‘Reforms agenda need to be put on track'

Mr Rajya Vardhan Kanoria, President of apex industry chamber FICCI is extremely optimistic about the business prospects given the opportunities ahead. Yet, he is a worried man as the going is getting tougher for industrialists like him and other fellow manufacturers.

They are faced with a hostile business environment where cost of funds has gone up, pace of decision making from the policy front has slowed , the rupee is weakening and macro-economic conditions show this is likely to last longer than expected. The power supply, a basic requirement for all industrial establishments, is getting worse each passing day.

The fuel supply situation for power plants has turned critical, leading to more imports and exchange outgo. In short, the industry is faced with tougher times ahead.

Mr Kanoria, the Chairman and Managing Director of Kanoria Chemicals, which has a manufacturing base in Andhra Pradesh, is forced to shut the plant for about 10 days due to power shortage. He spoke his mind during his visit to Hyderabad where the FICCI held its national executive meeting recently. Excerpts.

How do you assess the current business environment?

The business environment is promising, but faced with several challenges. Basic facilities, such as reliable power supply, are not there. If the country wants to reap the advantage of the demographic dividend; that is — 550 million people below 25 years — they need to be empowered by providing opportunities to work. And, opportunities crop up when more companies come up and existing projects get expanded. If the current situation of erratic power supply continues, and financing projects is what it is now, new industries would be hard to come by. India's competitive advantage will be impacted. Once a message of this nature goes out to prospective investors, they shy away from investing in India. Instead, they will prefer another emerging market. This impacts FDI.

As a representative of the Chamber, what is it that you want from the Government?

The least that the Government could do is to accelerate the reform process. Just let them take a couple of important decisions and see how the business sentiment changes. This has a cascading impact on the economy. The FDI will again start to flow in. It is such signals and positive vibes that investors (would like to) see to take decisions.

How do you see the power situation unfolding?

Old problems continue. Unless we address the power sector in a holistic manner, things would turn worse. Inadequate fuel supplies have forced nearly 10,000 MW of installed capacity out of production line. There is shortage of gas and coal. This reflects poorly on the planning. If about 10,000 MW is off grid, Rs 50,000-crore worth of investment is lying idle and manufacturing is suffering with inadequate power. The subsidy burden on hydrocarbons will continue to be a big drain on the economy. Therefore, the Government needs to evolve a comprehensive power policy addressing all these issues. If this is achieved, we could look forward to better times ahead.

Are your suggestions taken seriously by the decision-makers?

We are concerned about the general lack of confidence and the general decline in growth. The decline in growth is not external to us but totally internal and much of it our own making. We think that a lot of these could be tackled by addressing them directly and immediately. The Government should take bold decisions encouraging private participation in coal.

If we get the reforms agenda back on track things will get better.

One of them relates to the implementation of Goods and Services Tax, and the second is with regards to reforms in the pension and financial sector, which will play a crucial role in infrastructure funding. Infrastructure funding has been adversely affected as there is lack of long term funding. Lastly, the issue of land reforms and issues relating to environment need to be addressed at the earliest. While some steps have been taken to address this, by tabling a Bill, the Government could get pro-active and find the right trade off between development and sustainability. The GST will benefit the Centre and States.

The other issue relates to FDI in retail and aviation sectors. The Government must take steps to put the reforms agenda on track. Look at what happened in the 90's. Even a mere talk about reforms had a positive influence on the economy. We want a similar thing now.

vrishi@thehindu.co.in

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