Saturday, January 30, 2016

Exclusive Interview with RV Deshpande, Industries Minister, Karnataka

Seasonal Magazine interviewed RV Deshpande, Minister for Large & Medium Scale Industries, Government of Karnataka on the upcoming Global Investors Meet, 'Invest Karnataka 2016'.

RV Deshpande has been seven times MLA and Minister. Thrice he has been Industries Minister. Deshpande has a cumulative experience of a decade as Industries Minister under noted Chief Ministers like Deve Gowda, SM Krishna, and now Siddaramaiah. He has been Karnataka state’s longest serving Industries Minister.

When Seasonal Magazine met him in Bengaluru for this interview recently, it was a holiday. But for RV Deshpande and his whole office comprising of IAS officers to regular staff at Karnataka Udyog Mitra, it was like any other day.

We have met politicians across India and expect all of them to be unpunctual. But you would miss your appointment if you are late for a meeting with him. Because RV Deshpande keeps his time, irrespective of whether he is coming from his nearby official home or from across the world.

Expect meetings with him to be preponed rather than postponed. Our meeting too was preponed by a sharp 45 minutes, and sharp it remained.

India’s first Global Investor Meet by any state happened 16 years back when he was the Industries Minister. And this is the second time a GIM is happening under his tenure, and he is working hard to ensure that it leaves a mark.

Even if his officers are too busy, he is not busy enough not to return a call or text. To call this 68-year old veteran leader proactive would be an understatement.

He was recently in Silicon Valley evangelizing the business community there about why they should set shop in Karnataka.

But don’t expect him to dole out incentives like free land and decade-long VAT exemptions to attract investments, like his peers in Andhra, Telengana, & Tamilnadu are doing. He knows the strengths of Karnataka too much to invite investments at any cost.

In fact, he becomes most vocal when he starts speaking about Karnataka’s long love with industries. According to RV Deshpande it started even before Indian Independence with the Maharajah himself proactive in attracting entrepreneurs who went on to establish pioneering successes like Hindustan Aeronautics Ltd.

If you are a harsh critic of Bengaluru’s traffic situation, the Minister would gently remind you of the traffic situation in New York, where he was just weeks earlier. But he is candid enough to admit that much more needs to be done in the capital city to ease traffic.

According to him jargons like Single Window Clearance don’t mean much if it does not ease the process of approvals. He prefers actual approvals to mere signing of MOUs. Even if MOUs are signed, they should be realistic and implementable in future.

RV Deshpande is so experienced and so confident of his experience that he had some tips for India’s Finance Minister Arun Jaitley on Central Government’s programs like Make in India and Digital India. The Karnataka minister is reported to have suggested to Jaitley that he needs to create well-defined industrial policies for these programs to succeed.

Indeed this Industries Minister sure has the capability to advice as he had a pioneering role in promulgating Karnataka’s IT Policy and BT Policy, as well as in updating these policies during his long tenure. Today, Karnataka has well-defined industrial policies for each sector, including a new Startup Policy that is sure to be emulated by other states as they have done before with Karnataka’s famed IT & BT policies.

At his age and experience, Deshpande is so frank to express his preference for listening more to industrialists rather than his officers, due to their deep industry knowledge. He has recently made a 19-member team of industry captains to advise him which includes such stalwarts like Biocon Founder Kiran Mazumdar-Shaw, TVS Chairman Venu Srinivasan, JSW Founder Sajjan Jindal, Manipal Global Education Services Chairman TV Mohandas Pai etc.

No challenge is too big for him, and he has been advocating manufacturing industries to move out of Bengaluru to Karnataka’s Tier-II and Tier-III cities where cluster development for specific industries are followed. He counts UB Group’s moving out of Bengaluru as a productive one for the company, which happened after he advised Vijay Mallya on the same.

When speaking about Make in India he is quick to point out that Karnataka has been doing this for decades with examples like Bosch, ABB, and all the telecom giants in the electronic city. 

