Infra growth in Tier II cities our top priority: K'taka CM

Till a few years ago, Karnataka's growth rate was above the national trend growth. Today, it has dropped below the growth rate of the national growth rate, which has been a lingering concern. While the state was hit by a severe drought last year affecting the agricultural sector, the industrial sector has taken a beating because of the global melt down in the economy which has hit the IT sector – one of the chief contributors to the state's economy.

On the sidelines of the Global Investor Meet in Bangalore, Chief Minister of Karnataka DV Sadananda Gowda revealed what the state is doing to attract investments into the smaller second and third tier towns. Here is an edited transcript of his interview to CNBC-TV18. Also watch the accompanying video. Q: On thing that all investors, who come for the Global Investor Meet, look for is stability. You have been one year in office; it has been a time of political turmoil as well. How much time have you been able to devote to the government and to the real politics of keeping your job?
A: I concentrate lesser on my political activities. Much of my time is devoted towards the administrative and government activities. My party president is there to look after the political activities. Since last 10 months, most of my time was utilized for my duties as a Chief Minister. Q: Has it been an easy ride so far?
A: Ofcourse, there will be small confusions here and there. In politics, wherever it may be, right from 1950 till today, turbulence is quite common in almost every sphere of political activities across the country. Q: There are reports today that the former Chief Minister now would like you to move out of office and have someone else in your place. What is the guarantee you can give investors that you will be here for the next elections? Even if you are not here, the things signed at the GIM will be honored?
A: This is good old news. Since last six months, the same news is in the media and domain. The Global Investors Meet has taken a good shape till now. Nobody has questioned the stability of the government so far. As far as the investors are concerned, almost all types of policies whether pertaining to various sectors of this industry is there.
My officers are good; even if there are some problems in the government they will be able to carry out things because there are industrial policies, they are well versed with the things going on and day-to-day affairs of the state.
But no industrialist, so far, has asked me any question anywhere except the media. The industrialists are so sure that if they invest in Karnataka, even if there is a small political turbulence, the officers of the state will carry out the things smoothly. Q: One concern that has been worrying people about Karnataka is that till a few years ago, Karnataka’s growth rate was above the national trend growth. Today, it has dropped below the growth rate of the national growth rate. Ofcourse, you had a bad drought last year but the trend has for last four or five years has been down, why is that?
A: As far as agriculture sector is concerned, you answered that question, because of the draught it has gone down. Q: But that is last year only?
A: Comparatively, there was a very small gap inspite of the drought in 123 talukas of the state. But in industrial sector, I will concede there is a small drop because of the global melt down in the economy which has hit the IT sector. Our export has played an important role in this matter. Q: So I can sense you are saying that the rest of the country will be affected by global factors but Karnataka more so because you depend a lot on the IT sector.
A: Yes, a lot on the IT sector. Q: Is that the only reason? Are you worried that perhaps in the past, policies haven’t been taken to nurture infrastructure?
A: No, I don’t think so because there were complaints right from the beginning in the infrastructure and other various sectors. But our government has given much importance for infrastructure development and other activities also. Q: Bengaluru accounts for almost 60% of the state’s GDP. If you remove Bangalore, Mysore and some other prosperous parts the rest of Karnataka, as a development index, is very poor almost as bad as some other worse states in the country. So what are you doing about bringing equality?
A: We are now concentrating on tier II cities especially Mysore, Mangalore, Gulbarga etc. We are giving top priority to connectivity to those areas. We are also giving priority to other infrastructure developments. Various industrialists, especially almost all cement factories, are being diverted towards Gulbarga. So automatically, Gulbarga will grow. Similarly in sugar and other industries, there are investments in Belgaum. Q: Every Chief Minister will say that they are doing many activities. But what do you think you are doing different that will this time attract investments into the smaller second and third tier towns?
