MB Patil says private cos won't be allowed to exploit state funds as Lenskart picks Telangana over Karnataka

Karnataka Minister for Large and Medium Industries and Infrastructure MB Patil

In April, Peyush Bansal, co-founder and CEO of eyewear maker, Lenskart, said the company was looking for a 25-acre plot of land for a 'mega factory' within 60 Km of Kempegowda International Airport (KIA) in Bengaluru.

Within five minutes of Bansal's LinkedIn post, Karnataka Industries Minister MB Patil shared a screenshot of the post and wrote on X (formerly Twitter), "Karnataka is the ideal destination! The Industries Department is committed to supporting and facilitating all your requirements. Concerned officials will reach out immediately."

It showed Karnataka's agility and the state's willingness to become the go-to choice for all important investments.

Bengaluru, as a location, is also significant for Lenskart as Carl Zeiss India, a leading lens manufacturer specialising in optical systems and optoelectronics, and also Lenskart's rival, is setting up a 34-acre vision factory near Bengaluru airport with a Rs 2,500 crore investment. The project will generate 5,000 jobs and is expected to be completed by year-end.

That is roughly double of what Lenskart's plans are but those investments are not coming to Karnataka.

Also, read: Karnataka's loss is Telangana's gain: Lenskart to invest Rs 1,500 crore at Fab City

On December 8, eyewear maker Lenskart signed an MoU with the Telangana government to set up a manufacturing facility with an investment of around Rs 1,500 crore. The plant, to be established at Fab City, is expected to generate around 2,100 jobs.

"This is a testament to our policy that ensures speed and ease of business for companies," D Sridhar Babu, Telangana Minister for Information Technology, Electronics & Communications, Industries & Commerce and Legislative Affairs, said on X.

Very delighted to announce the signing of a MOU with @Lenskart_com today wherein Lenskart would be setting up the world's largest Eyewear manufacturing facility in Telangana with an investment of around 1500 cr rupees.
The facility will produce eyewear, lenses, sunglasses, as Sridhar Babu Duddilla (@OffDSB) December 8, 2024

Both Telangana and Karnataka are governed by the Congress party.

The announcement comes at a time when MB Patil is visiting Europe to seek investments ahead of the Invest Karnataka Meet in February 2025.

Patil said: "Certain investors have been demanding incentives amounting to more than 100 percent of their investment. The state government cannot and should not provide incentives exceeding the planned investment. Such practices raise concerns about the fundamental viability of these projects."

Speaking at the CNBC-TV18 & Moneycontrol Global AI Conclave, Patil said: "There is intense competition between various states. When I say this, there are certain reasons. The other day, one company approached us and asked for too much, but Bengaluru is not that desperate to offer such concessions."

Why did Karnataka lose investment

On December 9, Patil shed more light on the developments but refrained from naming specific companies.

"All industrialists are aware that our door is open for any of their concerns or expansion plans. We are here to support private enterprises, yet at the same time not let any private profit motivated enterprise take undue advantage of state exchequer," Patil said on X, reacting to Moneycontrol's news on Lenskart's new plant in Telangana.

Without reference to any particular project or company:The government of Karnataka and I as a minister, have to walk a tight rope. I as industries minister have taken steps to create confidence and make several structural reforms to the state industries department. All https://t.co/PYvVdzAYLa M B Patil (@MBPatil) December 9, 2024

"GoK and I have and will go the extra mile, wherever the benefits for State vis-a-vis Private Enterprise are a two way stream," he added but did not provide more details.

A senior Industries Department official however told Moneycontrol that companies' demands need to be reasonable.

"Karnataka is open to all investors and will go the extra mile, but within acceptable norms. Any subsidies that are overly burdensome on the collective conscience of the government cannot be accepted," the official told Moneycontrol.

"The state exchequer cannot be taken for a ride. Strategic industries need to be promoted. However, providing more than what Micron received in Gujarat, where they got 70 percent, may not be appropriate," the official added.

Matter of ethics and morals

Lenskart, which is worth over Rs 40,000 crore, is a key player in the space and competes with Titan Eye+ and others in India. It is also growing its presence in Southeast Asia and leveraging its existing manufacturing plants in Rajasthan's Bhiwadi and Gurugram for the same. The company is increasing production in India at a time when it is reducing reliance on China, a popular region for businesses in the domain.

Losing out an investment from Lenskart, despite being smaller in size, led opposition party leaders to take a dig at the Congress government in Karnataka.

"While Telangana acted swiftly, Karnataka snoozed! Despite Lenskart’s early interest in Karnataka, the Congress government failed to act, costing our youth a golden opportunity. Lenskart’s Rs 1,500 Cr investment and thousands of jobs are now headed to Telangana," BY Vijayendra, state president for the Bhartiya Janta Party (BJP), and son of former Karnataka chief minister, BS Yediyurappa, said on X.

While Telangana acted swiftly, Karnataka snoozed!Despite Lenskarts early interest in Karnataka, the Congress government failed to act, costing our youth a golden opportunity. Lenskarts 1,500 Cr investment and thousands of jobs are now headed to Telangana.@MBPatil https://t.co/MZ2gQFyscy
Office of BY Vijayendra (@OfficeofBYV) December 9, 2024

Another source aware of the developments told Moneycontrol that if the state makes an exception for one company, it will be unfair to the existing ones and potential investments in the future. It also boils down to ethics and morals.

"The minister directly spoke to all concerned, and everything was offered. But it's not right for the government to give a 100 percent (of their investment) subsidy; it's not a PSU. It’s a matter of ethics and morals. Tomorrow, there will be no end to this. It's a profit-making private enterprise," the source said.

"Promoting job creators is one thing, but offering 100 percent or more (of the total investment) just to get them here is another. As a ministry, we must promote industries while protecting the state exchequer. It's a tightrope."

Lenskart's founder, Peyush Bansal, has not yet responded to Moneycontrol's request for comment. This story will be updated as soon as we receive a response.

Jayesh Ranjan, Telangana's Special Chief Secretary for the Industries & Commerce (I&C) and Information Technology (IT) Departments, denied claims of offering more than a 100% subsidy. "It's one of the many such investments that come our way," he said.

Also, read: Union govt should not dictate to semiconductor companies on where to invest: Karnataka minister MB Patil

Too much subsidy

A major point of contention was the amount of subsidy that was being offered. While Karnataka government sources said they walked half-way, Lenskart's demands were unfair.

"Lenskart was shopping between states. We believe Telangana has offered a subsidy of 100-120 percent or more. We offered good land and subsidies that were much higher than what could be provided for that location. Lenskart is an important investment. However, a 100%+ subsidy wasn’t acceptable to the collective conscience of the government, nor to other industrialists who tried to mediate," a third source aware of the negotiations told Moneycontrol.

"The state exchequer cannot be taken for a ride. There are several strategic industries, like battery companies and global firms, that have invested far more money with much higher revenues, and they did not receive subsidies anywhere near that level. It would have been counterproductive and would send the wrong message to such industries."