Bengaluru: Karnataka, one of the biggest investment destinations in India, was able to implement just a little over 30 percent of the projects it approved between 2018 and 2023, shows official data released by Karnataka government.
Of the total 122 projects approved with a proposed investment of Rs 4.29 lakh crore and potential to create employment opportunities for 3.52 lakh people, only 38 have actually been implemented, registering a success rate of 31.14 percent so far.
A significant chunk of these big-ticket investments came through the biennial Global Investors Meet 2022, the state’s industries department said, justifying the delays as some of the new projects were signed just over two years ago and several others were stalled due to Covid-19 induced restrictions.
M.B. Patil, Karnataka’s minister of large and medium industries, said that some of these are investments that take three to five years to implement since they require an ecosystem that has to be created.
“There are 68 projects, with investment of Rs 2.29 lakh crore and employment to 2 lakh people, that are in different stages of implementation. That comes to 55.73 percent of the approved projects,” Patil told reporters in Bengaluru Wednesday.
Karnataka is among the most industrious states in the country and any slowdown in its growth is likely to have a direct impact on the country’s prospects, experts and policy makers believe.
But slow implementation of projects, delays in receiving clearances, corruption, and land issues, among other factors, continue to impede the process of converting potential investments into actual projects, industry captains say.
Capital inflows into Karnataka have been steady over the years, attracting IT services, venture capital funding into start-ups and e-commerce, manufacturing, aerospace and other sectors but the poor rate of conversion and sometimes losing big-ticket investments to other states continues to pose a challenge to its growth aspirations as well as those of job seekers.
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‘No hand-holding’
Successive governments have claimed credit for making Karnataka one of the most lucrative destinations for investments.
According to the Department for Promotion of Industry and Internal Trade’s (DPIIT) data, Karnataka was the second-highest recipient of foreign direct investment, raking in over Rs 3.89 lakh crore between October 2019 and March 2024, after Maharashtra, which received Rs 5.32 lakh crore in the same period.
Though the state government prides itself on these facts, on-ground implementation has been its bane.
For instance, Patil said that four green hydrogen projects were signed with an investment of Rs 1.50 lakh crore but are awaiting a ‘green hydrogen policy’ to be formulated by the state.
Combining the completed projects as well as those yet to be implemented between 2018 and 2023, Patil said that this would make the state’s hit rate shoot up to 65.31 percent.
He added that projects valued at Rs 500 crore and above take three to five years for implementation and those above Rs 1,000 crore “can go beyond five years since project proponents will implement their projects in a phase-wise manner”.
Officials say that there are companies that go “shopping” for land in other states that offer better incentives, free land, electricity and rebates based on their preferences.
“Karnataka is going the wrong way and hand holding (of companies) is poor since government officials are not used to this,” T.V. Mohandas Pai, chairman of Aarin Capital and former Infosys CFO, told ThePrint.
He added that processes like single-window clearances are not efficient. According to him, once the project is cleared by the chief minister or other government body, then the company has to individually seek out permission for power, water, roads and infrastructure, as well as get a clearance by the pollution control board, which, he said, is one way to extort bribes from investors.
“Harassment is too much,” said Pai.
He added that on most occasions, there is no “follow up” by the government after high-profile announcements like the Global Investors’ Meet (GIM).
Hosur, about 40 km from Bengaluru, has some of the biggest manufacturing setups like TVS Motors, Ashok Leyland, Titan, Caterpillar, and Exide, among others. A good chunk of its workforce travels from Bengaluru every day.
Karnataka prides itself on being a leading EV (electric vehicle) hub, but it has lost two major projects to neighboring states. This year, electric scooter company Ather opened its third plant in Maharashtra. In 2020, Bengaluru-based taxi service Ola had invested Rs 2,400 crore to establish its EV plant in Hosur, Tamil Nadu.
There are other instances where the state government has approved big-ticket projects, but many of them remain just on paper. For instance, in December 2020, when the Bharatiya Janata Party (BJP) was in power, the State High Level Clearance Committee (SHLCC) headed by the chief minister said that it had approved investment interests of Rs 22,419 crore in three different proposals involving EV and lithium-ion battery manufacturing that has the potential to create nearly 5,000 new jobs.
Two proposals by Elest Private Ltd — of Rs 14,255 crore and Rs 6,339 crore — and a Rs 1,825-crore project by Hyunet Private ltd, were cleared by the chief minister-led SHLCC. Both these proposals are yet to see any forward movement.
“We only approve the projects based on the proposals set before us. We do not know where the company raises money from or if they go through with the project,” a senior government official said, requesting anonymity.
Attracted investments from Japan & Korea
GIM 2025 will be held between 12-14 February next year and the government is already making preparations for the same. It has carried out roadshows, met international delegations, travelled abroad to attract investments and participated in other exercises.
Patil led a delegation to Japan and South Korea, attracting investment commitments of Rs 6,450 crore and potential to create 1,000 jobs. In its two-week tour, the delegation led by Patil and other industries department officials met 35 industry leaders and 200 companies across the two roadshows conducted in Japan and Korea.
The Karnataka delegation engaged in notable meetings with industry giants such as Renesas Electronics Corporation, Toyota Motor Corporation, Samsung Electronics, and LG Energy Solutions, among others, Patil said.
Osaka Gas has committed to its gas distribution infrastructure in Karnataka with an investment of $600 million over the next five years, Patil said.
The minister added that the state had also got leads for bigger investments.
“Beyond immediate commitments, the Karnataka delegation identified promising leads worth $3 billion (Rs 25,000 crore) across the automotive, electronics, and energy solutions sectors. These leads signify potential future investments and underscore Karnataka’s strategic importance as an investment destination,” Patil said.
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