Industrial leap

A number of institutions in the public and private sectors contribute to making the State an industrial giant.

AT THE Bangalore

SPEARHEADING the drive to make Karnataka an industrial powerhouse, the Directorate of Industries and Commerce has been wooing industrialists, facilitating investments, planning roadshows, offering easy access to government departments, securing licences and formulating industrial policies.

Investment proposals are cleared by the directorate basically through three windows. While projects costing up to Rs.3 crore are cleared by the District Level Single Window Clearance Committee, those between Rs.3 crore and Rs.50 crore are cleared by the State Level Single Window Clearance Committee (SLSWCC), and those above Rs.50 crore by the State High Level Clearance Committee (SHLCC) chaired by the Chief Minister. The directorate has established the single-window mechanism to facilitate faster clearance of projects seeking infrastructure facilities, incentives and concessions.

The directorates investment promotion and facilitation agency, the Karnataka Udyog Mitra (KUM), is the single contact point for all investors looking to set up business in the State. As the nodal agency, the KUMs role is to facilitate a smooth transition from the stage of receiving an investment proposal to its eventual implementation. It is also the secretariat for both the SLSWCC and the SHLCC for the grant of approvals and sanction of infrastructure facilities for approved projects. The KUM identifies and encourages prospective investors, provides information to investors and entrepreneurs on the opportunities available in the State for industry, trade and commerce.

According to Dr. Rajkumar Khatri, Commissioner for Industrial Development and Director of the Department of Industries and Commerce, 267 projects with an investment of Rs.83,665.29 crore were approved by the SLSWCC and the SHLCC between April and August this year. The projects include mega investments in steel, gas and sponge iron. Thanks to the initiative of the directorate, between 2004-05 and 2007-08 (up to August) 1,797 projects with a total investment of Rs.2,73,599.75 crore had been sanctioned by the two committees. These projects have generated 37,47,395 jobs.

Officials said that Tata Motors would be investing Rs.2,734 crore at Dharwad for the manufacture of buses and trucks. The first batch of vehicles from the plant, which manufactures earth-moving equipment, will roll out before the end of 2009. With the aim of locating industrial projects in various backward regions of the State so that the fruits of economic development and employment opportunities are shared by all segments of society and regions, the government has been actively promoting tier II cities such as Hubli, Mangalore, Mysore, Belgaum, Shimoga and Bagalkot.

This aspect features prominently in the States Industrial Policy for 2006-2011. It seeks to achieve an industrial growth of over 12 per cent, accelerate the growth of industries, increase exports, create employment opportunities for 10 lakh people during the policy period and also reduce regional imbalances.

The directorate has held roadshows in a number of cities in India and abroad California, Baltimore, Paris, Lyon, Amsterdam, Vienna and Hanover.

The Karnataka State

Established in 1951 to meet the long-term financial needs of small and medium enterprises (SMEs), the Karnataka State Financial Corporation (KSFC), which has assisted over 1,58,000 units to the tune of Rs.8,168 crore, is today reviving and restructuring itself to face up to the challenges such as the high cost of borrowing, the high mortality rate of SMEs and falling margins.

The KSFC is a Category One merchant banker. Its merchant banking division takes up management of public issues, syndication of loans, bills discounting and so on. The other activities are subscription to non-convertible debentures and factoring services.

Of the KSFCs total share-holding of Rs.124.68 crore, 80 per cent is held by the Karnataka government, while 19 per cent is held by the Industrial Development Bank of India (IDBI). The corporation, which made an operating profit of Rs.17.32 crore in 2006-07, was also able to bring down its net non-performing assets to 33 per cent (from 58 per cent in 2003-04). While its core business of term lending stood at Rs.425 crore during 2006-07 an increase of 25 per cent over the previous year the corporation has already begun to diversify to areas such as complimentary lending. The diversification has also been on account of the fact that the number of loans that are being handed out has fallen by half from around 50,000 a few years ago. But with the loan amounts seeing a dramatic increase, the KSFC, which as a rule does not lend amounts less than Rs.5 lakh, has been able to maintain and even increase its volume of business.

Elaborating on the corporations diversification ventures, its chairman and managing director V. Umesh said that it would soon obtain the licence for non-judicial stamp-vending, set up industrial areas at Koppal and Hubli, and information technology (IT) parks in Bangalore and Mysore, and establish industrial and infrastructure projects, some of which will be in tandem with the Karnataka Industrial Areas Development Board. It has also entered into negotiations with 10 to 12 corporations and boards such as the Karnataka State Electronics Development Corporation for setting up a nanotechnology park.

