Plan panel to rate states on ease of doing business: Arun Maira

Tamil Nadu holds top spot in terms of economic freedom till 2009, until it was displaced by Gujarat in 2011

The Planning Commission is looking at rating the states on the ease of doing business, based on various aspects in the respective states, which has an impact on the industry, said Planning Commission member Arun Maira.

The plans are not to rank the States, but mark the position of various issues in the states on a spider chart, to understand those issues, which would help in addressing some of them, he said. He was speaking in a programme organised by Madras Charmber of Commerce and Industry (MCCI) to release its study, 'Manufacturing in Tamil Nadu - A regulatory road map'.

The effort is to find out six major issues which affects the ease of business in each state. Each state has its own problem and each has to be addressed in different ways. The Commission is expecting the study to be ready in another month's time.

Meanwhile, the study by MCCI on the Tamil Nadu's manufacturing sector and the regulations, has indicated that one of the major issue affecting the industry is the regulatory constrains and the irritants faced in payment of taxes.

As per the Economic Freedom of States in India report, published by the Cato Institute, Tamil Nadu held the top spot in terms of economic freedom till 2009, until it was displaced by Gujarat in 2011.

Delays in obtaining construction permits, time taken to start a business and irritants faced in payment of taxes seem to be the key contributors that resulted in the downgrading of the State to Rank two in 2011, it said.

The State accounts for almost 60% of the nation's automobile exports, 70% of the country's leather tanning capacities, 60% of India's spinning mils capacities and leads in the export of cotton yearn.

However, manufacturing output in Tamil Nadu as a percentage of GSDP declined from 20% in 2004-05 to the current level of 16.6% owing to a steep deceleration in growth from 2007-08 onwards. Tamil Nadu received 3.5% of the total industrial investments proposals rereived into India between 2008 and 2012, as against states like Gujarat, Madhya Pradesh and Andhra Pradesh which received nearly 9-10%.

Challenges in availing land, severe power shortages and administrative delays in obtaining approvals are observed to have been the key factors contributing to the falling competitiveness of manufacturing sector in the State.

The State is also facing challenges in lack of flexibility in hiring labour for temporary work and challenges with complying various provisions of the archaic Factories Act,1948, stringent norms and procedures related to pollution control, high cost of complying with the norms and delay in obtaining drug licenses are some of the major constrains, said the study.

It added that the State has to introduce a single business act and permit the practice of fixed term employment, enhance viability of operating common effluent treatment plants, reduce human interface at check posts, along with simplifying income tax, central excise and customs Act are some of the ways the State can improve its performance in manufacturing.