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Green shoots in my Red Valley

(Scarred by two decades of secessionist violence, Kashmir is witnessing revival entrepreneurship as a new agent of peace. But you would never know from the headlines.)

If we delay you, says the English and Urdu sign on the gate, for more than two hours, we will pay you Rs. 2 per minute for every extra minute.

This is one of the first things that a driver carrying a truckload of apples – anywhere between 50 to a tonne – sees when he arrives at the gate of the cold storage and fruit processing factory of Harshna Naturals in Lassipura district about an hour and a half drive north from Srinagar, the capital of Jammu and Kashmir torn by secessionist violence for more than two decades.

The man who put up the sign, 31-year-old agriculture entrepreneur Khurram Mir, says the sign works like a talisman telling the farmers who come to sell and store fruits at his plant, his workers and even himself that things are getting better in a valley which, depending on who you are reading between 50,000 to 100,000 people have been killed in a two-decade insurgency that started in 1989.

“We are saying yes, things are so normal that we can pay for delays in a state used to shutting down for days with violence and anxiety.” Once described (by former US president Bill Clinton) as the world’s most dangerous place, this is the new sign of peace in Jammu and Kashmir, the Himalayan state over which India and Pakistan have fought three wars.

Long used to peace brokers in the shape of politicians, diplomats, aid workers, even ex-militants, the valley is getting used to a new kind of agent of calm: the entrepreneur.

And why not? More small and medium enterprises have been set up in Kashmir in the last two years than in the previous decade says the Jammu and Kashmir Entrepreneurship Development Institute (JKEDI). Its two flagship schemes have produced more than 1,700 new entrepreneurs in the last two years says Zamir Qadri, head of the JKEDI. One scheme provides unemployed high school passouts or graduates 35% of the cost of their dream project or Rs. 3 lakhs, whichever sum is lower, with the remaining amount financed as a loan by the Jammu and Kashmir Bank, the biggest bank in the region. The amount for post graduates is 35% of project cost or Rs. 5 lakhs and for professionals, Rs. 7.5 lakhs. The other, financed by the National Minorities Development Finance Corporation, gives out loans of an average of Rs. 2.5 lakhs to jobless young Kashmiris.

It’s a small number in a state of 12 million with more than 600,000 registered unemployed people but Qadri says the numbers are like Mir’s signboard — a small step towards the right direction that has many people excited.

“One of our big problems is that people feel lost – we have lost a generation to the violence. This is one way to tell people that all is not lost and they can start afresh.”

Back at the farm in Lassipura, Khurram Mir says the whole idea of new entrepreneurship is about people regaining respect and control of their own lives in a state which is estimated to have more than 330,000 military and para-military troops.

“There has been a respect deficit in the state. For instance, no one has ever appreciated the time of the farmer. The power was always in the hands of the people who were buying from the farmer. With this small board, right at the point of entry, we are saying – you are important to the farmer,” says Mir, who started Harshna Naturals in 2008 after returning with a management degree from Purdue University in America. His father is one of the biggest fruit and vegetable trader in the region. “Basically I came back and told him, ‘Dad, I am starting a project that will put you out of business,” smiles Mir. “And he said, ‘Well, we can always find other business opportunities but if the farmers continue to suffer the state has no future. So best of luck to you’. That was all I needed.”

The first Rs. 4 crores of investment built 5,000 metric tonnes or MT of capacity cold storage and fruit sorting facility. Mir is now aiming to touch 40,000 MT capacity at the cost of more than Rs. 250 crore by 2014. He says there is no dearth of investors since Kashmir is one of the main production hubs for fruits in India with, for instance, 57% of the apple production of the country (1.8 million tonnes in 2010-11).

But conservative estimates suggest that anywhere between 10% to 30% (in some seasons as high as 45%) of the Kashmiri apple crop gets wasted due to lack of storage and processing facilities in the state and the farmer is poorer for it. “The farmer has always had to sell when the trader tells him to — this has always been the way in Kashmir. But with the right storage facilities, the power shifts back to the farmer. He can choose when he wants to sell.”