Development of the IT parks, will be undertaken in collaboration with the Infrastructure Leasing & Financial Services Limited (IL&FS) and entrepreneurs have already expressed interest in the projects. The KSFC will also offer plug-and-pay facilities.

Says Umesh: We have also entered into talks with four or five municipal corporations for development projects. We will shortly offer entrepreneurs services such as third-party technical evaluation of projects, appraisal of projects, e-governance loan syndication, arrangement for loans, project and issue management consultancy, and supervision and monitoring of projects. In short, we will offer complete financial and technical support.

The KSFC has initiated several fee-based activities, by entering into memoranda of understanding with Unit Trust of India (UTI), the Life Insurance Corporation of India (LIC), IFFCO-Tokio General Insurance and IL&FS.

The Karnataka government provides interest subsidy for loans less than Rs.100 lakh taken by Scheduled Caste entrepreneurs, who have to pay only 4 per cent interest on term loans. The KSFC has already received a subsidy of Rs.4 crore under this scheme.

It is the nodal agency for the Union Ministry of Food Processings scheme that provides a subsidy/grant of 25 per cent to food processing industries to meet the cost of plant and machinery and related civil works subject to a maximum of Rs.50 lakh.

At the Toyota-Kirloskar

Government-owned sandalwood factories and sandalwood oil factories were established in Karnataka in early 20th century. The Sandalwood Oil Division in Mysore was set up in 1916, the Government Soap Factory in 1918 and the Sandalwood Oil Division in Shimoga in 1944. These establishments owed their success to Nalmudi Krishnaraja Wodeyar, the then Maharaja of Mysore and Sri M. Visvesvaraya, the Dewan of Mysore. The factories functioned as Departmental Undertakings under the control of the Board of Manager for Industrial Concerns (BMIC) until October 1980, when they were integrated into companies under the Companies Act, 1956, and christened the Karnataka Soaps & Detergents Limited.

Undertaking a soap expansion project in 1984, the company increased its installed capacity to 26,000 tonnes a year. In 1975, the Detergent Division was started with an installed capacity of 10,000 tonnes.

However, owing to a variety of reasons, the company accumulated a loss of Rs.99 crore by the end of March 1994. The loss was, however, wiped off by March 2003. Reserves and surpluses were also generated in 2002-03. Today the net worth of the Karnataka Soaps & Detergents Limited is in excess of Rs.27 crore. It has also won the ISO-9002 and 14001 accreditation certificates, and the Geographical Indication Registration Certificate for its Mysore Sandal Soap and Mysore Sandal Oil. While production during 2005-06 was 6,250 tonnes, it rose to 7,912 tonnes during 2006-07. According to its Managing Director B.H. Anil Kumar, the company plans to produce 8,605 tonnes for the current financial year.

The companys gross sales rose from Rs.125 crore in 2005-06 to Rs.134 crore during 2006-07. Its sales target for 2007-08 is Rs.140 crore. There has also been a substantial improvement in the profit margins of the company. While it recorded a net loss of Rs.2.67 crore during 2004-05, it was able to earn a modest Rs.1.79 crore as profit in 2005-06. The profit margin improved to Rs.3.58 crore during 2006-07, and is projected to touch Rs.5 crore in 2007-08. The company achieved an export sales target of Rs.5.03 crore during 2006-07 and is expected to clock Rs.6 crore in the current financial year. Anil Kumar said that the company had entered new markets such as the United States and Japan, besides being successful in many Asian and West Asian markets.

Among the new initiatives by the company are the marketing of talcum powder with an improved perfume, and economically priced agarbatis (incense sticks) sourced from the rural areas. There are also plans to launch a toilet soap in the popular segment and also liquid soaps. Anil Kumar says that farmers have reacted positively to the companys Grow More Sandal Scheme.

Having realised the need to put in place high-quality infrastructure, the Karnataka government came up with Infrastructure Policy, 2007 in July. Its main objective is to to provide a fair and transparent policy framework that helps facilitate the process of economic growth and encourage public-private partnership (PPP) in upgrading, expanding and developing infrastructure in the State. The government is keen to provide and facilitate an increasing role for PPP both in creating new infrastructure assets as well as in managing the assets already created.

