Politics, backdrop and more: Why Kitex shifted its Rs 1,000 business out of Kerala

What prompts a successful business tycoon, doing a roaring garment business in southern state of Kerala, to pull out his mega project and look outside the state to invest? Sabu Jacob, the Chairman and Managing Director of Kitex, world’s third largest supplier of infant wear, says he was harassed  hounded out of the ‘business unfriendly’ state. What Kerala lost, Telangana gained as several states lined up to woo the business magnate.

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While Telangana gained a Rs 1000 crore investment business that has a potential to employ 5000  people, Kitex’s decision to scrap  a Rs 3,500-crore expansion plan in Kerala dealt a further blow to the state’s reputation as not being conducive for business.  

All about Kitex

Founded in 1992, Kerala’s Kitex Garments Limited manufactures  and exports garments. The company is known for  infant and children’s wear and exports its garments to many countries. Based in Kochi, the company employs 5,500 workers  and has a production capacity of producing 4.32 lakh pieces of garments everyday. In 2019-20, the company registered a profit of Rs 109 crore 

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The backdrop

Jacob’s decision to shift his business to Telangana was preceded by 11 surprise checks by Labour, Pollution control board and other regulatory bodies of Kerala. The state government said the visits were the result of complaints filed by people. According to Jacob, the government has treated it as “bourgeoises, exploiter capitalists, and land encroachers”. Industry minister R Rajeev said, “It is an unfortunate decision. It seems Jacob has made up his mind long before. He is leaving the state when many major companies have decided to set up their shops in Kerala.”

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Is politics the real issue?

Many analysts opine that the company is being targeted for being the inspiration behind ‘Twenty20’, a political experiment. That, according to analysts,  explains why leaders across party lines are feeling threatened. The  Kitex Group upset  both the Left and the Congress-led fronts in the state after Jacob’s Twenty20 won in Kizhakkambalam, the area where the company is  headquartered and nearby panchayats in the local body elections last year.

Not the first time

Kerala has a track record of not being a business-friendly state. It’s militant labour organisations and ‘unofficial’ labour laws have forced many businesses out of the state. Earlier, many companies, including Toshiba Anand,  Premier Cables and Madura Coats have shut shop here. 

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The list is long. In 2018, spice oil producer Synthite Industries  threatened to stop operations  after the Left union-led strike disrupted its operations. SImilar complaints were aired by  Muthoot Finance, a  gold loan NBFC.  It complained of  a trade unions disrupting work in its  300-plus branches.

What has made matters worse is that successive governments have not made any effort to change the business environment in the state that ranks 28th in the country in the ease of doing business rankings.