
The state government should focus on simplifying the licence issuing process, and ensure that there is ease of doing business in letter and spirit, urged MG Balakrishna, president of Federation of Karnataka Chambers of Commerce and Industry. In an interaction with the editorial team of TNIE, he spoke on several issues -- the challenges industries are facing, encouragement for setting up of industries in rural areas, and others.
Excerpts…
How are industries doing in Karnataka?
Industries are not doing great. The current government is focusing heavily on revenue, primarily due to implementing free guarantee schemes. To generate funds for these schemes, they are increasing license fees for industries. In Karnataka, multiple departments have independently raised their fee structures, impacting industries significantly. We are trying to explain to the state government that it will hurt industries trying to compete globally if they do not address these rising costs — like licence fees and other expenses.
What are the challenges industries face regarding wages and MSME policies?
Industries are concerned about the government’s proposal to increase minimum wages, with the government suggesting Rs 50,000m, while labour unions are demanding Rs 30,000. The matter is currently in court, and industries argue that such a steep wage hike would make their products more expensive. This could harm their ability to succeed in global markets. Industries have also approached the court, stating that the increase in wages would significantly raise manufacturing costs, impacting their viability. In addition, the MSME (Micro, Small, and Medium Enterprises) policy needs urgent revision.
What solutions are industries proposing for infrastructure and ease of doing business?
Industries are pushing for improvements in infrastructure and procedural efficiency. The single-window clearance system, which is supposed to simplify approvals, is not functioning effectively. It often takes six months to a year to obtain all the required licenses, delaying the setup of new industries. To address this, industries are urging the government to streamline the process by ensuring all departments involved in approvals work collaboratively and provide all clearances at a single point, reducing delays for entrepreneurs.
Moreover, industries are advocating the development of fully equipped industrial parks with complete infrastructure, including pollution control systems like ETP (Effluent Treatment Plants) and STP (Sewage Treatment Plants), underground water facilities, and health and safety measures. Currently, industrial areas are primarily allocated to large-scale industries, leaving small and micro enterprises without adequate resources or land. This imbalance makes it challenging for smaller industries to set up operations or even access basic facilities.
Have single-window and clearance issues always existed, or did they begin only recently?
Such issues have always existed, but over the last year, the situation has worsened. While it was somewhat manageable earlier, now the challenges are escalating daily. Each official interprets things differently, forcing us to meet them personally to resolve issues. This has affected the ease of doing business.
Is the government’s claim of ease of doing business actually being implemented, or is it becoming more complicated?
It’s getting more complicated. When the government talks about ease of doing business, it should focus on genuinely encouraging the business community. For instance, states like Gujarat, Bihar and Uttar Pradesh have shown significant progress. However, Karnataka is falling behind in comparison. Unlike Maharashtra, which excels in manufacturing, or Uttar Pradesh, which has rapidly industrialised, Karnataka has not made similar strides. For true ease of doing business, the government must simplify processes and eliminate delays. When businesses come to the government’s doorstep to seek licences, the government must ensure licences are delivered at their doorstep.
Do you think Karnataka would lose its inherent advantage in bringing in industries?
Yes. The advantage of Karnataka is a good labour force and high availability of technically sound people. However we are not using this advantage, as they are moving out to other states and countries. Karnataka should realise this and encash the advantage of available resources. Youngsters are interested in setting up industries and businesses, and the government should hand-hold youngsters. The government should give them necessary quick approvals and subsidies and provide them with ‘plug and play’ setups, especially first-generation entrepreneurs.
How difficult is it for small-scale industries to get loans?
Getting loans for small-scale industries is a significant challenge. While the government has introduced facilities to distribute loans up to a certain amount, the process is not transparent. Banks are not providing clear details about who is receiving these loans. We have asked the Reserve Bank of India (RBI) to mandate banks to display the names of entrepreneurs and their industries that have benefited. Right now, many genuine entrepreneurs are not getting loans because of issues like collateral requirements and a lack of proper systems. Often, loans are given to individuals or entities that do not genuinely need them, while real entrepreneurs and small businesses are left out.
What are your budget expectations?
Ease of doing business and policies to support MSMEs are the major asks in the budget. Formalities of converting agricultural land should be eased. Many own agri lands and want to set up industries, but that process is big. We urge the Union government for a ‘uniform labour code’ and also make licensing uniform across India. This will make setting up industries and manufacturing costs uniform across India.
Does Karnataka have enough land for industries?
Yes, Karnataka has enough land banks. We urge people to go for dry land instead of wet land. Instead of keeping idle dry land, it can be given to industries and in exchange, as per the law, such farmers will be given a percentage of developed commercial land. He can give it for rent and earn a regular income, instead of keeping dry land which earns him nothing.
What is the status of labour and skilled training in Karnataka?
The majority is aiming to get into the software industry. The manufacturing industry also has the same potential. Colleges are giving skilled training and internships. However, the government has to make training and internships mandatory for one year. This will help industries absorb them into the workforce after college.