The policy, the government hopes, will help entrepreneurs save costs through innovative designs, timely implementation of projects and higher efficiency in operations; enhance the quality of service to users by adopting better managerial practices; reduce, and gradually eliminate, pricing constraints; enable public funds to be earmarked for other commercially non-viable but socially justifiable projects; develop solutions that are financially innovative and cost-effective; and generate more jobs.

According to the new policy, the government would think of directly investing in infrastructure projects only if the PPP route is found unviable. The policy was evolved after the government realised that issues such as environment, land acquisition and rehabilitation, inadequate capacity in public and private sectors, and lack of credible and bankable projects had been hampering the development of infrastructure. Also, despite a number of sectoral policies in areas such as power, ports, tourism, IT, roads and industry, infrastructure development could not be expedited through active private sector investment and participation.

According to V.P. Baligar, Principal Secretary, Infrastructure Development Department, the new policy, besides attempting to bring about changes in fiscal policies, also takes into account the emerging interest of the private sector in infrastructure development.

Infrastructure Policy 2007 covers agri-infrastructure, education, energy, health care, industrial infrastructure, irrigation, public markets, tourism, transport and logistics, and urban and municipal infrastructure. The policy will be anchored through a dedicated PPP cell in the department, which not only coordinates and facilitates the identification, development and implementation of infrastructure projects, but also assists in obtaining clearances and approvals through the PPP route.

According to Baligar, some of the projects taken up under the PPP route are the Bangalore International Airport (BIAL), which will be ready by April; a six-lane high-speed corridor between BIAL and the city (Delhi Metro is preparing a detailed project report for it); revival/upgrading of airports at Hubli and Mysore (which will operate as a full-fledged airport by October 2008), Belgaum and Mangalore; a civil enclave at the Bidar Air Force Station (which will serve parts of northern Karnataka, Andhra Pradesh and southern Maharashtra); and four greenfield airfields at Hassan, Gulbarga, Bijapur and Shimoga. Twenty helipads are being constructed to help the tourism industry.

Projects to double the Bangalore-Mysore rail line, construct new lines between Gadag and Sholapur, Shimoga and Talguppa, Harihar and Kotur, Bidar and Gulbarga and Mushirabad and Mehaboobnagar are also implemented through the PPP route.

Karnataka has requested the Indian Railways to undertake feasibility studies on the construction of dedicated high-speed passenger and cargo rail corridors between Bangalore and Chennai, and Bangalore and Kochi, which would be extended up to Hubli and Mysore.

Established in March 1966, Mysore Sales International Limited or MSIL, is a multi-dimensional, multi-product marketing and export organisation designed to meet the marketing needs of Karnataka. The company has emerged as a dynamic marketing force with a national presence and an international reach.

In the late 1960s, MSIL was merely a centralised marketing unit for the numerous State-owned industries. But by the 1970s, it had overcome teething troubles and acquired the expertise for a variety of projects. The MSIL was then asked to handle special projects for the government such as the distribution of imported cement during a nationwide shortage and the export of surplus white rice. The company was also entrusted with the responsibility of manufacturing and distributing notebooks to students at reasonable prices. MSILs Vidya and Lekhak notebooks and stationery are brand leaders.

In 1977, MSIL was asked by the Customs Department to manage the Bangalore Air Cargo Complex, and it has been serving the needs of exporters and importers since then. In 2004, MSIL constructed an 80,000 sq. ft. state-of-the-art export warehouse and, in 2005, expanded its operations to a newly constructed, modern, 50,000 sq. ft. warehouse, which is used exclusively for the storage of valuable imported cargo. In all the complex has over 2,60,000 sq. ft. of warehouse land and handles over 45,000 tonnes of cargo every year.

In the 1980s, MSIL entered the consumer market through its hire-purchase scheme MSIL Homaker and the travel trade through its MSIL Tours and Travels, (which is aimed at meeting the growing travel requirements of government officials). In the 1990s, MSIL took up the responsibility of streamlining the distribution of Indian-made foreign liquor.

The company is in the business of selling sandalwood oil, soaps, coffee, rice, garments and other commodities to overseas buyers. It acts as the local agent for international business buyers who wish to enter the Indian market and for foreign buyers to source products in India. It is also diversifying into iron ore exports and has already exported to China 41,000 tonnes of calibrated iron ore worth Rs.24.8 lakh.

