The Committee of Secretaries (CoS) on National Manufacturing Policy (NMP) is likely to meet for the first time on June 28. The meeting is expected to address concerns raised by ministries in the draft policy, which was given in-principle nod by Prime Minister Manmohan Singh earlier this month.
The CoS, which is headed by Principle Secretary to the Prime Minister T K A Nair, had been given the mandate to “fine tune” the policy in the wake of objections from various ministries.
“There are various issues that have cropped up ever since the policy had been drafted. Besides labour and climate, the most important issue is budgetary provisions and revenue implications over tax sops, which we have proposed in the discussion paper. In the long run it will have zero tax implications or it will have positive implications,” a senior Dipp official told Business Standard.
In the draft manufacturing policy, the department had suggested reinvestment of income generated from assets disposal owned by an entity operating within a specified zone or National Manufacturing and Investment Zones (NMIZ).
Such an income would be exempted from Capital Gains Tax with the condition of reinvesting it within three years.
According to the official, exemption from Capital Gains Tax would prove beneficial in the long run in checking black money and increasing revenue. Apparently, Dipp had been in war with the Revenue Department and CBDT over this issue.
It has almost been a year since DIPP released a discussion paper on the issue. Several rounds of discussions and consultations were held with all the stakeholders before the Prime Minister intervened.
Dipp has also suggested a Job Loss Policy in the draft that would be considered in the CoS meeting.
In the Job Loss Policy, Dipp has suggested it would be made mandatory for firms located inside the NMIZs to insure employees against loss of employment in the event of the company shutting down.
Earlier, Commerce and Industry Minister Anand Sharma had said there was broad unanimity within the ministries to bring out an ambitious NMP. After the required modification of the draft policy by the CoS, the concerned ministers would be meeting again with the PM for a final approval.
The government decided to bring in a New Manufacturing Policy in the backdrop of stagnation in the sector. The sector accounts for 50 per cent of the country’s exports and 12 per cent of the total workforce.
The manufacturing sector recorded an unprecedented average growth of 11.5 per cent during 2006-2008. However, the growth rate plummeted to four per cent during the global financial crisis in 2008-09.
The government also aims to boost the growth rate of the manufacturing sector at a faster rate in order to have a multiplier effect on the economy.
