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| Kerala has a
poor investment climate
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James Paul
21 February 2002 |
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Kochi:
In a recent study conducted by the Confederation of Indian
Industry (CII) and the World Bank among 10 different states
and approximately 1,100 entrepreneurs and managers, Kerala
is found to have a poor investment climate.
 Maharashtra
and Gujarat are the states having the best investment climate,
followed by Tamil Nadu, Karnataka and Andhra Pradesh. Delhi
and Punjab have a medium investment climate. West Bengal
and Uttar Pradesh have been categorised as states with poor
investment climate along with Kerala.
The study highlights the various hassles faced by entrepreneurs
due to the frequent visits and inspections by government
inspectors. This is a rampant complaint by enterprises in
India especially small and medium enterprises.
 Every
year government inspectors visit each factory in Kerala
at an average of 13 times, whereas in Tamil Nadu it is just
five visits per year. Almost 16 per cent of the management
time in India is used to deal with government officials
on regulatory and administrative issues. This compares poorly
with Latin American countries, where the average time spent
is just 4 per cent.
Responses of the study show that the frequency of visits
varies according to the investment climate of the states
the best states tend to impose lesser hassles on management
than the worst ones. Usually, greater the interface with
government officials, the higher is the probability of corruption.
Uninterrupted
and quality power supply is sine qua non for industrial
development. Power drawn from public grid and private generator
sets (put together) in Kerala costs Rs 4.71 per kwh (on
an average), whereas in Tamil Nadu and Maharashtra it is
Rs 3.91 and Rs 4.09, respectively. Due to the non-availability
of uninterrupted power supply, enterprises have to resort
to generator sets.
Apart from capital investments in gensets, entrepreneurs
have to incur huge costs on fuel and interest charges. In
Kerala on an average 63 per cent of enterprises have own
gensets, whereas in Maharashtra and Gujarat it is only 44
and 47 per cent, respectively, the study said.
But the delays faced by exporters and importers in customs
house clearance are much less in Kerala. Here, for imports
it takes seven days delay in clearance and for exports
it is three days delay, whereas in Maharashtra it is 12
and 17 days, respectively.
The study also points out that unless the best states adopt
international role models, they will remain behind the rest
of competing world - despite being better than other Indian
states. This is particularly relevant for Maharashtra, Gujarat,
Andhra Pradesh, Karnataka and Tamil Nadu.
Though Kerala was ranked as No 13 in investment climate
in the study
conducted by CII during September 2000, it had an overall
composite rank of number three among 18 Indian states.
Political consensus, support from bureaucrats and a synergy
between the government and industrialists alone will transform
Kerala into an investor-friendly state. It is incumbent
on the government to initiate practical and effective solutions
to translate into action the objectives enshrined in various
policy initiatives.
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