Balancing Growth and Sustainability
Dr. Haseeb Drabu’s article “A Tale of Two Deals,” published on January 30, 2025, in Greater Kashmir, explores the shift from debt financing to equity financing as a sign of economic progress in Kashmir. It provides an analysis of two key corporate transactions involving Saifco Cements and QUL Fruits, both of which have raised, or are contemplating raising, capital through equity.
However, the article’s preference for equity financing over debt could be an oversimplification. While equity can offer the advantage of capital without immediate repayment pressure, it often comes at the cost of diluting ownership and sharing profits, which may limit entrepreneurial control and long-term vision. Most globally successful businesses continue to thrive by striking a balance between debt and equity financing. Equity is not always the most advantageous route for every business, and a one-size-fits-all approach may not serve Kashmir’s diverse industries and business models.
The 60% equity stake acquired by JK Cements in Saifco Cements essentially amounts to a takeover, granting JK Cements full control and management of the company. Consequently, Saifco Cements loses any significant influence, which could eventually lead to them selling off their remaining shares. As noted in the article, local capital may initially be needed by national and international investors to familiarize themselves with managing projects in a new environment. However, once they’ve gained this insight, they may no longer see the need for continued local involvement.
Even in cases where equity investors hold less than a majority stake, we’ve seen them pressure companies to pursue rapid growth in the name of profit. This can often push companies onto a risky path, which can lead to failure. A notable example of this is the well-known multinational educational technology company Byju’s, which is currently grappling with insolvency.
The article critiques the era of import substitution, labeling it outdated and inefficient. Yet, this critique fails to consider how import substitution could still play a critical role in certain sectors in Kashmir. While the region may indeed benefit from diversification and export-driven models, some industries might find it more beneficial to reduce dependency on external markets, creating jobs and stabilizing local economies by focusing on substituting imports with domestic production.
Dr. Drabu advocates for a private-sector-driven approach, emphasizing short-term strategies like raising capital and de-leveraging. While valid in some cases, this view may be shortsighted. In Kashmir’s unique economic context—marked by political instability and limited market access—a purely market-driven model cannot address all challenges. Government support, through clear policies and strategic intervention, is crucial for long-term stability and growth.
A key oversight in the article is its focus on business growth without addressing the long-term environmental and social impacts. The emphasis on scaling and capital growth neglects the ecological and societal risks, particularly in mineral industries. Given Kashmir’s fragile ecosystem and socio-economic challenges, sustainable development should be at the heart of any investment strategy, aligning with global trends toward responsible business practices.
History shows that wealth concentrated in natural resources often attracts external forces, seeking control. The East India Company, initially a trading entity, gradually monopolized India’s economy, exploiting local resources and displacing indigenous industries. Today, multinational corporations use a more sophisticated, legally sanctioned approach, targeting high-return sectors like natural resources, energy, and cement. By leveraging financial power and market control, they secure dominance, often at the expense of local businesses, economies, and the environment.
In 2005, a major industrial group discovered vast limestone deposits in Jammu and Kashmir, of which only a tiny fraction (0.03%) had been explored. They proposed building a massive cement plant with a capacity of 10,000 MT per day, far beyond anything the region had seen. At that time, local cement plants were much smaller, producing between 100 and 600 MT per day, including companies like Khyber, TCI, and Saifco, besides a plant in public sector.
During a reception hosted by the then Chief Minister Mufti Mohammad Sayeed for a delegation of young captains of Indian and Pakistani industry, I had the opportunity to meet Puneet Dalmiya, a representative of one of India’s largest corporate groups. He presented his idea of the large cement plant to the CM, claiming it would allow them to produce cement at a much lower cost—around 60–70 rupees per bag.
The proposed plant would have flooded the market with cheap cement, making it impossible for local manufacturers to compete and potentially driving them out of business almost overnight.
In addition to the economic threat, the environmental impact would have been disastrous. A plant of this scale would have drastically increased limestone extraction, polluted the air, and put immense strain on local resources, exacerbating the pressure on Kashmir’s fragile ecosystem.
When the Chief Minister sought my opinion on the proposal, I explained that while there was a shortfall of about 8 lakh MT of cement per year, the local industry had the capacity to expand and meet this demand without the need for such a large corporate plant. I also highlighted the potential economic and environmental consequences, cautioning that the project could harm local businesses and threaten the region’s fragile ecosystem. Local cement manufacturers also raised their concerns, fearing that their businesses would collapse, leading to thousands of job losses and serious environmental damage.
Ultimately, the project was never approved, marking a rare moment where local interests and ecological concerns triumphed over corporate ambition. This decision marked a rare victory for local interests over corporate ambitions, but such victories are not always guaranteed. Across the globe, corporations continue to expand, targeting industries where profits are assured while often displacing local businesses and harming the environment. Governments, policymakers, and local businesses must remain vigilant against such monopolization and prioritize sustainable, community-oriented growth.
For many decades, Kashmir’s apple industry stagnated, with production stuck at just 10.5 MT per hectare due to flawed planning, a lack of research and development, and farmers’ reluctance to replace aging plant material. However, in the past decade, significant shifts have taken place. Academia has played a crucial role in guiding progress, and forward-thinking entrepreneurs like Khurram Shafi have helped change the mindset of local farmers with innovative practices. While exact figures are not available, it’s clear that production has far surpassed the previous 10.5 MT mark, with some areas now yielding over 40 MT per hectare.
In a recent meeting, Vice Chancellor of SKAUST, Prof. Nazir Ganai, mentioned that New Zealand has achieved an impressive 120 MT per hectare, underscoring the vast potential for further growth. Horticulture is deeply woven into the culture and livelihood of Kashmiri farmers, and any attempt to displace them with corporate interests would harm both the region’s economy and its heritage. Furthermore, the establishment of nearly 100 Controlled Atmosphere (CA) stores has been a major step forward; helping preserve the fruit for longer periods and further enhancing the industry’s potential.
In conclusion, while Dr. Drabu makes a compelling argument for equity participation over debt financing, we firmly believe that corporatising sectors like mineral resources and horticulture is not the right path for Kashmir. Given the region’s unique ecological and socio-economic challenges, these industries are better supported through debt financing, provided it is available at reasonable rates, along with necessary government subventions. This approach will promote growth while protecting against the risks of monopolisation and environmental damage often associated with corporate-driven models. The priority must be to protect local industries and ensure sustainable development, as a purely equity-based approach could undermine both. Kashmir’s economic strategy should focus on nurturing local enterprises and sustainable growth, rather than opening the door to corporate dominance.
Syed Shakeel Qalander is a social activist and business leader
