Punjab SMEs pin hopes on new industrial policy

Only new enterprises eligible to avail of the incentives and concessions

Green shoots may soon appear in Punjab's economy, as small and medium enterprises (SMEs) in the state have welcomed the new industrial policy rolled out by the state government on June 3. Though only new enterprises will be eligible to avail of its incentives and concessions, entrepreneurs in the state are upbeat about growth prospects after a two-decade-long period of industrial gloom.

In order to bring about equitable industrial growth across the state, the policy has for the first time divided the state into two zones. It has slashed the value-added tax (VAT) and central sales tax (CST) liabilities of new enterprises setting up shop in Zone I (consisting of poorly developed districts) to 20 per cent of what they are currently required to pay. The policy also allows new enterprises 100 per cent exemption from property tax, electricity duty and stamp duty in Zone I.

Jayant Davar, chairman, Confederation of Indian Industry's northern region, observed, "Creation of industry zones, especially keeping the border areas and designated industrial areas and focal points in priority zones, is a welcome step for MSMEs. This will spur MSMEs' growth and create new opportunities in border areas, besides de-congesting the cities."

Anoop Bector, managing director of Mrs Bector's Food Specialities Limited, said the agro-based industry's long-standing demands have been met in the new policy, as there are incentives on market fee, rural development fund and infrastructure development cess. His company may now expand in Punjab and launch new products, he added.

Rampant drug addiction among the young in the border areas of Punjab due to lack of gainful employment is the result of lopsided industrial development in the state. MSMEs can draw the maximum benefit from the policy, as labour is abundant and cheap, and land is also available at low cost in the border areas. So, new entrepreneurs may need to invest less capital to set up shop.

"Implementation of the proposed simplified procedures and actual usage of information technology for various applications and approvals will be the key to enhancing the 'ease of doing business' for MSMEs in Punjab," said Davar.

He added that schemes like self-attestation of documents, third party certification of building plans, stability and safety, and so on, and a payment gateway for online payments will prove beneficial for new MSMEs, enabling them to save time, because they are generally run single-handedly. "But again, their actual implementation on the ground has to be ensured and monitored meticulously."

The provision for creation of a land bank, especially with the Punjab Small Industries and Export Corporation having identified 5,000 hectares of land for industry in the state, will help in attracting mega investments and anchor units, which will catalyse further growth of downstream industry, especially MSMEs.

Raman Saluja, chairman, CII northern region committee on MSMEs, while welcoming the sector-specific incentives for SMEs in terms of relaxations in VAT and CST, said incentives must be created for SMEs wanting to invest up to Rs 10 crore in Zone II areas, because this would give great impetus to them to expand and create more opportunities in the state.

Most of the benefits apply to new industry, and there is not much in store for existing units. Amarjit Goyal, chairman of Mandi Gobindgarh-based Modern Steel, said "There should have been some measures for existing units in the form of VAT and CST reduction to provide relief to industry, which has been ailing due to structural problems in the state's economy." He added that new investments may expand the scope for SMEs by creating demand for ancillaries and lead to backward linkages with big units.