Scarce industrial land a major problem in UP

The scarcity of industrial land is emerging as a major impediment to the entry of new micro, small and medium enterprises (MSMEs) in Uttar Pradesh.

While government-owned industrial enclaves such as UP State Industrial Development Corporation (UPSIDC) have virtually no land for fresh allotment, leasing or buying such land from existing lease holders is an expensive proposition for budding entrepreneurs.

Besides, the option of setting up industrial units on agricultural land is both cumbersome and time-consuming, since it takes several months and even years to get the necessary clearance. To make matters worse, banks are also reluctant to give advances to units that are to come up on agricultural land, unless all formalities are already complete.

Often, investment proposals are dropped altogether for want of land, clearances or funds! In this backdrop, the Indian Industries Association (IIA) has sought time-bound clearance for units proposed on agricultural land. It also wants banks to be directed to provide loans to such projects.

"The main reason impeding the setting up of new industrial units in UP is scarcity of land and, secondly, time-consuming clearances," Man Mohan Agarwal, the president of IIA's Lucknow chapter, told Business Standard.

He said the lease or re-sale of land from existing lease holders costs almost Rs 10,000 per sq metre. "This is astronomical for an entrepreneur looking to set up a small industry, which would require at least 1,000 sq metres of space and thus cost Rs 1 crore."

Agricultural land flanking a roadway is much cheaper and will come for about Rs 1 crore per bigha (translating to roughly Rs 400 per sq ft). Land in the interiors is cheaper.

"However, the main challenge is to get this agricultural land converted for industrial use under section 143. We have proposed that the unit gets deemed approval under section 143, if there are no objections raised to such conversion within a month of application," Agarwal explained.

IIA has taken up this issue with top government officials in the run-up to the MSME conclave scheduled here on September 20. Uttar Pradesh Chief Minister Akhilesh Yadav will inaugurate the event and is likely to announce sops to the beleaguered MSME sector in Uttar Pradesh, which comprises an estimated 3.1 million enterprises.