Government extended Natural Manufacturing Policy benefits to Industry Clusters

The Union Government on 18 January 2014 extended the benefits of the Natural Manufacturing Policy (NMP) throughout the country. These extended benefits would be applicable whenever industry will organize itself into clusters and adopt a self regulatory model. This extension has been done to boost the manufacturing sector.

The issued guidelines of the Department of Industrial Policy and Promotion (DIPP) mentions that all the incentive provided to National Investment and Manufacturing Zones (NIMZs) will be available to all such clusters. Apart from the NIMZ, the policy benefits are also applicable to manufacturing industry across India, whenever the industry is able to organise itself into clusters and adopts a model of self-regulation as enunciated in the policy.

The guidelines have also mentioned that all such benefits or dispensations except NIMZ specific benefits or dispensation as available to the policy is also available for the manufacturing industry cluster. It also says that clusters as per the guidelines will be a concentration of manufacturing industry units located within a clearly demarcated geographical area notified by the state government. To manage each cluster, the state government has to constitute a Special Purpose Vehicle (SPV) that will be headed by a government official.

Other important points of the guidelines issued are:
• The policy also aims to create 100 million additional jobs over the next decade
• The zones that has been accorded with benefits like exemption from capital gains tax, simplified procedures and easier exit norms.
• Technology acquisition and development fund and greater access to institutional finance will be accessed to the SME units in the clusters
• There exists a provision for suitable representation of the industrial units on the Board of the SPV, which will be responsible to facilitate the clearances that are required to set up in the cluster and/or for running the units. Filling of the periodic returns will be facilitated by SPY to the Units III the cluster by designing an appropriate single window mechanism
• Incentives under NMP for the manufacturing equipment and technologies used to produce energy from sun, geothermal, wind, clean coal technology and carbon sinks management will also be accessed by the units in a cluster

Incentives provided to the clusters will consist if the 5 percent interest reimbursement of the nominal interest charged by lending agency and 10 percent capital as subsidy. In case the private sector units in the cluster will undertake a PPP project for skill development in coordination with the National Skill Development Corporation (NSDC) the government will provide a weighted standard deduction of 150 percent of the expenditure, which will not include the land and building. This will be done only to encourage the private sector participation in the skill development.

The Natural Manufacturing Policy 2011 was done with an aim to raise the share of manufacturing to 25 percent of GDP by 2022 from its present 16 percent. The union government proposed to set up a mega integrated industrial townships.

Comment: These benefits might help India in recovering the industrial production which contracted by 2.1 percent in November 2013. This contraction was the lowest in past six months and all this happened due to the poor performance of the manufacturing sector.