New industrial policy announced

Govt to form separate policy for biotech; to strengthen single window clearances mechanism

In a major move to get more investments into the state, the Andhra Pradesh government has announced a host of subsidies and incentives for the new industries in its industrial policy, effective April 1, 2005.

The state cabinet met here today to approve the new industrial policy with certain last minute modifications. The policy aims to reach Rs 150 billion new investments by 2010.

A 25 per cent tax reimbursement, a subsidy of 75 paise per unit on power consumption along with 100 per cent reimbursement of stamp duties paid by industries are some of the significant features that form part of the new policy.

The highlight of the policy is that the two important incentives "� tax reimbursement and power subsidy "� have been being made available to all the eligible small, medium and major industries without any discrimination. However, the policy does not mention anything specifically about the mega projects.

The government has also offered a special package to the existing large-scale industries, which is the creation of an industrial sustenance fund. The officials, however, maintained that it is yet to be worked out as the idea was incorporated at the last moment.

From the tax paid during one financial year, 25 per cent will be ploughed back to industries in the form of grant towards the payment of tax during next year. The subsidy on power cost will reduce the effective industrial tariff to Rs 2.50 per unit for the industrial consumers who draw power at 132 kv voltage level.

The tax reimbursement will be available for 5 years from the date of commencement of production, ie, up to the sixth year. The power subsidy at the rate of 75 paise per unit will be reimbursed during 2005-06.

For the remaining four years, the rate of reimbursement would be adjusted on a yearly basis keeping in view the changes in the tariff structures to ensure that power cost remains at the 2005-06 level.

Though the state government originally planned to offer 50 per cent tax reimbursement, it has now reduced the percentage by half following strong objections raised by the revenue department.

According to B Satyanarayana, minister for major industries, an additional amount of around Rs 250 crore will be made available during the current financial year for the subsidy and incentive package for new industries.

This is in addition to the Rs 179-crore budgetary provision that has already been earmarked for infrastructure support for major projects from the Industrial Infrastructure Development Fund (IIDF).

Apart from the new industries, projects involving substantial expansion/diversification of existing industries are also entitled to benefits.

The benefits on the infrastructure front include infrastructure assistance to stand alone units by contributing 50 per cent of the cost of infrastructure with a ceiling of Rs 1 crore, reimbursement of 25 per cent of the cost of land purchased in facilities owned by the Andhra Pradesh Industrial Infrastructure Corporation (APIIC), a corpus fund to match the contribution made by the consortium of industries in industrial estates or clusters to a maximum limit of Rs 25 lakh to improve the credit flow.

The benefits for the small and medium enterprises (SMEs) sector include 15 per cent investment subsidy on fixed capital investment to small scale industries/tiny industrial units subject to a maximum of Rs 15 lakh, an additional subsidy of 5 per cent fixed capital investment for women, and scheduled castes and scheduled tribes.

Women belonging to scheduled castes and scheduled tribes will get an additional investment subsidy of 10 per cent.

The government will provide an additional subsidy of 8 per cent over and above12 per cent subsidy provided by Small Industries Development Bank of India (SIDBI) under the credit-linked capital subsidy scheme for the new industrial units.

Other benefits include a reimbursement of 50 per cent of the expenditure incurred by the industrial units in getting national or international standard certifications.

The government has also stated that a separate policy shall be formulated for biotechnology along with the creation of a separate directorate to deal with the subject besides further strengthening of the single window clearances mechanism.

The state cabinet has also announced a resettlement and rehabilitation policy for land acquisition for the proposed irrigation projects in line with the Government of India's guidelines.

What's in store

• Policy aims at reaching Rs 150 billion new investments by 2010
• Two important incentives, tax reimbursement and power subsidy, have been made available to all the eligible small, medium and major industries without any discrimination
• Tax reimbursement will be available for 5 years from the date of commencement of production
• An additional amount of around Rs 250 crore will be made available during the current fiscal for the subsidy and incentive package for new industries