To show that his efforts are bearing fruit, Mir forks out a set of the charts which display how farmers are taking to Harshna. There are three kinds of customers that Harshna has: some produce the company buys itself to sell in the future, multinationals and big corporate houses like Reliance Fresh and Bharti Walmart who use itself facilities and local farmers.

The vision statement of Harshna Naturals says that the aim of the company is to almost wholly be used by local farmers. This is what seems to be happening. In 2008-09, big companies used more than 60% of Harshna’s facilties, while 30% was used in-house and only around 10% by the local farmers.

This year, the company did not use any of its own facilities to buy and store exiting that business entirely. Less than 30% of the space was used by big companies and more than 70% by local farmers.

This has also meant that Mir’s other big poster across the facility – warning that no one should be seen eating an apple within the compound – is taken very seriously these days. “If somebody is seen eating an apple, and there are farmers around, they will immediately wonder whose apple is that? And they raise the alarm. We are working to create an environment of full transparency which has been difficult here.”

Kashmir was among the top four most corrupt states in India in a Transparency International study done in 2008 and Mir says modern enterprise and systems are bringing sociological change too.

“For instance, Kashmiris have always been called lazy but in 2010 when the stone pelting was going on through the day, what we did was we just did all the work at night!” laughs Mir. “We told our employees that instead of working during the day, just work at night and that way our trucks could pass undisturbed.” In a state which has lost 5 years of working days to strikes in the last 23 years, such innovation is critical.

“Today in Kashmir, if there is a will, there is a highway of enterprise that is open,” says Mir, who tells his employees that they should never aim to work at Harshna for more than two years. “My standard introduction is – after two years, if you do not leave me and start your own business, then I have failed.”

There are many signs of that this time around, the peace wave might be enterprise driven. On the back of record tourist arrivals (1.1 million last year), Congress Party General Secretary Rahul Gandhi, a personal friend of state chief minister Omar Abdullah, made a gesture last month that was as much political as it was economic. He invited some of India’s biggest tycoons from Ratan Tata to Kumaramangalam Birla, Deepak Parekh and Rahul Bajaj to visit the valley with him promising to bring India’s biggest business houses to the beleaguered region. Part of the idea was old – integrating the valley to the economic growth story of India but as a top-ranking bureaucrat in the Kashmir government told Fortune India the method was new.

“We have tried everything from interlocutors to prime ministerial missions. Now the thought is the delivery of hope cannot be just top down. It has to be bottom-up too,” said the bureaucrat. “Sometimes economics can tell people that there is something to look forward to better than politics.”

Khurram Mir was at a closed door meeting with the business leaders. “Mr Birla said for enterprise to grow, there has to be a degree of stability. But I liked what Mr Tata said – that the true spirit of enterprise is to circumvent the situation and continue the work and that ultimately brings peace,” he says.

In 2011, Tata’s Taj chain of hotels opened their first property in the valley with an 89-room hotel overlooking the Dal Lake and Asia’s largest tulip garden and boasting a 2,500 sq ft presidential suite. One of the earliest big hotel chains in the valley, The Lalit, announced this year that their palace hotel in Srinagar had become the chain’s highest revenue generating property after years of losses since the time the palace was taken over by The Lalit Group. This year Srinagar’s first radio taxi service, called Snow Cabs, was launched, and Kashmir University started its first MBA course.

Numbers back this calm. According to the Home Ministry, terrorism related murders in the valley in 2010-11 amounted to 2.77 per 100,000 population, lower than the crime rate in Delhi (3.1) and Haryana (4.1). So there is greater consensus than ever that Kashmir’s military force needs to be drastically reduced and a sense that that might be work in progress (the Home Ministry is reviewing a strong proposal) has lifted the mood. One of the big achievements of the Omar Abdullah government has been to keep the army large in its barracks. For instance, compared to 2004-05, there are hardly any military barracks in Srinagar city. And why not? There is hope from the side of the terrorists too. Syed Salahuddin, the dreaded chief of the Pakistan-aided Hizbul Mujahideen declared earlier this year that he has no more men in Kashmir.

