Himachal calling: Lack of financial incentives, locational disadvantage impede industrial growth

Ambika Sharma

Tribune News Service

Solan, August 11

Bereft of any financial incentive and facing locational disadvantage, the state’s industrial growth has become sluggish in the last few years.

The cash-strapped state government was reluctant to roll back state-level levies like Certain Goods Carried by Road Tax and Additional Goods Tax which ideally should have been subsumed in the GST after its introduction in July 2017.

Due to the lack of rail connectivity in the state’s industrial hub of Baddi Barotiwala Nalagarh (BBN) area, which accounts for more than 89 per cent of the state’s industry, the lone mode of transport is road. The BBN area has the highest freight charges in the region and an investor has to shell out a large amount for transporting goods and raw material from other states.

“All these factors made the goods manufactured here uncompetitive and also dissuaded the investors from expanding their operations. Our numerous representations to the state government have failed to yield any result,” said Rajeev Aggarwal, president, Baddi Barotiwala Nalagarh Industries Association.

The state government has also enhanced the stamp duty which further added to the cost of investment at a time when the cost of land was also high in the state.

The occurrence of Covid led to the closure of the Centrally-sponsored Industrial Development Scheme (IDS) abruptly in 2020.

This scheme provided an industry with Central Capital Investment incentive in plant and machinery up to Rs 5 crore. This was the lone scheme providing financial incentives to the state’s industry.

The investors, who had registered provisionally, failed to get the incentives as promised under the scheme after its abrupt closure. The IDS was the lone scheme that promised financial incentives to the industry in Himachal Pradesh. With Jammu and Kashmir and North East continuing to enjoy the benefits of Central financial incentives, a tendency of shifting the high-value products to other states by the industrial units here was catching up.

Facing resource crunch, the state government has also enhanced the electricity duty up to 19 per cent, though it was curtailed to 16 per cent after the intervention of court. The investors also paid electricity duty on one Re hike implemented on power tariff, which further burdened the industry. The state’s much-touted unique selling point of having quality and cheap electricity has been lost and this further deterred the new investors.

With no funds to develop basic amenities like road, water, power etc in the developing industrial areas, as many as 305 industrial plots, measuring 4,95,488 sq m, are lying vacant across the state. This has hit the move to provide ready land to the investors by developing land banks. No allotment has been made for the last six months in the absence of demand.

The 650-odd pharmaceutical units, backbone of the state’s industry, arealso facing tough times.

A majority of the industry comprises Micro Small and Medium Enterprises (MSMEs) which are struggling to arrange finances to upgrade to revised Schedule M stipulations by the year-end as per the Central government’s directions. While non-compliance can lead to the closure of their operations , they are yet to get the extension of timelines to meet the stipulations which require investment of crores.

The industry associations had vociferously pleaded for a scheme on the lines of the New Central Sector Scheme that catered to Jammu and Kashmir, promising incentives to boost investment, from the Union Finance Minister, but it has yielded no result, rued Rajeev Aggarwal, president, Baddi Barotiwala Nalagarh Industries Association.

Being a major employer in the state, it has hit employment generation, which is a major setback to the employed youth.

The state government hopes to rope in investment in the upcoming bulk drugs park coming up in Una district and a medical device park in Nalagarh. But since the government has decided to return the Central assistance in these schemes, it remains to be seen if they would manage to lure investors by offering cheaper power and plots after the two projects are developed.

305 industrial plots lying vacant

n With no funds to develop basic amenities like road, water, power etc in the developing industrial areas, as many as 305 industrial plots, measuring 4,95,488 sq m, are lying vacant across the state. This has hit the move to provide ready land to the investors by developing land banks. No allotment has been made for the last six months in the absence of demand