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The Cabinet Committee on Economic Affairs (CCEA) gave its approval for the extension of Special Package of Industrial Incentives for Himachal Pradesh and Uttarakhand in January 2014. The extension of industrial incentives was enacted to help these states to attract projex, especially private projex.
The CCEA has approved the extension of the package till the end of the 12th Five Year Plan i.e. from 7 January, 2013 to 31 March, 2017. The new industrial policy and other concessions for these states were announced on 7 January 2003, for a period of 10 years, keeping in view that these states were lagging behind in industrial development.
As per the Special Industrial Incentives package, all new industrial units and existing units on substantial expansion, would be eligible for Central Capital Investment Subsidy, at a rate of 15 per cent of investment in plant and machinery, subject to a ceiling of Rs 30 lakh.
The cap on amount of subsidy will be raised from Rs 30 lakh to Rs 50 lakh for MSME units at the rate of 15 per cent of their investment in plant and machinery.
Incentive on substantial expansion will be given to units affecting an increase by not less than 25 percent of the value of fixed capital investment in plant and machinery for the purpose of expansion of capacity.
This subsidy will be available to all new and existing units on substantial expansion located in notified areas, as well as to “thrust industries" for units located anywhere in these states.
However, only those units that pre-register under the scheme, commence commercial production or operation before 31st March 2017, and file claims within one year of the commencement of commercial production will be eligible for subsidy under the incentive scheme.
Expenditure on purchase, procurement or installation of second hand plant and machinery will not be eligible for subsidy under the Central Capital Investment Subsidy Scheme. Also, a single unit cannot avail subsidy from both, the Central as well as State Government for the same purpose.
Over the 10 year period the policy and industrial incentives attracted several projects to the states.
Some of the major projects set up in the two states during the period include: Hero Honda Motors’s Rs 1,900 crore two-wheelers plant expansion project at Ranipur; Ashok Leyland’s Rs 1,200 crore Commercial Vehicles project at Pantnagar in Uttarakhand; and Jaypee Group’s Rs 1,200 crore clinker project at Baga in Himachal Pradesh.
Overall, Himachal Pradesh attracted 300 per cent more investment as compared to the pre-incentive package level. As per the state government, 16,500 units in the small, medium and large scale sector, with a proposed investment of Rs 48,830 crore, were approved from January 2003 to March 2013, out of which 9,353 units with an investment of Rs 14,557 crore were actually set up.
In Uttarakhand, investment close to Rs 30,000 crore was generated during the policy period, which is 42 times the level in the year 2000. The number of units set up also increased by more than 130 per cent.
Still, the extension of the Special Package of Industrial Incentives was highly sought after as it was feared that an expiry of the concessions would lead to an exit of companies from the states.
The Planning Commission has also earmarked an outlay of Rs 500 crore for extension of this package to special category states of Himachal Pradesh, Uttarakhand and Jammu and Kashmir during the 12th Five Year Plan.
The National Development Council (NDC) has accorded 11 states in India the status of "Special Category States", which are —Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura, Sikkim, Jammu & Kashmir, Himachal Pradesh and Uttarakhand.
These Special Category States have some common characteristics like hilly and difficult terrain, low population density, sizable share of tribal population, strategic location along borders with neighbouring countries, economic and infrastructural backwardness and non-viable nature of state finances.
The overall aim of this categorization and the subsequent special polices or incentive packages, is to target investment flow in these states for an overall balanced growth and overcoming regional disparities in industrial development.
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