The New Industrial Policy: Goa

This first appeared in the Heraldo dated 24 Jun 2022

 

The Government of Goa, has announced a new industrial policy. When compared to the previous policies on first reading it appears to be comprehensive and addresses all the pain points of industry, especially for those who wish to start enterprise in Goa.

 

It could be the first time Human Capital, Reliable Power, Water, Internet and Waste management are highlighted and part of one policy document in an integrated manner.

 

The way to hell they say is paved with good intentions, so we will have to wait for the final policy directions. This policy has many interconnections with other departments. For eg: land use comes under the regional plan and that is the domain of the TCP department. In the past, decisions by the Industrial Promotion Board (IPB) which will now become a very important part of implementation of the single window system (SWS)  were not accepted by power department. Therefore when the details are out, these links will have to be closed by notifications making the decisions binding on other departments.

 

One aspect that stands out is the fact that the Government has realised that it is the front line that needs to be trained to change their attitude to business and businessmen. While the Centre and State have been pushing reforms and wanting the environment to be investor friendly. It finally comes down to the dealing hand who handles the applications and who does not bother and thinks nothing of asking the investor to come tomorrow. We all know that tomorrow never comes but the front end employee loses nothing and gets his salary anyway at the end of the month. Training will help the employee understand the importance of revenue and job generation through investment and more importantly he will drive the Governments vision expressed very well in this document.

 

The vision is to build trust and collaboration, infuse transparency and predictability to achieve the all important goal of prosperity and SABKA VIKAS. These are very encouraging words and signals a shift in thinking at the policy level. This vision statement itself marks a departure from the normal, and now looks at every investor as a partner with Government.  “Sabka Vikas”, can only be achieved by revenue generation, and business is the main revenue generator, This revenue can power all the social empowerment schemes like free water or electricity.

 

The policy also makes GIDC the sole authority for handling allocation of land. This is as it should be, when IPB was also allotting 40% of available land there was a tussle between the organisations. On one occasion a piece of land was reduced from 3000 sqm to 2999 sqm after the first advertisement was released by GIDC because they realised 3000sqm comes under the purview of IPB to allot.

 

Allotting a plot, only after advertising is a good way to increase transparency. Manufacturing or MSME is not a focus area, proposals related to them have been floated. One, revival of sick and closed units.  The situation is complex, many of the closed units have dues with ESIC/PF/PWD and Electricity Dept. Often deals to transfer fall through because the “No Dues” certificate takes time or is disputed.  The plot then continues to be unused, a big loss to the exchequer. Hence finding a solution to the departments dues is imperative and must be time bound.

 

The Government has promised to incentivise an “Anchor” unit to invest once policy is finalised.  Industry organizations can leverage their connections, GSIA organised a meeting with the TATA group and CII also has such connections. Once an Anchor unit is identified, smaller plots must be made around it to facilitate ancillary MSME units.

 

On the lines of Micro Industrial Units, can GIDC be tasked with using a plot to create “plug and play” spaces (Galas in popular parlance), small spaces like you have in many parts of Mumbai, where entrepreneurs immediately, start operations without having to get a plot, build etc.  Welding, machine shop, electrical repairs etc are some examples of what can be started locally and in a  small area.

 

Revival of self governance of industrial estates, is a welcome step.  GIDC rules mandate a satisfaction certificate from the Estate Association which is bypassed at present. If implemented well it can ensure proper use of funds and quality control. Stakeholders cannot complain, having approved the work.

 

While subsidies have been out of style for a while, close on the heels of the central Production Linked Incentive (PLI) Scheme, Goa is now launching its own. This is linked to increasing capital cost or adding employees, both difficult to ascertain and not necessarily contributing to increased revenue. It would be simpler to give an incentive based on increased GST contribution, year on year. If your GST contribution increases above say a base threshold of 15% annually, the business would be entitled to a 2-5% of all incremental contributions. Very easy to track and will be fair and transparent too.

