t help but notice some of his distinguishing abilities. The first among these include his ability to admit shortfalls if any in the state, be it Bengaluru’s traffic congestion, Karnataka’s power shortage, or any such challenges. But he is also a solutions man, who can detail within seconds step-by-step plans for overcoming each of these challenges.

Gaurav Gupta’s next impressive ability is his realistic views on even high-voltage events like ‘Invest Karnataka 2016’. He prefers to admit that investor interest is sluggish in commodity sectors like steel and cement. But he is quick to add that the high investor interest in various sunrise sectors is more than enough to offset this sluggishness in a few large traditional sectors.

He is also fully in sync with CM Siddaramaiah’s and Industries Minister RV Deshpande’s unique view that Karnataka shouldn’t compete for investments by offering huge incentives. For someone taking up the huge responsibility of attracting investments in face of stiff competition from incentive-driven models like Andhra, Telengana, & Tamilnadu states, this is certainly not an easy position to take.

Gaurav Gupta would rather educate investors on how his state is rapidly building new advantages for investors based on its traditional strengths like its engineering talent pool, its pleasant weather, its stable socioeconomics etc. When he talks about the state’s new advantages like its R&D prowess, its start-up ecosystem, and its head-start in various sunrise sectors, one can easily realize that this seemingly soft-spoken bureaucrat is in fact a very effective evangelist for brand Karnataka.

When we met Industries Minister RV Deshpande for an interview later in the week, the minister was candid enough to admit that he consults industrialists more than his officers. But this same minister was of the view that ease-of-doing-business in the state would be much better if more powers at both the political and senior bureaucratic level is concentrated with the Commissioner for Industrial Development.

While Minister Deshpande was technically referring to the post of Commissioner, it is easy to make out that he is planning to empower Commissioners like Gaurav Gupta who are fast and passionate in their jobs.

The Commissioner also has the additional responsibility of heading Karnataka Udyog Mitra as its Chairman, which is a modern organization set up to ensure ease-of-doing-business and single-window clearance to projects. Empowering and perfecting Udyog Mitra ranks high in the agenda of Minister Deshpande.

Another ability of Gaurav Gupta that is playing out well for Karnataka is that he is an officer who knows the state inside out. Joining Indian Administrative Service in 1990, he started out as Assistant Commissioner of Kundapur Sub Division in Karnataka two years later.

Fourteen assignments and promotions later, as Commissioner for Industrial Development, he has a wealth of experience across sectors and geographies in the state. Gaurav Gupta has worked directly in Bengaluru, Raichur, Shimoga, Udupi, Mangalore, Dharward, and more regions in various senior assignments.

This experience really showed itself in our interview with him, as he had the details of all cluster-based industrial developments across this vast state, on his fingertips.

His experience across sectors too is impressive with he heading state level operations in revenue, transport, water supply, employment/training, and electricity distribution, besides heading Bengaluru and various districts and zilla panchayats as its Commissioner.

His awareness on all major companies present in the state, as well as those presently considering investments in the state, is also impressive, and seems to be a pleasant side-effect of having worked in various core service sectors during his 25 year old career.

This multiple award-winning officer for stellar performance in his career, also has an impressive track-record in higher education and specialized training. He took his BTech in Electrical Engineering from IIT Kanpur and his MTech in Power Apparatus & Systems from IIT Delhi.

His academic background and specialized training in multiple fields make him a rapid learner of new concepts and technologies, and he speaks Kannada as fluently as his English or Hindi.

Seasonal Magazine in conversation with Gaurav Gupta, IAS, Commissioner for Industrial Development , Government of Karnataka.

While the traditional advantages of Karnataka like its largest engineering talent pool and its head-start in IT outsourcing since the late 80s are well-known, what are the relatively newer advantages that Karnataka is projecting through this investor meet?

Yes, the talent pool has been the traditional advantage since a few decades now. But in recent years, this advantage has progressed to something very interesting, which is that today Karnataka is home to more than 360 R&D centres of leading MNCs in different sectors. For example, GE has the John F. Welch Technology Centre here, and other leading R&D Centres are by Cisco, Airbus, Boeing, UTC Aerospace etc to name just a few. Another relatively newer advantage is that Karnataka leads the country in start-up ventures, with almost all majors in e-commerce headquartered in Bengaluru, and the state being home to more than half of all new start-ups. There is a buzzing entrepreneurial ecosystem here in Karnataka now. Yet another newer advantage is that the state is once again pioneering investments in almost all the sunrise sectors.

