In an interview, Sukhbir Singh Badal, the deputy chief minister of Punjab as well as president of Shiromani Akali Dal says he wants the state to become an attractive investment destination for all kinds of industries, especially IT, food processing and education sectors
Punjab's deputy chief minister (DyCM) Sukhbir Singh Badal is on a 'red carpet' mission to invite industries into the state. During his second consecutive term as DyCM, Badal is on a whirlwind tour and met several top notch industrialists, like Mukesh Ambani, Cyrus Mistry of Tata group, Anand Mahindra, Adi Godrej and Ashok Hinduja over the past three days.
Punjab is already facing a threat from industries shifting to neighbouring states like Himachal Pradesh, Uttarakhand and Jammu & Kashmir, as there are more sops available. In order to alleviate these threats, Mr Badal claims to provide 24x7 power—on demand—to industries from December, besides extending all sops to industries. Here are excerpts from an interview of Mr Badal with Moneylife…
Yogesh Sapkale (ML): You have been moving ahead with a single point agenda of 'inclusive development' for Punjab. What are the main areas that you are focusing on?
Sukhbir Singh Badal (SSB): Basically, we are moving ahead in a very focused manner. Our first area is IT sector. As you may be aware, we are the ones who can provide best alternatives (for IT industries) across north India. In fact, across central India, the best location for IT is now Mohali.
At present, the IT sector is concentrated at Hyderabad, Bengaluru, Tamil Nadu and maybe Pune. At Mohali, we are coming up with an international airport. We have earmarked about 1,000 acres of land for IT industries near the airport. Hopefully, over next two-three months, all the space available will be taken up by IT companies, as per the response we are receiving.
Tata Sons chairman Cyrus Mistry had finalised a project to establish a Skill Training Institute and Training Centre at Ropar. We will attach five industrial training institutions (ITIs) with the Centre. A formal memorandum of understanding (MoU) in this regard will be signed during the Investment Summit being held in Mohali on 9-10 December.
We are also looking at food processing industries. Mahindra and Mahindra (M&M) has shown interest in processing of fruits and sweet potatoes. Several other companies have also shown interest in food processing business in Punjab.
We are looking at textiles as well.
In addition, we are focussing on providing quality education in Punjab. We are encouraging setting up private universities and institutions. Over the next two-three months, many private, branded and national and international institutions setting up bases in the state. Anand Mahindra is setting up Mahindra University in New Chandigarh, an umbrella institution for five engineering colleges being established by the Mahindra group in different parts of the country, in technical collaboration with Ecole Centrale Paris of France.
Hinduja group Executive chairman Ashok P Hinduja agreed to sign an MoU during the Investment Summit in December for establishment of a Driver's Training Institute in Punjab.
We are also focussing on healthcare. Several top hospital chains have shown interest in setting up hospitals in Punjab.
Adlabs chairman Manmohan Shetty has too evinced interest in setting up a theme based tourist entertainment hub near Ludhiana along River Satluj.
ML: You are talking about making Punjab a power surplus state by next year. However, last year due to non-supply of coal from Panen Mines (Jharkhand) there was a situation for possible power crisis. How do you plan to tackle such situations in future and what are your plans to make sure that all power plants continue to receive fuel uninterrupted?
SSB: That particular coal supply situation emerged due to the worker's strike at Panen Mines. Anyway, we had adequate stock even at that time. At present all power plants are maintaining a coal stock of 30 days.
Talking about surplus power, we do have shortage in the past. On an average, there is a shortage of about 2,364MW. By end 2014, it would go to 2,974MW considering the increasing consumption. However, there are three plants, the 1,980MW Vedanta plant at Talwandi Sabo, 540MW GVK plant at Goindwal Sahib and 1,400MW L&T plant at Rajpura becoming operational from next month. These plants would become fully operation by early next year giving us additional power of 3,920MW.
In addition, through several other new projects we are planning to generate additional 9,800MW of power. This would make sure that there is 24x7 electricity across Punjab for everyone.
ML: You are also providing free electricity to farmers. Don't you think that this would imbalance the power scenario and affect the health of state electricity board?
SSB: Electricity board receives its dues as the state government makes the payment (instead of farmers) through check. So electricity board is not in a loss. At the same time farmers continue to receive power.
ML: Industries from Punjab are shifting to Himachal, Uttarakhand and Jammu and Kashmir, as there are more sops available. What are your plans to restrain industries from shifting?
SSB: One thing we must understand is all these states, the specific period of sops is about to end. At the same time we are now starting to provide various sops for industries.
Another thing, for example, the industries in Himachal are located near Punjab's border. So, everything like raw material and manpower is being provided by our state.
ML: What kind of sops you would provide for industries?
SSB: We are willing to provide incentives on value added tax (VAT) and central sales tax (CST) front whereby companies investing in Punjab could retain as much as 80% of both taxes for 10 years.
You see, the government's job is not to make money but to create environment which would result in money creation. We are dispensing old archaic rules and posts including that of boiler and vehicle inspectors and introducing a new system of self certification.
Punjab is on the threshold of becoming a power surplus state. We have more than 20,000 acres of ready land available for allocation to entrepreneurs. We have created a single window system to hand hold investors coming into the state.
We not only assure 24-hour power to the IT industry but would also offer to pay for the cost of any disruption.
ML: You are talking about surplus power. But, what about the electricity tariff? Will it be competitive enough or at par with other states?
SSB: Today, we are equivalent or cheaper than most of the states. All our power plant calculations are made on the basis to total cost of production, much is quite low. This includes power from new plants that would be operational by the end of this year. We are getting power from them at Rs2 to Rs3 per unit while all other states are paying around Rs6 or Rs7. If you consider increasing costs of raw materials over next few years, electricity in other states would even cost as much high as Rs8 to Rs12 per unit. At the same time, electricity tariff in Punjab can even go down further.
