Mumbai: The Maharashtra government is likely to announce a new industrial policy this week, after a year’s delay.
The last five-year industrial policy was announced in November 2006. Unlike the previous policy that aimed to attract investment from big industrial houses, the new policy targets micro, small and medium (MSM) firms for employment generation.
The policy is likely to get the state cabinet’s nod on Wednesday, a top state government official said. He did not want to be identified.
The new policy aims to attract investment of Rs.5 trillion and create two million jobs, said the official. It wants to raise the share of industry in the state gross domestic product (GDP) from 21.5% to 28% over the next five years.
Formulation of the new industrial policy got delayed as the state government took time to find ways to use land acquired for special economic zones (SEZs) that did not materialize. Chief minister Prithviraj Chavan admitted this at a meeting with industry captains organized by lobby group Confederation of Indian Industry in October.
The new policy is likely to announce an exit route for SEZ developers by allowing them to use such land to primarily develop industrial townships, but also keep a portion for residential and commercial projects. Developers will likely be allowed to use 60% of such land for industrial projects and the rest for residential or commercial buildings, the state government official said.
The new policy is likely to offer 100% refund on value-added tax to firms across industries that set up units in tribal- and Naxalite-dominated districts such as Chandrapur and Gadchiroli in Vidarbha region. The MSM firms will be offered rebate of Rs 1 per unit on electricity tariffs.
The previous policy helped the state government attract investments from General Motors Co., Volkswagen AG, General Electric Co. and Dow Chemical Co., among others, but the state’s aim to take industry to under-developed regions remained on paper, said a second state government official, also requesting anonymity. Instead, new industrial developments mostly came up in already developed areas such as the Mumbai Metropolitan Region, Pune, Nashik and Aurangabad.
Maharashtra, which was a favourite destination for industrial investment since colonial days, now faces stiff competition from states such as Gujarat, Tamil Nadu, Andhra Pradesh and Karnataka. The state’s annual economic survey for fiscal 2012, released in March, claims that though Gujarat is ahead in attracting overall investment, Maharashtra still gets the maximum foreign direct investment (FDI).
The survey said Gujarat attracted Rs 10.39 trillion of investments and Maharashtra Rs 8.74 trillion between August 1991 and October 2011. However, in the same period, Maharashtra attracted FDI worth Rs 84,958 crore while Gujarat got Rs 23,398 crore, it said.
“Making Maharashtra more business- and investor-friendly is the key to enhancing its economic competitiveness. In this context, it would be helpful if Maharashtra’s new industrial policy could focus on the promotion of MSMEs, which are a key engine of economic growth as well as a solid contributor to employment,” said Niranjan Hiranandani, president of the Indian Merchants’ Chambers.
“Granting MSMEs strategic concessions in electricity tariff would be an important step forward. Streamlining and rationalizing the tax structure in the state would also be a powerful incentive to enhancing business activity and investments,” he added.
Anant Sardeshmukh, director general of Pune-based Mahrartta Chamber of Commerce, Industries and Agriculture, said his chamber has asked the state government to sort out the issue of lands acquired for SEZs and offer higher floor space index (FSI) in the industrial parks as this will help ease the problem of acquiring additional land for expansion projects. FSI indicates permissible construction on a plot of land.
Abhay Pethe, head of Mumbai University’s economics department, said policymakers should understand that small fiscal incentives will not attract industries to lesser develop parts of the state unless the state sorts out the problems of support infrastructure that industry needs, like linkages to highways, airports, ports, and assured power and water supply at competitive rates.
“If the state wants to attract investment it must also undertake steps on labour reforms; some baby steps were taken during last industrial policy but nothing moved since then,” Pethe added.