NEW INDUSTRIAL POLICY (1999): Himachal Pradesh

NEED FOR NEW POLICY GUIDELINES

1. The Government of Himachal Pradesh is fully aware of the need to create a congenial industrial climate conducive for speedy industrial growth, as also to further consolidate and strengthen the advantages that the state offers for rapid industrialisation.

2. Through the successive industrial policies and other investor friendly measures, the state has been striving to accelerate the flow of investment into industrial sector. It has also been extremely conscious about attracting more investment into the backward areas with the aim of achieving equitable development of the state. The policies pursued by the state have resulted in promoting investment in general, diversification of industries and generation of employment opportunities. The state has capability now to sustain long term growth of industrial development. There is a need for structural change in the economy, with diversification of the primary agricultural sector and the contribution of the industrial sector growing substantially, to take a comparatively significant place in the state's overall economy.

3. At this juncture, the state has to respond to the new challenges, and adequately deal with factors which would be relevant in the next millennium. The two issues, which will play an increasingly dominant role in future industrial policy planning are the globalisation of commerce and the new regime brought about through patents and WTO. The second is the qualitatively different role which governments have to play in bringing about transformation through a judicious mix of market driven and socially relevant economic policies. Keeping these broad aspects in mind, it is important to identify strategic areas and the constraints experienced in the past, and take corrective measures. Briefly these are as under:

3.1 Due to geographical factors the industrialisation is concentrated in the border areas & gateways of Himachal Pradesh; Paonta Sahib- Kala Amb- Parwanoo-Barotiwala-Baddi-Nalagarh. Inspite of the best efforts, other areas of the state have been relatively unaffected by the process of industrial development.

3.2 The existing infrastructure facilities are inadequate to meet the requirement of new investment. Therefore, it requires significant effort to improve the infrastructure. Further lack of social infrastructure has led to the concept of absenteeism of proprietors as many of the promoters of units in the border areas are living in the adjoining states, or even Delhi.

3.3 In the era of liberalisation and globalisation the flow of investment will depend upon the friendly attitude and approach towards the investors. The regulatory and control regime must give way to one, which is promotional and facilitative. The statutory provisions, rules, regulations and procedures relating to grant of approvals at the state level for setting up of industrial units, permission for purchase of land for industrial use need to be comprehensively reviewed.

3.4 Likewise, non-government organisations, which are engaged in the promotion of industries, will have to play a more significant role in the industrialisation of the state keeping in mind the socio-economic policies of the government. Their objectives and functioning will need to be re-oriented in this direction. The industrial units will have to play an increasing role in proper maintenance of the surroundings in which they work, establishing common services and looking after the social needs of the industrial workers.

3.5 Despite their being no specific comparative advantage the state has emerged as an important centre of textile spinning in the northern region and now there is a need to further expand & consolidate this sector by forward and backward linkages.

3.6 Human resource development facilities particularly in vocational & technical education for Himachalis are not adequate. In this regard both the State Government and the industries will need to join hands for structuring training programmes. These will have to be in relevant areas such as textile industry, as an example. If need be, one could also consider setting up specialised institutions in these areas if these will help in further employment and industrialisation of the state.

3.7 One of the main objectives of the Government of India is to make Indian industry globally competitive. The industrial sector will have to undergo restructuring through technology up-gradation and modernisation in order to improve productivity, quality, cost effectiveness and consumer satisfaction in order to survive and remain globally competitive. Government of Himachal Pradesh proposes to support efforts in this direction.

OBJECTIVES

To meet above challenges the Government has decided to review and rationalise the state's existing industrial policy so as to make it simpler and more transparent. Our goal is to transform Himachal Pradesh into an eco-friendly industrial state in the coming years with the following objectives to guide its industrial policy.

1.1 To focus on development of quality infrastructure particularly in the high potential industrial growth centres, to attract more units into the state with the objective of increasing employment and income and to enhance revenue generation for overall development.