Can you mention some of these newer sectors?

A lot of innovation is coming in material science, and Karnataka was thankfully ready for it due to our R&D advantages. Other emerging areas where we have an edge include machine tools, aerospace, pharma, biotech, audio visual technologies, gaming, animation films, movie post production etc. Many Hollywood studios outsource their animation or post production works to firms in Karnataka. In pharmaceuticals, we have attracted a big investment from UK based Glaxo SmithKline which is setting up its first production unit anywhere in the world in the last 15 years. This is coming up at Vemgal Industrial Area in Kolar and will be GSK’s largest greenfield facility worldwide, with Rs. 1000 crore investment, and producing 9 billion tablets and capsules annually. The Government has provided them a 50-acre land to develop this large production unit.  

Bengaluru has been the stronghold of Karnataka industry. While this will continue, what are your plans for bringing up investments in other cities and districts of Karnataka?

This is already happening since the last many years now. For example, India’s largest steel plant at a single location is in Karnataka, which is JSW Steel’s Vijayanagar plant at the Bellary-Hospet area which was traditionally an underdeveloped region. It is also the country’s first 10 MTPA steel plant. Similarly in Belgaum, which has traditionally been the foundry and automotive castings hub of Karnataka, a new aerospace SEZ has come up which is promoted by a private company Quest Global in joint venture with Canada’s Magellan Aerospace. The 300 acre SEZ is already home to Boeing, Airbus, Rolls Royce, Pratt & Whitney, United Technologies and Lockheed Martin. When it comes to Mangalore, the region has one of the largest greenfield petrochemicals complex in the country, the ONGC Mangalore Petrochemicals Ltd.

Still, Karnataka being a relatively large state, are you confident that most districts are getting similar projects?

Yes, industrial development is happening in other districts too. In Tumkur, we have approved acquisition of 12,000 acres of land for a National Investment & Manufacturing Zone (NIMZ). Tumkur is also a planned Smart City by the Central Government. The size and scope of Tumkur NIMZ is huge in that it is more than 40 times the size of Bengaluru’s Electronic City which has been India’s largest electronics park. It will also have a Japanese Village which is an industrial park by Japan, and a dedicated park for Machine Tools manufacturing. The new HAL facility for manufacturing helicopters is also at Tumkur, for which the PM recently laid the foundation stone. The state has also acquired 3300 acres at Yadgir, near Hyderabad, of which 500 acres has been earmarked for a Pharma Park, and a Textile Park is also being planned there.

Are you following cluster based development in these districts?

Cluster based development has been happening naturally in Karnataka, as well as by design in recent years. For instance, in Chamarajnagar, which is near Coimbatore, we have notified 1362 acres of land for an industrial hub, which will have specialized parks for textiles, foods, spices, granite, power, and renewable energy. This has been designed so by taking it account the region’s natural industries as well as proximity to neighboring industrial hubs of Coimbatore, Erode, & Salem. Similarly, at Narasapur in Kolar, which we are developing as a new automobiles hub we have attracted the largest two-wheeler plant by Honda, and a unit by Swedish bus and truck maker Scania. This development at Kolar will complement the state's other auto hubs like Hoskote, Bidadi, Bommasandra, Nanjagud, Dharward etc, that already host plants by auto majors like Toyota, Volvo, Mahindra, TVS, Tata, BEML etc.

Karnataka has been a traditional powerhouse in some sectors like mining, horticulture, food processing, floriculture etc. What are the new initiatives in these traditional sectors?

Mining as you know is highly dependent on policies of the Central Government, and lately it has also been directed by Supreme Court. Thankfully, after the new auction based licenses, things are once again looking up. If the commodity prices too improve, Karnataka stands to gain much in items like iron ore. When it comes to gold mining, the state still has the leading position due to the state PSU, Hutti Gold Mines. We are still strong in floriculture, horticulture, food processing etc, and in Mysore and Hassan we have major food processing industries. Recently Reitzel Group of France has agreed to put up a gherkin processing plant at Kunigal.  

Power shortage has been a challenge for many Indian states including Karnataka. How far has the state progressed recently in this regard to allay investors’ concern?

