Taxing times ahead

End of central industrial package has started to take its toll on state's industrial progress, reports P. S. Chauhan

For years region's economy was driven by tourism, agriculture and forest resources. But when Uttarakhand was created in 2000 then started industrial revolution in the state. Encouraging the same even central government announced the Central Industrial Package (CIP) for the state in 2003, along with Himachal Pradesh, J&K and the north eastern states. The central package, announced for the next ten years, included 100 per cent exemption of the central excise duty, 100 per cent income tax waiver for the first five years and 30 per cent for the next five years and 15 per cent rebate on capital subsidy on land and building and other infrastructure. Later on the central government curtailed the limit of the package from March 2013 to March 2010 for Uttarakhand and Himachal Pradesh, though the package still continues for the J&K and the states of the north east. With the announcement of the concessional package, the state saw heavy investment by many big industrial houses. Many national and multinational companies of repute such as the Hero Honda, Tata Motors, Mahindra & Mahindra, Hindustan Unilever, Birla Tyres, Bajaj Auto, ITC, Kirby, Luxor, Anchor Electricals and the Asai Glass, set up their units in the industrial estates developed by the State Industrial Development Corporation of Uttarakhand Limited (SIDCUL) in Haridwar, Dehradun and Udhamsingh Nagar districts.

Harendra Garg, the regional chairman of the Industries Association of Uttarakhand (Garhwal region) says that there has been investment in pharma, auto and other sectors for nearly Rs.30,000 crores. Nearly 2000 industrial units have started production, generating employment for more than one lakh persons since 2003. It was the boom time for industries in the state. "If the central industrial package had been extended beyond March, 2010, the momentum of industrial growth in the state would have got a further boost and we might have further attracted an investment of about Rs.20,000 crores which was in the pipeline," says S.C. Nautiyal, the additional director of industries in the state.

After announcement of the central package for Himachal Pradesh and Uttarakhand, there was gravitation of investors from the neighbouring states such as Punjab, Haryana and U.P., towards these states. The sources say that now states like Punjab and Haryana are demanding withdrawal of tax exemptions from Uttarakhand and Himachal Pradesh. The state chief minister, Dr. Ramesh Pokhriyal Nishank alleges that the centre is meeting out a step motherly treatment to Uttarakhand and Himachal Pradesh, since both these states are ruled by the party which is the main opposition at the centre. "Instead of increasing the time limit of the central package from the centre has curtailed its limit by 3 years, while the concessional package is still operational for the J&K and the north eastern states. UK is a new state and needs the concessional package for some more time, to consolidate our industrial base," says Nishank.

Inspite of the fervent pleas made by the state government time and again, the central government maintains a studied silence on the issue. There is a downward slide in the industrial development. Arun Saraswat, the president of the SIDCUL Industrial Association of Haridwar district says, "Though after the expiry of the industrial package, the central excise rebate has ended, the concessions like rebate in income tax still continue. However, there are many other problems which are adversely impacting the industrial units." Arun Raghav, the general manager (HR) of the ITC, one of the leading industrial units, says that the lack of proper infrastructure is the biggest problem. "Uttarakhand in itself is not a big market. Our main market is Delhi and other parts of north India. Proper road and rail connectivity is the most essential. The condition of the roads is not up to the mark and there are frequent traffic snarls.

For many days in the year, during the melas, the highways remain closed, obstructing the transportation of the goods," says Raghav. S.C. Sood, the vice president of the Birla Tyres and the president of the Thrust Industries Association, which include such giant units as Patanjali Food Park and the Asai Glass, says that the investors were lured to the state mainly because of the industrial package and the cheap and regular supply of power. "Now both these factors do not exist. The time limit of industrial package has expired. The rates of electricity for industry have also been hiked. To make situation worse there are power cuts for long hours. If we generate our electricity by our turbines and generators, the cost is very high. The small units are the worst sufferers due to erratic power supply." While the state government is blaming the centre for stagnation in industrialization, the opposition parties are passing the buck to the state government. "The state government has no vision for development. It is mainly the flawed policies of the state government which are responsible for the slump in the industrial sector," alleges Dr. Harak Singh Rawat, the leader of the opposition in the state assembly. While the blame game goes on, industrial growth suffers. The need of the hour to to find out solution of the problems afflicting the industrial sector in this young state.