Why The New Policy Is Victimising The Existing Industrial Sector?

by Ovees Qadir Jamie

FCIK is of opinion that these policies, orders and guidelines should be redrafted and reviewed so the existing industry can be saved before it vanishes.

Men at work in an industrial centre in Srinagar

Federation Chamber of Industries (FCIK) has taken strong note of the government policies, which have pushed the industrial sector to the wall. The policies, orders and guidelines issued in the last year have proved fatal to the industrial sector and has hampered the growth of industry rather. The commitments made in the Industrial Policy of 2016-26 have been withdrawn during the currency of the policy and new policy 2021-30 has added flaws, ambiguity and hurdles to the industry.

The FCIK has urged the government to look inwards for saving the reminiscent of local industry from extinction before wooing the investors from outside to venture into the sector.

FCIK is of opinion that these policies, orders and guidelines should be redrafted and reviewed so the existing industry can be saved before it vanishes. FCIK has demanded that measures should be taken immediately to save the industry. Some of the burning issues, which need immediate redressal are mentioned as:

  1. Marketing Policy

FCIK has demanded that the Marketing Commitments made in the previous Industrial Policy 2016-26 has been withdrawn during its currency of operation. FCIK has strongly resented that the Finance department has directed all Administrative Secretaries to send procurement of goods and services with Government e-Marketplace (GeM)  with the reference to the DO  No 200/CEO-GeM/2020 Dated: 23.10.2020 issued from Ministry of Commerce and Industries, GeM. The local industrial units are not registered with the GeM Portal yet and will be left out from the Government procurement. FCIK has demanded that the GeM Portal needs to be either amended as per demands of the Industrial Sector or the Local purchase policy must be introduced.

The Industrial sector has been provided with the Industrial Policy 2016-26, which is a pillar for the Industrial Sector and the same policy is protecting the Industrial Sector with price preference of 20% against their supplies made to government departments. But the government is not endorsing the same and are floating the tenders. The procurement agency of government i.e. SICOP is also kept apart from procurement of goods to be supplied to the departments.

The previous order with regard to the distribution that the Lowest tenderer i.e. L1 will be given the 1/3rd share to the tune of its capacity and rest to be divided among the other tender participants. Now, the government has floated the tenders and the supply orders have been allotted to outside J&K without accommodating other unitholders.

The industrial sector has already faced a jolt after the implication of GST, Toll Tax withdrawal, Entry Tax etc. The previous Tax regime was providing protection to the Industry but the new laws have made the goods and commodities non-competitive as the cost equalizing measures has been withdrawn. Further, the unitholder faith and confidence has shacked as the government is not supporting the sector.

FCIK has demanded that government should come up with a revised industrial policy particularly with regard to Procurement and Marketing as for the last two years contradictive orders have been issued by the government. Marketing is a basic fundamental governing the industrial development and growth of the industries in the valley.

The important incentives which have been excluded from the current industrial policy of 2021, which was acting as a stimulus are price preference, purchase preference, cost of tender document, earnest money and security deposit, freight subsidy, Income Tax holiday, exemption of stamp duty and court fee & Tax remission as in previous VAT regime.

  1. Industrial Land Allotment Policy

FCIK has strongly condemned the land allotment policy and the multiple amendments made in the past few months regarding the land allotment.

FCIK in a statement said that the portal of www.jkinvest.in was launched and the investment guidelines were issued on 22.4.2021 for inviting the applications. Since then the portal was opened and approximately 2500 applications were uploaded, out of which appraisal of nearly 90% of applications are already conducted. In the meantime, High-Level Committee meetings were also held and designated committees have also allotted some huge chunk of land to a few unit holders in Jammu and in Kashmir too. In addition, the Government comes up with the change in committees, i.e. abolishing all divisional level committees and constitution of a single high-level committee for allotment up to 200 kanals of land.

Further, guidelines in terms of score points for investment, these guidelines have been made applicable to all applications received on the portal and already apprised by the designated district-level committee headed by Joint Director Industries.

We fail to understand why the yardstick has been changed when it comes to the local entrepreneurs. Government must be aware that after guidelines were leaked by some WhatsApp group approximately 800 applications have been uploaded on the portal within the shortest period of only 10 days, which becomes very suspicious, but the general applicants were kept in dark and the applicants who have applied post-issuance of guidelines by way of points were already in the know of these guidelines.

