In August 2015, Micromax got approval to start a Rs 200 crore mega project in Fab city on the outskirts of Hyderabad. Keen to ensure that the mobile handset manufacturer dialled into Telangana, the decks were cleared to ensure commercial production started in January this year with a woman power of 1200. Micromax chairman Rajesh Agarwal reportedly told the Telangana officials that never in his life before has a government chased him to find out if there are any more issues pending before production can start.
It is this proactive attitude to make it easy for an investor to set up base in Telangana that has helped India's youngest state to zoom from 13th position last year to the top this year (July 2015 to June 2016) in ease of doing business ranking, as joint number one with Andhra Pradesh. Chandrababu Naidu's state moved one position from 2 to 1, dislodging Gujarat from the top spot.
Last year, Telangana's score was an abysmal 42.45 percent. It worked systematically in fulfilling most of the 340 parameters listed by the Department of Industrial Policy and Promotion (DIPP) and World Bank this year, implementing 324 of them. At the same time, it focused on systemic improvement so that the jump in ranking also translated into an investor-friendly approach on the ground. The parameters relate to environmental and labour registration, obtaining electricity connection, online tax-return filing, construction permit, etc.
"The fledgling state has today become a role model for many states. Within a short span, we have proved the naysayers wrong,'' says KT Rama Rao, Telangana's Industries and IT minister.
That in many senses was the driving factor. During the Telangana agitation between 2009 and 2013, there was indeed concern if Brand Hyderabad was taking a hit, driving away investment. There was apprehension if a political party that had been in protest mode for 13 years could also govern.
Industrialists in Telangana credit the leadership of Industries and IT minister KT Rama Rao and the two IAS officers - Industries secretary Arvind Kumar and IT secretary Jayesh Ranjan - for the ranking. Industrialist Narendra Surana says, "The combination has been proactive, going out of the way to get the biggies to invest money in Telangana. They have done well to compete with other global destinations and not just other states."
While most states talk of time-bound clearance for projects, Telangana is the only state to pass an Act under which it will be the right of the investor to get a time-bound clearance. By the 16th day if the permission does not come, it is deemed to be approved. There is also provision for penal action, wherein Rs 1,000 per day will be cut from the salary of the employee who was responsible for the delay. It goes to Telangana's credit that not a single rupee of anyone's pay has been cut so far.
Arvind Kumar points out the experience of Ikea, the Swedish furniture giant that is to set up its first retail store in India in Hyderabad. "Ikea is also looking to set up similar shops in Bengaluru, Mumbai and Delhi. But the CEO Juvencio Maeztu told us that the bar has been raised very high by Telangana when he compares it with the response he is getting in the other three cities,'' says Kumar. Inter-departmental coordination meetings ensure everything from power connection to building permissions get sorted out here in Telangana.
But while Telangana rejoices, it is a case of neighbour's envy, owner's pride. Karnataka next door is clearly not happy. The state has slipped from the 9th rank last year to 13th now, even though in terms of score, it has done well, improving from 48.5 percent in 2015 to 88.39 percent this year. The drawback is that Karnataka has implemented only 297 of the 340 reforms and lacks in 39 areas.
"We are quite surprised frankly,'' says Priyank Kharge, Karnataka's IT minister. He points out that the Centre has lauded its tax reform initiatives, making a special mention of investor-friendly measures likes e-filing, online payments, e-registration. "We have done well in attracting one of the highest FDIs in the country. So it is rather strange that Karnataka should actually slip in the rankings,'' says Kharge.
The industry does not quite share that sentiment. Mohandas Pai, Chairman of Manipal Global Education, says entrepreneurs have horror stories to share regarding demands of bribes. "There is huge corruption in getting permissions for power connections, building registrations and pollution control certificates. This is why Telangana is getting the marquee names in IT instead of the companies coming to Bengaluru. We have good manpower, but we need to market our strengths,'' says Pai.
Last year, Karnataka lodged a protest with the Centre over its ranking. "We ideally should be in the top five given that we have a better investment climate than many other states,'' says Kharge.
Both Karnataka and Telangana agree on what a ranking can do to a state's future investment. Pai says Andhra Pradesh which ranks number one, lacks in infrastructure but makes up for it by creating the right ecosystem and hence it will be the first port of call before Karnataka. Arvind Kumar believes the ranking is the icing on the cake and that it will make it easier to market the state.