Ashok Leyland Managing Director R Seshasayee says the company’s plant at Pantnagar in Uttarakhand, which started production today, will change the company’s “centre of gravity from south to north India”. But that’s not the only benefit the Hinduja group flagship company will get by fast-tracking the production schedule.
The company will also save Rs 30,000-50,000 per truck from duty benefits available under the government’s area-based exemption scheme for hill states — which will end on March 31 this year. The Finance Bill for 2010-11 makes no mention of this scheme, which started in January 2003, implying that it will die a natural death.
Ashok Leyland isn’t alone in starting production in a hurry. A host of leading companies such as Shree Cement, Titan and Hindustan Zinc are expected to follow in the next few days to take advantage of the exemptions, also known as the concessional industrial package or CIP.
Nearly 100 other companies, mostly small enterprises, are pulling out all the stops to start production in the next 25 days at the Pantnagar, Haridwar, Selaquie and Kotdwar industrial estates, which had been developed by the State Infrastructure and Industrial Development Corporation of Uttarakhand Limited (SIDCUL) after the announcement of the CIP.
Himachal Pradesh’s prime industrial hub, Baddi, and its adjoining regions such as Barotiwala and Nalagarh, have also seen a rush for registrations of new manufacturing units. Eighty five new units have obtained permanent registrations from the state industries department in recent months and the units cut across industry sectors, the major ones being pharmaceutical, packaging, engineering, electrical home appliances etc.
While the region attracted over Rs 6,000 crore investment through 1,300 units in the last five years, the last six months saw at least 332 more proposals — which have been given provisional registration — estimated to bring in another Rs 500 crore worth of investment, state government officials said.
Under the scheme, investments made in some areas qualified for 100 per cent excise duty exemption for 10 years and 100 per cent income tax waiver for the first five years and 30 per cent for the next five years.
The industry’s rush to beat the deadline is understandable. Manmohan Singh, commissioner, customs and excise, Meerut, says all the companies that want to take the benefits of area-based exemptions must start production before March 31.Nearly 2,400 new units have so far set up shop in the hill state since 2003, when the package was announced.
Dabur CEO Sunil Duggal says although existing units will not suffer, the new ones will, since those that have received in-principle approvals but have not yet been commissioned will stand to lose.
Industry, however, is still hoping for the best. Arun Rawat, general secretary of Baddi Barotiwala Nalagarh Industries Association in Himachal Pradesh, says he is expecting an extension of the tax holiday. Initially the scheme was to end in 2013, which was later cut short to 2010, but there is a case to extend it.
A senior Hero Honda executive says it would be most logical for the company to make investments at Haridwar if the tax holiday is extended.
“If not, we will have to look at the offers made by other states,” he said.
Hero Honda is currently operating at 83-86 per cent capacity at the Hardwar plant and will weigh its options on a fresh location for capacity expansion only if the tax facility is withdrawn. This fear of losing out to other states is what is prompting the state governments to lobby hard for an extension. The Uttarakhand chief minister has already made three trips to New Delhi to meet the Prime Minister to convince him to extend the deadline
A senior SIDCUL executive said only half the total land allotted by the state government has been utilised so far, which means that there is plenty of scope for further investments. There were proposals totalling Rs 47,000 crore, of which only Rs 25,000 crore have been made so far.
(With reporting from New Delhi and Mumbai)