A: The thing is like this. Bangalore is growing very fast. The investment in Bangalore for industry has become relatively much costly. The land value in and around Bangalore has grown up like anything. So now, industrialists also prefer the tier-2 cities rather than Bangalore. This time, in various high power committee meetings, the industrialists sought lands and other things outside Bangalore.
_PAGEBREAK_ Q: Is there a danger then that Bangalore could be neglected by the government also?
A: Certainly not, because the population of Bangalore is around one crore now. So you know very well, providing them water, power and other infrastructure is also difficult task for any government. This time, for Bangalore, we are spending nearly Rs 5,500 crore for the infrastructure and other facilities like drinking water, drainage etc. Q: In the past, other Chief Ministers have almost played Bangalore vs. rest of Karnataka and in a sense, sometimes neglecting Bangalore.
A: Prominence to other cities doesn’t mean that we are neglecting Bangalore. Bangalore and other type of cities should be given connectivity. This time, you may be aware that the Chennai-Bangalore, Bangalore-Mysore high speed train is under process. We are preparing the DPR. We go the clearance from the central government.
They have said that you go ahead, prepare the DPR and come back to us. We had discussions with JICA (Japanese International Cooperation Agency). Mangalore-Bangalore that tunnel road in Sakleshpur, they have agreed. We are going very fast but expectations are faster. Q: Are you slightly unambitious in plan size? Karnataka is one of the few states whose fiscal situation is quite good. You have a fiscal surplus. Your debt-to-GDP is only 22%. Given that, can you go little more aggressive on your plan? It has gone up a lot in last five years I think.
A: As you rightly said, in the initial stage, we are one state, which is giving more prominence to the agriculture sector. Almost everyone in the agriculture sector are diverting from there outside. Last December, we held a global agricultural investors meet. Investment of nearly Rs 1,100,000 crore from lending and other sectors, have come to us. So you should give importance to that too, especially food processing, cold storage etc. Certainly, there would be growth in agriculture sector also. This is the concept. For that, we gave a separate agricultural budget last year and this year. Q: But it’s a big task.
A: Yes, certainly it’s a big task. Big tasks also should be taken care of.
Q: Let me just give you a few numbers. 56% of your population depends on agriculture. Agriculture accounts for only 18% of your GDP and is growing very slowly. What are the numbers you would like to see? One way, of course, is to increase the contribution of agriculture to GDP. The other is to move people out of agriculture into other. So what are the ratios that you would be happy with?
A: Practically, the agriculture sector should reduce considerably depending on the population. That is our intention. So you can’t shift the people from agriculture sector to other sectors. You should keep it in mind. Gradually, step-by-step that should be taken care of. Q: So there are two ways of doing it. One is to of course increase the agriculture base and two is training farmers.
A: Yes, already we have taken up large scale skill training activities. We have got a separate wing to deal with the matter. Even with the assistance of the central government, they have given certain incentives and benefits. Our labor department is keen on doing all these things. Skill development is one of the important sectors where we are also giving prominence. Q: Power has been with a perennial shortage across the country other than very few states. Some states have experimented with privatization and found that it works quite well. Delhi, for instance, in transmission distribution has been privatized, in Kolkata, you have a fairly good example. Why are you shy of privatizing your power?
A: First, our government has given importance to the production side. I do concede that the privatization in Mumbai and certain other states has given you good result. But before that, the production side has to be given much importance; that was our intention. After my government came to power in Karnataka since last three and half years, we have started investing in various sectors in production or power.
Nearly 8,500 megawatts production planning has been already initiated especially in Chhattisgarh along with NTPC in Bijapur and Gulbarga. So we have given much importance. The earlier governments did not give any importance on the production side. That has created so much and consumption is equally going so high. So unless we are able to get sufficient power for the state, the development will be little bit hampered knowing fully well that we are doing all these things.
The central government is also not co-operating with us. Even if we purchase power from somewhere outside, we don’t have sufficient lines, corridors to draw the power. Coal blocks that are not being allotted to us since last several years - these are the things we are facing. Inspite of that, we have wind power, solar energy and the power production from sugar factories - we are just giving more importance for all these sectors.
