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Will Kitex Group Fully Withdraw From Kerala? Why Not, Asks Sabu Jacob

Kerala isn't a favourable state to do business because of political and bureaucratic interferences, Sabu Jacob said.

Updated
Business
4 min read
<div class="paragraphs"><p>Kitex Group Managing Director Sabu M Jacob has committed to invest Rs 1,000 crore in Telangana.</p></div>
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Kerala-based Kitex Group may altogether leave the state, if “ease of doing business does not improve,” Sabu M Jacob, Managing Director of the company, told The Quint in an exclusive interview on 10 July.

Kitex – the world's second-largest children's apparel maker, had pulled out Rs 3,500 crore investment which it had earmarked in 2020 for setting up a textile park in Kerala. On 9 July, Jacob announced that he will invest Rs 1,000 in Telangana towards “textile apparel” over a span of two years.

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“We are not looking for that (a total pull out of Kerala) immediately. But slowly we will think about it. Right now, we are thinking of investing (elsewhere) the Rs 3,500 crore. If everything goes smooth, then why not?” Jacob added.

Jacob, in a media conference at Kochi on 9 July, said he is being “hounded out” of Kerala. The Kitex Group faced 11 surprise inspections in June after the Left Democratic Front (LDF) government came to power for a second term in May 2021.

‘Victim of Political Targeting’

Kitex’s fallout with the ruling Kerala government is believed to be linked to Jacob’s political entry. Sabu Jacob had launched a political party Twenty20 in 2015. He also adopted a village, Kizhakambalam, in Ernakulam district where the party still governs the local body.

In 2021, Twenty20 fielded six candidates in Kerala’s Legislative Assembly elections. Even though the party did not win any seats, it still poses a threat for both the Communist Party of India (Marxist) and the Congress in local bodies in Ernakulam.
Jacob further said, “If we can make something more, not just in terms of profits but in terms of services, in other states, why not?”.

When asked whether his business prospects in Kerala were affected by his political interests, Jacob said, “I am a businessman. Business is business, charity is charity, and politics is politics. I do not mix it all”. Jacob, however, added that the recent searches at his establishments could be “politically motivated”.

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‘Nine States Under Consideration’

While Kitex has committed Rs 1,000 crore to Telangana, some of the other states are still in the running, Jacob said. “The investment promised in Telangana is the first phase. We may invest more in the state depending upon Telangana’s response,” he said.

Meanwhile, Tamil Nadu and Karnataka have been “aggressively” wooing the group, he added. In west India, Gujarat has been aggressively wooing the company, he said.

The Kitex Group has got invites from nine states, including Andhra Pradesh, Karnataka, Tamil Nadu, Telangana, Gujarat, Madhya Pradesh, Odisha, Uttar Pradesh and Maharashtra.

“We are considering logistics, feasibility, and other factors before investing anywhere,” he said.

In the first phase, Kitex will look at investment only in apparel.

Telangana clinched the deal because, “Industries Minister K Taraka Rama Rao was that impressive,” Jacob gushed. “It felt like I was talking to the CEO of a company and not a politician. Telangana offered the best deal.”

It was a change from his experience in Kerala, he said.

‘Continual Troubles in Kerala’

Kitex Group has been facing troubles in Kerala since the 1970s, he said. Sabu Jacob’s father had established Kitex Garments in 1968.

“We faced similar issues in Kerala in 1973, 1977, 1988, 1993, 1997 and 2001. Every time the government changes in the state, we have faced trouble. This time we have faced a bit more than normal. Maybe because of political reasons.”
Sabu M Jacob

As of 2019, Kerala’s status in ease of doing business is 28 among the 29 states in the country, Jacob said.

“Only Tripura lags behind Kerala. The government says that Kerala lags behind for political reasons, but then why is Tripura, which is a BJP-ruled state, lagging even behind Kerala? It is not politics, it is the reality,” Jacob said. In 2020, the Kerala State Industrial Development Corporation had asked the Union government to disclose the criteria for awarding poor ranking for the state.

Kerala was ranked poor even though it had completed 157 missions of the 187 prescribed by Business Reform Action Plan, the state had submitted.

Jacob, however, said that the state is rather behind. “Two major reasons for Kerala’s poor performance are political interference and bureaucratic interference. We have to please everyone from Upper Division clerks to the top brass,” he said.

While Kerala was plagued by labour unrest in the 1980s and the 1990s, political and bureaucratic interferences are currently affecting growth of businesses in the state, he alleged.

Despite difficulties that the company faced, Jacob continued to invest in Kerala for “sentimental” reasons, he said.

“The idea behind setting up the company was to give employment. That is why despite the problems that plagued us during the last 52 years, we continued,” Jacob said.

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'No Politics Behind Searches': Minister

Refuting Jacob's claims, Kerala Industries Minister P Rajeev on 9 July said that the state has not initiated any inquiry into the operations of Kitex Group. Inspections were held at Kitex's facilities because several complaints had reached the State Human Rights Commissions about mismanagement of workers, he said.

The state had even offered to hold talks with Jacob before he announced his plan to invest in Telangana.

Kerala Chief Minister Pinarayi Vijayan also refuted Jacob's claims stating, Kitex's withdrawal is an attempt to hamper the "investor and entrepreneurship-friendly image of the state".

In a media conference held on 10 July, the CM said that Jacob's move has besmirched the state's record. The CM said that Jacobs fears about doing business in the state are "imagined".

On 11 July Congress MP Shashi Tharoor also expressed his regret at Kerala losing Kitex.

"Whatever your politics, it's hard not to feel regret at Kitex's departure from Kerala. Ours is a state in which industrialists are reluctant to invest& which is congenitally unable to generate employment for its talented people. We should be doing everything to support investors," Tharoor tweeted.

(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)

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