MSIL has launched its own chit funds under the brand name MSIL Moneytree. Its business acumen, trade experience, managerial effectiveness, credibility and innovative marketing strategies have enabled it to manage effectively a diverse range of products and services. From a modest turnover of just Rs.1.5 crore in 1966, MSIL has a turnover of Rs.1,910.32 crore today. It is one of the very few Public Sector Undertakings to earn substantial profits consistently.

A part of the United Breweries Group, the Mangalore Chemicals and Fertilizers (MCF) is the only large-scale, organised manufacturer of chemical fertilizers in the State. It has a turnover of over Rs.1,400 crore. Its plant, commissioned in 1976, is strategically located at Panambur, 9 km north of Mangalore, on the banks of the Gurpur river and in front of the New Mangalore Port. While 65 per cent of the companys produce is sold in Karnataka, the rest is taken up by farmers in Andhra Pradesh, Tamil Nadu, Kerala, and even southern Maharashtra. Production has grown by 20 per cent, and profits were Rs.42 crore.

The company has a capacity to manufacture 2,17,800 tonnes of ammonia, 3,80,000 tonnes of urea and 2,80,000 tonnes of NPK (nitrogen, phosphorous and potassium) fertilizers annually. In addition to the manufactured products, MCF also markets 1,00,000 tonnes of imported MOP (muriate of potash), 1,75,000 tonnes of granulated fertilizers (crop- and soil-specific) and 12,050 tonnes of micronutrients such as zinc sulphate, magnesium sulphate and copper sulphate, annually.

Deepak Anand, Managing Director, MCF, says that unbalanced and indiscriminate use of fertilizers has resulted in nitrogen poisoning of the soil, affecting yields drastically. As they get urea at a subsidised price, farmers have overused it. This has resulted in the soil losing its natural nutrients, he said. In a bid to reverse the trend, the MCF is educating farmers on the use of fertilizer, choice of crop and soil quality. Its premix-granulated fertilizer has been accepted by the Karnataka government.

In order to undertake research and development activities such as identifying new products and evaluating them and also to provide extension support to farmers, dealers and its own marketing staff, the MCF has started an Integrated Nutrient Management unit at Hassan. The unit is also expected to manufacture small quantities of micronutrients and speciality fertilizers. The MCF offers farmers a total package under one roof in its Integrated Farm Management pilot project.

Thanks to its salubrious climate and cosmopolitan ambience, Bangalore has become the preferred destination for most global summits and trade conferences. No wonder it was chosen by the Indian Machine Tool Manufacturers Association (IMTMA) to establish its world-class international exhibition centre.

The Bangalore International Exhibition Centre (BIEC), being built on the IMTMAs 40-acre plot at Peenya on the Bangalore-Tumkur road, at a cost of over Rs.120 crore through PPP, will henceforth be the venue for the Indian Machine Tool Exhibitions and other events connected with the machine tool industry. The IMTMA, a premier institution engaged in promoting machine tools, has also chosen to locate its complex at Peenya since it is fast becoming the heart of the Indian machine tool industry. Bangalore contributes to 60 per cent of the production of machine tools in India. The city has emerged as a key manufacturing centre of Indian industry. The complex has been christened the IMTMA-Naoroji Pirojsha Godrej International Exhibition and Conference Centre.

According to Jamshyd N. Godrej, who is the chairman and managing director, Godrej and Boyce Manufacturing Company Ltd., the IMTMA would be investing over Rs.40 crore in the project, with the Government of India having released a grant of Rs.35 crore already. The government has also released another Rs.15 crore, which would be used for the development of that part of the Peenya industrial area near the centre. The Export-Import (EXIM) Bank of India has provided Rs.40 crore for the project and Rs.10 crore as a bridge loan. The BIEC will offer multipurpose facilities for exhibitions, product demonstrations, seminars and skill development training and support facilities. It will also house a productivity training centre and a design institute, the first of its kind in the private sector for training young engineers in the latest in design skills.

Two columnless halls offering a covered space of 20,000 sq m and designed to provide tremendous flexibility to organisers to lay out stalls are ready. Two halls covering 20,000 sq m are nearing completion. The partly air-cooled and partly air-conditioned BIEC is equipped with control rooms and business centres, rest rooms and VIP lounges, spacious entry and exit ways for movement of trucks into the halls and food courts. The BIEC has been designed and built as a Green Project 50 per cent of fly-ash has been used in the construction of non-critical areas, use of chlorofluorocarbons is avoided and an extensive water harvesting systems installed.