Business Today

Five Kashmiris the world should know

In the political and economic chaos that is Kashmir, BT discovers some entrepreneurs who have found a way to thrive.

Report by Puja Mehra Photographs by Vivan Mehra        Print Edition: December 12, 2010

No, not the Sher-e-Kashmir's grandson, Chief Minister Omar Abdullah. Not Rahul Gandhi, prime-minister-in-waiting, who is one-fourth Kashmiri. Or the anti-India Syed Ali Shah Geelani. The Kashmiris the world should know are the businessmen who keep the state going despite the civil chaos. They make cement, process milk and even write code for clients. They are young and middle-aged, B-school educated and high-school dropouts, second-generation traders and start-ups.

Beyond the denominators common to Indian business, such as red tape, bad infrastructure or ambiguous policies, Kashmir's entrepreneurs have their unique problems. For one, customers from other states who buy goods and services made in the Valley often refuse to transfer payments directly to accounts in the state. They are wary of getting linked unwittingly to a terror group.

Then, on an average, traders have to pull down shutters fi ve days a week either at the diktat of some political group or because of a curfew. No school, shop or enterprise dares remain open. The men in uniform or young lads pelting stones wield enormous nuisance power.

All this leads to undependable supply and delivery chains and gives businesses in the state a reputation for unreliability that prevents them from expanding outside the state. Few consultants, investment bankers, private equity investors or head-hunters service companies in the Valley. Recruiting is tough: Bright graduates either migrate to other states or opt for the security of a government job even if it means lower pay. Work culture and professionalism have not had a chance to develop. "We are at least 30 years behind the Indian corporate sector," says Umar Trumboo, Director of the hospital-to-cement Khyber Group.

High-risk, high-returns are two sides of the coin. Successful ventures can be very profi table. The market within the state does not see much competition, so business can be lucrative. Part of the reason is also that capital, whether loans or equity, is easy to come by in the Valley. Real estate prices are up 30-35 times since the 1980s. But rich Kashmiris prefer to invest these gains mostly in ventures outside the Valley, for security.

Those who choose to do business in Kashmir are extraordinary because they too could have made the choice to leave the Valley but have not so far. They are battling ground realities and make business seem as usual.

BT presents five of them.

Nisar A. Baba
Like many businessmen in the Valley, Nisar A. Baba is a third-generation trader. Baba's family had been trading in transformers and electrical equipment for two generations when he decided to set up a factory in 2002 to manufacture transformers for sub-stations.

His business plan was perfect: there were few transformer manufacturers in the state, capital and land were cheap and it was not too hard to get the small numbers of skilled labourers. Also, governments are liberal with subsidies and tax breaks.

Entrepreneur: Nisar A. Baba
Provenance:Third-generation trader in electrical equipment; began repairing transformers in the 1990s, now makes them
Company: Alba Power
Performance: Turnover was Rs 9 crore in 2009-10; profit was 10 per cent of this. Has 38 employees
'The indifference of the bureaucracy in Kashmir to business very often makes me want to move out of here'
So Baba's business, Alba Power, is profitable. But, eight years after it was set up, Alba Power has been unable to get on to the national stage, barring a few orders from Rajasthan. Alba Power's biggest worry is its production schedule. To plan for disruptions, it has to maintain big inventories. It is also hard to get technicians from outside the state.

The bureaucracy is indifferent at best. "The babus in the Valley do not recognise the importance of business," says Baba. As for government incentives, Baba says they have riders that are fine for other states but have no meaning in Kashmir, and figuring and complying with them is frustrating. "Sometimes I wish there were no incentives," Baba rues. Even the exemption from value-added tax or VAT? Yes. Baba points out that, to be eligible for the exemption, 90 per cent of a unit's staff have to be locals and it is impossible to hold on to Kashmiri engineers. Businesses fail so frequently that any engineer or doctor is ready to quit the private sector for a government job even if it means a huge pay cut. Businesses have to bring in people from outside the state on short contracts at higher rates.

Then, Alba Power's working capital could be cheaper but for the rule that the subsidy on the interest will be given only in a year of growing production. Baba reckons that Alba lost `9 lakh as the subsidy it would have received had it not been forced this summer to stop production. Jammu & Kashmir has a unique tax on contracts that costs Alba Power its business and limits its market.

Contractors buying transformers have to pay a contract tax and the VAT. This contract tax may be credited against the VAT only if the equipment has been bought from outside the state. "I have to be content selling my produce only to government departments and traders," says Baba. He often wonders if he would be better off moving out of the Valley. "The only reason I haven't moved out is that I am not giving in," he says.

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