New J&K Industrial Development Scheme, 2021; Dissected

The Weekly Insights | Issue 2

What’s the Deal?

The Lieutenant Governor of J&K (Jammu and Kashmir) recently announced the New Industrial Development Scheme 2021 with a financial outlay of INR 28,400 crores. The New Scheme is in line with the J&K Reorganization Act, 2019, with a vision that industry and service led development of J&K needs to be given a fresh thrust with an emphasis on job creation, skill development and sustainable development by attracting new investment and nurturing the existing ones. The Cabinet Committee on Economic Affairs chaired by PM Narendra Modi approved the Scheme proposed by the Department of Industry and Internal Trade (DPIIT).

Dissecting the New Jammu and Kashmir Industrial Development Scheme, 2021

· Central Scheme

- This is a central sector scheme and is 100% funded & implemented by the central government.

- Deals with subject matters of the Union List.

· Objective

- The main focus of the scheme is job creation and skill development which will lead to socio-economic development of the region.

- The union government for the first time intends to take industrial development on a block-level for sustained and balanced industrial growth in the entire UT of J&K.

· Beneficiaries

- The scheme is made attractive for both small and large businesses/industrial units.

· Financial Outlay

- INR 28,400 crores.

· Scheme Duration

- 2020–21 to 2036–37 (17 years).

· Incentives Under the Scheme

- Capital Investment Incentive at the rate of 30% in Zone A and 50% in Zone B on investment made in Plant & Machinery (in manufacturing) or construction of building and other durable physical assets (in service sector) is available. Units with an investment up to Rs. 50 crores will be eligible to avail this incentive. Maximum limit of incentive is Rs 5 crore and Rs 7.5 crore in Zone A & Zone B respectively.

Zone B — Includes far off or disconnected areas which will receive higher incentives to ensure equal opportunities for growth as major areas.

Zone A — Areas other than Zone B.

- Capital Interest subvention: At the annual rate of 6% for maximum 7 years on loan amount up to Rs. 500 crores for investment in plant and machinery (in manufacturing) or construction of building and all other durable physical assets (in service sector).

- GST Linked Incentive: 300% of the eligible value of actual investment made in plant and machinery (in manufacturing) or construction in building and all other durable physical assets (in service sector) for 10 years. The amount of incentive in a financial year will not exceed one-tenth of the total eligible amount of incentive.

- Working Capital Interest Incentive: All existing units at the annual rate of 5% for maximum 5 years. Maximum limit of incentive is Rs 1 crore.

Significance of the Scheme…

The scheme aims to radically transform J&K making it one of the leading industrially developed regions in the country with emphasis on employment generation and sustainable development by attracting new investments and nurturing existing ones. The scheme will provide direct and indirect employment to about 4.5 lakh people. Additionally, it will give indirect support to about 35,000 people because of the working capital interest subvention.

Socio-economic development of J&K will also bring down crime rates making the region peaceful and prosperous.