Industry pays heavy price in Telangana

Hyderabad: Commendably, Telangana shared top rank with Andhra Pradesh in the Ease of Doing Business rankings for 2016 compiled by the World Bank for the Indian government. That means Telangana is one of the country’s best two states in offering hassle-free approvals for setting up a new industry or business. But how cost-effective is the country’s newest State for starting a new venture?

A comparative study undertaken by leading industry body FTAPCCI reveals interesting facts about the cost of doing business in Telangana. Shock- ingly, entrepreneurs are required to shell out far more for setting up a new business or industry in Telangana than what they spend in the neighbouring states of Karnataka, Tamil Nadu and Andhra Pradesh.

The Federation of Telangana and Andhra Pradesh Chambers of Commerce and Industry (FTAPCCI) has cancelled the release of the report of the study paper titled ‘Cost of Doing Business in Telangana State’ at the last minute last month. The Hans India has access to a copy of the study paper.

“The recent revision of various fees/charges/taxes payable by the industrial units in Telangana, affected the cost of doing business to a great extent. The entrepreneurs are agitated as it affects their competitiveness adversely,” the 18-page report observed.

Some of the costs are so high that they are not only increasing the costs for operating units, but are also hindering the entry of new industrial units in the State, it added.

For instance, the Telangana government has revised the land development or conversion charges vide the GO MS No 223 (dated 30-08-2016) to 300 per so metre from Rs 150 per sqm earlier, thus increasing financial burden on the new entrepreneurs.

In comparison, the Tamil Nadu and Karnataka (Bengaluru) government charge just Rs 24.71 per sqm, while the land development charge in Andhra Pradesh (as per GVMC) is Rs 150.

The Telangana government also increased factory licence fee three-fold from Rs 8,000 per annum. As consequence, factory licence or renewable fee now stands at Rs 24,000. The fee is lowest in Karnataka at Rs 4,280 while AP collects Rs 12,500, the second highest. The fee is Rs 10,750 in Tamil Nadu.

Interestingly, power tariff is also highest in Telangana among all four states. Power supplied to industries under HT-1(A) category is charged at Rs 8.62 per kWh on an average in Telangana. Tamil Nadu charges the second highest tariff of Rs 8.19 per cent unit while it’s Rs 8.01 per unit in AP.

Karnataka has the lowest tariff of Rs 7.66 per unit. Industrialists in Telangana pay more property tax than their counterparts in Karnataka and Tamil Nadu. Minimum wages are high in the new State.

The cost of land is also far higher in Telangana when compared with three other states. The cost of industrial land in Telangana (Jeedimetla Phase IV) is Rs 15,861 per sqm as against Rs 11,290 per sqm in Karnataka (Electronic City), Rs 3,160 per sqm in AP (Visakhapatnam, IDA Parawada) and Rs 815 in Tamil Nadu (Cuddalore), according to the study.

“The above data shows that in both Tamil Nadu and Karnataka, which are relatively more industrialised than Telangana, the rates of licence renewal and land conversion are lower. The government has justified its move to hike charges and fee by saying that the rates have not been revised in the past 10 years.

However, a sudden hike in the rates by such a great extent will put huge financial burden on the industries (as illustrated in case studies), increasing the cost of doing business in Telangana,” it explained. As a result, companies here will lose their competitiveness in the national as well as international markets, it added.

The report cited a norm suggested by the World Bank which stated that licensing and renewal fees should cover only the processing costs and they should be treated as major source of income. “It is, therefore, recommended to reduce the charges to nominal levels as per the suggestions of the World Bank,” it maintained.