The government today proposed setting up National Manufacturing and Investment Zones (NMIZs) under a policy to increase the share of the manufacturing sector in gross domestic product to 25 per cent by 2022 from about 15 per cent at present. The zones not only get tax and other incentives, but will also be given relaxation under labour laws.
“The proposed National Manufacturing Policy for these NMIZs would act as the key enabler in driving the growth of the sector in India. Good physical infrastructure, a progressive exit policy, structures to support clean and green technologies, appropriate investment incentives, and business-friendly approval mechanisms will be the cornerstones of this new initiative,” said a discussion paper on the proposed policy.
The government plans to constitute a high-powered committee that would scrutinise applications for setting up NMIZs and subsequently monitor and expedite the progress of implementation. Each NMIZ would be notified separately by the Department of Industrial Policy and Promotion.
These zones would be run by a special-purpose vehicle (SPV) that would be responsible for their development and management. The SPV would, after notification of an NMIZ, prepare a detailed master plan consisting of a regional development plan specifying land use and zoning for processing and non-processing areas.
The policy recommends a moratorium of all municipal and other local taxes for 10 years for NMIZ developers, as well as the units located in the zone.
To ease the burden of payment to workers at the time of the closure of a unit, a job loss policy has been conceived for these zones. Under this, the asset stripping of the entity would not have to wait until payment has been made to workers. This could help ease the pressure on manufacturing entities considerably.
At the time of the closure of the unit, there is a mandatory requirement under Section 25FFF of the Industrial Disputes Act to pay compensation equivalent to 15 days’ average pay for every completed year of continuous service or any part thereof in excess of six months.
To encourage industrial units to take on training/retraining of workers, such expenditure is to be treated on a par with research and development expenditure.
The Centre would give tax exemption on expenditure incurred in taking national and international process, product certification, approvals like ISO 9000, BIS 14000, BEE, IS, CSA, UL, VDE, etc. Half of the expenditure incurred in filing international patents would also be shared by the government.
The policy also proposes a four-per-cent interest subvention on working capital to create parity with international counterparts. In government purchases, preference would be given to units located in NMIZs. To encourage supply-chain development, income tax exemption has been proposed for suppliers in proportion with the supplies made within NMIZs. There would also be special incentives for some crucial industries that are highly-dependent on import.
The central government would ensure the availability of external physical infrastructure linkages to NMIZs, including railway, road (national highways), ports, airports, and telecom, in a time-bound manner. This infrastructure would be created or upgraded through public-private partnerships to the possible extent.
The SPV would also be empowered to issue or expedite approvals and pre-approvals. It would be headed by a CEO with sufficient autonomy, with the participation of the developer or co-developers, industry association, and major manufacturers. The state government would also constitute a body to monitor, review and appraise the functions and the performance of NMIZs.
Welcoming the proposed policy, Ficci Secretary-General Amit Mitra said: “NMIZs would minimise the burden of regulatory compliances and inspection on the Indian manufacturing sector and protect the interests of workers by ensuring that appropriate compensation is given to them through an insurance instrument and dues settled at the time of closure of unit located in the zones.”
At present, a manufacturing unit in India has to comply with 70-odd legislation, on an average, with each clearance requiring at least one licence or registration certificate. These compliances involve multiple inspections — monthly or yearly. Also, the returns to be filed are on a monthly, quarterly or yearly basis under these legislation, amounting to more than 100 returns to be filed in a year.
