New Delhi: In line with the Narendra Modi government’s Act East policy, the cabinet on Wednesday approved a scheme to encourage industrial development in the north-east.

New industrial units set up in the region will get a host of tax breaks and incentives from the government, capped at Rs200 crore per unit.

The North-East Industrial Development Scheme, with an outlay of Rs3,000 crore, will help generate employment in the north-eastern states and is aimed at encouraging micro, small and medium enterprises (MSMEs), the government said in a statement.

The Bharatiya Janata Party (BJP) has expanded its electoral footprint in the north-east and has just formed governments in Tripura, Nagaland and Meghalaya with its allies.

The BJP-led National Democratic Alliance (NDA) is currently in power in seven of the eight north-eastern states, while the Congress is limited to Mizoram, where assembly polls are due later this year.

Speaking at an event last week, Modi had said that it was important to act fast on the north-east, a long-neglected region, in order to address regional growth imbalances.

On the tax front, new units will get a reimbursement of the goods and services tax (GST) that they pay to the central government for a period of five years from the date of commencement of production. The units will also be reimbursed the centre’s share of income tax for five years.

These units will also get a 3% interest subsidy on working capital credit for the first five years. In addition, they will get a central capital investment incentive amounting to 30% of the investment in plant and machinery, with an upper limit. They will also get full reimbursement of insurance premium on buildings, plants and machinery for five years.

To counter the geographical and logistical hardship of setting up units in the north-east, the scheme proposes a transport incentive. These units will get a transport incentive of 20% of their cost of transportation using railways and inland waterways, and 33% in the case of air freight for perishable items.

There is also an employment incentive wherein the central government will contribute up to 3.67% of the employer’s contribution to the employees provident fund.

Gireesh Chandra Prasad contributed to this story.