Bengal Beckons: New Industrial Policy Balances Industry & Agriculture

Bengal Beckons: New Industrial Policy Balances Industry & Agriculture

September 5, 2013

With an eye on winning the trust of the investor community and reviving the industrial scene in the state, the West Bengal government has come up with an ‘Investment and Industrial Policy of West Bengal, 2013’. It is a landmark document in terms of the balance it seeks to achieve between encouraging industrialists to invest in the state and ensuring the well-being of the people through optimum utilisation of manpower and land. Investors have to give as good as they get; checks and balances are one of the hallmarks of this policy document.

Destination Bengal – The Advantages

West Bengal has lots of advantages as far as suitability for growth of industries in the state is concerned. The problem was in not taking advantage of them until now.

  • In terms of geography, West Bengal has a unique location. It serves as a gateway to the landlocked regions of Central India as well as the North-East.
  • There is surplus water and power availability, two of the primary prerequisites for any industry to function.
  • With a large number of educational institutes, there is also no dearth of technical manpower.
  • The state is also rich in mineral resources. Not only that, Bengal is situated right next to the mineral-rich states of Jharkhand and Orissa.
  • Another major advantage for the state government is that as a principle, it is against bandhs. The culture of bandhs, which had crippled the state for three long decades, is no longer the disruptive force it once was. Any investor wanting to put money into projects would be eager to ensure that there is little or no disruption in productivity, and consequent loss.

Many incentives have been given to investors in the new industry policy. Various tax refunds and waivers of duties are in place to help investors offset the initial lack of profits, which is normal for any venture; it takes time for things to pick up. Stamp duty and land registration fees have been relaxed. However, a widespread malaise of the state of industry during the Left regime, of investors buying large tracts of land and keeping them idle, has been strongly discouraged.

The thrust of the new industrial policy is on bringing in new industries as well as on reviving the traditional sectors, on ensuring ease of doing business through waivers and perks, on encouraging entrepreneurship, and on promoting state labour.

Thrust of the new industrial policy

Nurturing and supporting labour-intensive micro, small and medium enterprises (MSME), as in textiles, agro-based, food processing and aquaculture, leather, and gems and jewellery

Reviving the industries that were the hallmarks of the state, like jute and tea

Leveraging the core competence and rich mineral base of the state for mid-sized and large-scale industries in the sectors of manufacturing and engineering, chemicals, petrochemical and its downstream hydrocarbon industries

Welcoming latest technology and foreign direct investment (FDI), especially in manufacturing, sunrise industries and high-tech areas

Promoting local entrepreneurship and employment

Utilising the potential of the large technical and creative manpower in IT, electronics and entertainment.

Upgrading the skills of human resource to meet global standards

Policy reforms and business process reengineering for ensuring ease of doing business, through the creation of a single-window system for industrial start-ups.

Building strong labour management relations

Source: Investment and Industrial Policy of West Bengal, 2013

To encourage companies, the document at the beginning itself, lists the economic advantages that the state enjoys. In terms of growth in GDP, industry, agriculture and services, West Bengal is way ahead of the national average. Moreover, based on purchasing power parity (PPP), Kolkata has the third highest GDP among Indian cities.

Source: Investment and Industrial Policy of West Bengal, 2013

Land Woes and the Solution offered

Land has always been a concern in West Bengal. The land ceiling policy of the state government does not allow any private party to own more than 24 acres. The new industry policy has successfully surmounted this problem through the application of section 14Y of the West Bengal Land and Land Reforms Act. Land is no longer a hurdle; any amount of land can be utilised for a project.

It works like this:

  • A private party acquires whatever land is required directly from the landowner through negotiations
  • He approaches the government for waiver from the rule limiting the land that can be owned by him
  • The government examines the proposals and grants waiver
  • It is just that the area beyond 24 acres remains vested with the government; the private party becomes a lessee for the remaining portion of the land

Through this approach the government has kept its promises to the people as well. The apparently incongruous approaches of the hands-off policy regarding acquiring land for industry and encouraging investors to set up industry have been successfully synced.

As part of this approach, of using the section 14Y of the Land Reforms Act, the government has cleared proposals requiring as much as 10,000 acres of land for setting up industrial parks, industrial hubs and IT parks; the largest one being the almost 2000-acre industrial park in Raghunathpur. Transparency is a key part of the government’s land allotment policy. So for all allotments, auctions would be held and the highest bidder would be allotted the plot.

