North Eastern Industrial Development Scheme (NEIDS) 2017
CII calls for a review to make existing units more competitive
Source: IT News

Guwahati, May 08 2018: In order to give a fillip to industrial activities, the Central Government has come out with the North Eastern Industrial Development Scheme (NEIDS) 2017, a scheme designed to promote MSME through incentivization, and in the process, generate large-scale employment in the region.

While the Confederation of Indian Industry (CII), the largest industry body in the country, has welcomed the scheme describing it as "positive and growth-oriented", it made a few points.

"Overall, NEIDS underlines the Central Government's commitment to promoting small and medium-scale units and catalyzing growth and development of the region," Mr Abhijit Barooah, Co-Chairman, CII North Eastern Council here today.

"Not only does the scheme seek to identify and prioritize MSME units as the growth engine of the North East, it also promises to simplify procedures for claiming benefits.

CII is happy that employment generation has a received a special thrust in the scheme," added Mr Barooah, who is also the Managing Director of Premier Cryogenics Ltd.

"However, CII feels certain provisions in the scheme need to be looked into and reviewed.

For example, while new units are covered under NEIDS, existing ones are kept out of the ambit.

This will make it extremely difficult for the existing units in in the region to withstand competition from the new units which are incentivised," he commented.

"Moreover, there is little on offer to facilitate the units keen to expand, modernize and diversify.

This will restrict the growth of the existing units," Mr Barooah, said, adding that "diversification" should form a part of NEIDS along the lines followed in the industrial policies announced for J&K, Uttaranchal and Himachal on 23rd April 2018 .

He also pointed out that as per NEIDS, the Central Capital Investment Incentive for Access to Credit (CCIIAC) is capped at Rs 5 crore.

"CII is of the view that investments in plant and machinery and plant buildings (technical civil works) should be part of CCIIAC calculation, and the cap should be raised to Rs 25 crore.

The Rs 5-crore capital incentive shall not attract many medium and large industries.

It must also be noted that a large part of industrial investments happen in plant buildings.

The scheme needs to take that into account," Mr Barooah explained.

He also said since MSME limits spectrum has been broadened to turnover of Rs 250 crore, medium-sized units can have a P&M of 100 crore.

"Disadvantages of the NER merit a higher capital outlay in any project compared to rest of India," Mr Barooah observed.

He also pointed out that transport incentives via rail, water and air route have been enhanced for products made in the North East to any part of the country.

While 20% cost of subsidy for the movement of finished goods transported via rail and water is borne by Railways/ Railway PSU and Inland Waterways Authority of India, 33% air freight on perishable goods (as defined by IATA) transported from the airport nearest to place of production to any airport within the country is also on offer.

"But no subsidy is there for transportation by road.

We strongly feel that subsidy on road transport should also be extended to the entrepreneurs operating in areas where there is no/very little rail, air and inland waterway connectivity," Mr Barooah said.

CII pointed out that the Central Interest Incentive is 3% on working capital credit is advanced by the Scheduled Banks or Central/State financial institutions for first 5 years from the date of commencement of commercial production/ operation is given, but that is restricted to MCLR.

Para 6.3 (b) caps working capital requirement of a unit to 25% of a unit's annual turnover.

"CII feels that it is disadvantageous for efficient units having good bank rating because they get interest rate near to MCLR under which MSMEs are considered a priority sector.

Incentive should be 3% of the working capital limits utilised, without any reference to MCLR," he said, noting that the need for working capital and the assessment for the same is stringently monitored by banks and governed by RBI norms.

As per Para 4.1, all new industrial units in manufacturing sector and services sector including bio-technology and hydel power generation units up to 10 MW located in NER, are eligible for incentives.

"CII feels that a 'new industrial unit' is a unit which registers itself on DIPP portal on or after the first day of April 2017 but not later than 31 day of March, 2022, and such a unit has to commence commercial production/ operation within 18 months of registration.

(Para 5(g)," he said.

"But, a cap of 18 months time to start production from date of registration may not be possible for the projects that involve large investments.

In a few cases, commercial production may be delayed because of some unforeseen reasons which beyond the control of the owner of the unit," Mr Barooah said.

"Also, 18 months from 31 March 2022 implies that the latest possible date of commencement of commercial production/operation is 30th September 2023.While CII wishes to have a greater clarity on the last date of commercial production, it recommends that the period from the date of registration to start production be raised from 18 months to 36 months," Mr Barooah said.

As per NEIDS, all eligible new industrial units can get reimbursement of GST paid on the products manufactured in the North East up to the extent of the central share of the CGST and IGST for a period of 5 years from the date of commencement of commercial production.

"This means that new units will have input credit on capital goods which have to be first utilised to have any net payment out go of IGST / CGST for at least the first two years, or so.

No CGST/IGST output may occur till such period.

It may also be mentioned that while in the past the Centre would refund 100% of the Excise Duty paid, it is now contemplated at 58% of the net CGST and 29% of the net IGST which has reduced the refund quantum considerably," Mr Barooah said.

"Moreover, since the North Eastern states are largely consuming states, the quantum of GST refund will be less.

The CGST/IGST period to which the benefits are available should be for 10 years," Mr Barooah said.

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