The Centre has begun mediations between Punjab, Uttarakhand, Himachal Pradesh, Jammu and Kashmir and some other states over the issue of tax incentives for industries.
Already, several rounds of talks have been held at New Delhi, said a top government official on the condition of anonymity.
During the past few years, Punjab and some other states have been opposing the concessional industrial packages given to some Himalayan and the north-eastern states under which income tax and excise tax exemptions are being given to attract the industries in the backward areas. The Punjab government has also filed a petition in the Supreme Court claiming that these tax incentives are leading to the flight of industries from the state which in turn has dampened the industrial sector.
For example, a package given in 2003 by the centre turned out to be a boon in Himchal Pradesh and Uttarakhand with some of the big names like Tata Motors, Hero Motocorp, Bajaj Auto and Nestle setting up manufacturing units in the two states. Uttarakhand alone had attracted an investment of over Rs 30,000 crore during the period with its growth rate touching the double digit mark.
“The main purpose of these mediations is to pacify these states not to quarrel with each other over the tax incentives,” said the official. The mediations are being held at the level of bureaucrats only and politicians are not being involved, the official said.
With the Akali Dal government opposing the package, the UPA government was finding itself in an unsavoury situation especially when the assembly elections are due in Punjab, Uttarakhand and Uttar Pradesh.
Due to pressure exerted by Punjab and other states, the UPA government withdrew the cent per cent excise tax exemption given to both Himachal and Uttarakhand last year even as the two Himalayan states had repeatedly demanded that the incentives should continue for few more years.
The BJP government in Uttarakhand claims that the tax incentives had affected investments worth over Rs 30000 crore as well as employment opportunities for nearly 1.5 lakh youths.
