To boost industries in J&K, centre clears Rs 28,400 crore scheme

New Industrial Development Scheme for Jammu & Kashmir

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New Industrial Development Scheme for Jammu & Kashmir

In News:

  • The Union Government has formulated a New Industrial Development Scheme for Jammu & Kashmir (J&K IDS, 2021) as Central Sector Scheme for the development of industries in Jammu & Kashmir.
  • The financial outlay of the proposed scheme is Rs.28,400 crore for the scheme period 2020-21 to 2036-37.

Need of the scheme:

  • The scheme has been announced in the backdrop of the reorganization of Jammu & Kashmir in 2019, into the Union Territory of Jammu & Kashmir under the J&K Re-organisation Act, 2019.
  • After the reorganization it is believed that industry and service led development of J&K needs a fresh boost by attracting new investment and supporting the existing industries.
  • The main purpose of the scheme is to generate employment beyond government jobs in both manufacturing and service sectors.

Incentives under the scheme:
  • Capital Investment Incentive
    • The capital investment incentive will be available at the rate of 30 per cent in Zone A (urban) and 50 per cent in Zone B (rural).
    • The incentive will be available on investment made in plant and machinery (in manufacturing) or construction of building and other durable physical assets (in service sector).
    • Units with an investment upto Rs. 50 crore 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.
  • Capital Interest subvention
    • Capital interest subvention will be available at an annual rate of 6 per cent for maximum seven years.
    • The interest subvention will be available on loan amount of up to Rs 500 crore for investment in plant and machinery (in manufacturing) or construction of building and all other durable physical assets (in service sector).
    • Interest subvention is the subsidy offered on interest rates on a loan. Thus, the government pays part of the interest on a loan.
  • GST Linked Incentive
    • GST linked incentive is a financial incentive based on gross GST. It is not a reimbursement or refund of GST but gross GST is used to measure eligibility for industrial incentive.
    • It will incentivise output up to 300 per cent 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.
    • However, the amount of incentive in a financial year will not exceed one-tenth of the total eligible amount of incentive.
  • Working Capital Interest Incentive
    • Working capital interest incentive is for all existing units at the annual rate of 5% for maximum five years and maximum limit of incentive is Rs 1 crore.
    • Working capital is the capital of a business which is used in its day-to-day trading operations. It is basically an indicator of the short-term financial position of an organization.

Key Features of the Scheme:
  • The Scheme has been made attractive for both smaller and larger units.
  • Smaller units with an investment in plant & machinery upto Rs.50 crore will get a capital incentive upto Rs. 7.5 crore and get capital interest subvention at the rate of 6% for maximum 7 years.
  • The scheme aims to take industrial development to the block level in J&K and attempts for a more sustained and balanced industrial growth in the entire Union Territory.
  • The scheme will have proper checks and balances by having an independent audit agency before the claims are approved.

Impact of the scheme:

  • The scheme is expected to bring about a significant transformation in the existing industrial ecosystem of J&K with emphasis on job creation, skill development and sustainable development.
  • The proposed scheme is likely to attract significant investment and give direct and indirect employment to about 4.5 lakh persons.
  • Additionally, because of the working capital interest subvention the scheme is likely to give indirect support to about 35,000 persons.
  • If implemented effectively, it will aid J&K to compete nationally with other leading industrially developed States/UTs of the country.

Also Read: J&K delimitation likely to give more political heft to Jammu

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