 

The last but not the least is Ease of Doing Business. The policy promises to make “Single Window System” concept a reality.  The thrust will be more online applications, a common form which will be used by all departments, rather than one form for each. The best is enforcement of time lines, will it be deeming clauses? We have to wait and watch. There is work to be done.

 

Well begun is half done. The Government has indicated the direction and the intent, we do hope they will be able  to cross the hurdles and covert the draft into a workable policy that will ensure SABKA VIKAS.  

  

Paying SEZ promoters is not a good idea

This first appeared in the Herald

Just over two months ago, in April, when it began to get clear that the Special Economic Zone promoters had indeed sought that they be paid the amount they had spent to buy the land so as to free up the property that has been locked since the SEZ policy of the State government was scrapped, Herald had termed this as ‘nothing short of a farce’ that ‘must be rejected by the government, for the interest of the State’. We now learn that the government has not rejected this proposal of the SEZ promoters, but has in fact decided to go ahead and make the payment.

Goa Industrial Development Corporation (GIDC) chairman Glen Ticlo has announced that the Corporation at a board meeting has agreed to pay the SEZ promoters around Rs 300 crore to unlock the 38 lakh square meters of land that had been allotted to them more than a decade ago. The GIDC chairman said that the corporation has agreed to pay the promoters an interest of 9 percent as against their demand for 15 percent, as this is the interest it has earned. This decision of the GIDC will be conveyed to the Supreme Court during the next hearing in July, as the matter currently stands in court.

We cannot deny that this deal of the government with the SEZ promoters will free up some much-required land for industrial purposes in the State. Over the past few years the State has been struggling to make available suitable area for industries, and has even decided to reduce the open spaces in industrial estates to free up some of the land, but should Rs 300 crore of public money be paid out to the SEZ promoters to get back the 38 lakh square meters? Especially since the promoters paid the State approximately Rs 108 crore for the land? What the State will be paying back is close to three time the amount it was paid by the promoters.

Before answering the questions above, we need to look back at the allotment of the land as even a decade after the SEZs have been scrapped, the State is yet to be free from them. The then Congress government, following massive public protests, had scrapped all the SEZs and withdrawn the State SEZ Policy in 2008, though three of the seven SEZs had already been notified by the Union Trade and Commerce Ministry. The promoters had approached the High Court that in 2010 set aside land allotments to all SEZ promoters and said the allotment had been ‘illegal’. The latter then approached the Supreme Court that stayed the High Court decision and directed the State government and the SEZ promoters to find a solution. That is when the promoters of the SEZs put up the proposal, which GIDC has now agreed to meet.

Herald, in this column in April had also said, “If unlocking means getting back land illegally allotted, by paying the allottees Rs 200 plus which included over Rs 100 crore of interest payments, when the State is reeling under a financial crunch, then it is not a good deal.” It reiterates this now by stating unequivocally that this is not a good deal and GIDC should reconsider its decision. There is still time for GIDC to change its decision.

GIDC: D=Develop or Destroy

This first appeared in The Herald

The Goa Industrial Development Corporation is in the news for the wrong reasons. The units in the industrial estates were informed through a press statement that henceforth their lease rents will be increased. This unilateral decision has irked the industry. The lease rent is sought to be increased despite valid lease deeds which already specify the amount of lease rent due from each lease holder. This move is unethical and unprofessional.

Professionalism is the last attribute GIDC strives for, this is very difficult for the employees to be professional because the position of Chairman is usually a political appointee and thus decisions are usually taken arbitrarily from a political point of view. Politicians as usually wield authority but almost no responsibility.