Power shortage in Karnataka has been a temporary setback during this year, which was due to the extremely poor monsoon rains. The state has the largest contribution by way of hydroelectric power, which stands at around 40%. So the bad monsoon could really affect us. But we have moved quickly to ensure that this is a temporary setback, and we have been rapidly augmenting not only our thermal power production, but also our wind and solar power programs, which will together provide the state with over 2000 MW more of generation, within this year itself. Over the longer term, we have visionary projects like the 2000 MW solar park being planned at Pavagada in Tumkur, which would be one of the world’s largest solar parks spread over 10,000 acres and being developed with Central Government’s assistance. Already, NTPC has committed to develop 600 MW solar power in this park.

Is the state planning any new tax incentives like VAT exemption to large industries so that they will be setting up new plants in the state?

Karnataka has been one of the most industrialised states in the country for many decades now, due to the state’s natural strengths as well as the industry-friendly policies the state has always followed. We have been very successful in attracting investments, in both the traditional manufacturing sectors as well as in the modern knowledge-based sectors. Our advantages are significant and continuing, like for instance our ease-of-doing-business and our industry-ready land bank of over 30,000 acres. As such, our view on incentives is that it alone shouldn’t decide whether a company invests in Karnataka or not. Having said that, we do have incentives like tax exemptions for attracting investments in our Tier-II and Tier-III cities.

While Bangalore has done a lot of projects like Metro and elevated road to ease traffic, the situation on road remains a challenging one. What are the state’s new plans to ease traffic flow in the capital city?

The current traffic situation, despite many significant infrastructure projects, reveals only one thing, which is Bengaluru’s more than expected growth, which is a good thing in fact. Our efforts to ease the traffic in Bengaluru would continue, but we are not sure whether it would be enough to catch up with the way the city is growing! Anyway the completion of Namma Metro Phase I within the next 4 to 6 months is sure to make a difference. Another major project for easing congestion in the city is the signal-free corridors planned for the Outer Ring Road as well for certain key arterial roads. Then we have the Peripheral Ring Road development which is going on. The fleet of air-conditioned buses, which already includes 500 to 600 buses to Whitefield area, is also getting augmented. We are also encouraging carpooling and similar new transportation concepts.

Karnataka is changing land acquisition rules for providing sharply higher compensations to farmers and landholders. While the idea behind this is equitable development, don’t you think higher land costs will be a dampener to the industry?

The state has been traditionally following consent based land acquisition. What you said is true, land rates have gone up significantly, especially around Bengaluru. We are tackling this on a two-pronged approach. One is to encourage heavy industries to set shop outside of Bengaluru, and the second one is to encourage knowledge based industries to go for vertical development. In high-tech zones, we allow an FAR of even 3.

As an experienced top bureaucrat, you have worked with many Ministers and Chief Ministers. How are the visions of CM Siddaramaiah and Minister RV Deshpande different, from your earlier experiences?

Both Chief Minister and Industries Minister are fully committed to growth. Unlike in earlier days, there is a realization among people as well as leaders, across India, that growth and employment generation need investments. Karnataka’s new industrial policy correctly reflects this awareness, and has put a target of attracting 5 lakh crore of investments so that 15 lakh new jobs are created.

How do you view the heightened competition from neighbouring states like Tamilnadu and Andhra?

I think each state has its own strong points that would help them in attracting investments. These strengths can even be mutually beneficial for the neighbouring states, and to that extent it is a healthy competition. Having said that, I strongly feel that attracting investments solely on too much incentive like free land and full tax exemption is very unhealthy. A state should be attracting investments also for the public good like larger tax income and land compensation for farmers, apart from employment generation, and as such, these kinds of incentives are damaging to the larger public cause.

You participated in various roadshows across India and abroad for this upcoming Global Investors Meet. How satisfied are you with the response so far from investors towards Invest Karnataka 2016? Is it up to your expectations or above it?

We are largely satisfied with the response so far to Invest Karnataka 2016. There is very high investor interest, especially in some areas like pharma, biotech, aerospace, high-tech manufacturing, R&D centres etc. However, investor interest has been moderate in some traditional sectors like steel and cement, which is due to the poor global sentiment in such commodities now. Such industries are cyclical in nature, and we are sure that investor interest in such sectors would bounce back when the global sentiment improves.

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