More than anything else, he wants investors to choose Karnataka for the Government’s attitude to industries, quickness in decision-making, transparency, good infrastructure, high ease-of-doing-business, and incomparable talent pool, all of which creates an excellent business ecosystem.

Seasonal Magazine in conversation with RV Deshpande, Minister for Large & Medium Scale Industries, Government of Karnataka:

Karnataka’s first Global Investor Meet happened 16 years back while you were the Industries Minister, and this is the second time the GIM is happening under your leadership. How do you plan to address the newer challenges facing a GIM in 2016, like increased competition among states, infrastructure bottlenecks etc?

First of all, Invest Karnataka 2016 is not happening under my leadership, but under the leadership of our Chief Minister, Siddaramaiah. But yes, this is the second time this Global Investor Meet is happening while I am the Industries Minister. Regarding challenges, please understand, these problems are everywhere, in every state, and we are addressing it. You should realize that Karnataka was the first state in India to host a GIM. And gradually, almost every other state followed. So we have shown the way even in hosting investor meets, and so we are pretty confident about this year’s outcome too. Karnataka’s industry-friendliness, in fact goes back to much more than the GIM, the IT boom of the last two decades. I was recently at a function where Prime Minister laid the foundation stone for Hindustan Aeronautics Ltd’s second helicopter facility. HAL was founded as Hindustan Aircraft Company 75 years ago by a private sector industrialist to whom the Maharajah of Mysore gave 700 acres of land free. Last year was HAL’s Platinum Jubilee. We should applaud, remember and salute the vision of Maharaja of Mysore who gave them this land. So, Karnataka has a long track-record in industry friendliness.

You are Karnataka’s longest serving Industries Minister who has worked with 3 CMs and two different parties. How do you assess the strengths of Congress and CM Siddaramaiah when it comes to promoting industrial growth?

I have worked with 7 Chief Ministers as Minister or MLA, right from the days of Ramakrishna Hegde. I have handled Industries portfolio for more than 10 years now, under SM Krishna, J.H. Patel, Deve Gowda and now Siddaramaiah. One thing I can say is that successive governments in Karnataka have all been investor friendly. That is why today if you take a look at all the leading industrial houses of India, they are all here in Karnataka – Tata, Ambani, Birla, Mahindra, Godrej, TVS any big group for that matter. When it comes to MNCs too, many of the largest such companies, across different sectors, are well-established in the state. The state has also spawned many great companies like Infosys and Wipro. All this has happened because successive governments in Karnataka have been industry-friendly. This culture cuts across party lines. Our Chief Minister Siddaramaiah too is very proactive in industry promotion.

So, according to you, what has resulted in attracting such investments into Karnataka, irrespective of politics?

Karnataka people are very friendly and cultured. Most politicians and bureaucrats too are friendly and proactive. Our human resource pool is second to none, and workers are available for everything from research activities to skilled work. Our labour strike rate is the lowest in the country. The law & order situation is excellent. Lastly, Karnataka has been blessed by God with pleasant weather all through the year.        

You have only taken up the Industries portfolio in this cabinet only very recently and you have been moving at a hectic pace. What do you identify as Karnataka’s greatest challenge in attracting investments these days? Is it lack of ease-of-doing-business, lack of infrastructure growth, or something else?

Please understand that both infrastructure development and ease-of-doing-business are works-in-progress. For conducting roadshows in America for Invest Karnataka 2016, I was in New York recently. Do you know at what speed cars move in New York during peak hours? At ant’s speed! So these issues are everywhere. But don’t think I am defending Bengaluru’s traffic congestion. We are working overtime to address such issues. But infrastructure growth will always lag because the industrial growth here is at a higher pace. That is why I said it is an ongoing process. Similar is the case with ease-of-doing business. We have progressed much in this regard. While there is still significant room for improvement, we are attempting it systematically.

You deserve appreciation for your non-partisan stand on development issues and you have openly praised CMs of Andhra and Telengana for their investor friendly policies. But at the same time you don’t believe in attracting investments through offering incentives like how they are doing. Why is it so?

