Ease of doing business in AP

Post bifurcation blues, the AP State Government has initiated a number of measures to improve ease of doing business. While all this has generated considerable positive sentiments with the investor community seeing silver lining for their foreseeable future.

But the question which needs to be asked is whether the policy measures being initiated by the state government are adequate?

The Chief Minister of AP Mr. Chandrababu Naidu is fairly determined and is introducing changes to ease the process of doing business and attract huge investments across the globe to ensure sustainable and inclusive growth. The road map for AP is very clear. It needs a lot investment and therefore bringing substantive changes in that direction to improve the credibility of the state’s economy. There is a flurry of activities like, wooing foreign investors, correcting aberrations in taxation structure and concentrating on infrastructure missions and trying to bring about fairness in system by implementing single window clearance model.

The New Industrial Policy unveiled by the government assures improved infrastructure, good governance and excellent power supply to the developers. Not only this, it will ensure water and road facility to all industries, 100 percent exemption of stamp duty, special subsidy to SC, ST, BC and women entrepreneurs till 20120 and assure them all clearances within 21 days from the date of application. Identified thrust areas of policy is agro & food processing, life sciences (including pharmaceutical, biotechnology & medical equipment), textile & apparel, electronics & IT, aerospace & defense, automobiles & auto components, petroleum, chemicals, (including fertilizers) and petrochemicals, energy, mineral based industry, leather industries . Land shall be allotted on 99-year lease.

During the last few years, state had fallen off the radar for slowdown of growth with blurred priorities and the neighboring states overtaken us of policy paralysis on the prevailing business regulatory environment. Even after two decades of economic reforms , we continues to falter on various sub-indices such as starting a business, dealing with construction permits, getting electricity, registering property, paying taxes, enforcing contracts or resolving insolvency.

There is an urgency to focus on improving the business environment and arrest the decline in relative performance against various determinants of investment attractiveness. We need to underscore the areas of business regulation that need attention and highlight a few effective and efficient processes already prevalent in some states like in Gujarat and Kerala that could be emulated by Andhra Pradesh government, particularly building SMART CITIES & SMART VILLAGES, and advocate for adoption of more efficient and effective practices for ease of doing business. When arriving at the ‘Doing Business’ rankings, the World Bank ranks 11 parameters that impact businesses across various stages of their lifecycle – at start-up, getting a location, getting financing, daily operations and even when things go wrong.

To maintain our growth trajectory & conducive investment climate, AP needs to be a relatively attractive investment destination across each of these parameters. The State Government would need to undertake reforms to help place the state on an equal footing amongst countries having favourable, flexible, liberalised and a transparent business environment.

And the recent signing of Memorandum of Understanding(MoU) by the AP Government with National University of Singapore(NUS) for cooperation in relation to 'Master plan on Ease of Doing Business in Andhra Pradesh (MEDBAP): Vision 2020 to collaborate in conducting joint-research programmes on issues such as strategies and assessment on ease of doing business and enhancement of economic competitiveness is shining example for building a happy, healthy and prosperous Sunrise Andhra Pradesh and gives credence to investor confidence both local and foreign level.

With this in view, my aim is to identify the improvement areas in various aspects of doing business in the State of Andhra Pradesh after bifurcation, like starting a business, land acquisition, labour, and taxes. Specific recommendations have been identified for each of these areas.

Lack of an effective land acquisition process has made land acquisition complex and time consuming:

(a) Setup large designated industrial zones with pre-clearances and is ready to move in.
(b) Single window registration and mutation process.
(c) Move from a deed-based registration to title based registration (Torrens system- Torrens title is a system of land title in which a register of land holdings maintained by the state guarantees an indefeasible title to those included in the register. Land ownership is transferred through registration of title instead of using deeds)
(d) Streamlines process for land use conversion.
(e) A market-based pricing system, where prices is determined by an independent body.

Taxation stills a challenge – not conducive to fostering growth:

(a) Implement Goods & Service Tax. (GST)
(b) Reduce the number of taxes and the ambiguity/discretionary nature of taxes, especially in transfer pricing cases.
(c) Efficient, effective and time-bound taxation related dispute resolution.
(d) Ensure taxation does not hinder free flow of goods.
(e) Implement independent grievance redressal cell.
(f) Operational reforms required to get the tax base right.
(g) Administration reforms required for consistency and increased efficiency in approach to taxation

Starting a business – costs incurred in the whole process is significantly high:

(a) Reduce approval turnaround by making the eBiz portal more effective.
(b) Wider and effective adoption of deemed approval principle.
(c) Automatic approval for power, water and sewerage.
(d) Moving away from department, centric approach to business centric approach
(e) Labour reforms.
(f) Continuous skill development
(g) Access to funds for Micro, Small and Medium Enterprises (MSME).

Contract enforcement-complicated and time-consuming:

(1) Create a centralized contract repository with non-repudiation
(2) Effective implementation of e-courts
(3) Increase number of courts and tribunals
(4) More international treaties for increasing ‘reciprocative territories’.
(5) Update antiquated laws.
(6) Recognise and update laws keeping in mind the trends of higher technology updating, greater trade based on IPR and greater global trade.

I do hope that the recommendations for the long standing issues would help bring the issues to the fore and also serve as a reference point for the imminent need to pursue policy reforms in business practices and processes.

By GADAGOTTU SAMBASIVA RAO

The author is Vice President- The Andhra Chamber of Commerce And Industry Federation