Himachal’s industrialisation dream turns sour

Ravinder Makhaik

Attracting industry to the hill state with tax sops has all but turned into an illusion. As exemptions get withdrawn, industries take flight for safer harbours and with GST in place, the very case for incentives has fallen through.

Data not available in the public domain shows that over the past three years, the contribution of industry towards the state’s gross domestic product (SGDP) has fallen from 26 to 24%.

Economic adviser Pradeep Chauhan admitted that there was an industrial slowdown. “Withdrawal of incentives for industry has led to many units shutting shop and attracting new industry has become a challenge,” he said.

It was primarily to create employment opportunities in the hills that the states of Jammu & Kashmir, Uttarakhand, the North-East and Himachal were handed out a comprehensive industrial package in 2003 by the then prime minister, Atal Bihari Vajpayee.

The policy for 10 years was meant initially for those units that would start production by March 2010 and the tax holiday till 2020 was for income and excise taxes. Besides, there was Central investment and a transport subsidy element also.

Later, the federal government backtracked and revoked income and excise tax exemptions in 2007 but has allowed the investment and transport subsidy to continue up to 2020. 

“Delays in releasing transport subsidy has all but defeated the purpose,” says Dinesh Sharma of Ambuja Cements. The company received a Rs 17-crore transport subsidy for 2011-12, but a subsequent claim of Rs 32 crore remains unsettled.

Against a claim of Rs 176 crore for 2015-16, the state received just Rs 26 crore in March from the Department of Industrial Policy & Promotion, the federal body.  “The funds are certainly not enough to pay all eligible units,” says Rajesh Sharma, Director, Industries.

An India Brand Equity Foundation research report released on September 15 cited the data gathered from the Director General of Commercial Intelligence & Statistics (DGCIS), a Union Government entity that showed Foreign Direct Investment (FDI) in Himachal, which was $416 million in FY 2010-11, had dried up. In the next seven years, from FY 2012 to FY 2018, the total FDI was only $4 48 million.

The merchandise exported from the state valued at $ 12.22 billion for FY 2018 was higher than $10.56 billion in the previous year. The bulk of the exports (60%) were contributed by bulk drugs, drug formulations and biologics and about 16% was from cotton yarn, manmade yarn and fabrics.

The state’s ambitious industrialisation programme has also extracted a social cost, not just for the state but the entire region.

With the bulk of the industry having come up on the border corridor with Punjab, Chandigarh and Haryana, not many youngsters from the hills ventured to take up jobs in these hottest zones of the state. 

As a result, the number of those registered on the live register of aspirants seeking employment, which was 8.1 lakh in 2008-09, increased to 8.6 lakh in 2012-13 and was about 9.7 lakh in February 2018. The primary objective of the industrial package lies busted.

Second, the concentration of pharmaceutical units around Baddi-Barotiwala-Nalagarh belt has had a spillover into the manufacture of spurious and narcotic drugs. 

The case of Punjab’s fight against drugs is well documented and even cast in films, with many of the trails leading to the drug-manufacturing factories in Himachal’s industrial belt. Himachal is grappling with a menace of its own for none other than chief minister Jairam Thakur has publicly admitted that about 27% of the youth are victims of drug abuse.

The final nail in the coffin has been the implementation of the GST, which has freed the industry to move to any part of the country, as it has levelled the tax field for all industries, for all regions. 

Fears have been expressed that the state’s industrial belt would soon be abandoned into wastelands.