Plan review for paring sops to Uttaranchal, HP industries

The mid-term appraisal of the Tenth Five-Year Plan has called for toning down incentives available to industries in Uttaranchal and Himachal Pradesh.

This is different from the draft version of the appraisal which had said incentives should be done away with after the Tenth Plan. The final version, to be submitted to the National Development Council (NDC) next week, says "corrective steps" need to be taken.

"The scheme was not calibrated adequately to take into account the fact that Uttaranchal and Himachal Pradesh are not as disadvantaged geographically as the north-eastern states," the MTA says.

The incentives available to industries in the Northeast had adversely affected the industrial climate of advanced neighbouring states. Industries had shifted in droves to Himachal Pradesh and Uttaranchal after the government announced the extension of similar tax incentives, as available to industries in the Northeast.

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

In 2002, the government had announced a new industrial policy for units in the two states. It included a 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 5 years, and thereafter 30 per cent for companies and 25 per cent for other entities for another five years.

All new industries in the notified locations were eligible for the 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 existing units were also entitled to this subsidy on their substantial expansion.

Subsidies should be provided only if they result in sound environmental practices, substantial value addition or large-scale employment generation, the MTA states. It adds that constant monitoring is required to ensure that objectives of introducing incentives are met.

Incentive correction

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• The final version, to be submitted to the National Development Council next week, says "corrective steps" need to be taken
• The incentives available to industries in the Northeast had adversely affected the industrial climate of advanced neighbouring states
• Sectors which benefited the most from the incentives included pharmaceutical, information technology, communication technology, bottling of mineral water and horticulture and agro-based industries
• The new industrial policy for units in the two states included 100 per cent excise duty exemption for a period of 10 years