Tax holiday for setting up manufacturing units in SC/ST areas

By Rajeev Ranjan Roy, New Delhi, Sep 28 : The government has offered a 10-year tax holiday for setting up manufacturing units in areas dominated by scheduled castes and scheduled tribes (SC/ST), a senior official of an industry chamber said Sunday.

'A firm will get exemption from all taxes if a manufacturing unit is set up in areas dominated by the people of SC/ST. It will also help manufacturing sector expand further,' said the official, who did not wish to be identified.

The government offer came during a meeting in the prime minister's office (PMO) held Sep 17. Representatives from India's key industry chambers like the Associated Chambers of Commerce and Industry (Assocham) and the Federation of Indian Chambers of Commerce and Industry (Ficci) attended the meeting.

The offer is likely to formalise soon, perhaps much before the government announces the schedule for general elections due in March-April next year.

'An early announcement is expected. The government's Department for Industrial Policy and Promotion (DIPP) is now looking into the matter. Thereafter, a formal proposal will go to the ministry of finance,' he added.

India's manufacturing sector logged 7.5 percent growth in July this year as compared to 8.8 percent in the last corresponding month.

Manufacturing sector contributed only 5.6 percent to the country's gross domestic product (GDP) growth in April-June of the current fiscal against 10.9 percent in the same period last year.

The Prime Minister's Economic Advisory Council (PMEAC) in 2008-09 economic outlook report has projected the manufacturing sector to grow at 7.2 percent in the current fiscal against 9.4 percent in the last fiscal.

Prime Minister Manmohan Singh's United Progressive Alliance (UPA) government has been putting much emphasis on affirmative action by the industry for SCs and STs to upgrade their social and economic lot.

The prime minister's principal secretary T.K.A. Nair heads the co-ordination committee on affirmative action (CCAA), which monitors the implementation of affirmative action by the industry.

DIPP of the ministry of commerce and industry is another unit dealing with industry on the issue of affirmative action.

'The idea of tax holiday is very encouraging, but how industry responds in general remains to be seen. STs concentrated pockets are in states like Jharkhand, Chhattisgarh, Orissa, and Madhya Pradesh, which are faced with major law and order challenge from Maoists,' said an industry representative, requesting anonymity.

SCs and STs are India's largest disadvantaged social group, who account for 24.4 percent of the country's billion plus population as per the census 2001.

The National Sample Survey Organisation (NSSO) report 2004-05 says 36.8 percent SCs in rural areas belong to the below poverty line (BPL) category, while 39.9 percent in the urban areas.

As much as 47.3 percent STs in rural areas live below the poverty line, currently pegged at the monthly per capita expenditure of Rs.327.56 in rural areas and Rs.454.11 in urban areas, while 33.3 percent STs in urban India live below the poverty line.