Maharashtra Cabinet discusses new industrial policy, to pass it in 2013

Concessions include rebate in VAT, waiver in stamp and electricity duty

The Maharashtra state Cabinet on Friday discussed the state’s proposed new industrial policy, but postponed it for further discussion till the next year. The policy is expected to be passed in the next Cabinet meeting in early 2013.

The proposed industrial policy has several “investor-friendly” measures such as rebate in Value Added Tax (VAT) and waivers in stamp and electricity duty.

A senior minister told Business Standard, “The new industrial policy has retained the investment target of Rs 5 lakh crore, but the focus will be given on promotion of micro, small and medium scale enterprises (MSMEs) which have more potential for job creation. At least two million jobs will be created in the next five years.”

MAHA INVESTOR POLICY

• Proposes 100% VAT waiver to mega & MSMEs in Naxalite and tribal districts
   
• 90% in under-developed districts of Vidarbha & Marathwada
   
• Concession in power tariff to MSMEs
   
• Wants new investments in less developed regions due to saturation in Mumbai, Pune and Nashik

 

“A 100 per cent rebate would be provided in VAT to mega projects with an investment of Rs 500 crore and also to MSMEs, especially in tribal-dominated and Maoist-infested districts. Ninety per cent rebate would be provided in under-developed districts such as Chandrapur in Vidarbha, Nandurbar in North Maharashtra and districts from the Marathwada region. The VAT rebate will be for a period of 10 years,” the minister said.

By giving rebate in VAT, the government hopes to lure investments, especially in the auto sector which have recently gone to Gujarat and Tamil Nadu following the government’s revision in VAT recovery policy. Maharashtra has lost investments by Tata Motor, Maruti and Ford to Gujarat while Mahindra & Mahindra had objected to changes in VAT policy.

The government will also waiver the payment of stamp and registration duty as well as electricity duty for industrial projects proposed to be set up in the Vidarbha and Marathwada regions. “The government will provide 75 per cent or up to Rs 2 lakh reimbursement of expenses incurred by MSMEs for carrying out electricity and water audits,” the minister informed.

The government has also proposed a rebate in electricity tariff charged to MSMEs by the Maharashtra State Electricity Distribution Company (MahaVitaran). “The government has proposed a rebate of Rs 1 per unit or 20 per cent annually in the electricity tariff charged to MSMEs. The government will reimburse the difference between the actual tariff and the concession to MahaVitaran through necessary budgetary provision as done in the case of powerlooms and agricultural consumers,” the minister added.

The government's move to provide concession in electricity tariff especially to MSMEs comes at a time when various industries associations have protested against higher tariff charged by MahaVitaran compared to other states.

The government has also proposed an additional floor space index (FSI) of 1.5 to existing units situated in MIDC industrial estates after realising the limitations of existing units to expand due to lack of sufficient FSI or their financial inability to shift to other locations.

“Maharashtra has realised that a forward-looking policy with a special focus on MSMEs is the key to future growth of the state. However, the real test would be the actual implementation of the policy. Although the incentives offered to MSMEs are welcome, the crux of the matter is the ease of doing business in Maharashtra which has been lacking in recent years,” noted Chandrahas Deshpande, director (research), World Trade Centre.