Vishal Thappa
What were the biggest challenges in J&K that were stopping investors to come here and set up manufacturing units?
* Fear of Instability due to militancy threats.
* Anybody outside J&K could not get land in their own name.
* No such incentives – fiscal and tax to setup business.
* Basic infrastructure unavailable and no dedicated industrial areas
* Connectivity issues to transfer raw material and human resources easily to and from the state.
Abrogation of Article 370 – a blessing or a curse for J&K industries?
We have always heard J&K is unstable, there is militancy, it is only good for tourism, there are no incentives to set up manufacturing units here, there are no tax benefits, etc. etc.
However, there is so much more this state has to offer.
Do you know J&K is the largest producer of apples, walnuts, cherries, almonds and saffron and 3rd largest producer of wool in India.
The right words to describe the last 1.5 year of development in J&K after abrogation of article 370 are:
“J&K ki toh shakal hi badal gayi hai… ye pull yhakabbana…acha ab Srinagar bhi train jane lagi…….acha ye international brand yhakabaya…”
Yes, that’s right. These are some common reactions of people who have come to J&K after a long time.
Is the situation any different now?
Showing you the ground reality….
The Government is now actively working towards developing this state. The Govt has taken various policy initiatives and notified policies:
* J&K Industrial Policy 2021-30 (central sector scheme for industrial development)
* J&K Industrial Land Allotment Policy, 2021-30
* J&K Industrial Policy 2020 for MSME units
* J&K Private Industrial Estate Development Policy 2021-30
* J&K Wool Processing, Handicrafts and Handloom Policy 2020
* Financial Support Scheme for Cooperatives/Self Help Groups
* Credit Card Scheme for Artisans and Weavers, and
* Karkhandar Scheme for Craft Sector 2021
These are not just policies on paper, most of them are actually being executed well and upcoming businesses are deriving benefits from them.
The most important scheme is the one by DPIIT – New Central Sector Scheme for Industrial Development of Jammu & Kashmir which came into effect on 01 April 2021. The scheme is for the duration of 2021-22 to 2036-37. It helped the territory in bringing Rs 2,200 crore investment and 10,000 jobs in one year (i.e. FY 2022-23) and similarly, in the first six months of this financial year, the UT has realized investments worth Rs 1752.1 crore. (FY 23-24). So far, the Govt has allotted land to 1854 units.
Moreover, just last month (November 2023) Govt. has approved four new industrial estates namely, Budhi in Kathua district, Medicity Jammu in Jammu district and Chandgam and Lelhar in Pulwama district, to boost investment and promote local employment. These new industrial estates are expected to be on 1,379 kanals of land with an investment of Rs 136.65 crore to generate over 11,497 private sector jobs with the expected time of the project being just 18 months.
The authorities plan on developing the Industrial Estates in all aspects to provide the basic infrastructural facilities to the industries at their door-step including – Road network, water supply, internal Power distribution, drainage system besides CETP, Common facility Centre, which houses Conference Hall, Bank Counter, Dispensary, ATM, Cafetaria etc. and on ground the infrastructure development has actually begun.
Infact, since the abrogation of article 370, there has been peace in the state, militant activities are a rare occurrence that also in certain sensitive areas. I really think this abrogation was a blessing in disguise as the state has been developing on the fastest rate ever.
The Govt has been flooded with applications for the land allotment in the last 18 months that they were able to accommodate only 1 out of every 3 applications. Govt. industrial pockets are of course there, most popular ones being Kathua and Samba. However, what makes J&K more attractive is the ‘change in land use’ scheme where now any private land can be converted or change use of agricultural land to non-agricultural purposes and establish a unit there. There is even a strict timeline for such approvals – 30 days or less from receipt of complete application.
Moreover, now investors can get land in their own name on long term leases. This has helped in reducing dependency on Government estates. Eventually the areas around them would develop along.
To streamline all these applications of land use, land allotment and to other incentive schemes, J&K administration has set up an online portal – ‘InvestJK’ which is a single-window clearance system for ease of doing business. Practically too the portal gives you a flawless experience.
You must have read in the news that there are some big names making their mark in the state-
* Earlier this year in March, the makers of Burj Khalifa marked their formal entry into J&K, performing the ground breaking ceremony for the first FDI in the UT – a shopping mall and a multipurpose tower on the outskirts of Srinagar.
* Jindal Steels has also been allotted land in Kashmir for establishing their units.
What is the Role of CAs and other Professionals?
Chartered Accountants are playing an active role in supporting businesses in setting up plants in J&K end-to-end from drafting an application for allotment or change in land use or availing various benefits under different schemes, especially the incentives under the Central Sector Scheme for Industrial Development:
* Capital Investment Incentive at the rate of 30% in Zone A and 50% in Zone B on investment made in Plant and Machinery (in manufacturing) or construction of building and other durable physical assets (in service sector) is available. Units with an investment upto Rs. 50 crore will be eligible to avail this incentive. Maximum limit of incentive is Rs 5 crore and Rs 7.5 crore in Zone A and Zone B respectively.
* Capital Interest subvention: At the annual rate of 6% for maximum 7 years on loan amount up to Rs. 500 crore for investment in plant and machinery (in manufacturing) or construction of building and all other durable physical assets (in service sector).
* GST Linked Incentive: upto 300% of the eligible value of actual investment made in plant and machinery (in manufacturing) or construction in building and all other durable physical assets(in service sector) for 10 years. The amount of incentive in a financial year will not exceed one-tenth of the total eligible amount of incentive.
* Working Capital Interest Incentive: All existing units at the annual rate of 5% for maximum 5 years. Maximum limit of incentive is Rs 1 crore.
And many more such benefits. This policy is effective for 10 years (w.e.f 01-04-2021).
J&K is a rich land and has been supporting many in-house small-scale industries for generations. The efforts being made by the authorities are commendable when it comes to overall development of the state; however, every developing state has its learning curve. So, there are always going to be certain challenges in setting up and maintaining business in a developing area for example, upskilling the local labour or getting the land of your choice.
I think the businesses, locals of J&K and the authorities would together have to overcome these challenges, as we go further on this path of development. In fact, I don’t see these as shortcoming, I see it as an opportunity for training institutes to set up businesses here to train the labour for skills required in various industries or support service entities and construction enterprises to come up with business plans to provide everything even to the private lands where new industries are coming up.
In fact, everyday we have now been reading new trains like Vande Bharat express connecting the country to J&K, new flights being launched, new corridors to reduce time to reach Jammu and Srinagar and further.
So, if someone would ask me when is the right time to invest in J&K?
Then I would say NOW is the TIME.
(The author is Chartered Accountant)
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