North-east units may get boost

Industries in Himachal Pradesh and Uttaranchal likely to lose special status

Industries which shifted in droves to the hill states of Himachal Pradesh and Uttaranchal may be left high and dry with the Planning Commission in favour of doing away with the incentives extended to industrial units in these two states beyond 2006-07.

Meanwhile, the Department of Industrial Policy and Promotion is working on a proposal to extend the benefits to industrial units in the North-east under the North-East Industrial package by another ten years from 2007-17.

Government officials told Business Standard that the department was awaiting the response of the finance ministry on the proposal, which includes, increasing the interest subsidy on term loans and extending income tax concessions and excise exemptions to information technology, biotech, tourism and health sectors.

According to officials extending the benefits to new sectors and deepening the concessions would cost Rs 300 crore to the exchequer annually.

The proposal also envisages extending the concessions to the existing and new units irrespective of their location. Officials said they had also received representation to exempt units in the region from service tax.

Making a case for discontinuing the incentives to Himachal and Uttaranchal from the Eleventh Plan, the Planning Commission in its Mid-term appraisal of the tenth five-year plan said, "These states are not as locationally disadvantaged as the states in the North East and Jammu and Kashmir".

Sectors which benefited most from the incentives included pharmaceuticals, IT and communication technology, bottling of mineral water and horticulture and agro-based industries.

The MTA said that the industrial subsidies should be provided only if they result in positive externalities like sound environmental practices, substantial value addition or large scale employment generation. It further stated that that constant monitoring is required in order to ensure that the objectives of introducing the incentives are met.

The government had in 2002 announced a new industrial policy for industrial units in the two states which included extension of the 100 per cent outright excise duty exemption for a period of 10 years from the date of commencement of commercial production, 100 per cent income tax exemption for an initial period of five years and thereafter 30 per cent for companies and 25 per cent for entities other than companies for a further period of five years.

All new industries in the notified locations were eligible for capital investment subsidy at the rate of 15 per cent of their investment in plant and machinery, subject to a ceiling of Rs 30 lakh.

The North-east package was announced in 1997 and is being implemented from 1999. Since the implementation of the policy, over 460 units have come up with an investment of over Rs 1250 crore.

Looking east

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• Extending the benefits to new sectors and deepening the concessions would cost Rs 300 crore to the exchequer annually
• The North-east package was announced in 1997 and is being implemented from 1999
• Since the implementation of the policy, over 460 units have come up with an investment of over Rs 1250 crore
• Monitoring required to ensure that the objectives of introducing the incentives are met, says MTA