Paper presented at NIES-2008

Jharkhand and Industrial Development

Dr. KSS Kanhaiya
BE, DCPA, MBA, MA (App. Psy.), PhD (Mgmt.)
C.Eng. (I), FIE (I), MIMA, LMCSI, LMISCA
kss.kanhaiya@gmail.com

Background:
Jharkhand is one of the youngest states of the Minerals Quantum Minerals Quantum
Union of India. It is also one of the richest ('000t) ('000t)
states of India in terms of mineral resources. Apatite 3070 Gold Ore 7.20
Asbestos 40 Granite 19105
('000cm.m)
• 40% of the total minerals of the country Barytes 15 Graphite 389678
are available in the state. Bauxite 68135 Iron Ore 308326
• The state is the sole producer of cooking China clay 45930 Kyanite 90
coal, Uranium and Pyrite. Chromite 334 Limestone 964917
• It ranks first in the production of coal, Coal 6208485 Manganese 2363
Ore
mica, Kyanite and copper in India.
Cobalt(m.t) 9.00 Mica 13554
• 80% of the coal & 100% of the cocking Copper 108690 Nickel Ore 9.00
coal, 50% of the bauxite and epetite, 40% Ore
of the iron and 95% of the kainite Dolomite 29864 Quartz 136429
resources in India. (silicasand)
Felspar 5152 Quarzite 219842
• The JMDC website claims that the
Fireclay 50462 Talc/ Stealite/ 289
geological exploration and exploitation of Soapstone
gold, silver, base metals precious stones Garnet 72 Vermiculate 15.024
etc. are the potential areas of futures.
Major Mineral Reserve in Jharkhand

At the same time, it is also a state having 05-06 25716

19066
considerable income inequality and low 22946
04-05 17493
State Domestic Product.
As can be seen, the state has been 03-04 12941
20936
consistent in maintaining its Per capita
02-03 18899
SDP significantly lower than All India GDP 11865
over the years since inception. 01-02 17800
10972
While it was 80.5% of GDP in 1999-2000,
it has rather fell to 74.1% in 2005-06. 00-01 16648
10294

99-00 15839
12747

Jharkhand SDP (Rs.) All-India GDP(Rs.)

Per capita SDP vs. AI GDP at current prices (Rs.)

Source : ECONOMIC SURVEY 2007-2008

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Real Growth Rates of the GSDP of the 26.9
Jharkhand State at Constant Prices as seen
alongside also shows that except for the
year 2004-05, SDP of Jharkhand has always
grown at a rate lower than growth of GDP of
India, if we ignore the year 2001-02 when 9.4 9.6
the growth over 2000-2001 had been slightly 8.54

over GDP rate of growth. 6.43 3.79

7.5 7.52
5.8 3.29 6.74 6.78
So, we find that the state has rich resources
and poor production and slow growth of the 01-02 02-03 03-04 04-05 05-06 06-07
State Domestic Production. Jharkhand INDIA

Source : ECONOMIC SURVEY 2007-2008

Obviously, the state should be home of a poor BPL Population%

populace.
46.4
The statistics supports this assumption we see 41.4 40.9 40.3 39.6
38.3
that Jharkhand really has a major population
living below Poverty line. Next only to Orissa, 27.5
Bihar and Chhatisgarh, Jharkhand is one of the
only four indian states having more than 40%
8.4
of population below poverty line. While the All 7.1 5.4
India figure stands at 27.5% and lowest figure
in the country is a little over 5%, the Jharkhand

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state of poverty is at best miserable in view of
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the richness of the state in terms of natural

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resources.
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Source: Planning Commission

It is necessary to ponder and introspect why Jharkhand has not been able to establish
itself as an Agro-industry state with the available wealth of forests, cultivable land and
age-old industries like TISCO, TELCO, HEC, even BSL – for last more than 35 years. It
is also to be pondered that SDP growth rate has not been very encouraging since it’s
becoming a separate state.

In such situation, it is not very important to enquire, explore, establish or explain the
comparative position of Jharkhand vis-à-vis other states in terms of Industrial
development. As its 23 per cent area is covered by forest and nearly 35 per cent is over
mines, there is limited scope for Jharkhand to become a Punjab of Agriculture with its
around 45 per cent land area being arable and that too having Archean metamorphities
as most dominant hard rocks in the State. So, if it has to improve its state of affairs,
Jharkhand cannot think of doing so without having a high pace of Industrial
Development.

