The state claimed these losses have been caused by several industries migrating to nearby Himachal Pradesh as a result of this scheme, which runs till March 2010
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| "Our central excise revenues were over Rs 3,000 crore in 2001-02 and dropped below Rs 800 crore in 2006-07 mainly because of migration of units from Punjab to nearby tax-exempt states," V K Janjua, industry secretary, Punjab, told Business Standard.
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| The Punjab government will be the first to take the central government to court on the issue. Janjua said the government has identified a senior legal counsel to represent the state and a petition will be filed within a few days.
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| Janjua claimed that 90 per cent of pharmaceutical manufacturing units in Punjab have shifted to areas like the industrial town of Baddi in the Solan district of Himachal Pradesh.
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| "We are losing out on generating employment opportunities, stamp duty fees and other aspects related to the growth of industrialisation," he said.
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| The migration of industrial units to tax-free states has drawn complaints from several chief ministers, including those of Punjab and Andhra Pradesh, and dozens of Parliamentarians.
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| The central government's special area-based exemption package was mainly targeted at hill states (in the north-east, Uttaranchal, Jammu & Kashmir, Himachal Pradesh) and the Kutch district of Gujarat to encourage new industrial investment in those regions.
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| All units set up in these regions between 2003 and 2010 are exempt from excise duty for 10 years and income tax for the first five years, followed by a 50 per cent income tax exemption in the remaining five years.
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| These industrial units also enjoy concessional central sales tax.
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| "The act of providing tax sops to selective states is against the spirit of the Article 303 of the Constitution," said Janjua.
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| Article 303 says neither Parliament nor a state legislature has the power "to make any law giving, or authorising the giving of, any preference to one State over another, or making, or authorising the making of, any discrimination between one State and another, by virtue of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule" of the Constitution.
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| The Punjab government believes the policy is against the spirit of the Constitution as it gives "undue" support to other states and distorts the natural level-playing field.
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| In 2006-07 alone, total area-based excise and other exemptions cost the central exchequer Rs 99,690 crore, up from Rs 66,760 crore the year before.
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| Punjab Drug Manufacturers Association President Jagdeep Singh said most Punjab-based units have set up shop in excise-free zones, and are outsourcing bulk of their medicine requirement from these units.
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| "About 80 per cent of the country's medicine production is taking place in tax-exempt states today. While the objective of the tax concessions was to create new job opportunities, what has happened is that industrial production has shifted from one state to other," he said. |
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