This Company’s Terrible Experience In Bengal Indicates Why Investors Continue To Shun The State

The sixth edition of the Bengal Global Business Summit to be held in Kolkata two weeks hence will see state chief minister Mamata Banerjee rolling out the red carpet to industrialists and prospective investors and holding up the state as a prime investment destination.

The central theme of the Summit is ‘Bengal Means Business’ and Mamata Banerjee will wax eloquent on ‘ease of doing business’ in Bengal and how her state is much more attractive than others for business activity.

The ground reality, however, is starkly different and instead of ‘Bengal Means Business’, ‘Bengal Mars Business’ would be closer to the truth. Nothing illustrates this better than the bitter experience of IFB Agro Industries Pvt Ltd, the largest manufacturer of Indian Made Indian Liquor (IMIL) in Bengal and a major exporter of seafood.

The Rs 1700-crore company with its headquarters in Kolkata made a startling disclosure to the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) earlier this month that it would purchase electoral bonds worth Rs 40 crore in the current financial year (2022-2023) in response to “excise related issues being faced by/affecting the company” (read this).

This is the second time it has made such a disclosure under Regulation 30(4) of SEBI’s Listing Obligations & Disclosure Requirements Regulations, 2015. On October 7, 2021, the company had written to the BSE and NSE that it was “contributing to political parties by way of subscription to electoral bonds” an amount of Rs 25 crore for the 2021-22 financial year. In its letter to the two bourses, the company made it clear that the ‘contribution to political parties’ was in response to ‘excise-related issues’.

IFB Agro has been at the receiving end of unreasonable demands and extortion by excise officials as well as goons backed by the ruling party. And unlike other companies in Bengal which quietly pay up and remain silent, IFB Agro decided to expose such extortion and intimidation. Which is why it continues to be a target.

On June 26, 2020, and again on December 22 that year, the company informed both NSE and BSE (read this) that on June 25, 2020, its distillery at Noorpur in South 24 Parganas district adjoining Kolkata was attacked by 150 armed goons who forced the closure of the unit after beating up the company’s employees and holding them hostage.

The company said though operations at the distillery resumed on July 2, 2020, after police protection was provided to the unit, none of the armed goons had been arrested.

IFB Agro had been targeted by the state excise department on June 15 that year when the Excise Collector of Hooghly district suspended the licence of the company’s Dankuni unit (Dankuni is in Hooghly district). The company has seven bottling plants in Bengal. The suspension order was revoked by the Excise Commissioner on June 25 even as the order was challenged by the company in the Calcutta High Court.

Bengal Governor Jagdeep Dhankar wrote to the state finance department (which is in charge of the excise department) in end-June seeking a report on the suspension of the licence of IFB Agro’s Dankuni unit (and the subsequent revocation of that suspension), and also the attack on the company’s Noorpur unit.

The Governor rightly pointed out that the attack on the company’s unit by armed goons and the coercive action by the excise department “does not promote a conducive investment climate” in the state. He opined that the coercive actions against the company amounted to “misuse of power” and “arbitrariness” which sends a “wrong signal to existing industries in the state and discourages investment”.

IFB Agro, in its communication to the BSE and NSE in December 2020 stated: “Further, the alcohol business of the company has been suffering and is under threat as we have been singled out by certain excise officials for not succumbing to their illegal demands”. The company also stated that despite having complained to the Bengal chief minister as well as the finance, industries and commerce ministers, harassment by the extortionist excise officials continues.

It is clear that IFB Agro’s subscription to electoral bonds is nothing but a payoff to the ruling Trinamool Congress to ward off harassment. “It (purchasing electoral bonds) is a political payoff to avoid extortion by excise department officials and goons backed by the ruling party,” said an industrialist who is privy to the goings-on in IFB Agro Industries.

“Other industrialists and businessmen pay off venal government officials and politicians as well as the goons and remain silent. That is the price for doing business in Bengal. IFB Agro has exposed the deep rot in Bengal,” said the industrialist who did not want to be named for obvious reasons.

A prominent office-bearer of the Eastern Region chapter of Confederation of Indian Industry (CII) told Swarajya that the travails of IFB Agro Industries are common to all industrial units and business ventures in Bengal. “Everyone has to be paid off, and the demands are not only recurring but also keep on increasing. Goons backed by the ruling party, the police and government officials have to be kept happy by industrialists and businessmen if they have to continue running their units or doing business in Bengal,” said the CII office-bearer who did not want to be named out of fear of retribution.

The extortion starts right from the time an investor acquires or gets land for setting up his unit in Bengal. Huge sums of money have to be paid to government officials for the requisite permissions, to the police for protection and to goons and petty politicians belonging to the ruling party keep them at bay.

And then the powerful and notorious ‘syndicates’ step in to supply building materials at extortionist rates and dictate who to hire, salaries to be paid to staff, hours of work , fix suppliers of raw materials and also collect regular payments.

“Bengal has never been a business-friendly state and all this used to happen during the Left Front rule as well. But the extortion was more organised during Left rule: money would be paid to the party and that was it. There would be no trouble from government officials, police, goons or petty politicians after that. But it is a free for all now and everyone is in the business of extorting money from industrialists and businessmen,” said the owner of a marine products export firm who also did not want to be named.

Economist Susanta Bhowmick says that large-scale extortion from businesses in Bengal is because of acute unemployment in the state. “Ruling politicians have to allow their musclemen (who they use to intimidate and crush opposition and stay on in power) to extort money from businessmen and industrialists because there are no other avenues for them (the goons) to earn a livelihood. And government ‘babus’ as well as policemen also feel encouraged by corrupt politicians to make unreasonable demands on businessmen,” he said.

IFB Agro’s balance sheet shows that the company made a modest net profit (after tax) of Rs 47 crore in 2020-21. It donated more than half of that profit--an amount of Rs 25 crore--to political parties (read: the Trinamool Congress) through purchase of electoral bonds in the next fiscal (2021-22).

Given the pandemic and slump in exports, IFB Agro’s profits in 2021-22 are not likely to have gone up substantially in 2021-2022. If the company is to purchase electoral bonds (out of compulsion and as a political payoff in order to stay in business) worth Rs 40 crore, it would be spending a lion’s share of last year’s (2021-22) profits to pay off the ruling party.

And that, surely, is no ease of doing business in Bengal. Investors know this very well, and that’s why, despite Mamata Banerjee’s desperate pleas to them to set up shop in Bengal, they continue to give the state a wide berth. And that’s why the forthcoming edition of Bengal Global Business Summit will be yet another useless jamboree.