In a valley jaded with talk of violence and peace in equal measure, enterprise driven peace is a new thought process. In these years, there have been regular summers of peace with its usual tourist flood and hype in a place where the first signpost outside the airport says ‘Welcome to paradise on earth’ taken from the lines written by the 13th century poet Amir Khusrau, ‘Agar firdous baroye zameen ast; Hami asto, hami asto, hami ast’ (If there is paradise on earth, it is here, it is here, it is here.’

In a state which has one of the highest population to government employee ratio with around 500,000 government workers (states of similar size like Jharkhand or Himachal Pradesh have one-fifth the number of state employees), stability among the guns have always meant a government job. Among the state’s 350,000 craftsmen families, in the last 20 years, the trend has always been to leave unique handwork skills nurtured over centuries and hunt for even the lowest rung posts as a peon or a guard.

That might now be changing.

This is why after 14 months of hard work and an invitation now to attend the L’Artigiano, the global annual arts fair in Milan, 29-year-old Arifa Jan still says she has to lead a dual life. A bit like Batman, she laughs.

Jan works to revive Numdah, the 11th century rug making technique said to have been popularized by the Mughal emperor Akbar. Her father is a helper in the state transport department. Both her parents are illiterate.

“Usually Numdah was made by the lower castes and that’s why I can’t even tell my relatives what exactly my business is. I just tell them that I am into handicrafts. I can never discuss what I am actually doing,” says Jan.

Two years ago she was selected for training under an unemployed youth training programme of the Jammu and Kashmir Entrepreneurship Development Institute (JKEDI) which gives seed capital between Rs. 3 to 7.5 lakhs upon completion of training. Jan decided to work with Numdah which was a dying art form in the valley with terrible quality and inflated prices. She uses only pure merino wool (unlike the cheap ones with cotton which would come apart in weeks) for her rugs that cost between Rs. 3,200 to Rs. 8,500. Of the first lot of 300 pieces that she made, 85% were sold immediately. She had also been invited to participate in the fests organised by Dastkar, the crafts body in Delhi.

“I feel that there are a lot of things that the world does not know about Kashmir. That’s what my business is all about. I want to teach the world about Kashmir,” says Jan who recently got her passport for her first trip outside India (to Milan). Even in India, she has only travelled to Delhi.

To understand what is happening to an economy where the average annual gross state domestic product has grown by 11.6% from $6 billion to $13 billion between 2004 and 2012, listen to Haseeb Drabu, the former chairman of the Jammu and Kashmir (J&K) Bank, who now works as a private consultant in Mumbai.

“There was always a lot of money in the state,” says Drabu. “Kashmir has never had the kind of poverty that for instance Bihar or Bengal had with absolute malnutrition. Whether it’s from the central government or from vested interests in militancy (including from Pakistan) money has flowed into the state. But now there is a palpable difference. The son of an orchardist is not content to remain just another orchardist. He wants to bring in modern machinery and take it to the next level. Is this one big magical change? No. But you are definitely seeing the beginning of a change in mindset and sociological make-up. People are not leaving everything to the government. They are taking some things in their own hand.”

Drabu says a lot of the change also happened with the penetration of the availability of finance. During his tenure from 2005 to 2010 as chairman and CEO of J&K Bank, Drabu changed the lending pattern of the bank from only 10% to people in the valley and rest to big companies across India to 60% local lending. He says it helped the bank build an almost zero non-performing asset book since “it was hundreds of small loans”. It also took the credit deposit ratio (CDR) from 20% to 62%. According to the Reserve Bank of India, a low CDR is usually indicative of tepid entrepreneurial activity. According to latest figures available till March this year, J&K Bank has a CDR of 60.47.

One of the numbers that suggest this is the rise of the state’s gross domestic product from $8 billion in 2004 to $13 billion last year. As Drabu explains, a compounded annual growth rate (CAGR) of 11.6% cannot only be government dole and illicit money.

