“Now that the policy is through the committee, we expect the cabinet to endorse it soon,” said Industry Minister Mahendra Prasad Yadav.[break]
Once the new policy comes into implementation, it will replace Industrial Policy of 1992.
The new policy will entitle industries with various state supports, incentives for setting industries in rural areas and promote enterprises run by women. It promises finance support to lay down infrastructures like roads, electricity lines and water supplies up to the factory sites to encourage investors setting up industries in rural and mining areas, said a source.
Likewise, it pledges additional promotional incentive packages for export industries, particularly the small and medium enterprises. It promises 25 percent income tax concessions to small, medium and large industries that directly employ 100, 300 and 600 people, respectively.
“Industries promoted by women will also get income tax incentive,” Yadav said, adding that the policy also promises tax incentives for companies employing differently-abled people.
The new policy also categorizes the geographical regions into three groups -- highly underdeveloped, undeveloped, and underdeveloped industrial regions -- and pledges tax holidays of 10 years, 7 years and 5 years respectively to the industries in these regions.
Apart from the existing Special Economic Zones (SEZs), it envisages the development of Agro-Export Promotion Zone (AEPZ). "Industries established in these zones will be exempted of excise duty and VAT, the minister added.
It also recognizes research and development (R&D) and market promotion as an integral part of the industrial activities and promises income tax deduction for such expenses. The new policy also promises exemption of excise, customs duty and VAT on raw and packaging materials for export industries in SEZ, among others.
The policy cites IT, cement, hydropower, vehicle and motor parts, chemical fertilizer, bio-technology and adventure tourism as high priority industries, and agriculture, forest-based, Ayurvedic, and homeopathic medicine manufacturing, minerals and handicrafts as priority industries.
“It promises simple exit policy to the promoters, thereby freeing them from long-term labor and other liability,” said the source.
It also recognizes and allows subcontracting of productions for the first time.
Officials said this provision will help create specialization in the manufacturing process and enable a firm to meet international orders without investing further in its production units.
“Most importantly, this is expected to help foster backward linkages, mainly facilitate small scale industries, to incorporate in the larger manufacturing process,” said the source.
The policy also provisions differential tariff rates for raw material imports and the import of finished goods. While the aim of the provision is to promote domestic manufacturing over import trade, the policy says such protection rate (difference in tariff favoring local manufacturing over direct import) will be 25 percent.
Similar protection, and duty and tax-discount incentives have also been provisioned for the industries using local raw materials and generating higher value addition in the economy.
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