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What’s behind the Rs 3,500 cr investment dispute between Kerala govt & Kitex Garments

Here's a look at the controversy, the political factors that may have been in play, and what the state is planning to do to restore the faith of investors in the state.

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New Delhi: Kerala-based Kitex Garments, the second-largest manufacturer of kids’ garments in the world, has opted to move a Rs 3,500 crore project out of its home state. The company will now invest Rs 1,000 crore in Telangana after the latter laid out a red carpet.

The group’s top official publicly blamed the Kerala government for “hounding” the company, raising questions about the ease of doing business in the state.

Here’s a look at the controversy, the political factors that may have been in play in the exit of the company from the state and what the Kerala government is planning to do to restore the faith of investors in the state.

The root of the public spat

Kitex was subject to multiple inspections by different Kerala government departments over the last few weeks that saw the group chairman Sabu Jacob openly accusing the Left government headed by Pinarayi Vijayan of hounding the company.

Jacob announced the group’s decision to shift its Rs 3,500 crore proposed investment to set up three apparel parks out of Kerala after being subjected to “11 inspections in a month” in June.

Some of the complaints against the group were filed by a Congress MP as well as a Congress MLA, besides a woman employee. The allegations varied from discharging pollutants into a nearby river to harassment to flouting the minimum wage norms.

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Vijayan’s response

The Kerala government has denied that it deliberately targeted Kitex. The state industries minister P. Rajeev pointed out that the inspections followed specific complaints and orders from courts and the state’s human rights commission.

The Kerala chief minister also stressed in a tweet that the state is one of the most investor-friendly states in India and will continue to be so. “The LDF Govt. ensures that sustainable and innovative industries thrive here,” he wrote.

A political threat from an experiment

Kitex group’s Jacob, besides being an industrialist, has also dabbled in politics. Jacob floated Twenty 20, a unique political experiment, that managed to win some seats in the 2015 panchayat elections and went on to build on that success in the 2020 polls by winning seats in more panchayats.

This model of corporate-driven panchayat has resulted in a fair bit of development in small villages, posing threat to both the Congress and the Communist Party of India (Marxist).

How Kerala performs in the ease of doing business rankings

Kerala lags many states and Union territories in the ease of doing business rankings. It was ranked 28 among 36 states and UTs in the ease of doing business rankings based on reforms that states were asked to enact in 2019. 

It was found that Kerala didn’t implement some of the reforms around labour regulation, single-window clearance and steps to ensure easy information flow and transparency. 

However, after the Kitex pullout, some groups that have thrived for years in the state came out openly in support of the state government.

Harsh Goenka, chairman of RPG Enterprises, openly tweeted in support of the government. “We are the largest employers in Kerala. We find the local government very supportive,” he wrote.

Harrison Mala, a RPG enterprises firm, is India’s largest producer of rubber and also produces tea. It has a substantial presence in Kerala.

New bill to protect industries as Kerala tries to woo investors

The Kerala government is now in the process of drafting a bill aimed at improving the ease of doing business for manufacturers.

The bill proposes to do away with overlapping inspections by multiple departments and minimising disruptions to the production cycle as the state looks to repair its image as an investor friendly state. It also envisages keeping industries in loop ahead of such inspections.

(Edited by Amit Upadhyaya)

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