India Announces Industrial Incentive Schemes in Three States, MSME Sector to Benefit

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Last week, the federal government notified industrial development schemes for three states in India – Jammu and Kashmir, Himachal Pradesh, and Uttarakhand.

The schemes will benefit new and existing industrial units in the manufacturing and service sectors; providing easier access to capital investments, among other incentives.

The Industrial Development Scheme for Himachal Pradesh and Uttarakhand, 2017 will apply for the period from April 1, 2017 to March 31, 2022, with retrospective effect.

Similarly, the Industrial Development Scheme for Jammu and Kashmir, 2017 will be effective from June 15, 2016 to March 31, 2022, with retrospective effect.

Eligibility for investment benefits

The micro, small, and medium enterprise (MSME) sector will enjoy preference in the determination of eligible industrial units for the government’s investment and subsidy schemes.

The project cost of applicant units will be appraised by a Scheduled Commercial Bank or government financial institution before the proposal of assistance is forwarded to the Empowered Committee, Department of Industrial Policy and Promotion.

New industrial units, in both the manufacturing and services sectors, which undertake substantial expansion will be eligible for further benefits.

These include bio-technology and hydel power generation plants up to 10 Megawatt.

However, a negative list of goods will not be eligible for the subsidy scheme, including those that come under polluting industries. An illustrative list of such industries in the state of Uttarakhand may be accessed here.

Industrial Development Scheme in India

As mentioned above, the scheme is applicable to the states of Jammu and Kashmir, Himachal Pradesh, and Uttarakhand.

Under the scheme, the government will provide:

  • Access to credit at the rate of 30 percent of the required capital investment in plant and machinery, with an upper limit of Rs 50 million (US$750,000).
  • Rate of interest at three percent on the working capital credit advanced by banking or government (either federal or state) financial institutions for the first five years from the date of commencement of a unit’s commercial operations.
  • 100 percent reimbursement of the insurance premium paid on the insurance of building, plant and machinery for a maximum period of five years from the date of commencement of commercial operation. This incentive is offered for units planning for a substantial expansion.

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