1.2 To strive to achieve balanced economic and social growth in all regions of the State through a process of planned industrialisation in different regions particularly the industrially backward areas.

1.3 To attract investment into various sectors of the state's economy through financial institutions at a national and international level and also to encourage NRI investment.

1.4 To encourage and sustain the cottage and tiny industrial sector which employs a large number of persons in the state with low investment and contributes significantly to the State's industrial produce.

1.5 To encourage the participation of the private sector in infrastructure development like power, roads, transportation, development and maintenance of industrial townships.

1.6 To provide gainful employment opportunities to the unemployed Himachalis both in rural and urban areas.

1.7 To promote and regulate industrialisation in a manner which ensures environmental protection and pollution control.

1.8 To create an environment of mutual trust between the Government and the business persons, industrialists and entrepreneurs.

1.9 To create a supportive environment with transparency and easy access to information, technology and financial resources in which the industry can flourish.

1.10  Identify thrust areas of industry which would be most suited to the special geographical location of Himachal Pradesh and provide an attractive package of incentives to promote the growth of such thrust industries.

1.11  To take adequate steps in the field of Human Resource Development so as to make available skilled/technical manpower as per the need of industry.

1 Approach and Strategy

Considering that the resources for development are always limited, one can at best channelise them in an optimal way. The entire State is industrially backward except some development on the periphery of the State. The State has been classified into two categories namely "industrially developing areas" and "industrially backward areas". The development blocks of Paonta Sahib and Nahan in district Sirmour and Nalagarh, Dharampur & Solan in district Solan, excluding backward panchayats as notified by the Planning Department of Govt. of Himachal Pradesh from time to time would fall in the category of "industrially developing areas". The rest of the State including backward panchayats in the industrially developing areas referred to above will be in the category of "industrially backward areas". There is a need to give an over-riding incentives in industrially backward areas. In order to create employment opportunities at the door step in the tribal areas, it is proposed to promote industrial growth centres by exempting the units coming therein from payment of all State Government taxes and duties. A special package of incentives is required for fruit, vegetable & maize based units consuming locally available raw material. In addition, emphasis is also to be given to thrust areas including 100% EOU's and investment by NRIs which have been identified & classified as priority sector. Relatively higher incentives and support are planned to the units in cottage, tiny & small sector particularly in industrially backward areas and in priority sector. For the units in large & medium scale sector more emphasis is laid for providing better infrastructure. In order to accelerate and facilitate industrialisation, clearances required for setting up of units in industrially developing areas shall be specially dealt on fast track basis. The Income Tax holiday and the Central Transport Subsidy Scheme, the two major central incentives have helped the growth of industries in the State. The Government of India will be approached to extend these incentives beyond March, 2000. It will be the endeavour of the State Government to continue to request and persuade the management of companies to open/transfer their registered offices within the State of Himachal Pradesh. In order to achieve these objectives, following parameters would be adopted.

2 Infrastructure

Infrastructure is the most essential requirement for entrepreneurs. Realising this fully, it is proposed to promote the existing industrial corridors of Baddi, Barotiwala, Nalagarh, Parwanoo, Solan, Shogi, Paonta Sahib, Kala Amb and develop growth centres at identified locations. More industrial areas will be set up in future to meet the needs of industrialisation in different regions of the state. All existing industrial areas have been linked with network of roads, telecommunications, water and electricity. Special emphasis is being paid to the Baddi-Barotiwala region to develop it into a major industrial township in the state. An Export Promotion Industrial Park is being established at Baddi to further boost the export from the state. The role of the private sector in infrastructure development and its maintenance needs to be emphasised. Privatisation of industrial areas for creation of infrastructure including social infrastructure will be considered for rapid industrialisation. The Government has already taken up housing particularly for the industrial workers as a priority area of development through such joint venture projects.

