Govt to provide tax sops, capital support to manufacturing zones

22 Mar 2013

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The central government today issued guidelines for setting up National Investment and Manufacturing Zones (NIMZs) and industrial units within these zones. It also announced a host of incentives to investors setting up manufacturing units in these NIMZs.

Units coming up in the NIMZs will be eligible for a host of benefits, including exemption from capital gains tax on sale of plant and machinery, in accordance with the guidelines issued by the department of industrial policy and promotion (DIPP). 

The tax break will be granted in case of re-investment of the sale consideration within a period of three years for the purchase of new plant and machinery in any other unit located in the same NIMZ or another NIMZ, a government statement said.

Besides, NIMZs will be eligible for viability gap funding not exceeding 20 per cent of the project cost.

NIMZs would form integrated industrial townships of at least 50 sq km (5,000 hectares) with latest infrastructure where at least 30 per cent of the total land area would be devoted to manufacturing activity.

Since the NIMZs will be developed in partnership with states, the state government will enter into an agreement with the DIPP for development of the project, detailing the mode and schedule of implementation and the specific role of the implementing agencies.

Under the two-stage application procedure, the state concerned will first make an application for in-principle approval to the DIPP, the nodal department under the commerce ministry.

Once the DIPP communicates its in-principle approval for the MIMZ, the state government will present a detailed application for final approval, detailing the land area in its possession and action initiated to acquire the remaining land.

The infrastructure for the NIMZ will be created / upgraded through public-private partnerships to the extent possible  with the provision for viability gap funding through existing schemes. If necessary, requisite budgetary provisions will also be made for creation of these linkages.

Simultaneously, the state government will constitute a special purpose vehicle (SPV) for setting up the SPV.

The SPV will have a senior government official as its CEO and will also have senior official conversant with the work relating to pollution control / environmental protection. There will also be provision for suitable representation of the government of India (DIPP) and the allottees and subsequently of the industrial units on the bard of the SPV.

NIMZ developers will be allowed to raise funds through external commercial borrowings (ECBs) for developing the internal infrastructure.

Besides, the government will explore the possibility of raising soft loans from multilateral agencies, besides negotiating loans from non-sovereign lenders overseas for funding development of the NIMZ infrastructure.

The central government will bear the cost of master planning for the NIMZ. It would also help improve / provide external physical infrastructure linkages to the NIMZs, including rail, road (national highways), ports, airports, and telecom, in a time bound manner.

The National Investment and Manufacturing Zones are intended to promote manufacturing activity in the country, so as to raise the contribution of manufacturing to 25 per cent of the country's gross domestic product (GDP) and creating 100 million jobs within a decade.

The guidelines also provide for a job-loss policy under which the central government will put in place an insurance scheme to enable units to pay suitable worker compensation in the eventuality of closures.

The compensation under this instrument would be equivalent to 20 days' average pay for every completed year of continuous service, or any part thereof in excess of six months, it said.

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