It is with this backdrop that we shall discuss something about factors for Industrial
Development and shall expose ourselves to certain questions that need to be pondered
upon seriously so that answers can be found out for achieving real ground-based
development.

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Current Industrial Set Up of Jharkhand:
Tata Steel, Tata Motors, Heavy Engineering Corporation and Bokaro Steel Plant are
the biggest industrial assets of Jharkhand. Public sector units established in Jharkhand
include - Metallurgical and Engineering consultants India Ltd. (MECON), Hindustan
Zinc Limited, National Mineral Development Corporation (NMDC), Pyrex Phosphate
and Chemical Limited and Indian Aluminium Company Limited. There are a number of
medium and small-scale units in the State manufacturing a variety of products.
Besides, a number of business giants like Rungtas, Birlas, Bajaj and Poddars are
associated with the State. Many foreign and national industry leaders like Posco, JSW,
and Arcelor Mittal are interested in associating with the state.
Principal reasons for this include availability of basic raw material and cheap labour.
At present, there are three industrial development authorities under industrial policy of
the government. These are:
• Adityapur Industrial Area Development Authority (AIADA), Adityapur (150 acres)
• Bokaro Industrial Area Development Authority (BIADA), Bokaro (755 acres) and
• Ranchi Industrial Area Development Authority (RIADA), Ranchi (975 acres).
These agencies are responsible for development of infrastructure like roads, drainage,
parks, water supply, public utility etc., within industrial areas under their jurisdiction.

Factors related to Industrial Development:

Industrial development is though influenced by several social, political, economic and
even psychological factors; it mainly depends on Political will, Commitment of Statutory
Authorities and present Industrial units. For accelerating development of industries in
any region, it is essential to have the conditioning factors strengthened and inhibitory
factors restrained. The important factors are discussed below.

Infrastructure
A vital factor in the development of industries is the availability of means of transport
and communications. It includes telecommunication, air service, road and rail links for
movement of men and material both within and outside the State. Growth in
infrastructure not only alleviates the supply side constraints in industrial production, but
also stimulates additional domestic demand required for industrial growth.
A brief account in the context of Jharkhand is as follows:
Road Network: The Road network of Jharkhand includes 1600 km of national highway
and 2711 km of State highway. India as a whole has 66,754 km of National Highways
and 1,28,000 km of State Highways. Improvement of existing road network, widening
busy roads, provision of new road linkages/bypasses with bridges over rivers,
development of Inter State & intra-state bus terminus across the state etc. are certain
measures that would aid further development by facilitating quick/efficient movement of
raw materials and finished products. Besides length, quality of road network is equally
important. Jharkhand has a long way to go to improve the Safety and security related
issues with Road Transport through the state.
Railways: Rail system in the State provides links to major cities and ports in India.
Important mining centres in Jharkhand are well connected by rail. Handling facilities for
goods are adequately available at Ranchi, Bokaro, Dhanbad and Jamshedpur, In
addition, ore loading facilities are available at Kiriburu, Lohardaga and all the coal
mines. Development of Inland Containerisation facility in the state may help to facilitate
movement of export cargo. Connectivity of the state with major trade and business
centres of India like Mumbai, Kolkata, and Bangalore etc. is still poor.

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Air Service: There is immense potential for improvement and upgradation of Air
transport infrastructure in Jharkhand. Ranchi is connected with Delhi, Patna and
Mumbai by air service. Airstrips are available at Jamshedpur, Dhanbad, Bokaro, Giridih,
Deoghar, Hazaribagh, Daltonganj and Noamundi. A developed Air Cargo Complex and
regular Air Taxi/Cargo Service in major towns in the State may be a further fillip.
Sea Access: Being a land locked state, Jharkhand routes its export shipments through
Kolkata and Paradeep ports. Having a dedicated berth for the state at the Haldiya and
Paradeep ports would facilitate export/import cargo. Navigational infrastructure can be
developed on Suvernrekha and Ganga to provide inland water transport facilities to
facilitate seaport access.
Telecommunication: The telecommunication network in the State is enabled through
presence of major telecom service providers, Six Internet nodes of BSNL including ‘A'
category node at Ranchi, Optical Fiber Cable media connectivity in all district HQ, Local
Dialing Internet access throughout state etc. However, an effectively narrow broadband
is a major concern.
Power: Adequate/uninterrupted supply of power is an essential input for sustained
industrial growth. Jharkhand has a total installed capacity of 2590MW. Although exact
data related to power deficit for Jharkhand is not available, Central Electricity
Authority’s data in respect of All India for 2007-08 till Dec.’07 shows that with energy
availability of 497.8 Billion units, there was an energy deficit of 8.4% over required
543.4BU. For the Peak Demand of 106.6GW, country could meet peak of 90.8 GW –
i.e. a deficit of 14.8%. We don’t need statistical evidence to know that Jharkhand
performance is not better than the All India figures. The deficiency in Power situation is
the main impediment for healthy industrial growth.
Voltage fluctuations and frequent power cuts result in production loss and erosion of
cost competitiveness of industries. Also, rural electrification has considerable
potentialities for the development of small industries like carpentry, blacksmithy etc.
To improve the situation, it is necessary to make the working of State Electricity Board
more efficient. With a number of waterfalls, rivers and huge coal belts, the State has
immense potential for power stations and non-conventional energy. Other options
include privatization of electricity.
Another area of concern is the transmission loss of power. Power suppliers are always
worried about the huge transmission losses caused not by the bleeding powerlines but
by the doctored energymeters.