3 The Package of Incentives & Concessions

Keeping in view the stated objectives of this policy document, the incentive package has been accordingly worked out. On the one hand thrust has been given to infrastructure development particularly in the industrial corridors of the state which together with the simplification of procedures should provide a major incentive for large industrial houses to establish units in the state. In the present day scenario when each state is competing with other state for attracting investment, Himachal Pradesh should seek to become a preferred and favourable destination when this is viewed with assured power availability, good governance and attractive physical environment. Emphasis has also been given to provide graded incentives with a promotional bias in favour of units in industrially backward areas and the units in village, tiny & cottage sector. To encourage employment of Himachalis, these incentives have also been linked with the employment status in such industries. For protecting the interest of local manufacturer in the State it has been decided that there should be a provision both for price preference and purchase preference for locally manufactured commodities but without compromise on quality.

4  Power

The state is committed to exploiting its vast power potential. A number of ambitious schemes are already under implementation. Recognising the importance of this sector for industry the Government has further taken note of two important requirements. Quality of power to sustain high technology industry and a power tariff structure which is planned so that the entrepreneurs can foresee its impact in the competitive manufacture and marketing of their products.

5   Simplification & Rationalisation of Taxes

Incentives in the form of concessions in taxes and levies applicable to the industrial sector have been rationalised and simplified and details are indicated in the revised package of incentives being issued simultaneously with these policy guidelines.

6   Foreign Investments, NRI Projects and Exports

The State Government will welcome foreign investment particularly in high-technology and thrust areas. It will provide necessary assistance in promoting foreign technology tie-ups with local industries. Apart from the normal incentive package to which they are entitled, NRIs will be given special consideration in allotment of land for their projects and time bound clearances for their projects. The state is already exporting goods to the tune of about Rs.300 crores. To further boost this, the Export Promotion Industrial Park at Baddi would provide the required infrastructure facilities which would be attractive for the Indian entrepreneurs, NRIs and foreign investors.

7 Research & Development and modernisation of Existing units

It has been recognised that technology upgradation and modernisation of existing units are crucial for the survival of industry. ISO certification will be encouraged. The Government is also considering strengthening of the testing and calibration facilities in the state so that more units will be in a position to compete with international standards and find export markets for their products. The State Government will also make an endeavour to link existing R & D institutions in the state with various facets of industry like technical training, summer training of students and technology development of industrial projects. In a small measure these initiatives have already been started by the Government but need to be made more widely known. With the globalisation of markets it is recognised that technology inputs particularly in the small and medium scale industries are going to play a key role. The Government is trying to create technology linked financial support for industry through programmes with the Government of India. This should go a long way in avoiding technological obsolescence in industry.

8   Revival and Rehabilitation of Sick Industrial Units

The aspects involved in the revival of sick units primarily relate to the funds advanced by the banks/financial institutions and interface of such units with those institutions is much more frequent and relevant than with the Directorate of Industries. In this regard it is the conscious view that the financial institutions should take concerted steps to reduce the burden on account of penal interest, lay more stress on one time settlement and facilitate revival of sick units. State Level Inter Institutional Committee (SLIIC) also needs to take more active role in the revival of sick units. A revival package for such sick units has also been planned to facilitate their successful revival.

9   Public Sector Industrial Undertakings and Investments

In order to maximise efficiency and optimise benefits accruing from the investments made, the performance of public sector industries shall be evaluated and efforts will be made to bring in professionalisation by associating the private sector. Exercises will be conducted with respect to mergers based on work load and closure of sick Public Sector Enterprises and appropriate action will be taken.

10 Creation of an industrial promotion cell and provision of escort services

In order to ensure timely and expeditious clearances by the respective departments, a new mechanism to remove the procedural bottlenecks has been developed. The IPARA mechanism has been discontinued even before the announcement of these guidelines. District level clearances will henceforth be dealt with at that level. The Industrial Promotion Cell set up in the Department of Industries will co-ordinate to expedite clearances from the concerned departments. A Committee headed by Chief Secretary will review & monitor the progress of the industrial projects in the state. The Director of Industries will nominate a nodal officer for each project in medium & large scale sector to provide escort services and to actively assist and obtain clearances from different departments/agencies. The Secretary (Industries) will regularly monitor the implementation of this scheme. It is hoped that procedure will considerably reduce the procedural problems faced by entrepreneurs in setting up projects in reasonable time frame.

