Ahmedabad: Gujarat may soon become India’s first state to be free of so-called backward areas. Semantically, at least. Chief minister Narendra Modi has asked the state bureaucracy to remove the words from its 2009-13 draft industrial policy, which isn’t likely to offer any new sweeteners to companies investing in such areas.
Modi told bureaucrats at a meeting about a fortnight ago that he “was not in favour of extending additional incentives to the industry”, a department of finance official said on condition of anonymity. “He also does not want (the) word(s) ‘backward area’ to be included in the policy.”
The logic, the official said, is that Modi believes if Gujarat offers backward area incentives, it recognizes the existence of such areas. “Modi was firm and said that Gujarat is a well-developed state which cannot have any backward areas. He asked us to rework the policy accordingly,” he said.
Unlike in other states, companies investing in backward or economically under-developed areas haven’t been entitled to any special incentives in Gujarat, a gap the new industrial policy was aimed at filling. State government officials had earlier identified 30 of 225 talukas as industrially backward.
The state government extended to industry sales tax incentives to the tune of Rs45,140 crore for the period 1999-2007, including exemption and deferment.
Gujarat is targeting annual industrial growth of about 15%, according to the draft industrial policy, but wants to achieve it without extending “unwarranted and backward area” sweeteners, officials say. Industrial production in Gujarat grew at an average annual pace of 12.6% between 2003 and 2008. The state had attracted investments worth Rs5.62 trillion as of March, including Rs2.15 trillion for the electricity sector and Rs1.86 trillion for manufacturing. In addition, the state had signed so-called memorandums of understanding for investments worth another Rs6.5 trillion, according to government data.
Fine-tuning:?Chief minister Narendra Modi has asked officials to remove the word ‘backward areas’ from 2009-13 draft industrial policy, which is unlikely to offer new incentives to firms investing in such areas. Raveendran /AFP
Saurabh Patel, minister of state for energy, petrochemicals, finance and industry, declined comment on the new policy, which is expected to be ready by September-end and will be marketed in the run-up to the “Vibrant Gujarat 2009” summit of investors in January.
“The chief minister has also advised us that we should now not entertain any requests for free land to industry,” a bureaucrat in the department of industry, or DoI, said.
The draft policy earlier aimed at creating a special land bank for industry. The Gujarat Industrial Development Corporation, or GIDC, the agency facilitating infrastructure for industry in the state, had been instructed to acquire more than 50,000ha.
“Modi now wants industry to foot the bill for setting up infrastructure within these industrial estates. All the roads, water, effluent treatment plant and electricity cost will have to be borne by the industry themselves. (The) state, on its part, will own land and will give it on lease,” the DoI official said.
Government officials added the chief minister wants bureaucracy to market the state for its availability of basic infrastructure, including electricity, water, road and rail networks and effluent treatment plants. “Gujarat also has (the) longest coastline of around 1,600km. All this, Modi claims, are attractive enough reasons for industry to come and set up their base in the state,” the official added.
Industry leaders were not willing to speak openly about the issue. “We have submitted our memorandum to the government on the new policy and can only hope that the state includes them,” an Ankleshwar-based chemical unit owner said. “If the government is indeed planning to withdraw all incentives, it will be a sad scenario.”
The new policy will, however, continue to focus on providing some capital and interest subsidy to companies willing to invest in green technology, the DoI official said. The thrust on environment-friendly technology is effectively a clean-up act in a state with a sizeable share of investment in sectors such as chemicals, a DoI official said.
The Ankleshwar-Panoli-Jhaghadia belt in Bharuch district in southern Gujarat, has seven of the state’s 51 special economic zones and is one of the biggest chemical and pharmaceutical hubs in the country, with more than 2,000 units earning an estimated Rs20,000 crore in revenue.
The state government may also be open to providing special incentives to investors setting up effluent treatment plans and landfills for industrial waste, and is expected to give more powers to the Gujarat Pollution Control Board.