Sops for the industry

Although many sops have been provided in the new policy for investors, the government has also ensured that the land leased to any company does not remain unused. If an industrial unit remains closed for 12 consecutive months, then the registration certificate for the unit would be revoked. This is to ensure optimum utilisation of land available in the state.

Classification of areas for the purpose of determination of types and quantum of incentives available under this scheme for the approved projects, according to their location, the districts/areas in the state:

Group A - Kolkata Municipal Corporation, Bidhannagar Municipality and Nabadiganta Industrial Township of North 24 Parganas district, and Alipur Subdivision of South 24 Parganas district

Group B – Howrah district, Barrackpore and Barasat Sadar subdivisions of North 24 Parganas district, South 24 Parganas district (excluding the area under the jurisdiction of the Kolkata Municipal Corporation and Sundarban Development Board), Durgapur and Asansol subdivisions of Burdwan District, and Haldia subdivision of Purba Medinipur district

Group C - Murshidabad, Birbhum, Nadia and Hooghly districts, Burdwan district (excluding Asansol and Durgapur subdivisions), Purba Medinipur district (excluding Haldia subdivision), Bongaon and Basirhat subdivisions of North 24 Parganas district, and Baruipur, Canning, Diamond Harbour and Kakdwip subdivisions of South 24 Parganas district

Group- D - Malda, Cooch Behar, Uttar Dinajpur, Dakshin Dinajpur, Jalpaiguri, Darjeeling, Purulia, Bankura and Paschim Midnapur districts, and the area under Sundarban Development Board

Incentives for the Industry

While no incentives will be provided to the investors for investing in areas under Group A, any company setting up an industry in other groups will benefit the investors a lot.

Anyone investing more than Rs 10 crore will receive a major bonanza, under terms known as Industrial Promotion Assistance (IPA).

  • Up to 90 per cent of VAT would be waived for a period of up to fifteen years from the commencement of commercial production.
  • Central sales tax would be considered for three years
  • Electricity duty would be waived for up to 10 years
  • Up to 90 per cent of the stamp duty would be refunded
  • The quantum of all these incentives increases according to the amount of investment made. So the more the merrier

Utilisation of the Employment Bank

  • Units employing at least 50 per cent of the employees from the state’s employment bank will be offered a reimbursement of up to 100 per cent of their contribution towards ESI and EPF for a period up to 10 years.
  • This is important, considering the fact that from 2008 to 2011 there has been a negative growth of 2.16 per cent in the rate of employment in West Bengal, which places it in the top five worst performing states in the country.
  • As per the state Directorate of Employment, the average percentage of successful placement from the employment bank from 2004 to 2009 was a mere 2.46 per cent.

The policy has given a thrust to the areas - in the districts of North Bengal and in the Junglemahal - that have remained under-developed over the years. For units set up in these areas, there is tax holiday on VAT returns for five years.

Also, certain industrial sectors, which include the ones in which the state has traditionally been strong as well as ones which have potential for high employment generation, will get additional incentives. This includes jute, textiles, leather, gems and jewellery, handicrafts, and agro and food processing.

State’s Self-penalty

The state has also puts in checks and balances to ensure that it keeps its side of the deal. If incentives for any particular year are not released within the next three years, the state would pay an interest of eight per cent of the incentives to that particular industrial unit.This self-penalty is commendable on the part of the state government; it shows the seriousness the government attaches to industrial development.

Parting Thought

Balance is the key operative term of the new industrial policy of West Bengal. Without tampering with land laws, provisions for giving extra land to industry have been enabled. There are sops and there are controls; there is self-penalty as well. All these show that the government is really serious about attracting investments to the state.

The industrial summit that Chief Minister Mamata Banerjee held in Mumbai in August was highly successful, attracting many of the bigwigs of India. That success has now been followed up with a concrete policy.

Disproving all the naysayers, the government has proved that industrial progress, balanced with agriculture, is the road ahead for West Bengal.

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Comments (5)
Nandaram Ghose Reply
September 04, 2013
There cannot be any criticism to this iconic bill. This is historic.
Seema Adhikary Reply
September 04, 2013
We need such policies for all ministries.
Babun Reply
September 04, 2013
Kudos! What more to say. What a comprehensive article. Great work.
Lily Reply
September 04, 2013
Wish Central Govt also thought about Aam Admi like this government does
Samiran Reply
September 04, 2013
"Disproving all the naysayers, the government has proved that industrial progress, balanced with agriculture, is the road ahead for West Bengal." Hats off...
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