Another arbitrary decision which defies all logic is the rate for raw water supplied in Verna. To reduce the dependence on bore well water by industries, CM Parrikar ensured that a 20 MLD storage facility was set up in the industrial estate. Since the laying of pipes to supply the stored raw water was delayed by GIDC, it was agreed that the Association would organise tankers and GIDC would charge RS 10/- per M3. A year later, the association gets a notice stating that the actual rate is 25/M3 applicable from day 1. They also issued a circular doubling the water charges with immediate effect without any corresponding change by the PWD. The GIDC gets water from the PWD and supplies the same to industry. Just doing this GIDC loses 2 crores a year . No one has ever looked at ways of reducing or plugging this loss.

This sudden urge to top up the coffers of GIDC comes from a dire need to find funds to pay salaries.The GIDC is looking at means which actually threaten the future of industry, a raise of 2000% in some case and an average of 300%. This increase is hardly reasonable.

Why has GIDC which at one time was sitting on piles of cash that they used to give money to other Corporations viz Kadamba, SAG and even for the Quepem Road . The reason is not hard to find. It is poor decision making and worse abdication of duty by employees tasked with the job of safeguarding the interests of GIDC.

The biggest expenditure is maintenance of infrastructure viz roads etc. The GIDC board had take a decision that before a contractor was paid finally, a certificate of completion would be taken from the respective industrial estate association. From 2015 on wards there was rush of road contracts issued and not one on them has any completion certificate, so technically all are illegal. The Government should audit each contract in terms of scope of work, when was Board approval taken and for how much, any enhancement given and why. This is the major areas where GIDC funds are wasted.

The salary bill is reportedly 25 crores. How did this bill come up? There is a complaint in the CVC that the 6^th pay commission increase has been erroneously applied thus causing a huge loss to the exchequer. A staffing agency, Shudha Facility Management Services, has been employed to recruit and staff GIDC offices across the industrial estates, this is not housekeeping staff but field managers. Is this right? The authorities should find out why the Corporation is using such a service when it is a well known fact that such employees get lower than assured salaries despite signing for higher amounts. Why is the Corporation not hiring on contract directly, instead of paying taxes on this service too?

The cash strapped GIDC has now put in place a farewell gift of 10000/- per employee who superannuates. Should not farewells be a private affair, why this largess and why start something not present in any other Government Corporation.

Given the political pressures over the years, employees have all decided it is better to be quiet than sorry. An employee who was heavily involved in the GIDC scams pre 2012 and was put to pasture is back and close to the top. Apparently he knew all the loop holes that could be converted into plots. This gives a wrong impression to other employees and finally no work gets done.

Thus lease rents or sub lease changes are not collected. The field managers do not report subleases not registered or plots not utilised for fear of ruffling feathers, and so there are huge arrears on lease and sub lease rentals.

The last areas that one can look at for want of space to write is wrong calculations of amounts due. The classic case is that of the 50000 sqm plot sold by Babu as Chairman of GIDC where atleast 2 crores is due as short lease and wrong interest charged. Till date nothing is done. Another case which begs a CBI inquiry is the transfer of the Meta strips plot. Against GIDC rules it was transferred to a logistic company. The lease deed signed without GIDC receiving the transfer fees, but against a bank guarantee which is nowhere stipulated in the rules. The transfer charges are wrongly calculated and the figure reported is 26 crores. The best part of this illegal deal is why Canara Bank which had released advertisement taking possession of the property allowed GIDC to transfer the same without an NOC from Canara Bank. This is clearly a case of collusion by GIDC officials to defraud the bank, else why have a system of obtaining an NOC before transfer?

Hence, inefficiencies of GIDC if transferred to industrial units will have a detrimental effect. It is time GIDC pulled up its socks and professionalised its systems so that it is truly a development body for industry in the State.

GIDC Board Needs Support

This 1st appeared in the Herald

First, I have to apologise for saying GIDC was going to pay the SEZ promoters 15% interest, the rate agreed is simple interest earned on the FD’s made out of SEZ funds less tax paid. This appeared in my column “Not Again GIDC dt 21^st August 2018”. This error was pointed out to me in a healthy discussion on the functioning of the GIDC board by an industry colleague.

