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Will UP sops stop flight of finance?

THE CONCESSIONS announced by the State Government to invite investment may fall short of the industry?s expectations, if the benefits are compared to those offered by Uttaranchal.

india Updated: Jun 09, 2006 01:11 IST

THE CONCESSIONS announced by the State Government to invite investment may fall short of the industry’s expectations, if the benefits are compared to those offered by Uttaranchal.

The State Government had recently announced a package of concessions to those willing to invest Rs 100 crore or more in the State.

As the Centre has announced a special package of concessions for Uttaranchal, the State Government’s move is being considered an obvious bid to check the flight of capital from Uttar Pradesh to the hill state.

Will the State Government be able to achieve its objective? As a debate goes on over the issue, the industry is drawing a comparison between concessions given to industry in UP and Uttaranchal. A sample study conducted by the State Government before announcing the concessions indicated a wide gap between benefits given to industry in the two States. This study compared the concessions available on investment of Rs 100 crore to set up an integrated steel plant with annual production capacity of 100 metric tonnes.

As per the study, Rs 100-crore investment in Uttaranchal would entitle any investor to concessions to the tune of 525 per cent. This includes concessions to the tune of 400 per cent in excise duty. Anyone making the same investment in UP, even after announcement of the special package, will be entitled to benefits to the tune of 200 per cent, thereby indicating a wide gap. This gap would become even wider if the concessions given to industry in other central taxes were taken into account, said a senior officer of the State Government.

As the Centre was not favourably inclined to Chief Minister Mulayam Singh Yadav’s demand for a special package to UP, the State Government decided to grant concessions from its own resources, he said.Senior officers of the State Government asserted that no industry had shifted from UP to Uttaranchal ever since the new state had been formed. Officers, however, admitted that new industries that had come up in Uttaranchal could have been attracted to UP. So Uttaranchal’s gain was UP’s loss, they said.

The Confederation of Indian Industry, the Indian Industries Association and other representatives of the industry have welcomed the State Government’s move. Punita Priyadarshini, who heads the CII in the state, said the industry was looking forward to concessions with a positive mood. No industry had shifted from UP to Uttaranchal, she said, adding only new units had come up in the hill state. However, IIA executive director DS Verma said the State Government should not have restricted the concessions to those investing Rs 100 crore or more. The State Government should make sure that existing industry felt more comfortable, he said. Nearly 95 per cent of industrial units were small-scale and the State Government should take care of them, he said.As per the decision, concessions to the tune of 200 per cent of the invested amount will be given to prospective investors. This would include concessions to new investors on trade tax and subsidies on transportation and development of infrastructure facilities.

Industrial Development Commissioner Atul Kumar Gupta, felt that a majority of pending proposals worth Rs 3,3000 crore received in 2005 may materialise following the State Government’s decision to announce the package. Tata Motors have indicated towards making more investment. Kajaria Ceramics was yet another company showing interest in UP, he said, adding the JK Group and some other leading names were also willing to come to the State.