Government Machinery
Government machinery, within the given policy framework, may be Proactive, neutral,
indifferent or even restrictive in its approach. Any state can impact the regional
Industrial development most directly through its machinery even more than through its
policies. Proactive machinery can be the most potent tool in the hands of people of any
state to enable all-round development including industrial.
The important point here is that data cannot establish the extent of enabling attitude of
government machinery. Withdrawal of multinational companies and non-participation of
reputed infrastructure service providers can be an indication of our will to industrialise
our state.
Self-analysis and introspection by the government functionaries coupled with effective
training and development intervention for them by government are the only ways to
identify rooms for improvement and to effect those improvements.

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Government Policy
A forward-looking industry policy with due emphasis on bridging the gaps and
benchmarking with best practices elsewhere can surely accelerate development of
industries in any state. The policies should not be repetitions of the beaten path,
statements of intentions without complementary procedures, or susceptible to
bureaucratic misinterpretations. Ambiguity, rigidity and porosity in policies are great
restrainers of industrial development and practically every state needs to revisit their
policy for possible imperfections in view of contemporary realities.

Government Procedures and Mechanisms

In order to ensure that Industries are set up and run without sacrificing the overall
social development plans, it is essential that these be subjected to rules, regulations,
procedures and supervision. This is achieved through governmental mechanisms of
clearances, leasings, licences, permits, registrations, reports, returns, inspections and
controls. These procedures and mechanisms are necessary and are aimed at
balanced social development including those of industries.
However, if the procedures and mechanisms become unduly cumbersome, they would
impede industrial development.
Particularly if the procedures and mechanisms in one state are restrictive and other
drivers of competitive advantage are similar in other states, the entrepreneurs would
surely prefer the latter.
Every state, including Harahan should endeavor to examine its procedures and
mechanisms vis-à-vis other states and make necessary adjustments towards
simplification of rules.

Industry Friendly Atmosphere

An industry friendly atmosphere of any state encourages industrial organisations to
establish and expand industry in the state.
A single window interface between the various governmental agencies at one side and
the willing entrepreneur on the other side shall save lot of time, effort and cost to the
latter. Setting up such interface may be easy. More important is empowering such
interface properly to be able to provide effective, responsive and time-bound service.
Injecting enthusiasm in such interface organisation is also a challenge worthy to take.
It is also necessary to put in place a proper public relations and information system to
save the masses from biased misinformation leading to public distrust towards the
industrial organisations having interest in setting shop in the state.
To encourage industrial development of the state, a strong-willed system must be
created so that the industry houses are assured that they will be supported and saved if
it so happens in any case at any occasion that they feel threatened of exploitation in the
hands of unscrupulous politicians or public servants. Such occasions occur in any state
in the life of industries and the system support they receive during such crises has great
bearing on their strategic business planning as well as planning of other business
houses that learn from experience of the former.
An interesting phenomenon is that of division of unionised workforce. Law provides
opportunities and options for collective bargaining actions by unions of workforce.
United workforce can take care of labour welfare. But there are examples when many
politically motivated persons succeed in dividing the unionised workforce in

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innumerable ‘unions’ – causing collective bargaining difficulties and deterring industrial
development.

Law and Order

General law and order status of state is always an important determinant for decisions
of business houses about setting up industry in the state. Jharkhand needs to create a
confidence amongst all concerned that the general law and order situation in its
territory is better than what is perceived today. Investors need to be made to feel that
they are safe and their investments are secure in the state.

