Maharashtra’s Investment Incentives for 6 Top Industries
Maharashtra is among the most industrialized states in India and a popular destination for foreign investors. The state has a strong presence of automobile and auto-component, pharmaceutical, information technology (IT), and textile companies, but has introduced industry-specific investments schemes and incentives to retain its status as the most favored investment destination in the country.
The state has identified 12 industries for investment promotion. Below, India Briefing describes the incentives available for six of these industries. Business leaders that are thinking of investing in Maharashtra should review these incentives to see if they are eligible before comparing them to any similar schemes available in other Indian states.
Maharashtra is a leading manufacturer of auto and auto-components industry in India, accounting for approximately 38 percent of the country’s total output of automobiles by value. Pune is one of the largest auto hubs in India, with over 4,000 manufacturing units in the Pimpri-Chinchwad region alone.
The New Industrial Policy of Maharashtra, 2019 (“New Industrial Policy”)provides an industrial promotion subsidy, interest subsidy, and electricity duty exemption on fixed capital investments by Micro, Small and Medium Enterprises (MSMEs) and large-scale industries. Industrial units may also receive an additional incentive if they employ a large number of individuals from local communities.
Further, the acquisition of land and term loans by MSMEs and large-scale industries are completely exempt from the payment of stamp duty. MSMEs are also exempt from payment of duty on the electricity consumed.
New policy for electronic vehicles
Last year, Maharashtra become one of the first states in India to introduce a policy dedicated to electric vehicles (EV). The state government exempts EVs from road tax and registration charges in the state. It also offers a 15 percent subsidy to the owners of the first 100,000 EVs registered in the state.
In addition, the state government has proposed to offer a maximum subsidy of INR 1million (US $15,549) per charging station to the first 250 stations that are set up in Maharashtra.
The biotechnology industry in Maharashtra contributes about 35 percent of the total revenue generated by biotechnology in India.
The core competence and strengths of the biotech industries in the state are in health care (medical), crop production and agriculture, non-food (industrial) use of crops and other products (such as biodegradable plastics, vegetable oil, biofuels), and environmental areas.
The New Industrial Policy offers an interest subsidy, electricity duty exemption, 100 percent stamp duty exemption for acquiring land and for term loan purposes, as well as a full exemption on fixed capital investments to biotechnology units for a period.
Maharashtra’s electronics sector, including telecommunications, equipment, electronic components, industrial electronics, and consumer electronics, contribute about 31 percent of India’s total electronics industry output.
To promote large-scale manufacturing in electronic system design and manufacturing (ESDM) and attract domestic and global investment, the state government provides a capital investment subsidy of 20 percent in special economic zones and 25 percent in other areas for a period of 10 years.
In addition, investors in the electronics industry can avail benefits like reimbursement of taxes and duties in consumer electronics, telecommunications, equipment, nano-electronics, mobile handsets and accessories, medical electronics, LEDs and LCDs and IT hardware sectors.
4. Information technology
Maharashtra accounts for more than 20 percent of India’s software exports, with over 1,200 software units established across the state. Pune and Mumbai together account for more than US $8 billion of IT exports.
To encourage investments in the sector, the state government has set up several IT parks that offer state of the art facilities to both domestic and international IT companies. Currently, there are 37 public IT parks and 506 private IT parks, out of which 185 parks are operational with an overall investment of US $735.14 million.
The state government has framed an IT policy that details incentive schemes and tax benefits for the sector. These include an additional floor space index (FSI) of up to 200 percent to IT and IT-enabled services (ITeS) units, an exemption in local body taxes and special emphasis on the development of animation, visual effects, gaming and comics (AVGC) industry.
Further, the policy provides for exemption of IT and ITeS units from local body tax, entry tax, stamp duty, and cess. The IT and ITeS units operating from registered IT parks or notified SEZ that has a green building certification are also exempt from seeking approval of the Maharashtra Pollution Control Board (MPCB).
Maharashtra is home to several globally recognized manufacturers of affordable and quality generic medicines. The state has the highest number of United States Food and Drug Administration (USFDA) approved manufacturing plants in India and the highest number of pharma units. Maharashtra contributes about 20 percent to India’s total pharmaceutical output.
Under the Maharashtra State Innovative Start-Up Policy, 2018, new pharmaceutical units are exempt from stamp duty and registration fee for the first three years of renting or leasing land.
Pharmaceutical and drug companies involved in research and development can avail reimbursement of up to INR 2 lakh (US $2,873) for an Indian patent and INR 10 lakh (US $14,365) for an international one.
There are separate tax and fiscal benefits available for large, ultra and mega projects under the New Industrial Policy .
Maharashtra contributes about 10.4 percent to India’s textiles and apparels output, and approximately 25 percent of the country’s total cotton production. Of the 2.5 million power looms working in India, Maharashtra has more than 50 percent of them, comprising those running in Bhiwandi, Malegaon, Ichalkaranji, Sholapur, Nagpur, and other textile clusters.
Last year, the state government approved a new textile policy for the period 2018 to 2023 to increase investments in the sector. The policy offers a 25 percent capital subsidy to self-financing textile projects — spinning mills, cotton ginning, and printing units – and a 45 percent capital subsidy to processing units.
The state government provides an additional subsidy of 20 percent to the upcoming processing and garments units in the less developed regions of the state such as North Maharashtra, Marathwada, and Vidarbha. It also offers capital subsidy on textile machinery that fulfils the Amended Technology Up gradation Fund Scheme (ATUFS) criteria of the federal government.
Compare and contrast before investing
Maharashtra’s incentives make many of its key industries more competitive for investors that would like to expand in India. However, investors should seek to compare Maharashtra’s incentives with those offered by other states to ensure they obtain a competitive advantage.
This comparative analysis can be conducted as part of market entry research that examines local regulations and compliance requirements along with projected costs for land, labor, basic utilities, and any required materials.