That’s what Fayaz Bhat, 47, did when he started iQuasar (earlier Musky Software) in 2004. The company now has a turnover of $2 million and 47 employees. His father was a gauge reader with the state water board. His office is at the software development park at Rangreth on the outskirts of Srinagar.

He says he fights every day to change the mindset of the people around him, including that of his own father. “Even today my father is not happy that I am doing something on my own. If I tell him that my private sector job pays Rs. 50,000 and a government job pays Rs. 10,000 a month. He will say take the government job,” says Bhat who is COO at iQuasar.

But that’s not the only impediment to entrepreneurship. Speaking on the Skype from Manhattan, Bhat’s partner Tahir Qazi, CEO of the company, says his company is a great example of how “India grows at night when the government sleeps”. “As Kashmiri entrepreneurs we began with a feeling that we need to make things happen in spite of the problems. For instance, we have never paid one paise in bribes. Everyone here pays bribes but we just don’t. That means we are obstructed at every level by bureaucrats all the time.”

Case in point this Kafkaesque-ly absurd incident: iQuasar just received their latest once in two years factory license from the Department of Labour and the office of the Chief Inspector of Factories. The license, a copy of which is with Fortune India, clearly says that it’s valid till 31st December 2011.

Only it has been signed on the 19th of September 2012 and sent to the company.

“Now what do I do with this? You tell me,” smiles Bhat. He says he will keep the license and assume it is for the next two years and only apply again in 2015.

Nearby at the Essar-owned Aegis BPO Omar Wani, the manager in charge for Kashmir, says he had a raid once from factory inspectors who accused him of not having a manufacturing license.

“I told them but hold on, what am I manufacturing? They said, no, this is a factory. I was like – but you tell me what is being manufactured here? Nothing. They just didn’t understand what a BPO does but wanted bribes. So I was determined, you fine me, shut me down and I will go to court and fight for as long as it takes.” Faced with aggression, the inspectors backed off and after a few days cleared the BPO.

Wani says he is able to face this kind of harassment because of the enthusiasm his employees show. Of the around 200 people between the age of 19 to 27 years who work at the BPO, most leave in about two to three years, almost always to start their own enterprise.

“There have been people who have started a shop, become a trader, all sort of things. You see what they lack is a purpose, a sense of confidence. Here’s what I think we do. We don’t run a BPO at all. We run a service where young people come to be told that they too can make it in life, that they too have it in them. Once they have that, they can fend of themselves. The demand for government service has come from the fact that people had very low expectations of themselves and that was the ultimate comfort zone.”

I asked that question when I met the Chief Minister of Jammu and Kashmir Omar Abdullah. At 42, Abdullah is one of the youngest chief ministers in India and is seen as a potential reformer in a state where more than 60% of the population is under 30 years of age.

The Blackberry-carrying chief minister, in a navy blue track suit (and not the kurta-pyjama that politicians prefer especially when meeting the press) since he had just returned from a walk, frowned. “A license? Which company did you say?” grimaced Abdullah and it seemed like he was taking a mental note.

“This is exactly why we are pushed through a Public Service Guarantee Act last year,” said Abdullah. “It takes a bit of time to spread to every department but this is now monitored directly by my office.”

The Public Service Guarantee Act, now implemented by eight Indian states, makes the delivery of a set of essential services from the electricity connection to, in the case of Kashmir, industrial license renewal a public service the denial of which is a criminal offence.

“The idea is that, for instance, we train young entrepreneurs and they come out and cannot get licenses and clearances without paying bribes. These cases come straight to the entrepreneurship development body and then straight to the chief minister’s office. We take action and I am personally reviewing these things.”

This seems to be true at least in the case of Arifa Jan. When she applied for a industrial unit license and was told it cannot be given unless she has the right kind of machines. “One of those machines cost Rs. 25 lakh,” said Jan. “I was getting that part of the work outsourced. My total start out budget was Rs. 3 lakh. How could I buy a machine for Rs. 25 lakh?”

She then spotted the chief minister at a fair and approached him. “I told him that your people are not letting me start. He looked angry and then told his secretary, this license needs to be sent now! He told me, don’t worry this will not stop your work. In two days, the license was delivered to me.”