However, that was not the only error, the impression given in the news reports was that the GIDC Board had decided to pay the promoters the principal and interest, however it was a decision apparently taken by the Council of Ministers sometime in July 18 and the job of GIDC was to organise the funds which at present are non existent. Unfortunately, the GIDC board was not given complete information. GIDC management gave Government information with mistakes without approval of the GIDC Board.

Assuming the SEZ promoters funds were parked in FD’s and earning interest, it should be quite easy to believe that the principal is available. That is not available is evident from the fact that GIDC is considering auctioning part of the SEZ land in Verna, proceeds of which will be used to pay the promoters. This itself will cause problems because GIDC already has a policy as to how much land can be allocated to utilities, which is the land that can be auctioned. GIDC proposes to auction 50% of the land available post allocation to open spaces and IPB, this is against the existing policy where utilities can be only 10% of available land. They also missed the fact that today as per GIDC policy only 7.5% needs  to be allotted to open space. Whoever prepares documents which Board members rely on to take decisions should be careful and through so that Directors can make a good informed decision.

However GIDC policy could not be considered by the GIDC board as they got instructions from GoG.. The GIDC policy as notified, is very clear that interest cannot be paid on land that is surrendered to GIDC. This fact though mentioned clearly seems to have been missed in the decision making process both at the cabinet level and GIDC board level. More over, the fact that the High Court of Mumbai at Goa has declared  “allotment of lands made to the companies is illegal, the possession of the lands will have to be restored to the GIDC”, was not highlighted to the decision makers. Was such an important aspect/fact left out by mistake or deliberately?

Another argument in favour of paying interest and getting the land back quickly was the analogy of the tenant and landlord. Landlords will agree to settle tenants quickly so that they can get back their land and make a killing rather than be stuck in litigation. If this logic were true we would not see so many landlords and tenants battling it out in the courts. The point is GIDC surely behaves like a landlord more and a development body less normally. In this case, because of the lack of information and veiled political expediency to get the land back and make it plots, the board lost the plot. Why should you pay interest for something illegally allotted in the first place. Why has the Board not demanded any action against those responsible. The money for the land auctioned/leased today or tomorrow will always be increasing given the fact that land is a finite commodity and not perishable. Time is on the side of GIDC.

Focussing on the interest component, it is a figure which should be constant. Meaning simple interest for Rs 100/- at 8.5% p. a. should be Rs 8.5 every year. In GIDC most of these calculations are done historically by the Estates department and not by the accountants. This leads to a situation where there is almost 23 crores difference between what is reported in the balance sheet and what is calculated by the Chartered Accountant. There are four different interest calculations and each arrives at a different answer. Should this not raise eyebrows? Also, there is a difference between what GIDC has calculated ie 256.19 crores and what was submitted to the SC by the AG on behalf of Government of Goa/GIDC ie 256.56 crores. Approx Rs 37 lacs, since it is public money should these figures not be accurate and if there are difference should they not be reconciled and corrected before submitting to Cabinet/ Supreme court? Or does it not matter as no one asks questions? If anyone has questioned, there appears to be no record.

The Congress has demanded withdrawal of this payment or settlement but they fail to mention the fact that the Leader of the Opposition Babu Kavlekar who was Chairman of GIDC during the allotment of SEZ has been let off the hook by the same cabinet decision. So is the Congress making a noise for the sake of making a noise? Can we be sure that there is no quid pro quo. The Congress who is threatening to hold liable all current board members who are party to this new decision but are silent on the greed of those who belong to their own party who created this mess in the first place.

Going forward, apart from taking a better decision based on facts with reference to paying interest, GIDC agendas minutes and information presented to the Board must be considered a serious activity and if there are half truths or omission, someone must be held responsible so that every decision taken by the GIDC Board reflects the commitment of the board members. Lets hope one day GOA FIRST will be the operating policy.