Industrial park policy to affect 349 pending applications

The recently amended industrial park policy, which has been implemented with retrospective effect, will adversely affect 349 applications for setting up industrial parks that are pending with the Department of Industrial Policy and Promotion (DIPP).

Many of these developers have already started constructing the projects related to the infotech sector in the hope of being included in the new policy, which has been on the drawing boards since mid-2006.

The draft scheme floated by the Department of Industrial Policy and Promotion in 2006 had included the infotech sector and envisaged a minimum area of 85 per cent for industrial use in the units inside the parks. Moreover, the draft policy also had mandated a minimum of 10 units for industrial parks.

The provisions of the Industrial Park Scheme, 2008, will be applicable on all industrial parks set up between April 1, 2006, and March 31, 2008. Experts said the developers, who had developed Infotech parks, would not be entitled for any tax benefits under the new scheme.

This is likely to see an increase in the cost of space in the parks and thus reduce investment attractiveness in infotech projects. Significantly, income tax exemptions to Software Technology Parks of India (STPI), which incubates many small infotech companies, are set to expire in March 31, 2009.

"Even if developers decide to go for litigation, their case will be weak because all the while the policy was being formulated," said a Delhi-based analyst.

Developers maintained there was no indication from the government that the infotech sector would be exempted under the new policy.

They are also worried about the new clauses, which mandates units of associated enterprises, would be considered as one and a single unit will not have more than 25 per cent of the area of the park.

Experts pointed out that companies prefer to have separate units inside a single park because of commercial prudence and the new condition may lead to cause supply scarcity.

The new scheme also restricts transfer of industrial parks to new developers. According toDepartment of Industrial Policy and Promotion data, ownership of seven existing industrial parks were transferred between 1997 and 2006.