Abdullah says that the bureaucracy issue will not go away in a hurry. “It a legacy I have inherited and I cannot suddenly fire thousands of people. But left to me I would immediately halve the number of state employees. Since I cannot do that, I have to bring many issues right into my office to hasten the process.”

As he sat with Ratan Tata, Rahul Bajaj and Kumaramangalam Birla, Abdullah says his thoughts were about what he could do rather than the investment of corporate bigwigs. “I do not believe that our problems would be solved by external money pouring in. Big companies come in because they see some loop hole with which to make even more money and as soon as that goes, they exit. In the 1980s, HUL (Hindustan Lever) used to have a big factory in Jammu because the monopolies and restrictive trade practices law was not applicable in the state. The moment it was introduced, they packed up and left.

“So my focus is clear – entrepreneurs within the state. People who will definitely stay here,” says the chief minister who has been quoted as saying that enterprise cannot wait until “all the guns fall silent”.

He needs to hasten the process of the state government’s push into the support of indigenous industries especially since the central government’s thrust programmes like Udaan and Himayat launched in March to train 8,000 professionals for industries like information technology and to be placed at companies like HCL, Wipro and TCS are stuttering with only 139 students trained so far.

Drabu says that instead of such programmes, the state government needs to focus on a “quick double formula”. “Look at it this way, in indigenous craftsmanship, for years, through all the troubles hundreds of thousands of people have continued in business. We calculated when I was at the J&K Bank that with a sustained push to provide finance to them, each crafts family which now employs two members can easily employ four – that’s three or four hundred thousand jobs right away! And then spend money on marketing the goods – why has the price of a Kashmiri shawl remained stagnant more or less for more than 30 years now? There you have it – simple solutions that can immediately bring prosperity.”

For the first time, says Gazzala Amin, sometimes called Kashmir’s Queen of Lavender, there is this sense of urgency among many entrepreneurs and young people.

The 48-year-old started her Fasiam aromatic plants and oil extraction business with Rs. 8 lakhs seven years ago. Today her cultivation is spread over 2000 canals of land (20 canals = 1 hectare) and international quality lavender oil sent across from Turkey to France and China. Amin points to the global flavours and fragrances market set to hit $26.5 billion by 2016 and says Kashmir can develop as an essential oils hotspot.

Lavender is prized for its linalool molecule, the perfume molecule which is used in cosmetics. The molecule contains esters which give it strength and purity and Kashmiri lavender esters are often comparable to French lavender esters.

In her three hilltop farms at Sonawari, Pulwama and Tangmarg, Amin produces five crops a year, one tonne each of lavender, Rosa Damascena (Damascus Rose), rose scented geranium, clary sage and rosemary.

This is where she dreams of creating “an Indian Body Shop”. “We have everything. Kashmir can grow some of the best quality aromatic plants in the world. We also have a lot of barren land where maize cannot be grow but aromatic plants can be grown there. This land can be used to get up to Rs. 3 lakh per hectare,” says Amin.

“There is so much opportunity that is being wasted.”

Mudasir Mir says that’s what he tells Omar Abdullah, who is also the power minister of the state each time he meets the chief minister. In a power deficit state, Mir’s Magpie Hydel has three small hydro power plants at Bandipur (10 MW), Tangmarg (10 MW) and Poonch (20 MW).

He says at the moment Kashmir has “enormous pent-up entrepreneurial demand”. “There can be 40 – 50 power plants in Kashmir in hydel power which is so much cleaner than coal but very little moves without the personal intervention of the chief minister. How many files can he personally move?”

The Fordham University MBA says entrepreneurs in Kashmir have decided to see that “the glass is less than half full”. “Half full is where we realise that there is so much infrastructure missing in the state, and less than half full is where the bureaucracy and politics stifles things but I think there is an overall sense that we must get things done in spite of all the problems.

“At least the guns are silent now.”

(A version of this essay first appeared in the Indian edition of the Fortune magazine.)

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