Tax breaks: Punjab comes under fire

States, which enjoy area-based tax exemption on new investments, have hit back at the plans of the Punjab government to seek legal remedy to check migration of investments from the state to the tax-free states.

Calling the central package a "well deserved" one, the industry and government representatives of Himachal Pradesh and Uttarakhand felt that it is in tune with the constitutional rights of the central government.

PC Sarma, principal secretary (industries), Uttarakhand, said the central government has always provided assistance to the backward states.

"Punjab and Haryana have been complaining this for some time now. They are industrially developed states as compared to us. To correct this anomaly, the central government in its wisdom decided to offer this special package. It is a well deserved package," Sarma said.

The feeling was shared by industrialists who have set shop in these states also. According to them, the combined investment proposals that have reached Himachal, Uttarakhand and Jammu and Kashmir over the last four years is about Rs 60,000 crore. As compared to that, investment proposals reaching non-exempt states are much higher even today, they say.

"Himachal has received investment proposals worth Rs 27,000 crore in the last four years. This is very less when compared to Punjab's claim that it has attracted 1,50,000 crore worth investment proposals in just one year," said Rajinder Guleria, chairman (Himachal Chapter), Confederation of Indian Industry (CII).

Guleria added that none of the big companies like Dr Reddy's, Hindustan Lever, Unichem or Torrent have closed their existing units in other states.

"There is no question of migration. Further, if the total investments are divided between the states that claim revenue losses, one would realise that no major investment shift has taken place," he explains.

Punjab is not alone in voicing protest against the central policy. Andhra Pradesh, the first state to voice its reservation on the Centre's area based tax-exemption policy, has reiterated its request for extension of the sops to other backward regions in the country, including Andhra, and also urge the Centre to include its request in the ensuing Budget.

"In a democratic set-up, it is difficult to withdraw such incentives once they are given, but they can be extended to other backward regions in the country as industrialisation is the fastest growth engine to economic development," DV Somayajulu, economic adviser to the Andhra Pradesh government, said.

Andhra Pradesh had in the past requested the prime minister to extend the same industrial incentive package to its backward districts, Somayajulu said.

According to him, certain regions in Rayalaseema, north coastal Andhra and Telangana with their larger populations and lower per capita incomes than states like Uttarakhand continue to be more backward and deserve the same treatment.

The Punjab government has decided to oppose the Centre's 2003 area-based tax exemption scheme in the Supreme Court on the grounds that the policy had resulted in significant revenue erosion and job losses for it.

Meanwhile, the ruling Siromani Akali Dal (SAD)is planning a rally of about 100,000 persons in Delhi on February 26 to protest against the "step-motherly" attitude of the central government towards industrial growth in Punjab.

As reported, Punjab is the first state to declare its intention to oppose the central tax exemption scheme for hill states, both politically as well as legally.