Incentive is not a prerequisite for an industry to succeed. What matters more is the whole industrial ecosystem, especially Government’s attitude to industry. Other factors in this ecosystem are the available HR pool, labour laws, presence of other related industries etc. This entire ecosystem is present in Karnataka. This is not to say that we don’t offer incentives. We are open to offer them, but before that an industry should approach us based on this state’s ecosystem. The fact at the ground level is that this is what is happening; I don’t see many industries choosing a place only on incentives. They are smart and understand the importance of the whole business ecosystem. Otherwise, how so much investments would have flown to this state?

Don’t you think Karnataka lost major projects like that of Foxconn, Xiaomi, & Hero MotoCorp due to lack of incentives on both land price and tax exemptions? These projects could prove to be game changers for Maharashtra, Andhra, & Telengana?

All that is mere propaganda. I don’t believe it at all. I know each of these cases, and none of these companies overlooked Karnataka based on incentives. To cite a specific example that you mentioned, I had a recent discussion with Pawan Munjal, Chairman of Hero MotoCorp, and he informed me that they didn’t choose another state over Karnataka due to the incentives there. There are other considerations too for a business house. Hero Group is in fact actively considering Karnataka for their aerospace venture.

On the ease-of-doing-business front, you are now strengthening Karnataka Udyog Mitra. How do you address investor concern that this is still not a single-window facility?

Single-window concept has been there for more than 10 years now. But what is the use if one window opens to ten other windows? In practice, it is very difficult to implement what is ideal, as there are numerous laws and protocols that should be dealt with, that should be removed for such efficiency to arrive. That is why we are strengthening Udyog Mitra with features like country-specific desks, and one of our key plans now is to empower Commissioner of Industrial Development much more so that many decisions can be taken at his level itself in a rapid manner. Ease-of-doing-business also can’t be the responsibility of a single agency like Udyog Mitra, as it involves many policy aspects, for instance labour reforms. We have done it recently with our new Labour Policy, and the efforts will continue. That is why I said earlier that ease-of-doing-business too is a work-in-progress.

Can you explain the concept of country-specific desks at Udyog Mitra?

You see, investor proposals and project approvals are complex affairs. An industrialised state like Karnataka has to deal with a lot of proposals on an ongoing basis. The complexity is compounded when the investors come from different countries with their own different culture and expectations. So to reduce the complexity and speed-up follow-up action, we have created country-specific desks like USA Desk, Japan Desk etc at Udyog Mitra. This ensures that investors from a specific country will be served by a unique set of officers that will make follow-up actions more effective.

You have recently set up a 19-member committee of industry captains to advise you. How do you view their feedback on various issues? Are you planning to change track on any issue due to their advice?

Frankly speaking, I value the advice of industrialists much more than the advice of my officers, when it comes to the matter of how to attract more investments. This is because as industrialists they have immense experience, and they would be knowing what other industrialists who are considering Karnataka, are looking for. They will be able to guide me on what to do and what not to do, while seeking investments. This committee has been formed only recently, and I hope it will make productive change in the near future itself.

You have played a pivotal role in formulating the state’s pioneering IT Policy, BT Policy etc which helped these industries to thrive. But if you look at recent successes like e-commerce or startups, this has happened even in the absence of any government policy. In this context do you think that the government should focus only on aspects like infrastructure growth and ease-of-doing-business?

No, that view is not correct. Government’s sector-wise policies will indeed make a positive difference. I agree that startups and e-commerce have arrived on its own in Bengaluru, but to take it forward, and to take it to more aspiring entrepreneurs, government policy is critical. Recently we have made a Startup Policy and are planning to set up a Startup Council which will be driven by the industry. Earlier, the startup movement was confined only to the information technology sector. But with government assistance and encouragement, startups are now appearing in almost every sector. If you see the emergence of industry in Karnataka, especially the emergence of knowledge industries like IT & BT, it was driven by very effective sector-specific policies that were also updated every few years. Karnataka was the first state to have an IT Policy, first state to have a BT Policy, and now the first state to have a Startup Policy. Today, we are the only state with relevant policy for each sector be it tourism, infrastructure, textiles, agriculture etc, with some of them amended recently. This strategy has made a difference in the past, and it will make a difference in the future too. Youngsters today are much more innovation-driven, and given proper encouragement there is no limit to what they can achieve. Our plan for a Startup Council includes the participation from the state’s vast university/college system so that encouragement starts from the young age itself.    

