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Oh Calcutta! Firms moving to greener pastures

A Pal in Calcutta

The present year has not started well for the state of West Bengal. Two bluechip corporates -- Philips and Shaw Wallace, both traditionally based in Calcutta -- recently announced their decision to move out. Last year, paints major ICI India also finalised its decision to shift its headquarters to Gurgaon, near Delhi. The P K Mittal-promoted Ispat Group is also in the process of shifting its marketing setup located on Calcutta'a posh Park Street.

Electronics giant Philips India is moving its factory from Salt Lake in Calcutta to Pune, Maharashtra. The moves by Philips and Ispat were preceded by a huge brouhaha, with politicians and unions alike promising to prevent more jobs leaving the state. The Centre for Indian Trade Unions, affiliated to the Communist Party of India-Marxist, even took the matter up with the chief minister, only to find the state's Left Front government, led by the CPI-M, completely unaware of the plans.

Shaw Wallace's announcement to shift its corporate headquarters to Bombay was hardly a surprise. The liquor giant had over the past few months moved out its human resources and corporate finance departments. Many top managers had been also been gradually relocated to Bombay. Company officials said the decision to focus on the core areas of liquor and beer necessitated this move.

Shaw Wallace may not yet shift its registered office from Calcutta because of the legal wrangles involved in doing so. The company is keen to use its palatial Wallace House property in the heart of the city for more rewarding activities. Moreover, this will allow company promoter Manu Chhabria to distance himself from the Shaw Wallace Employees' Federation. The employees have moved the court for the sale of the consumer products division and charged him of siphoning funds.

Incidentally, tyre-manufacturers Dunlop, part of Shaw Wallace, has declared a lockout and the plant placed under the Board of Industrial and Financial Reconstruction.

The move by electronics bluechip Philips is a surprise and few had expected it. The decision to shut shop in Calcutta comes on the heels of 322 employees taking voluntary retirement from the company. Post-VRS, productivity had gone up by 15 to 20 per cent. Moreover, Philips enjoys a cordial relation with the ruling CPI-M government.

The company insists that the move is only part of the internal restructuring and has nothing to do with city or the workers. However, late last year, following a dispute, Managing Director K Ehnreich was prevented from entering a factory by the workers. Things have never been the same since then.

West Bengal government officials are quick to say that too much should not be read into the moves. Entrepreneurs in the state have full freedom to enter and exit the state as they feel.

What, however, is perplexing is that the companies have begun to move out at a time when there is a conscious effort by Calcutta to welcome investors to West Bengal. Few will disagree that the city's infrastructure is in a bad shape; or that a work culture needs to be sorely introduced where none has existed for the past 20 years. Yet, things did appear to be looking up. The government was even boasting that attitudes among the workers are changing.

The CPI-M has always blamed the Centre for West Bengal's industrial decline, saying it had received step-motherly fashion, with little central aid or important projects coming its way. For instance, recently the city's status was downgraded from A1 to A, whereas Bombay, Delhi, and Madras remain A1.

While Calcutta is still home to leading tea companies like Tata Tea, Goodricke, Duncans, among others, it has made little headway in attracting a high-level of investment. The most common complaint is that despite signing countless agreements, implementation has been extremely low. Out of proposals estimated at Rs 426.5 billion, only 337 projects worth Rs 172.4 billion have been implemented.

ICI, headquartered in the city, is centralising all its operations in Gurgaon, near Delhi. ICI India Executive Director Dr Param Bhargava justifies the move. "West Bengal has improved considerably; but there still exists a gap between substantial and considerable that needs to bridged fast," he said.

Nevertheless, he agreed that there has been a sea change. "The environment is much more favourable to industry and I am definite more industries will keep coming in. Investments made today will take about two to three years to bear fruit," he added.

Some foreign companies have come in to Calcutta. For instance, Techna, a United States-based software concern, has invested heavily in Calcutta and brought in the latest technology to serve its clients both in India and abroad. It recently tied up with Hitachi to serve the Japanese software market. Techna is an exception in the otherwise dead Salt Lake Electronics Complex.

Experts agree that the progress of West Bengal is directly linked to the success of the Rs 51 billion Haldia Petrochemicals complex.

After declining from leading India, West Bengal no longer leads eastern India. Of the total investment made to India, neighbouring Orissa picked up 11 per cent while West Bengal garnered just six per cent.

Calcutta lost its pre-eminence as India's premier city due to militant trade unionism and the freight equalisation policy, leading to an outward flight of resources. And which has not been reversed since, in spite of the changing conditions.

A few years ago, the state government set up the West Bengal Industrial Development Corporation to attract investors. At its helm is veteran parliamentarian and winner of the Best Parliamentarian award last year, Somnath Chatterjee, who is affectionately referred to as "Mouda" given his penchant for signing MoU (memorandum of understanding; da means elder brother).

Says the head of a multinational gas firm, still based in Calcutta, "It's a question of momentum. The ball has been set rolling. But these things take time and we can't expect changes overnight."

An abundance of power, skilled manpower, proximity to Southeast Asian markets are some of the pros being flaunted by the Marxist government to lure investor. The most attractive must surely be the availability of cheap and plentiful power: while peak demand is 2,800 mw, the combined installed capacity is 4,102 mw.

The state has also enjoyed a stable law and order situation. Efforts are under way to improve Calcutta's infrastructure with seven flyovers, funded by the Japanese Overseas Economic Cooperation Fund, on the cards..

A a clutch of big companies like the RPG Group, ITC, Tata Tea, G P Goenka Group, Williamson Magor, and Bata continue to stay put in Calcutta. But West Bengal will have to work twice as hard: first, to erase the fuddy-duddy image associated with the state for so long; and secondly, to ensure that the pace of development is fast enough to keep pace with other states like Maharashtra, Gujarat and even neighbouring ones like Orissa.

Says an office bearer at the Bengal National Chamber of Commerce, "What West Bengal needs most are a few solid success stories. The ability to attract and implement mega-projects like the Haldia petro complex is crucial for projecting the state as an investment destination."

Certainly, before seeking fresh investment for West Bengal, it is imperative that the CPI-M government stem the outward flight of capital and business.