Insurgency
A serious detriment to any effort of Jharkhand for encouraging industrial development
in the state is the widespread belief that the area is challenged by insurgency. The
problem is one of socioeconomic nature having political and criminal hues. Tackling the
same in right earnest with due sense of urgency is necessary.

Availability of financial resources

The bank coverage of Jharkhand is good enough. As per Economic Survey 2007-08 of
the Government of India, Jharkhand had 1119 bank offices at end June2007 and they
had lent Rs. 10,560 Crores – around 47% of that being in priority sector.
But, industrial development in the state may be accelerated if banking system is more
generous in financing small entrepreneurs in Small-Scale, Rural based and labour
intensive industry projects.

Facilitate the growth of labour intensive industries

Labour laws and labour market regulations need to be reviewed so as to facilitate the
growth of labour intensive industries.
But, industrial development in the state may be accelerated if banking system is more
generous in financing small entrepreneurs in Small-Scale, Rural based and labour
intensive industry projects.

R&D, UpSkilling and Innovation

To have commendable industrial development, it is necessary to technologically
upgrade the manufacturing units by incorporating contemporary methods of production
resulting into value added items. The swiftness and efficacy in skill upgradation,
facilitation of technological innovations and promotion of research and development are
areas of immediate concern for the industries operating in this region. That will aid to
their development and to the development of the state.
Strengthening and encouraging further the various research institutions operating in the
state under aegis of SAIL, CIL, CSIR etc. as well as the important technical like NIFFT,
ISMU, BIT Mesra, BIT Sindri and management institutions like XLRI, XISS etc. should
be helpful in this aspect.

Role of Ancilarisation
The aspect of anciliarisation would require some serious thought. Strengthening
ancillary development by large industries is prima-facie considered the panacea of
industrial development. That may sometimes prove quasi-truth.

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It is undisputable that ancilarisation is beneficial both the large industry and their
ancillaries at their nascent stage. The former get access to nearby capacities for parts
and spares while the latter get assured market conducive for investment.
But as the industries age, the large one induces entry of other suppliers into their
supply chain and some ancillaries also grow appreciably. The truly efficient
ancillaries grow well and transcend dependency on parent industry. They get entry to
bigger world of customers. The average efficient ancillaries too become developed
into cost and quality competitive suppliers.
However, the ancilarisation serves as a detriment to development of the not so
efficient me-too type ancillaries. These are the ancillaries who invested because of
assured customer and survived because of it. They, now after coming up age, face
severe competition from external suppliers to the parent industry as well as the above
two categories of ancillaries.
The parent industries – in their own quest of quality and cost competitive advantage in
the market – find it difficult to patronise the me-too ancillaries. They bootstrap
themselves a little and pull up the parent a little whenever the survival becomes at
stake. This struggle and sometimes combat for survival gives them life for a while –
sometimes at the cost of other ancillaries and also the parent.
As is natural with any fight-or-flight adrenaline rush, the usual lack of efficiency sets in
soon after temporal survival is assured. And the cycle repeats.
This state of affairs is detrimental to development of both the ancillaries and the parent.
There appears to be a need that the large industries periodically review the
development and growth status of their ancillary to relieve the well grown ones from
ancillary status, to help growing ones and also to motivate the truly complacent ones to
find a place in the big wide world of competition without relying on ill-deserved crutches.
Most of units making auto parts, forgings/castings are either tied up with Tata Steel,
Tata Motors, HEC and BSL or are selling their products in the local market. This
domestically centered approach of these units has not allowed them to think beyond.
Outward orientation of these units is necessary for preparing them to undertake growth.

Conclusion
Industrial development is necessary to be encouraged in Jharkhand to improve its
GSDP and Gini Coefficient. A lot needs to be done by Industries, Public Servants,
Public representatives and Government. Sectorally differentiated initiatives may be
required in various industry sectors and action areas.
Much study, thinking and research is required by scholars and development
organisations to find out exact opportunities of action and to benchmark Jharkhand with
its neighbours, its same age states and also the best practice states in different
aspects.
This paper is not aimed to provide solutions but to raise questions and ignite the minds
of intelligentsia and concerned individuals, groups and bodies to create an environment
of discussions, deliberations and dialogues so that consensus solutions can be found
and Jharkhand can be enabled to earn its due place on the map of India.

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