Where does Karnataka stand in South India, in terms of ease of doing business?
Andhra Pradesh and Telangana are doing better than Karnataka. They are great competitors for the state. They have many advantages, which include proximity to Bengaluru International Airport, much closer to the Andhra border than Bengaluru. Labour is cheap in Andhra compared to Karnataka.
Most workers come from North India...
We have a category of people who come for jobs. You find people from North-East India in the hospitality sector, Biharis in the construction sector, and people from Uttar Pradesh for other labour-intensive jobs. In Karnataka we mostly find people in the supervisor category. We are more dependent on outside labour force than on local labourers.
What about industries not going to certain parts of Karnataka ?
The government should provide more benefits. For example, in tier-two cities, if I want to start an industry, I should get a 24-hour power supply. The government needs to support industries in rural areas. Without power, we have to rely on generators, which increases the cost of manufacturing. The government should develop industrial estates in tier-two cities with uninterrupted power and all necessary facilities.
They should also provide incentives to attract industries. Local labourers in rural areas are cheaper compared to Bengaluru. People are migrating to Bengaluru because they don’t have jobs in their hometowns. If the government creates jobs in their hometowns, they will stay and work there.
Are land prices higher in other cities?
Definitely it’s cheaper outside Bengaluru. However, people are coming to Bengaluru because of its advantages. Bengaluru offers 24-hour power, established industrial hubs, and an abundance of labour. In rural areas, high-skilled Technical workers may not always be available. But now, tier-two cities like Belagavi, Hubballi, Mysuru, Vijayapura, Gadag, and Bagalkot are well-developed and have a significant number of industries.
The government needs to ensure uninterrupted power supply, offer incentives, and provide tax holidays for five years. The government should encourage industries to set up operations outside Bengaluru.
What about climate change laws?
They are a necessity. Many industries are focusing on sustainability, especially those involved in exports. Most industries have already implemented measures to comply with these laws. It has now become mandatory for every industry to prioritize environmental protection and sustainability.
Are industries and investments moving to neighboring states?
Yes, large industries are moving to Other states because those states provide better facilities. The way industries are handled in Andhra Pradesh and Telangana is different compared to Karnataka.
What three key suggestions would you like to give the Industries minister of the state?
Implement a singleWindow system where licenses and approvals are granted quickly. Files should be processed within 24 Hours, and licenses issued within 30 minutes.
Use digital tools for instant communication and tracking. Secondly, allocate land promptly for industries and ensure private investors can develop industrial hubs. Align rules, like pollution-control fees, with other states to reduce costs for businesses. The third suggestion is the government needs to improve infrastructure and make licensing processes fully digital. Simplify systems like e-khata to reduce errors and delays. Focus on delivering services efficiently to attract industries.
When you talk about the single-window system not being functional and departments not completing work, are you implying corruption?
I can’t say that exactly, but there are definitely delays. When multiple officials are involved, things take time. For example, changing land use requires approvals from the PDO, tahsildar, Assistant Commissioner and Deputy Commissioner — four different offices, each taking their own time. These processes should move online.
How well is the Indian economy doing?
The Indian economy has significantly improved compared to a decade ago. Previously, most imports were dollar-based, but today, many countries export to India in rupees, reducing our reliance on foreign currency. This shift has impacted some nations, including the US, but highlights India’s growing economic strength. Over the years, India’s economy has progressed, benefiting from competitive wages and increasing infrastructure development. The reduced reliance on Chinese imports has boosted indigenous manufacturing, improving quality awareness and driving exports. As exports rise and with potential tax structure liberalization, India’s economy is on track to becoming one of the strongest globally.
With Aero India around the corner, how are you looking forward to it from the industry perspective?
The defence and aerospace manufacturing industry will grow well, thanks to the incentives being offered by the Central government. The day is not very far when everything will be manufactured in India.
What suggestion would you like to give to the government?
Karnataka has a lot of tourism potential. The government should take advantage of it and help people take up tourism as a business. Another important neglected field is agriculture. What would happen if everyone from villages migrated to cities in search of jobs. Agriculture is often seen as a loss-making venture. The government should focus on changing the perception. It should handhold farmers and make agriculture a profitable venture. A robust marketing system should be devised for agricultural products. If agriculture is converted into a business, the country would grow much more.
Is the infrastructure in Bengaluru congenial for industry?
Bengaluru is saturated, and any infrastructure development can be done only about 150km from Bengaluru. Everywhere there is a residential area, which is why industrialists in the Peenya Industrial Area are demanding an alternative location. The authorities will have to improve mass transportation in the city, be it the circular train or connecting Metro, so that industries can sustain.
What is your advice to youngsters who want to start their own business?
They must learn the skill. In colleges, they get ideas but they must be converted into business. If they start without proper preparation, they will have to face a lot of hurdles. Also, they must be ready to sustain for three years as businesses won’t yield results immediately. To encourage youngsters, we have the ‘Manthan’ programme designed by FKCCI. We handhold them in converting their ideas into business models.