AP clears Rs 1,400-crore industrial incentive dues at one go

Move aimed at building trust among investor community

In a bid to instill confidence in the government’s commitment on policy incentives for the industry, the Andhra Pradesh government has cleared the incentive backlog of close to Rs 1,400 crore at one go. The government had released over Rs 300 crore for this purpose recently.

With the latest budget release orders pertaining to Rs 1,398.95 crore towards the industrial incentives, there will be no more dues pending for clearance in the industrial sector, according to the officials.

These dues were pertaining to the sanctions given under the Industrial and Investment Promotion Policy (IIPP) 2005-10 and IIPP 2010-15. The companies were being made to wait for release of incentive money for years together as these details reveal. In all, 5,300 units will be benefited from the government decision, according to the latest orders.

Of the various incentives, the energy subsidy dues alone were Rs 839.91 crore, followed by Rs 391.48 crore in sales tax reimbursement. The rest of the amount was related to the investment subsidy, stamp duty, interest subsidy, among others. Earlier, the governments used to allocate around Rs 200 core towards the payment of incentives to the industry in the annual budgets, irrespective of the actual requirement.

The State Investment Promotion Board (SIPB), headed by chief minister N Chandrababu Naidu at its recent meeting observed that the abnormal delays in keeping up with the government promises had been sending wrong signals to the investor community, according to the officials.

The state government has been betting on offering more incentives at the state level to attract the incentives  as the uncertainty continues over the fate of tax incentives promised in the AP Reorganisation Act, 2014, for both the truncated AP and Telangana states.

States like Tamil Nadu and Karnataka had already wrote to the Centre, opposing any tax incentives for industry specific to the jurisdiction of AP or Telangana as they would be at a disadvantage for no fault of theirs.

AP had asked for the exemption of excise and customs duties on the new industrial investments up to a period of 15 years along with an income tax relief to the units located in the state. Also, it wanted these tax incentives to be applied to the investments made in any part of the state.

Waiver of excise duty alone will generate a lot of interest in AP, especially from the automobile sector as the auto component parts carry as high as 14.5 per cent duty, according to the officials. With an eye on developing the automobile manufacturing hub at Tada and nearby areas bordering Tamil Nadu, which has a huge automobile base in the entire south India, the AP government had brought out a separate automobile manufacturing policy targeting big companies.

Though the proposal for granting the special category status to AP seems to be a remote possibility as admitted himself by Union minister M Venkaiah Naidu during his recent visit to his home state, the state officials, on the other hand, kept their hopes alive on the tax incentive front.

“The Union finance ministry is doing the exercise on the offer of tax incentives to AP and Telangana. The state government is also of the opinion that the Centre cannot completely go back on what it had promised in the Act,” an industry department official said.

If not in the form of complete exemptions as offered to the hill states like Uttaranchal in the past, at least some percentage of relief in these central taxes could still be a possibility, the state officials say.