Kerala’s efforts to spruce up its image as an investment destination had received a jolt when garment exporter Kitex declared that it’s pulling out of a potential Rs 3,500 crore investment in the state, following a series of inspections at its factory units. The company chairman Sabu Jacob, whose political party Twenty20 Kizhakkambalam had contested the recent Assembly elections without success, has said he’s unlikely to invest another rupee in the state.
The government, however, appears unperturbed and believes the investment climate in the state has changed for the better in the last few years. In an interview with Moneycontrol, Kerala’s Minister for Industries P Rajeev talks in detail about how the state is being turned into a ‘Responsible Investment Destination’. Kerala will not be a retirement home anymore, the minister says, adding that the government will adopt a slew of measures to get highly skilled workers back into the state. Excerpts from the exclusive interview:
Q: The Kitex controversy has not helped matters in a state known for its business tardiness. How do you view the situation at present? Do you think the state’s image has been affected?
We do believe that there has been an attempt to tarnish the image of the state. Yes, there have been inspections regarding alleged labour law violations and Covid-19 protocol breaches. The Kerala High Court and National Human Rights Commission had received complaints about the firm, and action was taken accordingly by the various departments.
From our point of view, there is no other motivation. However, the company may have both political and economic motivations to pull out from the proposed investment.
Q: So, is the government ready to negotiate?
We are open to talks. If they have any reservations about the inspections conducted, they are welcome to discuss that with the government. After all, that company made a name for itself by operating in Kerala for decades.
Q: They are all set to park their investment in the state of Telangana, which the company claims has welcomed it with open arms.
Well, that’s good for them. As a state that wants to encourage responsible investments and cannot promise any one that there will be no inspections. I had reached out to them the very next day after the issue came out in the open.
As a state we are focused on environmental, social and corporate governance (ESG) and cannot ignore the fundamental principles of development.
Q: The new minister of state for IT, Rajeev Chandrasekhar, has welcomed the company to Karnataka.
Well, that was not done. Maybe it was just an emotional reaction from his end. We understand that he is a politician from Karnataka, but he’s a Malayali. Hope he supports our cause in getting IT investments into Kerala.
Q: Kitex has not signed a Memorandum of Understanding (MoU) regarding the investment. The company had given only a Letter of Intent (LoI). Do you think Kitex really had plans to invest Rs 3,500 crore in Kerala?
That’s something I cannot comment on. After all, it’s a company based in Kerala. We don’t want to make a remark on their financials.
Q: Minister, you have talked about responsible investment. Can you elaborate?
A: We are a land locked state. Acquisition of land for industrial purposes is quite tough. Hence, we encourage industries that are ecologically friendly. People are highly aware of their rights and are conscious about protecting the environment. We are also a state that values labour. Wages are the highest for labourers here. So, when investments are proposed, we want to ensure that these factors are kept in mind. This is the spirit behind responsible investment.
Q: Which are the areas that the government is expecting to see investments come in?
An additional 71,000 MSME units have come into the state in the last five years, taking the total number to 1.4 lakh. That’s a 50% jump. The incentives provided by the government have played a big role in this. If all documents are clear, license for the business unit will be provided in one week. Plus, all formalities can be done online.
On the tech start-up front, there has been a boom. We are looking to create a start-up hub in and around Kalamasseri in Ernakulam district. IT firms like IBM are continuing to invest in the state.
We want to give a thrust to agro-industries and agro-processing too. We would like to start exporting wine made from nutmeg and even green chillies. Rubber as a commodity needs further support in central Kerala and the cashew industry based around Kollam needs some attention too.
Pharmaceuticals and medical equipment/consumables are two other areas we would like to encourage. A pharma park is in the offing. We are also keen to welcome more financial institutions into the state.
Q: With all this, Kerala still suffers from a perception issue. The feeling is that it’s not a place to do business. In the ease of doing business index, the state is in the 28th spot.
You are right. We have to do more work to change the perception. With regard to the ranking, we have pointed out some anomalies in the criteria. Even Lakshadweep is ranked higher. We have sought some clarifications on this. However, on NITI Ayog’s Sustainable Development Goal index, Kerala was awarded the top most position.
We are now in the process of putting together a Statutory Grievance Redressal Mechanism that will serve to address the concerns of any industrialist. The Bill will be passed in the next Assembly session. The plan is to put together a software-centric inspection system. This will take out the subjectivity as the software will pick the inspector.
The state government is also in the midst of launching a unified land lease policy; the draft of that proposal is ready.
Q: Apparently, there are some archaic laws that continue to govern us. How do you plan to repeal them?
A committee has been formed to look into this. There are some outdated rules like companies having to keep a pot of water, when there is already a water cooler. There is also a requirement, I believe, to keep a spittoon. These are completely outdated provisions and need to be removed.
Q: Though Kerala has 100 percent literacy, we do not have that many good quality higher education institutes. Also, we do not generate enough jobs within the state.
A: The key will be to forge better industry-academia partnerships. We need to have good research going. The course curriculum in technical institutions have to be updated, to keep up with the needs of the industry. We are trying to encourage students to have Young Entrepreneurs Clubs in colleges. This could be across areas like IT, food processing or electronics.
Q: Keltron was a great start for electronics in Kerala back in the ‘80s. But later that momentum fizzled out.
Yes, you are right. Keltron was formed even before countries like South Korea started out on electronics. Later for many reasons, the industry did not move forward.
Now, we intend on create an Electronic Park in the district of Ernakulam in the next 2-3 years.
Q: So, in essence, Kerala is on the mend.
We are working on a Kerala Brand of Industry. The state wants to promote responsible investment that attracts people from all over. On July 22, I’m meeting NRIs for fresh investments in the state. They will largely be individuals who run enterprises with Rs 500 crore plus turnover.
We want people to make use of our excellent broadband connectivity and work from home here in Kerala. The K-Fon project (Kerala Fibre Optic Network) will drive transformation in education, industry and entrepreneurship.
Flexi-work and remote jobs are the new reality in the post-pandemic world. As the government of the state, we would like people to enjoy the beauty of the state, rely on the robust broadband infrastructure and do some great work out here.
Certainly, we do not want Kerala to have this retirement-home image anymore. The state government would like to see it become a thriving business destination for the young.
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