Sub: New Industrial Policy and other concession in the North Eastern Region.

In view of the continuing backwardness of North East region, the need for a new and synergetic incentive package was widely felt to stimulate development of industries. (Hon’ble Prime Minister made a statement at Guwahati on October 27, 1996 that new initiatives would be announced for the industrial development of the North Eastern Region) . Expert groups / committees were constituted by the Ministry of Industry and the Planning Commission to concretize the initiatives.

Subsequently, Inter Departmental Meetings were held under the Chairmanship of Member Secretary (Planning Commission) to consider the recommendations and finalise the proposals. Based on these proposals, Government approved the new Industrial Policy and other Concessions in the North Eastern Region which interalia envisage the following:

A. DEVELOPMENT OF INDUSTRIAL INFRASTRUCTURE

i. Currently the funding pattern of the growth centres envisages a Central assistance of Rs. 10.0 crores for each centre and balance amount to be raised by the State Government. Government has approved that entire expenditure on the growth centres would be provided as Central assistance, subject to a ceiling of Rs.15.0 crores.

ii. In respect of the IID centres, the funding pattern would be changed from 2:3 between Government of India and SIDBI to 4:1, and the Government of India funds would be a grant.

B. TRANSPORT SUBSIDY SCHEME

The transport subsidy scheme will be extended further in so far as N E States are concerned, for a period of another 7 years i.e up to 31st March , 2007 being coterminous with the Tenth Five Year Plan on same terms and conditions as are applicable now .

C. FISCAL INCENTIVES TO NEW INDUSTRIAL UNITS AND THEIR SUBSTANTIAL EXPANSION

i. Government has approved for converting the growth centres and IIDs into a total Tax Free Zone for the next 10 years. All industrial activity in these zones would be free from Income Tax, Excise for a period of 10 years from the commencement of production. State Government would be requested to grant exemptions in respect of Sales Tax and Municipal Tax.

ii. Industries located in the growth centres would also be given Capital Investment Subsidy at the rate of 15% of their investment in plant and machinery, subject to a maximum ceiling of Rs.30.0 lakhs.

iii. The Commercial banks and the North East Development Financial Corporation (NEDFC) will have dedicated branches / counters to process applications to term loans and working capital in these centres . While sanctioning assistance NEDFC and Commercial banks would take a liberal view of the debt equity ratio.

iv. An interest subsidy of 3% on the working capital loan would be provided for a period of 10 years after the commercial production. The working capital requirements would be worked out as per the Nayak Committee.

v. Similar benefits would also be extended to the new industrial units or their substantial expansion in other Growth Centres or IIDs or industrial estates/ Parks / Export Processing Zones set up by the States in the NE region. New industrial units or their substantial expansion in the specified industries (as at Annexure-A) located outside these growths centres and other identified locations would also be eligible for the similar fiscal incentives.

D. RELAXATION OF PMRY NORMS

The PMRY would be expanded in scope to cover areas of horticulture, piggery , poultry , fishing , small tea gardens etc. so as to cover all economically viable activities. PMRY would have a family income ceiling of Rs.40, 000.00 per annum for each beneficiary along with his / her spouse and upper age limit will be relaxed to 40 years. Projects costing up to Rs.2 lakhs in other than business sector will be eligible for assistance. No collateral will be insisted for projects costing up to Rs.1.0 lakh. Group financing up to Rs.5.0 lakhs will be eligible. Scheme will have a subsidy component @15% with an upper ceiling of Rs.15,000.00 . The margin money may vary from 5% to 12.5% of the project cost to make the subsidy and margin contribution at 20% of the project cost. PMRY would continue to have Entrepreneurship Training Component as per the existing rate.

E. OTHER INCENTIVES PROPOSED

i. A comprehensive insurance scheme for industrial units in the North East will be designed in consultation with General Insurance Corporation of India Ltd and 100% premium for a period of 10 years would be subsidised by Central Government.

ii. A one time grant of Rs.20 crores will be provided to the North East Development Financial Corporation (NEDFC) by the Central Government through NEC to fund techno- Economic studies for industries and infrastructure best suited to this region.

iii. State Government may consider setting up of a "Debt Purchase Window" by the NEDFC which buys the debt of the manufacturing units particularly in respect of the supplies made to the Government Departments so as to reduce the problem of blocking of funds for these units.

iv. For development of markets in North East, possibilities of Export of products of North East to the neighboring countries particularly, Bangladesh, Myanmar and Bhutan would be explored.

v. It may be considered to provide assistance for restructuring State PSUs from National Renewal Fund.

vi. The community pattern of land holding in large parts of NE region does not lend himself to providing collateral security as required under conventional bank lending. RBI has constituted a committee to look into this issue. An appropriate system of "guarantees" will evolved for NE region.

F. PROCEDURE FOR RELEASE OF ASSISTANCE UNDER THE NEW INITIATIVES

It is approved that the transport subsidy budget may be released by a designated agency on the basis of the recommendation of the S L C. It is proposed that NEDFC may be designated as the nodal agency for release of transport subsidy in N E States. NEDFC may be paid administrative expanses for this service, which may be decided in consultation with IDBI.

G. DEVELOPMENT OF VILLAGE & SMALL INDUSTRIES (VSI) SECTOR

Weavers Service Centres (WSCs) in NE region and Indian Institute of Handloom Technology at Guwahati would be suitably strengthened to provide technology and training support to the weavers. National Handloom Development Corporation will give priority in supply of hank yarn to the NE Region. All the four varieties of silk would be covered under the Mill Gate Price Scheme. Priority would be given to the NE region in scheme of setting up of market complexes and permanent exhibition facilities. A new design centre for development of handicraft would be set up in NE region. To up grade the skill of artisan, advance training programme would be organised. New emporia will be set up and financial assistance for renovation of existing emporia would be provided. The Central Silk Board will give priority to NE region in implementation of its scheme.

Ministry of Finance etc. are requested to amend rules / notifications etc. and issue necessary instructions for giving effect to these decisions.