The Cabinet Committee on Economic Affairs (CCEA) today gave its approval for extension of the Special Package of Industrial Incentive for the States of Himachal Pradesh and Uttarakhand from 7th January, 2013 to 31st March, 2017. Union Commerce and Industry Minister Shri Anand Sharma while welcoming the decision of the CCEA for extending the special package of industrial incentives for Himachal Pradesh and Uttarakhand mentioned that “the UPA Government has always been sensitive to the aspirations of the hill people. This decision will catalyse industrial development in Himachal Pradesh and Uttarakhand and generate gainful employment especially for the rural youth. It will also give a fillip to manufacturing and the Small and Medium Enterprises in these two States.”

The objective of the scheme is to create an enabling environment for industrial development to provide a fillip to private investment in these States. Private entrepreneurs will be encouraged to set up more industrial units in Himachal Pradesh and Uttarakhand, leading to overall growth and industrialization of these States and generation of more employment.

All new industrial units and existing units on substantial expansion would be eligible for Central Capital Investment Subsidy at the rate of 15 percent of investment in plant and machinery subject to a ceiling of Rs.30 lakh. Further, 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 percent of their investment in plant and machinery.

Subsidy would 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. Only those units that pre-register under the scheme, commence commercial production/ operation before 31st March 2017 and file claims within one year of the commencement of commercial production shall be eligible for subsidy under the scheme.

Incentive on substantial expansion will be given to units affecting an increase by not less than 25 percent in the value of fixed capital investment in plant and machinery for the purpose of expansion of capacity. Expenditure on purchase / procurement / installation of second hand plant and machinery will not be eligible for subsidy under the Central Capital Investment Subsidy Scheme. A single unit cannot avail subsidy both from the Central as well as State Government for the same purpose.

Background:

The New Industrial Policy and other concessions for the States of Himachal Pradesh and Uttarakhand were announced on 7th January, 2003 for a period of ten years, keeping in view the facts that these States lag in industrial development. The objective of the Policy is to provide the required incentives as well as enabling environment for industrial development, improve availability of capital and increase market access to provide fillip to private investment.

The policy package announced on 7th January, 2003 for Himachal Pradesh and Uttarakhand was for a period of ten years. The State of Himachal Pradesh has been able to attract 300 percent more investment as compared to the pre-incentive package level. On an average, total investment generated in Himachal Pradesh is above Rs.12,500 crore and number of units set up has grown by 28 percent while growth in employment generation is more than 33 percent.

In Uttarakhand, investment generated is close to Rs. 30,000 crore, which is 42 times the level in the year 2000. The number of units set up has grown by more than 130 percent while growth in employment generation is more than 490 percent for the same period.

Central capital investment subsidy extended for eligible industrial units in hill states, with specified rates and compliance conditions. Extension grants a 15% Central Capital Investment Subsidy on investment in plant and machinery with a raised ceiling for MSMEs; available to new units and substantial expansions in notified areas and to designated thrust industries, provided units pre-register, commence commercial production before the cut off date and file claims within one year. Substantial expansion requires at least a 25% increase in fixed capital investment in plant and machinery; second hand machinery purchases are excluded and a unit cannot obtain both Central and State subsidy for the same purpose.