Old policies, new costs

West Bengal's commitment to reform seems doubtful

Perhaps trying to make up for lost time, the Trinamool Congress government in West Bengal has announced as many as three draft economic policies in the run-up to its second anniversary. These cover industry proper, that is large industrial units; textiles; and micro, small and medium enterprises. The attempt to formulate an industrial policy met with a setback a couple of months ago, when Trinamool MP Saugata Roy resigned from the position of adviser engaged in the task of drafting a policy. With Mr Roy gone, the field was left to Partha Chatterjee, the states commerce and industry minister, who is considered close to Chief Minister Mamata Banerjee.

A new policy was sorely needed since the last major industrial policy  which also marked a directional change inasmuch as it made the state industry-friendly  was unveiled by the Left Front under Jyoti Basu in 1994. So there will be keen interest in spotting any directional change that may be there in the latest policy. It is indeed there, but along known lines. The draft shows theres been no change to Ms Banerjees firmly expressed belief that land acquisition for new industry should be left solely to the proposed plants promoters, without the government getting involved. Since the Trinamool government is also opposed to special economic zones, the policy instead pushes industrial parks and hubs set up under the public-private partnership (PPP) model. There is nothing wrong with this, though it essentially means looking at smaller units. But will the government be earnest about PPPs? Ms Banerjee, as railway minister, had set up an advisory committee headed by Amit Mitra, then Ficci secretary general and now state finance minister, to take forward railways projects with external finance. But nothing came of it. Besides, the West Bengal governments state support for industries scheme 2008 expired in March this year, and the incentives part of the new policy is structurally very similar to the 2008 scheme. So how new is this new policy, really?

What could perhaps be more significant in revealing the state governments mindset and priorities is the announcement, made along with the unveiling of the industrial policy, of a rise in the salaries of its casual and contractual employees by 25 to 40 per cent. This will put a significant burden on the states already highly stretched finances, leaving that much less for infrastructure and development expenditure. The decision will also create pressure to raise minimum wages in the private sector so that they do not remain too far out of line with government rates. The salary increase has been widely seen as political, given that crucial panchayat elections are approaching. So the governments objective seems to be primarily political, and few will bet the new policies will affect West Bengals lacklustre investment climate.