Did Article 370 impede Jammu and Kashmir's growth? Volatile situation, geographical constraints hurt state's economy, not special status

Editor’s note: This article was originally written in February 2017 by a serving IAS officer from Jammu and Kashmir. It is being republished with permission in view of the Centre’s recent decision to scrap the state’s special status by abrogating Articles 370 and 35a, which are often blamed for the state’s poor socio-economic development. Jammu and Kashmir’s higher unemployment rate and underdevelopment in industrial sector is often attributed to the Article 370 acting as stumbling block or impediment in the process of industrialisation. An economic survey from 2017, revealing 25 percent unemployment in state against national average of 13 percent (age-group 18-29 years) left the social media flooded with observations that it was all due to poor industrialisation owing to prohibitions under Article 370. The reality is altogether different and needs to be understood for better appreciation in right perspective. Constitution of India contains special provisions under Article 370 and 371(A-J) for at least 12 states, fully or partly, including Jammu and Kashmir, Arunachal Pradesh, Assam, Meghalaya, Mizoram, Maharashtra, Sikkim, Uttarakhand, Himachal Pradesh, Tripura, Manipur and Andhra Pradesh. In states like Mizoram and Nagaland, Acts of Parliament do not apply to the religious and social practices, customary laws and procedures, administration of civil and criminal justice, ownership and transfer of land etc. Inhabitants of notified regions in Karnataka have special reservations in jobs. There are stringent regulations on ownership and transfer of land in various states. Scheduled areas have more stringent regulations to the benefit of local population.

It is utterly wrong and unjust to blame Article 370 for every minor or major shortfall faced by Jammu and Kashmir state in the path of development under prevailing circumstances which have already taken a toll on economy.

Article 370 drafted by Gopalaswamy Ayyangar is not the same as it stood 67 years ago. There have been more than 47 presidential orders amending it which makes laws governing 94 out of 97 subjects in Union List applicable to Jammu and Kashmir, in addition to 260 vital Articles. Legislations like Income Tax Act, Excise Act, CVC Act, Delimitation Act, Mines Act, MV Act, NH Act, NIA Act, MGNREGA Act, Police Act, Labour Act, Water Act, Wealth-Tax Act, Banking Act, Army Act AFSPA etc, to mention a few among hundreds, are all extended to Jammu and Kashmir which has special provisions similar to many other states or regions, historical background notwithstanding. Successive state governments, both at Centre and State, have endeavoured to promote industrialisation in Jammu and Kashmir in various ways. Thrust has also been on tourism, horticulture, service sector and manufacturing with varying success. The 10-year tax holiday beginning on 2002 was a major step, followed by 100 percent excise exemption for 10 years, capital investment subsidy and allotment of land on lease for a period of 90 years which is a lesser known fact about Jammu and Kashmir. Food processing industries established in state get a grant of 33.33 percent, upto Rs 4.00 crore subsidy on agro-based units, and a host of other incentives are in vogue including working capital subsidy, term loan, single-window clearance, transportation etc. Land allotment for Industrial establishments has been made extremely attractive to woo potential investors from other states eg Rs 16 lakh/acre in Jammu, Samba, Kathua, Udhampur, Srinagar, Budgam, Anantnag and Pulwama Industrial estates while it is meagre Rs 8 lakh/acre in various districts like Rajouri, Reasi, Kupwara, Bandipora, Ramban, Doda etc. Land lease upto 90 years through single window clearance is one step towards ease of doing business. With introduction of Industrial Policy 2016 the government has fixed targets for creation of land bank of 20,000 Kanals of land in new industrial estates. Easy and cheaper availability of land in Jammu and Kashmir on long-term lease is at par with many industrially developed states. The volatile situation in parts of state and its exaggerated representation in a section of media are among many factors responsible for dismal investment from outside the state.

It’s not due a particular Article of the constitution. The locational disadvantage both in terms of raw material and geographical constraints are attributes of industrial underdevelopment compounded by low potential of higher investments.

Governments have been actively engaging potential investors and entrepreneurs from outside the state. The industrialisation has been picking up silently and majority of investment is by outsiders in key industries. In Kathua district there are 274 industrial units in estates out of which 207 i.e 76 percent are owned by outsiders. In Samba district 109 industrial units out of nearly 600 are owned by outsiders. Across 5 districts of Jammu region more than 510 industrial units owned by outsiders have been allotted more than 5520 Kanals of land on long lease upto 90 years. In Kashmir region, 23 industries in prime industrial estates spread over 275 Kanals are owned by outsiders; non-state-subjects have established industries in Khonmoh, Shalteng, Zainakote, Rangreth, Khanda, Anantnag, Lassipora, Sopore and Leh which include steel, pharmaceuticals, milk products, confectionary, timber products, food processing, cattle feed, refrigeration and electronics, batteries, bakery and engineering services to mention a few. Prominent names of industry have their presence in Jammu which include Chenab textiles, Dabur India, Godrej, Coca-Cola, Berger Paints, Euro Bond, UK Paints, Reckitt Benckiser, Cadila Pharma, Jindal, Medley, Surya, Sun Pharma and others having more than Rs 5000 crore investment. Apart from cheaper land and easy clearances, Jammu and Kashmir offers power at prices far lower than cost of production. Rs 3.30/KWh for consumers less than 50KW and Rs 3.09/KWh above 50KW are energy charges against unit cost of production at Rs 7. Cordial labour-employer relations also provide a congenial atmosphere for industrial development. Central package of incentives for Jammu and Kashmir state in various sectors is another major attraction for investments apart from various incentives provided by state. Investors from other states have a greater presence in hotel industry, tourism, manufacturing, transport, education, housing, entertainment, construction and processing and packaging industries. Out of 1395 roads constructed by PMGSY more than 80 percent contracts were awarded to outsiders, prestigious railway projects Jammu-Udhampur-Katra, Katra-Banihal, Banihal-Baramulla had contractors and firms drawn from other states through national tendering. National Highways Kathua-Jammu, Jammu-Udhampur-Ramban and those in valley have been completed and under construction by firms from other states. Apart from this there are huge investments in private partnerships without Government incentives which make a larger part of state economy.

No state can afford to be an insulated or bordered economy and Industry in times of globalisations. Jammu and Kashmir too has attempted its best despite volatile situation, weaker resource base, lower private investment capacity, lesser availability of labour, seasonal nature of construction and other vital sectors, geographical and locational disadvantages.

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The “uncertainty impact” has been included in Jammu and Kashmir’s Planning and Development process to provide a cushion for predictable and unpredictable uncertainties to avoid a cascading effect on developmental projects. The state represents a complex situation offering challenges and opportunities at the same time threats and risks remain larger. However this has not deterred the serious investors in last decade and half as we see major investments coming around. Every citizen of the country has moral and Fundamental Duty to develop spirit of humanism, enquiry and reform strive towards excellence in all spheres of individual and collective activity. This cannot be achieved unless we understand issues in right context and perspectives. A bare reading of Article 370 along with more than 47 presidential orders amending it and subjects and legislations extended to Jammu and Kashmir would reveal that it is no impediment to industrial development of state or even unity and integrity of nation which though is beyond the spirit of this write-up. If special provisions were to isolate states, then 12 other states would have been suffering a similar fate rather than receiving focussed development. The author is an IAS officer from Jammu and Kashmir. He presently serves as District Magistrate and Development Commissioner, Srinagar The article has been reproduced exactly as it appears on the author’s personal blog and has not been edited by Firstpost staff