Industrial package fails to draw much investment in Himachal

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Vishal Gulati | 29 Mar, 2010
A special package for industrial development in Himachal Pradesh which expires this month is likely to be extended, but experts are sceptical about its impact as the scheme has failed to attract much investment in the past seven years.

Official data shows that the state has got investment of only Rs.6,523 crore, though proposals amounting to Rs.41,205 crore have been cleared.

The government has approved 13,195 projects since 2003 when the package was announced. Of these, only 6,356 units have begun production.

Pharmaceutical, food processing, textile, packaging and light engineering sectors have seen most of the investment.

"Uncertainty was the main factor discouraging the entrepreneurs. The Vajpayee government had announced the package from 2003 to 2013. But the successive Congress-led United Progressive Alliance government curtailed it to 2007. Later, it was restored till 2010," Chief Minister Prem Kumar Dhumal said.

He blamed the Congress government (2003-2007) for the lack of industrial growth.

"The government should have focused on developing industrial areas across the state. Today more than 80 percent of industry is mainly cluttered in the Baddi-Barotiwala-Nalagarh belt in Solan district only," said Dhumal.

Lack of infrastructure was also a reason why many industries preferred going to neighbouring Uttarakhand, he said.

Virbhadra Singh, former chief minister and currently steel minister, disagreed. "The present government has trivialised the issue of extension of industrial package by asking the central government for its extension till 2020," he said.

A resolution demanding that the package be extended by 10 years till 2020 was passed in the assembly in December last year.

"We are in favour of getting the package extended till 2013," said Singh.

In January, the commerce ministry had recommended to the prime minister and the finance ministry that the package be extended till 2013.

Interestingly, the Punjab government moved the Supreme Court in December last year challenging the central government's sops to Jammu and Kashmir, Himachal Pradesh and Uttarakhand since 2002 for industrial development.

It contended that the "discriminatory fiscal incentives" in the form of excise duty waiver, income-tax holidays and investment subsidies to industries in the three states had led to mass exodus of industries from Punjab.

"The objections by Punjab are wrong. We do not agree with their contention. Most pharmaceutical units that have set up their units here are from Goa and Maharashtra," Industries Minister Kishan Kapoor said.

Industry experts say if the subsidies are withdrawn, the cost to companies could increase by anywhere between 20 and 30 percent and they would go to other states where there is better infrastructure.

"There is no infrastructure in the industrial belts. Roads are in bad shape. Water availability is too bad. The government rule to employ 70 percent local people is the main hindrance for getting trained manpower from other states," said a CII official.

But Dhumal said: "Even if the excise duty exemption is withdrawn, the income-tax holiday will continue."

"Hero Honda has shown interest in setting up its main facility and other auxiliary units in the state with an outlay of Rs.2,000 crore. It requires 400 to 500 acres of land. Similarly, a textile park in Una has attracted the Jindal group. Nestle is also setting up a facility. These projects are coming up irrespective of the excise exemptions," he said.