Investment Opportunities in Jammu and Kashmir

Aniruddha Rajput

The ultimate priority of any investor is expectation of security at the place of investment. The notion of security is multifold: physical security, legal security and security of business opportunities. Business people are reluctant to invest in Jammu Kashmir due to these security concerns. These concerns are founded on perception rather than reality. The first task is to change the perception – create a sense of security and then investments will follow. This event, organized by GFI in collaboration with the JK Study Center is an effort in the direction of altering this perception and aligning it with the reality. The perceptions are based on myths and there is a need to bust these myths and understand the reality.

            The first concern is of security. The total area of the State of Jammu and Kashmir is 222236 square kms. From this area, presently 78114 square km is occupied by Pakistan and 37555 square km by China. 5180 sqkm Area was ceded by Pakistan to China in 1963. 26293 square km constituted the Jammu region, 59146 square km is Ladakh region and 15948 square km is Kashmir region. The perception of insecurity could be claimed only for the Kashmir region, which is only 15948 square km Thus total 85439 sq km is free of any concern at all. Even from the Kashmir region the areas affected by terrorism are only  5 districts : Shrinagar, Anatnag, Baramulla, Pulwama and Shopian. Thus effectively only 7% area is affected. It is a pocket and the perception is that the entire state is unsafe. One needs to get this so-called security fear out of the way and look at the State objectively as any other state with investment potential. Jammu Kashmir has a peculiar position – it is unexplored – virgin areas for investment. There is huge potential in each sector. Many sectors are untouched and even those currently covered by economic activity are massively under explored.

            The second perception is of legal security. I have stated on other forums, with supporting legal documents that the integration of the state with India is complete and it finds place in the Constitution in Schedule1, which lists all the State of Jammu Kashmir at number 15. The real concern, raised often is that property cannot be purchased in the State because of Article 370. Article 370 has nothing to do with ownership of property. It is a mechanism for extending laws passed by Parliament and Constitutional provisions to the State of Jammu and Kashmir, until the Constituent Assembly of the State of Jammu and Kashmir completed the process of making the State Constitution.  Thus limiting the right to property was neither the intention nor mentioned anywhere in Article 370. The exclusive right over property is granted in favour of permanent residents of states (PR) in Section 6 of the State of Jammu and Kashmir Constitution. Article 35-A of the Constitution of India as applied to the State of Jammu and Kashmir saves this provision. Even Section 6 contains exception that allows transfer of properties in favour of industries. It says:

“Permanent residents

(1) Every person who is, or is deemed to be, a citizen of India under section 6 the provisions of the Constitution of India shall be a permanent resident of the State, if on the fourteenth day of May, 1954—

(a) he was a State Subject of Class I or of Class II; or

(b) having lawfully acquired immovable property in the State he has been ordinarily resident in the State for not less than ten

years prior to that date.

(2) Any person who, before the fourteenth day of May, 1954, was a State Subject of Class I or of Class II and who having migrated after the first day of March, 1947, to the territory now included in Pakistan, returns to the State under a permit for re-settlement in the State or for permanent return issued by or under the authority of any law made by the State Legislature shall on such return be a permanent resident of the State.

3) In this section, the expression "State Subject of Class I or of Class II" shall have the same meaning as in State Notification No. I-L/84 dated the twentieth April, 1927, read with State Notification No. 13/L dated the twenty-seventh June, 1932.

One problem created by Section 6 is that it has impacted the real estate business. Since the customers are controlled all depends on the extent of growth these limited pool of purchasers possess. And there is no growth and industry which would make them rich and thus they cannot pay more. This vicious cycle has converted the real estate business into an ineffective sector.

            Even if purchase may not be possible without State Government permission, long-term lease is always possible. The state has suggested that it is in the process of creating ‘land bank’. The Government suggests that it would identify uncultivable lands, acquire them, create a pool of such lands and thereafter transfer for setting up industries. The State has been dived in to three zones, based on priority. The lands would be offered through a 90 year lease at cheap price in order to incentive investors. There is a strong possibility that land can be acquired on a long term lease to run industries.

 

The third security is of business environment and opportunities. For certain industries such as food processing, leather, handicraft, etc. raw material is cheaply available. Agriculture is a good example. The state is a leading producer of apples, but there is no branding of “Kashmir Apple”. A grocery shop owner tries to convince his customer by calling the apple to be Kashmiri apple. It is a persuasive argument, but no effort is yet made to create a brand. There is potential to brand and market Kashmiri Apple. There is scope for investment in logistics and transportation.

The extent of yield of apple is 2.6 times less than that in USA Australia and NZ. (10 tons per hectare: 26 tons per hectare ;statistics from Rangarajan Report). 30% of apple are of low quality is total production per year .[1]This is an area for food processing industry. The Central Government has declared certain sectors as ‘thrust areas’. These are horticulture, skill development ,food processing, herbal and medicinal plants and handicraft. Central Government is providing lot of incentives such as exemption from central excise…..The Government is granting subsidy for establishing and expansion of industry  (new industrial zone i.e Gati)

An important sector that would contribute to growth is of infrastructure. The infrastructure is underdeveloped and there are changes to work done on PPP Model. There is immense scope to investment in these sectors.

The other area with immense potential is of power sector. The total identified potential of the state for power in hydel power is 20MV. Presently only around 4.5 MV is explored, which is barely 15%. There is immense potential to growth in the entire state in the power sector. There is possibility to operate at different levels: large as well as small projects. Small hydel is an unexplored are where there can be investments made. Ladakh is an important region for solar power generation. There can be many small projects that could be undertaken. There is great possibility of investment and growth in these areas. These can be small scale investments. There are various other avenues that could be explored in the sector of power generation.

Labour force is available. There are efforts made under the Skill Development Mission. Private entities are engaging in the skill development process. For example Accenture is running a project in the State under the Yuva scheme JSS. There is a population of West Pak Refugees of 2 lakh. They are hardworking and keen seekers for jobs. They may lack in skills but can be trained and employed. They will provide strong employable group. It is a misnomer to assume that all in the state are supporters of terrorism or anarchy. The majority wants employment for which investment is needed. Greater is the participation of the business people from other parts of the country, better would be the outcomes.

Overall, investing in Jammu Kashmir is not merely an economic activity. It is an immense opportunity for serving the nation. The best way of national service is to contribute towards the strengthening of economic ties between Jammu and Kashmir and the rest of the country. We all have keen interest about the State of Jammu and Kashmir. Now we all need to act on it - investment, contribute to the development and accomplish integration of peoples. The integration in law is complete, integration of people has been ongoing and needs to be strengthened, I hope you all will contribute in this process.