You are a strong proponent of industries moving to Tier-II and Tier-III cities. Do you really see this happening on the ground on a massive scale?

We have been requesting manufacturing industries to move from Bengaluru to Tier-II and Tier-III cities for a long time now. Many of them have done that and reaped the benefits too. I remember suggesting this idea to Vijay Mallya and he did that successfully some time back. Even more, he could use the vacated land in Bengaluru to build UB City. We are also requesting new investors to actively look at the opportunities provided by our Tier-II/Tier-III cities like lower cost of manpower, lower living costs etc. Many of them are setting shop in these smaller cities because we follow the cluster development model and it makes sense for them to be where their competitors and ancillary industries are. Since many of these smaller cities and regions are well-developed now with even the presence of MNCs, I see this momentum picking up. Tier – II cities like Belgavi, Hubbali-Dharwad, Mysuru and Mangaluru have good connectivity by Rail Road and Air. All Tier – II cities have excellent climate and rich human capital.

What about connectivity issues between these regions?

Apart from excellent road and rail connectivity, we are very aggressively promoting air connectivity. Bengaluru airport is already the nation’s third largest. Two cities have international airports and four other cities have domestic airports. And there are concrete plans to develop smaller airports or airstrips in around 10 Tier-II/Tier-III cities, many of them by the private sector for faster completion.

Are you concerned about the power situation in the state?

You see, not too long back, we were power surplus. But now we are a bit power deficient due to the poor monsoons in 2015. Our depends was m0re on hydel and hence in drought situation like this year our dams get empty and such situations arises. Hence Government has approved many thermal, gas and also renewable energy projects of solar, wind and water to energy projects. We are hopeful that more than 2500 MW power will be generated and supplied to the grid by June / July 2016. 

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 government’s policy is that no fertile land should be acquired. Only barren land would be acquired on a consent basis. The government is committed to providing more than fair compensation to landholders. I strongly feel that ensuring equitable development in such a manner won’t be a dampener to industrial growth.

You led roadshows in USA and Europe for Invest Karnataka 2016. How has been the follow-up from these meets? Are you bullish on investor sentiment?

I could sense strong investor sentiment favouring Karnataka from these road shows. Not that there aren’t any concerns. With regard to Bengaluru there are concerns like the traffic bottleneck, the efficiency of the garbage disposal and so on. But we are trying to attend to this concerns and in many places action have been taken. New flyovers are being built and some are planned. We are looking at construction of Peripheral ring road and elevated corridors for Bengaluru and  we are in agreement with investors that a lot more needs to be done.

Are you concerned about the increasing competition from other states, especially your neighbours? Also, why should an investor choose Karnataka over other states?

There are several reasons to choose Karnataka to set up a business. Government’s attitude to industries, quickness in decision-making, transparency, good infrastructure, high ease-of-doing-business, incomparable talent pool, excellent business ecosystem etc are some of these reasons. Regarding competition, I can only say that every state has a right to attract investments. They would get it or not is based on their own strengths.

What would be your strategy in a nutshell for Invest Karnataka 2016?

There is a great feeling among our people and our leaders that the state’s prosperity is linked to continuous inflow of investments. Only investments into the state can create more jobs, create revenue, create infrastructure, and thus ensure development. So, in Invest Karnataka 2016 we want to attract investments from all over the world. For that we need to showcase our strengths. We want to explain where we stand on ease-of-doing-business, infrastructure etc. Signing of MoUs is not the real objective. What matters is only how much is implemented. MOUs will be signed with investors who are yet to prepare their project reports and where the projects are realistic. Our focus will be on what can be implemented.

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