In preparation for investing in Karnataka 2025 – Global Investors Meet (GIM 2025), which is scheduled to be held from February 11th to 14th, MB Patil, Minister of Large and Medium-sized Industry, said how the state government will strive to Talk to the Indian Express about whether it is positioning Karnataka as a global investment hub. Patil said new industry policies have been announced, focusing on providing capital-based incentives to companies that convert research and development facilities into manufacturing units. Excerpts from the interview:
Q. We have held several road shows around the world, particularly in the US, Japan and Korea. How did you respond and how will you make it from an investment perspective?
MB Patil: The roadshows in Japan and Korea were completely different experiences. These countries have traditional family-owned businesses that take time to make decisions. However, despite the slow decision-making process, initially secured investment worth Rs 6,500, but now it has increased to around Rs 10,000.
One of the key points from these roadshows is that we were able to attract niche tech companies from these countries. Although we cannot disclose details at the moment, these companies belong to sectors such as semiconductors, battery manufacturing, machine tools and more.
Q. What challenges do you anticipate regarding global investment?
Patil: Today’s key challenges are geopolitical uncertainty, the impact of artificial intelligence, and climate change. The industry is evolving rapidly – electric vehicles (EVs) and green hydrogen will replace traditional gasoline and diesel vehicles. In London, for example, Ashokleyland said it is stopping the expansion of traditional engine manufacturing because it knows that the technology will soon become obsolete.
This transition is not limited to the automotive industry. AI has an impact on manufacturing, media and almost every sector. So we must be resilient, tech-driven and green.
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Q. Regarding investment summits, how is Karnataka differentiated from other states?
Patil: Previously, it is just a small part of the global industry summit introduced in Karnataka, Maharashtra and Gujarat. Now many states, including Odisha and Madhya Pradesh, are doing the same thing. To stay ahead, we have incorporated elements from Davos’ World Economic Forum.
For example, we have joined from 19 countries to introduce country pavilions. I also participated in the Economist to hold a session featuring over 60 speakers. Additionally, it has launched new industrial policies, including flexible incentives. Companies can choose production-related or capital-based incentives. They also offer employment-based incentives, providing additional benefits for hiring women.
Q. Karnataka is known as the R&D hub, but manufacturing is behind. How are you tackling this issue?
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Patil: Of the Fortune 500 companies, over 400 have R&D centres in Bengaluru, including Samsung, Airbus, Boeing and Mercedes-Benz. However, only about 10% of manufacturing happens here.
To change this, our new industrial policy will provide an additional 10% incentive for businesses that turn R&D into manufacturing in Karnataka. This should encourage more companies to establish manufacturing units here.
Q. What are the sustainability clauses in Karnataka’s new industrial policy?
Patil: Provides incentives to businesses that employ sustainable manufacturing operations. Karnataka already has a strong green energy capacity. 65% of the installed electricity comes from renewable sources such as hydropower, solar and wind. It also offers businesses the option to invest 26% in solar or wind energy projects.
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Additionally, it spends Rs 5,000 on securing water supply to industrial parks and providing land parcels on a lease basis to create unique electricity needs within the industrial zone.
Q. When interacting with CEOs and company representatives, what are their main concerns regarding investment in Karnataka?
Patil: One of the great benefits of Karnataka is its policy stability. Regardless of the party in power, states have always respected their incentives and commitments.
But business ease is an area we are working to improve. To address this, we are partnering with Microsoft to launch an AI-based single window portal. The platform provides information on state and central regulations, land availability, incentives and application tracking, all in one place. Processing times are significantly reduced from 100 days to 50 days. The system is smartphone-friendly and allows investors to check land availability, pricing, timelines and incentives. It also integrates various government sectors to ensure seamless approval and reduces bureaucratic delays.
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Q. Karnataka was a powerful player in semiconductor ecosystems, but large manufacturing (FAB) units go to other states. Why does that and how will it keep your semiconductor investments going?
Patil: Karnataka has an established semiconductor ecosystem, with several high-tech companies already operating here. However, when it comes to large-scale fab investments, the central government plays a key role as 50% of the incentives come from them.
For example, some companies initially expressed interest in Karnataka, but later turned elsewhere by central level decisions. We have raised this concern to the federal government and continue to drive more semiconductor investments in the state.
Q. Bengaluru’s high altitude prices and poor road infrastructure are concerns for investors. How do these issues affect your investment?
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Patil: Land prices in Karnataka, including Bengaluru, Belagavi and Hubri, are higher compared to other states such as Tamil Nadu and Andhra Pradesh. For example, if Hyderabad land costs Rs 2 trillion in Bangalore, that is Rs 4 trillion. This is due to the IT boom and demand in these cities. However, this was not a major deterrent for investors.
Meanwhile, Bengaluru is a growing city in the world, and traffic congestion is a challenge in such cities. Even in London and San Francisco, traffic delays are common. However, it has taken steps to improve its infrastructure, including developing surrounding roads, developing satellite Townling Road (STRR), expanding metro and suburban rail networks, and investigating the feasibility of tunnel roads.
Q. Karnataka was the first state to develop a framework for the Global Capacity Centre (GCC) policy. What progress has been made and what can we learn from central policies?
Patil: Implementing GCC beyond Bengaluru is not easy, but it has made progress. We focus on electronic manufacturing, aerospace and FMCG parks in Veragabi and other cities. Additionally, it develops Startup Parks in Mysuru, Hubli, Belagavi and other Tier II cities.
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Q. How does the government encourage industry to expand beyond Bengaluru?
Patil: We are lowering incentives and land prices in other cities like Mikle. For semiconductor industries that require critical water resources, they encourage investment in places like Vijayapura. Several battery and electronic component companies have shown interest, including those from Japan, South Korea and the UK.
Q. At the last investor summit, Karnataka secured a commitment of Rs 5, but some projects, such as those related to green hydrogen, did not come to fruition. How do you ensure a realistic commitment this time?
Patil: Last time, a 2.25 Rs of Rs. 2.25 Rs. commit to green hydrogen, but only Rs. 40,000 were realized due to a lack of evacuation infrastructure. This time, we are more realistic. 70% of your investment commitment must be realized. If you announce the 10 Rs of Proposal, you will need to convert at least Rs 7 Rs into actual investments.
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Q. What is the government’s attitude towards recruiting Karnataka residents in incentive industries?
Patil: Industry in the “C” and “D” categories that receive incentives must provide reservations to residents of Karnataka. However, even in the “A” and “B” categories, companies already employ between 55 and 67% of local workers, exceeding the required requirements.
