Is a business-friendly Kerala a mirage?

File image of Kerala CM Pinarayi Vijayan

For some time now, the Kerala government has been making much noise about being a business-friendly state. The Left Democratic Front (LDF) government is taking extra effort to change its anti-business perception. In its effort to put the state on the country’s industrial map about seven Acts were amended and an ordinance was issued in October 2017 to attract business to the southern state.

With these reforms, and by leveraging the positive narrative it gained worldwide in the early days of the fight against COVID-19, the Pinarayi Vijayan government has now positioned Kerala as a haven for sustainable investment in the post-pandemic period. Thus came out the government’s ‘Invest Kerala Primer’ on August 22, dwelling on some of the policy decisions and legislative measures it has taken to reform the investment clime in the state.

However promising these efforts look on paper, the ground reality has kept jousting with the image makeover ever since. Instead of fresh investments pouring into the state, existing companies are compelled to pack up and leave.

The latest victim of the ‘Kerala model’ towards businesses is the English Indian Clays Ltd (EICL), part of the erstwhile Thapar Group. The EICL downed its shutters on August 10, a good year after giving closure notice to the state government. The reason: it has been starved of its mining permits for the last two years. The result: Supply of vital ingredients to paint manufacturers, and pharma companies will be disrupted, forcing them to import costly replacement. Speaking to this author, an EICL official said that the company continued to service a few industry verticals even while functioning at 50 percent of its 18,000 tonne per month capacity after the state froze permission to its non-blasting mines in mid-2018.

With mounting losses and non-availability of quality material squeezing it from one side, what really tipped the scale for the EICL was the double standards shown by the state government. The 57-year-old company saw obstacles one-after-another, even as the state government gave a free hand for mining to the State-owned Kerala Clays & Ceramic Products Ltd.

If EICL were to permanently shut shop in Kerala and move to Bhuj, Gujarat, where its new clay plant is nearing completion, it would reflect poorly on the state government.

The double standards here are glaring. If the government’s cites environmental concerns to justify its indifference towards resolving the problems the EICL is facing, it is the same government that has no qualms in giving a free run to 5,000-plus illegal quarries that are blasting their way through the ecologically-sensitive Western Ghats. The Madhav Gadgil commission has warned of the irrevocable damage mining is doing to the state, but no major political party in the state voices concerns about it. This could be because illegal quarries are believed to be a source of unaccounted money for political parties in the state.

Is Kerala being extremely parochial towards a company that has its roots outside the state? Look closer, and it will be clear that such an inference would be incorrect because the Kerala government has been even-handed in turning away companies. Each time a company faced an issue, the government seems to have forgotten its ‘ease of doing business’ promise.

In 2012, when the Congress-led United Democratic Front government was in power, Kochi-based garments major Kitex Garments, with a niche export portfolio, threatened to exit the state. However, instead, it fielded candidates in the 2015 panchayat elections and won. In 2018, following trade union problems spice major Synthite Industries contemplated shifting from Kerala to Andhra Pradesh.

Last year came the standoff at Muthoot Finance as the trade unions questioned termination of staff and closure of branches. The issue dragged on till other companies facing financial crunch followed suit. The current high-decibel criticism from the LDF and the UDF against the Adani Group for bagging operating rights of the Trivandrum airport smacks of posturing and mindless opposition now associated with politics in Kerala.

The real reason why industries in Kerala face these endless problems is because there is a shortage of companies political parties can leech off. In other states, it is understood that political parties move on once they get their ‘cut’; this helps companies focus on production and not on greasing hands and meeting unreasonable demands put forward by political parties and their satellite groups. In Kerala, there are many political parties but only a few industries — and these few are wrung dry.

The likely exit of EICL, which has been running operations in the state for close to six decades, does not bode well for the ‘business friendly’ image of Kerala.

Vinod Mathew is a Kochi-based senior journalist. Views are personal.