11 New procedure for immediate transfer of land

The Government intends to simplify rules for granting permission under section 118 of H.P. Land Reform & tenancy Act for transfer of land for setting up of industries, tourism and hydro- power projects. After simplification, it is expected that the number of authorities processing such cases would be considerably reduced and time limit set for final decision.

12   Administration

In order to bring about the desired effect for rapid industrialisation, it is important to improve the quality of administrative support. In this context the Department of Industries has already created a web site so that the programmes and policies of the department are available to a large audience of prospective entrepreneurs. The department is also moving into the era of computerisation of services which will help in modernisation of the services. It is also planned to create a data bank of information to help the industries in processing projects, identification of technologies and relevant services available in the state.

THRUST AREAS

1 Himachal Pradesh due to its location and geo-climatic conditions has certain positive assets for certain industries. These are based on considerations like available human resource, natural resources, locally available raw materials,. fauna and flora. Other considerations are employment, economic and social development particularly in the backward areas. Some of the industries, which fall within this scope, are briefly addressed below. The list is in no way exhaustive. It is only indicative of a direction of thinking and guidance.

2 Agro-horticulture produce based industries, including food processing and mineral water bottling. It will be the endeavour of the State Government to encourage post harvest technologies including setting up of cold storages and establishing of cold chains. The state needs to identify national and international markets including advanced technologies in food processing. Herbs and aromatic based industries because of the geo-climatic zone provide a unique opportunity for the entrepreneur. Sericulture based activities also have a tremendous scope for further development. The more traditional industries involving use of wool needs to be modernised and internationalised. These areas have been kept as priority areas where the Government is providing special incentives for development.

3 Industries in high technology areas where there is a large value addition, with low volumes of raw materials involved, are particularly suited for the state, have also been included in priority sector. These industries involve smaller transportation volumes of both raw materials and finished products, which can become a bottleneck in the mountains. With the advancement of technology today, the State is very fortunate to have one of the best communication networks, and was one of the first states to have the ISD services established which have now revolutionised the country.

4 Information Technology is now emerging as a major catalyst for development. It has become synonymous with software development due to India's eminent position in the world trade market. However, under the WTO it has a wider connotation as all hardware industry is now classified under this head. It therefore encompasses all electronics industry and India may be moving into the zero duty regime in this area, implying a stiff competition for Indian industry. Though the State has still to take its first stride in the area of software development, it has already a fairly good base in the hardware side. There is over Rs. 200 crores of investment in high technology areas like magnetic heads for audio systems, ferrite technology for magnetic cores, optical fibre technology and assembly of PCs, television components and bimetallic sensors to mention a few industries in this field. Some of these industries have no parallel elsewhere in the country. This development will need to be further strengthened and diversified.

5 Himachal Pradesh also occupies now an eminent position in textile sector with many large units located in the State. Textile mills in the state are also amongst the largest employers of human resource. This development needs to be further strengthened with forward and backward integration.

6 The importance of the cottage and tiny industrial sectors for Himachal Pradesh needs to be emphasised. It holds the key to large scale employment and generation of economic activities in remote areas. It is, therefore, proposed to enhance the opportunities of employment and income in such activities. The traditional skills and cultural heritage associated with production in this sector will need to be preserved.

7 More investment will be required in the allied sectors of tourism, power generation, transport which have a crucial place in the State's economy.

The Government of Himachal Pradesh is committed to accelerate the pace of industrial & economic development of the State within the stated macro objectives. It invites entrepreneurs not only local and from other states of the Union, but from abroad as well, to be a partner in Himachal's endeavour in transforming the State into a modern entity, which in the next millennium can justifiably earn the title of " Switzerland of the East".