UP's investment scenario looks up despite crime, red tape, corruption


LUCKNOW: Tangible benefits may follow in due course, but for now chief minister Akhilesh Yadav is leading a gradual makeover for Brand UP. 

For years, UP is known to have drawn scores of Letters of Intent from investors across the country. Few, however, were converted into real investment. But there have been positive signals since Akhilesh's ascent to the chief minister's office. And though it is still struggling with the baggage of poor governance, corruption , red tape and weak law and order, the last few months have seen hectic activity on the industrial front in UP. 

Allegations of UP being led by 'multiple chief ministers' notwithstanding, initiatives to boost industrial growth have progressed well. In one year, the Samajwadi government has overhauled several policy decisions. With six new policies—infrastructure and industrial investment, food processing industry, IT, solar power, sugar industry-cogeneration and distillery and poultry—government is better prepared, and with a clearer roadmap, to welcome fresh investments into the state. 

What matters now—and experts agree this will be the game-changeris how these policies are implemented. For the most part, chief minister Akhilesh Yadav's one year in office has been seen as an extended election campaign, an unending sop story that many fear could end up as a sob story. This may have drawn applause from papa and the party men, but officials are beginning wonder how the promises will be sustained. 

Experts also say the decision to stay "in the red" will not be for long, at best, until the Lok Sabha elections in 2014. A trouncing will defeat the purpose of these sops, but a victory will lend a helping hand to MSY's stature. But even as far as conjectures go, Akhilesh's initiative to host an international summit, his commitment to bring the World Bank Group President to UP shores and his phone call to Ron Somers, president of the US-India Business Council inviting American investment in UP, are unarguably well-intentioned. 

It is true that business doesn't arrive overnight. It is true, equally, that UP needs the right public posturing. But unless it is backed by affirmative action, it will not yield results. The long-overdue overhaul of the state's industrial policy, for instance, has been affected. Until a few months ago, bureaucrats said the marketing initiatives undertaken by the state government attracted business interests worth several thousand crores of rupees. Now, Akhilesh faces the challenge of creating an enabling environment. "The state has two major advantages: of being raw materialintensive and of having been among the Top 5 most preferred destinations for investment in the country. The challenge, though, is to undertake sustained brand building exercises to dispel several preconceived notions about the state," says Arvind Mohan, professor of Economics at Lucknow University. 

Fresh investments and jobs in UP will need a sustained focus on developing the agriculture, food processing and textile sectors, each an area where the state enjoys a distinct advantage. Despite being the largest producer of many food grains and fruit produce, the food processing sector in UP is in the nascent stage. The food processing industry policy speaks of plugging losses in the agriculture sector, but with little actual investment, the state has been unable, so far, to prevent nearly 30% of foodgrain, fruits and vegetables from rotting after being harvested every year. 

For the industry scene to really take off, there are other practical impediments as well that UP faces. For one, the power situation is still not stable, a critical sector that impacts industrial growth directly. In the two budgets he has presented so far, Akhilesh has upped the allocation for energy sector. This year, the budget has been increased by 24.5% in comparison to last year. But adding 1,500 MW production capacity to a state of 20 crore is seen as ridiculously low. 

There have, however, been useful initiatives in the new and renewable energy sector. With the government completing its first year in office, the state will sign an MoU for setting up a 200-MW solar power unit. This will be in addition to initiatives in the wind energy sector. None of these, though, will meet the rising demand for power that UP sees. 

There are tariff-related issues as well. At least one segment of the industry bodies has been critical of the government's decision to raise electricity duty on existing industry from nine paise per unit to 35 paise per unit. Considering all new industry is being promised a duty waiver, some have referred to this as a regressive move that threatens to make smaller units in the MSME sector unviable. 

Also, the government has failed to bring in a defined land acquisition policy like it promised, choosing instead, to opt for "mutually convenient settlements" wherever the need arises. For fresh investment, creating sufficient land banks is critical. In addition, the government has also dragged its feet on issuing all government orders that bring into effect the new Industrial and Service Sector Policy, 2012, especially some that have financial implications. Things are better, no doubt, considering the concerns were felt more acutely in the BSP regime, but Samajwadi reign has seen inordinate delays as well. And the absence of government orders , industry insiders argue, makes a robust policy redundant. 

The Samajwadi government's also promised to set up micro and small industries to generate more jobs. This promise has been largely vague. Much depends on fresh investment, while the existing lot of industry is crying for help. Traditional handicraft from UP were meant to given a boost as well, but a concerted programme to target them is also, as yet, not in place. 

With the right projections, though, the industry is not without hope. The CII-UP government backed Agra Summit may not have yielded rich dividends yet, and the government may focus on vote bank appeasement, but the word is unanimous; at the end of 5 years, UP, most agree, will have more to show than it did in the past five years. With one year gone already, Akhilesh has four years left to meet the deadline.