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

Major Mineral Reserve in Jharkhand

At the same time, it is also a state having considerable income inequality and low State Domestic Product. As can be seen, the state has been consistent in maintaining its Per capita SDP significantly lower than All India GDP over the years since inception. While it was 80.5% of GDP in 1999-2000, it has rather fell to 74.1% in 2005-06.

05-06 04-05 03-04 02-03 01-02 00-01 99-00 12941 11865 10972 10294

19066 17493

25716 22946

20936 18899 17800 16648

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 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 the growth over 2000-2001 had been slightly over GDP rate of growth.
5.8

26.9

8.54 6.43 3.79 3.29 02-03 7.5 7.52

9.4

9.6

6.74

6.78

So, we find that the state has rich resources and poor production and slow growth of the State Domestic Production.

01-02

03-04

04-05

05-06

06-07

Jharkhand

INDIA

Source : ECONOMIC SURVEY 2007-2008

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.

O ris sa B C hh iha r at is ga Jh rh ar kh an Ut d t M ad ark ha hy nd a Pr ad es h Al lI nd ia Pu nj C ab ha nd ig ar h J & K

Obviously, the state should be home of a poor populace. The statistics supports this assumption we see that Jharkhand really has a major population living below Poverty line. Next only to Orissa, Bihar and Chhatisgarh, Jharkhand is one of the only four indian states having more than 40% of population below poverty line. While the All India figure stands at 27.5% and lowest figure in the country is a little over 5%, the Jharkhand state of poverty is at best miserable in view of the richness of the state in terms of natural resources.

BPL Population%

46.4 41.4 40.9 40.3 39.6 38.3 27.5

8.4

7.1

5.4

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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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