BY INVITATION: NITHIN CHANDRATamil Nadu’s investment climate has made a constructive start under the TVK govt in its first six months. The investment promotion commission, constituted on Nov 3 under the Tamil Nadu Business Facilitation (Amendment) Act, is a potentially important step. The 20-member body, chaired by the chief secretary, can issue binding directions to state agencies, bringing 22 state laws under a common investment facilitation framework. The 21-day deemed-approval mechanism, backed by penalties for non-compliance, could help investors rely on stated timelines. Of 21,753 applications received through Guidance’s single-window portal, 19,323 have been resolved. Land registration reforms and an accelerated direct benefit transfer scheme add further credibility.Power, however, has emerged as the most urgent structural challenge. When evening peak demand surged in Oct, TN paid up to `37 per unit for emergency supply — a record high — while other states procured comparable power a month earlier at roughly half the price. Three successive short-term tenders were cancelled within a week as bids reached `41.50 per unit. TN projected a peak-demand deficit of 6,162MW by Sept 2027, leaving a narrowing window to bridge the gap before next summer.This is less a case of bad luck than of planning lagging demand. Emergency procurement is structurally expensive; advance procurement is not. When investment commitments outpace power infrastructure, manufacturers bear the cost through unpredictable tariffs and unreliable supply.The battery energy storage policy addresses peak-demand volatility, but storage without procurement reform and network upgrades tackles symptoms rather than causes. Power planning must be synchronised with investment pipeline, with power, water and infrastructure capacity assessed before MoUs are signed. Public finances make these choices more consequential.Salaries, pensions and interest payments are budgeted to absorb 61% of revenue receipts in 2026-27, constraining fiscal flexibility. Yet capital outlay is budgeted at `56,985 crore, about 11% above the 2025-26 revised estimate. This spending must be protected, particularly where critical power and water connections can unlock private investment and jobs. Social support must remain affordable and outcome-focused.The govt should focus on five priorities:First, make project execution an explicit accountability. Each major project should have a named case owner within the Investment Promotion Commission to coordinate land, approvals and utilities until production begins. Delays must be escalated early. TN’s investment proposition is not weak; the challenge is follow-through.Second, offer industrial locations that are genuinely ready. Real-time data on land, roads, water and power, backed by credible cost estimates and timelines, would strengthen the state’s proposition. Unused SIPCOT, TIDCO and ELCOT land should be identified, cleared and offered with statutory clearances in place, with locations matched to industry requirements to minimise the risk of projects stalling after agreements are signed.Third, prioritise existing investors’ expansion plans alongside new proposals. Companies decide where to add capacity well before announcing investments. Early engagement, prompt resolution of utility and incentive-payment issues, and support for ongoing operations — not just inaugurations — can help secure repeat investments. Extending the TN Industrial Investment Corporation’s Bill Finance Scheme to suppliers and contractors working with state public sector undertakings could ease cash-flow pressures between order completion and payment.Fourth, ensure incentives to measurable economic returns. Disbursements should be tied to verified milestones, including investment deployed, sustained employment, local supplier orders and skills development. The pending industrial policy revision offers an opportunity to link incentives to outcomes rather than announcements, ensuring fiscal responsibility and strategic impact.Fifth, link investment promotion to workforce and cost-of-living planning. Apprenticeships should match actual vacancies, while accommodation, childcare, safe transport and food infrastructure develop alongside industrial facilities. A formal framework for migrant workers would protect them and improve operational reliability for employers. Tracking wages, placement rates and worker retention would help establish whether investment benefits TN’s households — ultimately, the measure that matters.(The author is a senior partner at Kearney)
