The Progressive Punjab Summit held on December 9 and 10 has definitely generated the feel-good atmosphere in Punjab, culminating into the signing of the memoranda of understanding between industrial houses and business groups and Punjab, entailing an investment of Rs 65,000 crore.
The credit for bringing a galaxy of foreign and Indian industrialists of international repute to Punjab goes to deputy chief minister Sukhbir Singh Badal, whose single aim is to give the Punjab economy that much-needed push.
The sole reason of attracting investment is the incorporation of the retention of VAT (value-added tax) and CST (central sales tax); electricity duty; stamp duty and property tax incentives; and market fee, rural development fund; and infrastructure development cess incentive for different periods in consonance with the investments: that's in the Industrial Policy 2013 announced recently.
The idea of retention of taxes was introduced by chief minister Parkash Singh Badal in his third term, 1997 to 2002, when Rs 18,000-crore Bathinda oil refinery project was initiated. The concept of the exemption of stamp duty and electricity duty were emulated from the mega and super mega policy initiated by Congress government in 2005 and continued by the SAD-BJP (Shiromani Akali Dal and Bharatiya Janata Party) government from 2007 onwards. The repackaging of the concession in the industrial policy has attracted the investors definitely.
The deal worth Rs 15,000 crore signed in the agri- and food-processing sector will help generate an atmosphere for crop diversification but it needs more investment in the sector to coax the farmer to go in for the de-facto diversification of crops, thereby assuring better returns than wheat and rice to give a push to Punjab's stagnated agriculture growth rate.
The investment proposals of Rs 10,000 crore in the energy sector will go a long way in making Punjab electricity surplus. The education, healthcare, telecom and IT (information technology) sectors are expanding across India, as investors of these sectors are getting good returns, so the investment proposals of Rs 1,100 crore in the education sector, Rs 3,500 crore in healthcare and Rs 7,000 crore in telecom will be sooner or later likely in unexplored destination Punjab.
The industrial sector of Punjab has got investment proposals of Rs 5,200 crore only. The reason is that there is no level playing field in the industrial sector for Punjab, as the cost of bringing the raw material and dispatching the finished goods makes the investment in the sector unviable for an outsider.
The industrial growth of Punjab witnessed in the year 1970-80 was sheer because of the enterprising nature of Punjabis, who installed industry in the state, though its raw material was unavailable there.
Punjab based its industrial growth during the 1980s on the import of raw material from other states, followed by value addition and re-export, so there is the hosiery industry but we don't have own wool; there is sports industry but the willow is imported from Jammu and Kashmir.
The rubber industry imports raw material from Kerala, while the biggest steel market of Asia at Mandi Gobindgarh doesn't have iron ore.
The 1980s was an era of subsidisation when Punjab saw Industrial growth; the stagnation in the growth rate in industry came with the fizzling out the policy of subsidising. The industry installed in that decade needs government support for level-play, else it will shift to the states where the raw material is available, in order to make finished goods cost effective.
Attracting investment in the manufacturing sector with concessions will give heartburn definitely to the Punjabi industrialists of the 1980s, if their business interests are not taken care of.
The system of E-Tripping has made Punjab third in the country in revenue collection but its side effect was the closure of 100 furnace units in Mandi Gobindgarh. When an attempt was made to levy a new tax in Delhi in the 1990s, former Delhi chief minister Madan Lal Khurana said it would destroy the distributive character of the state because all finished goods came to it for distribution to the entire India.
Similarly, the Punjab government should take care to revive the steel-melting furnaces of Mandi Gobindgarh by setting off the losses caused because of E-Tripping, thereby making the unaccounted purchase of raw material and sale of finished goods impossible.
Otherwise, the entrepreneurs of the closed units will shift to the E-Tripping-free states where the raw material is available. E-Tripping has been lifted from scrap to revive the furnace industry but something more has to be done to make it viable.
E-Tripping is good for revenue collection but it is against free-trade ethics and causes unwarranted hassles to the raw-material supplier and finished-goods purchaser outside the state, who will prefer to trade with the states without this system. If buoyancy is gone from the trade in Punjab, the manufacturing-sector scenario will be of gaining penny and losing pound.
The investment in infrastructure is definitely a key to fiscal revival. The investment proposals of Rs 24,000 crore in real estate and infrastructure will go a long way in pushing the state economy. In spite of the stringent laws of PUDA (Punjab Urban Planning and Development Authority), unauthorised colonisation remained unabated in Punjab.
Though the policy to regularise the same is a welcome step, an attempt should be made to bring the small real-estate developers on board, so that not a single unauthorised colony be allowed to develop.
Something more is required to be done in the real-estate and infrastructure sectors to make it the engine of growth by lessening the tax burden and providing cheaper building material, which will make the sector affordable and viable commercially.
The Progressive Punjab Summit, hoping MoUs are realised within the stipulated periods, is a new beginning but Punjab has miles to go before the investment destination.