Atul Kumar Gupta (KAS)
It is said that Money is the greatest Coward in the world, running away from insecurity and instability. In today’s era of Globalization and Economic liberalization, the relationship between states’ economic prosperity and the Centre’s/world’s Money- Market is decisive as majority of states are not able to generate the required endogenous wealth to finance their economic development. States need to provide domestic economic conditions which will attract much needed investments into their territorial spheres as the growth parameters of states are now judged in terms of their comparative “hospitability” to foreign investment and ease of doing business. In a recently published reporttitled “Assessment of State Implementation of Business Reforms” by DIPP, Ministry of Commerce and Industry, GOI, J&K ranks at 29th position with a score of 5.93%. Also as per the Final report: Evaluation Study of Industrial Policy Package of Incentives for the state of J&K by Grant Thornton Advisory Private Limited published in 2012, the cumulative investment, at an aggregate level, generated in the State was close to Rs.3940 crores only as on January 2012 (Rs. 3132crores in Jammu Division and Rs.808 crores in Kashmir Division respectively). The Macro- Indicator Outcomes in the three Special Category States (The states of J&K, Himachal Pradesh and Uttarakhand are collectively known as SCS) placed the State of J&K to 3rd position in terms of maximum investment generated. The 1st, being Uttarakhand and Himachal Pradesh occupying the 2nd rank. Being a hilly state, J&K is clearly not placed in an advantageous position topographically, demographically and climatically for industrial growth per se. The overall contribution of J&K Industrial (Secondary) Sector to GSDP at current and Constant Prices is 23.71% and 28.21% respectively [Percentage Distribution of GSDP Estimates for the year2014-15(1R)-issued by Directorate of Economics& Statistics, J&K]. With the announcement of New Industrial Policy (NIP)-2016 of the state, an earnest effort is made to build upon the strengths and address the weaknesses of the state in respect of industrialization. Though under the NIP-2016 all the major incentives offered in earlier policy(State industrial Policy 2004 along with GOI Package of Incentives) would continue, albeit with some modifications/amendments, the major focus is on development of industrial infrastructure viz; to create a Land bank of about 20000 kanals, across the state so as to attract an investment of at least Rs.20000 crores in the industrial sector(including Services), which would act as a catalyst in employment generation of15000 direct and indirect employment opportunities annually for the unemployed/educated youth. Although NIP-2016 evoked mixed responses from across the varied sections of stakeholders, with State government deciding to revisit it and to make it more comprehensive, broad based and inclusive, the aim of this approach paper is not to go into the nuances of NIP-2016 and to critically evaluate it but to focus primarily on its procedural underpinnings and highlighting the role of implementing agencies (DICs) in the establishment of an industrial unit in the state.Because, from the personal experience of the author it has been observed that though the prospective investors do possess some working /cursory knowledge of the various schemes/policies and package of incentives offered by the state/Central Government regarding setting up of their units in the state of J&K, they actually lack the step by step procedural knowledge of departmental/ official norms and guidelines in this respect. It results in their being exploited at the hands of unscrupulous elements which in turn is detrimental for the industrial growth and larger interests of the state. The focus of this paper is precisely to fill this information gap.
Following are the various steps in chronological order to be followed for the establishment of an industrial enterprise in J&K:
1. Initiation of the idea (Blueprint of the project): The progenitor of a successful industrial enterprise is the very idea behind it. First and foremost the prospective entrepreneur should be quite thorough about the following aspects of the project:
(i)Line of Activity: The entrepreneur must have a clear idea of which product(s) are to be manufactured based on the SWOT analysis of product potential of the State of J&K. Consecutive State Industrial policies including the NIP-2016 have made a distinction between Thrust and Non-Thrust industries in order to provide greater impetus to units in areas/product lines, where the state is supposed to have organic/in-built strength. Sufficient market study about the availability of raw material, consumables and packaging material, their transportation costs, Demand potential of the product mix and competitive pricing( both in qualitative and quantitative aspects) of the Finished product is very essential before taking the plunge. Packaging/ branding, Advertising and marketing of the product is not possible without making a deep study of the consumer behavior and supply chain of the product-mix in the market.
(ii) Technical knowledge of the project: A rudimentary knowledge of mechanical aspects related to main and ancillary machinery, its spare parts, Pollution control devices (PCDs), Quality Control & Testing equipments, Fuel and power load requirement (as well as its availability) could clearly give an edge to an entrepreneur. Knowledge about availability of skilled manpower has also acquired much significance now- a -days as due to corporate globalization, industrial enterprises constantly look for cheaper sources of labour.
(iii) Managerial/ operative knowledge of the project: Entrepreneurs are born managers who practically do nothing but leave nothing undone. Managerial acumen in the form of good Human resource management is the hallmark of a successful enterprise and conversely its ill- management may doom the project. Closure of the operations of Hindustan Lever and Bhilwara group in J&K are examples of the tension between the management and the workers union. Hence an entrepreneur has to be a very efficient communicator, not aggressive but assertive in dealing with co-workers.
(iv) Finance: Finance is the life-blood of an industrial enterprise. An entrepreneur has to be sure about the availability and arrangement of sufficient funds to start an enterprise. Financial projections of setting up a unit in J&K in comparison to setting it up in some other industrially developed state may differ considerably. Hence, Ratio- analysis of various parameters of the industrial project has to be made in advance. Finance options are available to prospective entrepreneurs at both State and Central levels through; JKDFC, JKSFC, JKEDI, Commercial/Regional Rural/ Cooperative Banks, SIDBI etc. The term loan and working capital loan should be structured in a balanced way. The benchmark of Debt-Equity ratio is 2:1. Ideally, the total liability of the unit including loans and advances from creditors and banks /financial institutions should not exceed 60% of its net worth.
(v) Location of the unit: A promoter has to apply specifically in the respective District Industries Centre (DIC) of that verydistrict, where he/she wants to establish the unit. DICs headed by General Manager(GM) and a team of Functional Managers(FMs) and Project Managers(PMs) on the pattern of Corporate Governance are set up in every district of the State for promotion and facilitation of industrial enterprises. DICs in J&K were set up by the Government of J&K vide order No- 155-DIC of 1978 dt. 29-4-1978 and are given the mandate to address the needs of the industry and offer effective delivery of services right from the inception of the unit throughout its entire life cycle. DICs are the first interface of the Government with the Investor.
2. Preparation of a detailed project report
3. Filing of Entrepreneur Memorandum Part-I/Composite Application form
4. Provisional registration
5. Filing of Entrepreneur Memorandum Part II
6. Assessment of Raw material and finished goods
7. Post operational engagement of the enterprise with the Department of Industries & Commerce.
(The author is a KAS Officer)
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