Investment summits — hype and reality

After a break of two years, the CII-Partnership Summit (January 12-13) was revived in Andhra Pradesh. This time, there was renewed excitement and enthusiasm, reflected in the signing of 243 MoUs with investments worth Rs 6.47 lakh crore.

The two-day Summit seems to have given a boost to the sagging image of Hyderabad and Andhra Pradesh as a favoured investment destination. But the hype generated by the MoUs has raised many eyebrows. How much of this will fructify on the ground?

The raging issue of Telangana, the economic slowdown in the US and Europe, and the political uncertainty in the last two years, have taken a toll on the ability of Hyderabad to attract investments. Recently ASSOCHAM, the industry body, said there had been a flight of companies in the IT/BPO space to the Philippines and Vietnam.

Given this background, the summit comes as a shot in the arm for the N. Kiran Kumar Reddy Government. In highly competitive southern India, where Tamil Nadu, Andhra Pradesh, Karnataka are in cut-throat competition to lure investors, the involvement of the big boys of the private sector like GMR, GVK, Adani, BR Shetty, Yash Birla in the summit, as well as the public sector giants—NTPC, RINL, GAIL, among others — augurs well for the State.

So, has Andhra figured out its own answer to ‘Advantage Karnataka', `Vibrant Gujarat' and ‘Lead Bengal' — the investment meets of those States? On the face of it, this would appear so. Despite the slowdown, about 43 countries took part.

Going by reports, Mr Narendra Modi's show called ‘Vibrant Gujarat' (started in 2003) in 2011, was a runaway success with promise of investments totalling a whopping Rs 20.83 lakh crore. Interestingly, even during the recession, in 2009, the investment proposals scaled a high of Rs 12.37 lakh crore.

There were no dearth of big ticket investments with Ambani's Tatas, Mittal's, and you name them, parking funds in the State.

‘Advantage Karnataka' in June 2010 attracted Rs 4.5 lakh crore investment proposals and around 350 MoUs. ‘Lead Bengal' did not prove to be a hit. Madhya Pradesh, Chhattisgarh also have their own editions to attract investments and sign MoUs.

Land is the lure

A critical review of investment flows shows that land has emerged as the biggest draw for corporates. Experts opine that Gujarat offers best options of clear land, followed by Rajasthan. With tax breaks and other incentives being common, big investors find the going easy in these two States.

Take the case of solar energy — these two States are way ahead of the rest, be it private investments or through the Jawaharlal Nehru Solar Mission. To set up one MW of solar power, about five acres of land are required for the photovoltaic modules. Therefore, for higher MW capacity to come in, larger land stretches are required. While many States have shown the intent, inability to provide land at the desired locations has slowed down progress.

Not long ago, Andhra Pradesh had effectively utilised the land bank strategy to get large investments. Through its Andhra Pradesh Industrial Infrastructure Corporation, it provided chunks of land to attract the highest number of Special Economic Zones in the country.

The coming of Microsoft, Google, Rahejas, Wipro's and Infosys or Tatas making helicopter cabins around Hyderabad was through liberal offers of land.

The situation has changed now, with Government land shrinking and private land becoming costlier and difficult to acquire contiguously. At a recent meeting organised by CII, where corporates from South India participated, the single biggest concern expressed was the lack of clear land. If this is the case, how does Andhra Pradesh expect to convert the MoUs into reality? For example, the Yash Birla Group wanted 1,250 acres close to Hyderabad to invest Rs 12,750 crore in three ambitious projects.

Critics point out that some corporates are using this route to lay their hands on to huge land, which is becoming a scare commodity.

In West Bengal, too, the major handicap is availability of land. In most parts, small holdings are the norm. The government does not have a land bank, hence the challenge is — how do they attract manufacturing units?

FEEL-GOOD FACTOR

Further, corporates are requesting ready infrastructure, power subsidy and a range of incentives, which governments are sometimes eager to offer. However, MoUs may not have a bright future, in view of funds becoming scarce, power availability being a concern and government finances being stretched.

Anyway, there seems to be no great sanctity attached to MoUs, which have often remained just that.

In a way, the CII-Andhra Pradesh partnership summit's launched with gusto during the regime of Mr N. Chandrababu Naidu in the late 1990s takes the cake for such high-profile activity. While the Naidu Government showcased MoUs and trumpeted the impressive investment figures, the subsequent Dr Y.S. Rajasekhara Reddy regime, slightly toned down, but still persisted with it, as it put the State in the limelight.

It's a different matter, that the conversion of MoUs or expression of interests to real projects, money flow and employment generation, is anything but impressive in the State.

Asked, how much of the 6.47 lakh crore investments will really come, Mr Kiran Kumar expressed optimism. “I will monitor it on a monthly basis and appoint escort officers for each project.”

While such business events do give the State a ‘feel good' factor, the competitive environment among States vying to get investments from same corporates has led to unhealthy trends.

Mr Kiran Kumar pointed out that some companies signed an MoU with Andhra Pradesh and then went to another State to bargain for better deals. Similarly, the competition between States to attract auto giants has been unsavoury.

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