_PAGEBREAK_ Q: Will PPP play an important role?
A: This time in the investors meet, power is one of the sectors where we are giving more importance. Q: For private public partnership even in production?
A: Yes. Q: The one concern that people have about PPP - these are all long term contracts. If a new government comes in, what are the statutory rights? How are they going to be protected? The fear is that the next government will come and review the whole thing.
A: Now people are so cautious and they are so careful, even if the government is changed, the people will not allow the government to take their own individual policies whereby just keeping away the policies which was given by the earlier government. This is not so easy nowadays. Earlier they used to have a political play, as far as they come into power, they used to have their own policies. Q: But regardless, are you making any special attempt to give certain statutory protection?
A: We have already done it. Q: Let’s talk about ports. One of the ironies about Karnataka that it has such a long coastline, perhaps one of the longest coast lines in the country. Yet you have only one major port - Mangalore port. You are losing out to the Madras port; you are losing out to Kochi. Just look at what Gujarat is doing with ports. They have allowed private investments. Why haven’t you moved ports?
A: This time, we are giving much importance to the ports and the costal areas, especially tourism and other things. These are the two major things that we have decided and we are going ahead with. Many investors have come now for about eight-nine ports across the costal breadth.
So under PPP projects, we are going to take up that project. We will certainly hope that we will make use of this sector especially ports and other things. Q: So is it going to be through PPPs?
A: Yes, PPPs. Q: What else will you be doing innovatively to ensure that investors are comfortable when they invest in long-term PPPs?
A: As I already told to you, 19% of the budgetary allocations have been made for infrastructure, especially with regards to ports, roads and energy etc. The state has already drafted an Infrastructure Bill also to provide a legal framework for developing the infrastructure to PPP. It will also establish an infrastructure authority in this regard. So these are the things to focus more on the infrastructure and get it implemented. These are the things we are taking care of. Q: Final question is going to be on corruption. That’s one thing that industrialists look at. Any investor looks to see what is the government doing about corruption. What are you going to do?
A: After assuming charge, I brought 151 services under Right to Services Act; that is called Sakala in Karnataka. So the papers are moving so smoothly, corruption in the official level has gone down. Since the last one month, about 14 lakh applications have been disbursed at tahsil states, right from the tahsildar’s office, BU office, engineer’s office and municipal office. We are extending it after the secretariat. This has not happened anywhere else in the country. So we are planning and we are doing it. That is one thing.
I would like to drive your attention to another thing. You are telling that because investors are not coming to the state just because there are delays in disbursing; the last two high power committee meetings were chaired by me. In the morning, papers will come to the high power committee meeting. At 2 o’clock after the meeting, the proceedings will be drawn. At 6 o’clock in the evening or at the maximum within 24 hours, the industrialist walks away with the government order with regard to land and other incentives. Q: I didn’t say that people will not come to Karnataka who has had the record better than most other states. But I was just asking about generally what investors look at?
A: Right, because in the recent days, things that have happened in Karnataka is in the news across the country. So everybody thinks that something has gone wrong in Karnataka. But the things which are in the public domain is a little bit exaggerated. Practically, it is not true.
To minimize corruption, we are very keen and we are going in the right direction. Since last 10 months, after I became the Chief Minister, the eradication of corruption is my priority. Transparency in administration is another priority. These sectors are given importance. I hope that certainly we will be on track and will be in good news in the media. Q: Finally, if your monsoons are good this year, what kind of growth can we expect in the state this year?
A: The reports that we have received is that the monsoon will start on June 2 and we will have good rain across this year. Certainly, once we get good rains this time, we have planned for water harvesting and the rejuvenation of tanks. We are taking these up massively. This year, our budget is Rs 102,000 crore. Last time, it was Rs 85,000 crore. So that much importance will be given with regard to water and thereby we will get proper hydel power. Certainly, the GDP will grow that is what I hope. Q: You are not giving us a number?
A: I cannot.