ML: Although Punjab's new industrial policy was announced in June there still is no notification. When do you expect to issue the notification for this? Why it is delayed?
SSB: I agree we announced our new industrial policy in June. However, this is such a drastic policy, it has to go through certain legal processes. Anyway, we will issue the notification over next one-two weeks. In any case, before our Investor Summit, it would definitely be notified.
ML: Talking about politics and elections that are around the corner, more and more people are demanding better governance and good administration. What are your views on this?
SSB: In Punjab, our basic thrust is on governance and reforms. We are changing all obsolete and old laws. We are moving to make all services available online for citizens so that they can access it at ease from home or file complaints. For example, we started Saanjh Kendras that provides most of the services of a police station, except handling heinous crimes. There are over 100 such Kendras, which have a corporate style look that people can approach without any hesitation.
Over the next few years, we want to connect each village in Punjab through a broad band network. Reliance Industries' chief Mukesh Ambani has shown keen interest in providing the broadband connectivity to all schools and hospitals in Punjab at nominal cost.
Tata Consultancy Service (TCS) has shown a willingness to take all citizen services to the doorsteps of the people through a unique "Punjab Online" programme, which will cover each and every village panchayat in the State. The services offered will include birth and death certificates, school admission forms, examination results, vehicle registration, passport verification, marriage certificate, utility services and provision of land records.
ML: You were a minister at Central level. Are you happy at your current position?
SSB: Being a regional party, we can contribute to more welfare of people at the state level. However, with the new government coming (at centre) we will send some of representative as ministers there.
ML: What are the chances of a new NDA government at Centre?
SSB: 100%. There should be no dispute on this!
Rural wages continue to rise, but the pace of that growth is moderating, says Nomura in its research note
Rural wages continue to rise, but the pace of that growth is moderating. With real rural wages moderating, both rural demand and inflationary pressures should moderate in the medium-term, says Nomura Financial Advisory and Securities (India) Private Limited in its research note on rural wages and inflation.
Several factors, including the government’s employment guarantee scheme and indexing rural wages to CPI inflation, have boosted rural wage growth and shifted the terms of trade in favour of the rural sector, according to the research note. However, the slowdown in urban areas is now starting to feed through into slower rural wage growth.
According to Nomura, over the last few years, rising real rural wages have both supported rural demand and increased the cost of production, thereby making inflation sticky. A moderation in real rural wages should cause rural demand to moderate, but medium-term inflationary pressures should moderate as well, as the cost of production (wages) eases.
The Nomura research note gives the following statistics: Growth in the average daily wage rate for agricultural labourers moderated to 13.1% year-on-year (y-o-y) in August 2013, significantly slower than 18.5% y-o-y in 2012 and 23.4% in 2011. After adjusting for inflation, the decline was even more stark — real rural wage growth moderated to -0.1% y-o-y in August from 9.3% y-o-y in 2012 and 13.4% in 2011.
The overall picture on rural wage growth is summarised in the following chart:
The markets started very strong, rising to a three-year high but a surprising selling pushed it down. Nifty has closed just above the 6,160 support level, indicating weak legs. For the third, there were huge volumes without any meaningful advance, which is a warning for the bulls.
We had mentioned yesterday that the first signs of market weakness in the ongoing bull- run surfaced yesterday. Today, the markets opened flat but shot up after half an hour without any news flow, to a three-year high. However, after that initial burst, the market started declining slowly at first and then with increasing speed.
The S&P BSE Sensex opened at 20,766 and the bulls, ,within the first hour of trade, charged it to its intra-day high of 21,039 before the bears came and propelled it down to its intra-day low of 20,656. The index closed at 20,725. (down 42.45 points or -0.20%).
Similarly, Nifty opened at 6,164, hit an intra-day high of 6,252 then went down and hit its intra-day low of 6,142 before slowly climbing up to close at 6,164 (down 14 points or -0.23%).
The breadth of the market was negative, with declines outpacing advances by 1.3 times. Out of 1,224 stocks, 666 were down, 496 were up and 62 were unchanged. The National Stock Exchange witnessed much higher volumes compared to the preceding four trading sessions slowed down this time, with 71.18 lakh shares traded. Once again, huge volumes without meaningful advance are a warning for the bulls.
Most sectoral indices were down except Bank Nifty, Auto, Finance and FMCG. The Bank Nifty breached the psychological 11,000 barrier but then retreated to 10,902, up 0.20% for the session. CNX IT and CNX Media were sharply down at 1.68% and 1.91% respectively.
Of the 50 stocks in the Nifty, 20 stocks advanced and 30 declined. The top five gainers were Ranbaxy (2.71%), IDFC (2.68%), NMDC (2.60%), M&M (2.56%) and GAIL (1.56%).
The top five losers were HCL Tech Jindal Steel (-4.63%), Wipro (-4.59%), Coal India (-3.81%), TCS (-2.58%) and BHEL (-2.28%).
Positive Chinese economic data sent some soothing signals to the markets worldwide. Its manufacturing output was better than anticipated. The initial 50.9 reading for a Purchasing Managers’ Index, by HSBC Holdings Plc and Markit, compared with a 50.4 median estimate from analysts surveyed by Bloomberg News. This put hopes that China’s economic recovery is alive and well, but the Shanghai Composite was seen down 0.86%.
Most Asian markets, except for Shanghai Composite and NZSE 50 (New Zealand) and BSE Sensex, were flat.
US stock futures rose during early morning trade on Chinese economic data. The European indices were solidly in the green.