New Industrial Policy and Other Concession in the North Eastern Region

In view of the continuing backwardness of North Eastern Region, the need for a new and synergetic incentive package was widely felt to stimulate development of industries (Hon’ble Prime Minister made a statement at Guwahati on October 27,1996 that New initiatives would be announced for the industrial development of the North Eastern Region). Expert groups/committees were constituted by the Ministry of Industry and the Planning Commission to concretise the initiatives.

Subsequently, the Inter Departmental Meetings were held under the Chairmanship of Member Secretary (Planning Commission) to consider the recommendations and finalise the proposals. Based on these proposal government approved the New Industrial Policy and other concession in the North Eastern Region which inter alia envisage the following :

A. Development of Industrial Infrastructure:

Currently the funding pattern for the Growth centres envisages a central Assistance of Rs.10 crores for each centre and balance amount to be raised by the State Government. Government has approved that entire expenditure on the growth centre would be as Central Assistance subject to a ceiling of Rs.15 crores.
In respect of IID centres, the funding pattern would be changed from 2:3 between GOI and SIDBI to 4:1 and the GOI would be a grant.

B. Transport Subsidy Scheme:

The transport subsidy scheme will be extended further in so far as N.E. States are concerned for period of another 7 years i.e. upto 31^st March 2007 being coterminous with the Tenth Five year Plan on the same terms & condition as are applicable now.

C. Fiscal Incentives to New Industrial Units and their Substantial Expansion:

Government has approved for converting the Growth Centres and IIDCs into a total tax free zones for the next 10 years. All industrial activity in these zones would be free from Income Tax, Excise for a period of 10 years from the commencement of production. State Government would be requested to grant exemption in respect of Sales Tax and Municipal Tax.
Industries located in the Growth Centres would also be given Capital Investment subsidy at the rate of 15% of their investment in plants & machineries subject to a maximum ceiling of Rs.30 lakhs.
The Commercial Banks and the North Eastern Development Financial Corporation (NEDFI) will have dedicated branches/counters to process applications for term loans and working capital in these centres. While sanctioning assistance NEDFI and Commercial Banks would take a liberal view of the debt: equity ratio.
An interest subsidy of 3% on the working capital loans would be provided for a period of ten years after the commercial production. The working capital requirements would be worked out as per the Nayak committee.
Similar benefit would also be extended to the new industrial units or their substantial expansion other Growth Centres of Idiocies or Industrial Estates/ parks/ Export Promotion zones set up by the States in the N.E. Region. New Industrial units or their substantial expansion in the specified industries (as at Annexure-A) located outside these growth centres and other identified locations would also be eligible for the similar fiscal incentives.

D. Relaxation of PMRY Norms:

The PMRY would be extended in scope to cover areas of Horticulture, Piggery, Poultry, Fishing, Small tea gardens etc. so as to cover all economically viable activities. PMTY would have a family income ceiling of Rs.40, 000 per annum for each beneficiary along with his/her spouse and upper age limit will be relaxed 40 years. Projects costing upto Rs.2 lakhs in other than business sectors will be eligible for assistance. No collateral will be insisted for projects costing upto Rs.1 lakhs. Group financing upto Rs.5 lakhs will be eligible. Scheme will have a subsidy component @ 15% with the upper ceiling of Rs.15, 000. The margin money may vary from 5 % to 12.5 % of the project cost to make the subsidy and margin money at 20 % of the project cost. PMRY would continue to have Entrepreneurship Training component as per the existing rate.

E. Other Incentives Proposed:

A comprehensive insurance scheme for industrial units in the North East will be designed in consultation with General Insurance Corporation of India Ltd and 100 % premium for a period of 10 years would be subsidised by Central Government.
A one time grant of Rs.20 crores will be provided to the North East Development Financial corporation Ltd. (NEDFi) by the Central Government through NEC to fund techno economic studies for industries and infrastructures best suited to this region.
State Government may consider setting up of a “Debt Purchase Window” by the NEDFi, which buys the debt of the manufacturing units particularly in respect of the supplies made to the government departments so as to reduce the problem of blocking of funds for these units.
For development of markets in North East possibilities of exports of products of N.E. to the neighbouring countries particularly Bangladesh , Myanmar and Bhutan would be explored.
It may be considered to provide assistance for restructuring State PSUs from National Renewal Fund.
The community pattern of land holding in large parts of N.E. Region does not lend itself to providing collateral security as required under the conventional bank lending. RBI has constituted a committee to look into this issue. An appropriate system of “gurantee” will be evolved for N.E. Region.

F. Procedure for Release o Assistance under the New Initiatives:

It is approved that the transport subsidy budget may be released by a designated agency on the basis of the recommended of the SLC. It is proposed that NEDFi may be designated as the nodal agency for release of transport subsidy in N.E. States. NEDFi may be paid administrative expenses for this service, which may be decided in consultation with IDBI.

G. Development Of Village & Small Industries (VSI) Sector:

Weaver’s Service Centres (WSC) in N.E. Region and Indian Institute of handloom Technology at Guwahati would be suitable strengthened to provide technology and training support to the weavers. National Handloom Development Corporation will give priority in supply of hank yarn to the N.E. Region. All the four varieties of silk would be covered under the Mill Gate Price Scheme. Priority would be given to the N.E. Region in scheme of setting up market complexes and permanent exhibition facilities. A new design Centre for development of handicraft would be set up in N.E. Region. To upgrade the skill of artisan advance training programme through master-craftsman would be organised. New emporia will be set up and financial assistance for renovation of existing emporia would be provided. The Central Silk Board will give priority to N.E. Region in implementation of its schemes.

Ministry of finance etc. are requested to amend rules/notifications etc and issue necessary instructions for giving effect to these decisions.

Ashok Kumar,
Joint Secretary.