Privatisation, properly done, will certainly benefit economy

Interview PGR Sindhia, Janata Dal(Secular) industries minister

Despite overall growth, there has been a general deceleration in industrial activity in Karnataka in recent years.

Both industries and trade in the recent past have witnessed far-reaching and rapid changes in technology, innovation, new products and processes, and business practices and Karnataka is trying hard to maintain its position among the top five industrialised states in the country.

Karnataka's new industries minister P G R Sindhia, from the Janata Dal (Secular), is a political and administrative veteran who has held diverse portfolios like transport and youth affairs in the past.

He outlines initiatives which will be taken over the next couple of years to give industrial activity in the state a much-needed boost. Excerpts from the interview with Business Standard:

Karnataka's mission is to notch up economic growth of 8-10 per cent over the next decade. How does the government propose to achieve this?

The manufacturing sector is the core of any economy. It is true that over the past few years the manufacturing sector has not been given due support. We are caught up in a situation where we do not have sufficient resources to give such support.

We are also not in a position to mobilise more resources. The state cannot tax beyond a point. You can only widen the tax. As value added tax will be a reality by April 2005, the competition between states on tax incentive issues will come down. Under such circumstances, we have to fix our priorities. Like any government, we have to give importance to rural areas.

For these sections, not just infrastructure, health and primary education also have to be properly delivered. Our priority is to safeguard these interests and let's face it, we have to stay in power. No government can remain in power on the anti-incumbency factor alone.

Funds are insufficient to take care of these issues. The huge investments we have made in public sector units are not paying back due to various reasons. We are pressing ahead with disinvestment in these units and this process is one of the key components of attracting investments to the state.

What is the strategy being adopted by the new government for disinvestment?

When globalisation hit Indian shores, many of our leaders -- politicians, bureaucrats and trade unionists -- did not appropriately guide and educate industrial workers and make them understand the consequences of reforms. Many industries were not in a position to bear the impact of global competition.

The industries turned sick and they lost their jobs and industries turned sick. My view is that if an industry cannot be revived, it is better off being closed.

At least we can realise some assets from these companies. For example, NGEF has been closed down and we will be getting close to Rs 500 crore from the sale of assets which we can use to better the infrastructure in the state.

There are some good companies such as Mysore Paper Mills, Mysore Soaps and MSIL which are performing well as of now. If we leave them uncared for, they may not be able to sustain themselves.

This is good time to bring in joint venture partners for such companies and reduce the government holdings in them. Privatisation, if carried out properly, will certainly benefit the economy. Vikrant Tyres is a good example of this.

We brought in JK Tyres as the partner and now the company is doing pretty well. The only issue in such privatisation is that the workers interest should be protected and I will make sure that this happens.

There seems to be a dearth of large scale investments in the manufacturing sector in the state. Except Toyota and Volvo, such companies seem to be preferring states like Tamil Nadu, Andhra Pradesh, Maharashtra and Gujarat. What initiatives are you taking to attract such investment?

I admit that there has been no large investments in the manufacturing sector in the recent past. But that will change over the next year of two. Corporations such as Hero Honda, BMW, Volkswagen have been showing interest to set up plants in Karnataka and we will ensure that the scenario in large scale industries changes.

We have a detailed industrial policy which envisages a strong partnership with the private sector in all aspects and we aim to provide a demand driven decision making process in an increasingly market-oriented economy.

Small scale industries (SSI) in the state are also suffering. What are you planning to do to revive the SSI scenario?

SSIs are truly in a bad shape as of now. Infrastructure is bad and there has been no marketing support for them from any agency. We are planning a Common Revolving Fund to help SSIs. I have also spoken to the Union industry minister regarding this fund and I have also requested the Union ministry to advise RBI to liberalise credit to SSIs.

In addition to this, I also understand that these industries have not been given subsidy for the past five years which amounts to nearly Rs 500 crore. I am happy that the Chief Minister and the finance minister have agreed to release subsidy worth Rs 140 crore during the current year and I will make sure that over the next 15 months the entire pending subsidy is released.

We will be adopting a cluster approach and setting up common facilities -- power, water, treatment plants -- for the benefit of SSIs. Recently Karnataka Small Scale Industries Association (KASSIA) said that a few of their member companies want to shift to outer localities near the city and I have granted them land to set up units.

For growth of any industry, power and infrastructure are key components. Karnataka seems to be pretty far behind in both of these areas. How will you improve the situation?

There is undoubtedly a power crisis in the state. We are all putting in efforts to address this. We will shortly sign an MoU with ONGC which will be investing close to Rs 20,000 crore for gas-based power plants in Karnataka.

Reliance is looking at a gas pipeline from Kakinada to Kolar to Bangalore. Gas Authority of India is also showing keen interest here. With all these projects in the pipeline, the power scenario should surely be manageable. The infrastructure has been neglected in the state. Traffic is a problem and bottlenecks in traffic coming into the city should be cleared.

The state is addressing these issues, but I will have to state that these problems will not be solved overnight. Besides these, the aviation infrastructure seems be on an upswing here.

Construction of the Bangalore International Airport will start by end 2004, the Mangalore airport will have a new runway with an investment of Rs 100 crore.

Besides this, the government of India has approved airports at Mysore and Gulbarga and all these, I am sure, will encourage industries set up shop in the state.