Kutch tax sops may be extended

Political one-upmanship caused confusion over tax holiday status

The Congress-led United Progressive Alliance (UPA) government is likely to extend the excise holiday for the Kutch district before it expires on December 31, 2004.

Gujarat Pradesh Congress Committee (GPCC) president B K Gadhvi said: "Yes, the Congress led UPA government will extend the tax holiday to Kutch. We have been pursuing the matter with the government."

However, political one-upmanship seems to be the reason why Kutch did not find a place in the recently announced list of backward areas where excise duty exemption has been extended until March 31, 2007.

The UPA government did not include Kutch in the list that was announced in the Union Budget because the Gujarat government, including chief minister Narendra Modi and state industries minister Anil Patel, had made a plea to extend tax benefits to the district. Inclusion of Kutch would have enabled the BJP to gain political mileage from the development.

But while it appears that the tax holiday might be extended beyond December 31, 2004, the Kutch district might still lose some investment as industries would still be reluctant to setting up units there. It would take a few months for the impact of the government's decision to sink in.

One of the members of the delegation that met Union finance minister P Chidambaram and other central government officials said: "The Congress leadership was of the view that, although the earthquake was a natural disaster, the BJP leadership, both in the state as well as the Centre, derived political mileage out of the sops given to Kutch. We have been assured that the sops to Kutch will be extended."

Another member of the delegation said Congress leaders have assured them that the excise exemption will be extended before the deadline expires.

"It is purely a political thing now. But, whatever the compulsions of the leaders, it appears Kutch will get an extension," said the industrialist who did not want to be named.

However, Gadhvi denied the charges of political one-upmanship. State industries minister Anil Patel could not be reached for comment.

When MP from Kutch, Pushpadan Gadhvi, raised the issue at Parliament five days ago, Chidambaram said Kutch was not in the list of areas where tax holiday has been extended.

This statement caused an outcry in Gujarat, with the Gujarat Chamber of Commerce and Industry terming it 'unfortunate and Kutch MPs alleging that this was an injustice to the district and to Gujarat.

Following the devastating earthquake that destroyed a majority of structures of the district apart from loss to life, a special package was announced for speedy growth of the region. The special incentives were originally effective from July 31, 2001 to July 31, 2003, but these were extended to December 31, 2004.