Approximately 2500 applications were received in seven months all over Kashmir Zone and 800 applications were received within only 10 days. It is worth mentioning here that guidelines for allocation of points in investment are different in Kashmir and with the special features for Jammu Division. Whereas Jammu investment points include working capital also, so as to give more points than Kashmir. Taking working capital as part of investment needs introspection as working capital has never been a part of investment globally.

FCIK in a statement said that entrepreneurs who have applied for land without any defined parameters are unnecessarily been put to the valuation method of newly introduced investment points. Whereas a major chunk of land has been allotted to a few blue-eyed entrepreneurs in J&K on the same previous system of first come first served basis along with appraisal basis surprisingly the parameters now devised for rest of the applicants, which means the large industrial units are getting preference and small prospective unitholders are not given any weightage in land allotment as they could set up more numbers of industrial units by providing them small plot size of land.

The department has called for second and third preferences of industrial estates from the applicants now after seven months by calling for preferences, the department is dropping out entrepreneurs in as estate, who had applied there. It seems that committee wants to pool estates and call for preference/choice of estates when it has not been envisaged by the industrial policy and was not made known to the applicants during submission of applications. FCIK seeks details of how the parameters are devised now, when 90% appraisal has been completed without the marking system in place now, then what’s the role of recommendations of Appraisal Committee.

Further, Prospective Unitholders recommended by the District Industries Centre to the SIDCO have paid 10% of the land premium since 2016. These applicants are awaiting land allotments and the guidelines to be adopted for such cases are pending.

The amendments in the Land allotment policy continues as the High-Level Land Allotment Committee in its meeting held on 30.12.2021 reserved the maximum of 05 marks for the category of women entrepreneur/ Foreign Direct investment/ SC/ ST Ex-servicemen with the different breakup of marks for each category. Further, the Government Order No 261-JK (IND) of 2021 dated 22.12.2021 IE Sempora was declared as Medicity and separate merit list for the applications/ projects appraised for the same. What will be the fate of unitholders who have applied in the General category and as they were not knowing that it will be declared as Medicity.

FCIK demands that the government should make a land allotment to all those bonafide prospective unitholders, who have applied with their proper applications on the same parameters by way of which the Government has earlier allotted huge chunk of l and at J&K.

  1. FCIK demands revocation for cancellation and eviction process of the Industrial Land

FCIK had taken strong note of the cancellation and eviction process of the allotted Industrial plots in the J&K. The Industrial Sector in Kashmir has gone through a tough time since the last decade where a series of unprecedented events has taken place, which has jolted the industrial sector. The government should note that the unconducive atmosphere has made the Reserve bank of India (RBI) introduce Rehabilitation and restructuring schemes for the business community five times since 2014 after floods, unrest and twin Covid Lockdowns. The enterprises have dried up their capital by paying off their establishment cost during the lockdowns.

On the other hand, the UT government is issuing such orders which are against principle slogans for the promotion of the Industrial sector by the government.

FCIK has expressed serious concern in respect of Govt order 233-Ind of 2021 dated 22-11-2021 issued by the Industries and Commerce Department for the nomination of General Manager, JKSIDCO, Jammu and Kashmir Division as Member for eviction process with regard to cancellation of lease deed and eviction of allottees in Industrial Estates Managed by J&K SIDCO.

It is unjustified to cancel the lease deeds of such closed units, which are having Permanent Registration with the Industries Department closed for the last few years due to unforeseen circumstances. The constraints faced by units are non-availability of supply orders, change of constitution, financial constraints, transfer to legal heirs on the death of the promoters etc.

FCIK referred to the Govt Order No.214-IND of 2021 dated 02-11-2021 for the constitution of Sub-Committee for examining the proposal for the grant of extension in the validity of provisional registration in respect of units, which were provisionally registered prior to the notification of J&K Industrial Policy 2021-30 in accordance with the directions issued in the meeting of 47th Apex Project Clearance Committee held on 02-09-2021 with the directions to submit the report and to be followed by the 48th APCC scheduled on 8.12.2021.  The renewal cases of provisional registration of Industrial units, who has already taken effective steps in respect of the installation of machinery, construction of factory building and placed orders for the machinery, are now awaiting the approval of the Apex Committee. Another order passed by the government vide No. 269-IND-OF-2021 Dated: 30-12-2021 for auction of Industrial plots just after 10 days of the extension was granted, “in which an Auction Committee has been formed for auction of Industrial plots which have been retrieved after the cancellation of provisional registration”.

 FCIK has demanded that the eviction order should be immediately kept in abeyance and the government should look into the problems of such units and redressal of same.

  1. Issues in the change of constitution, line of activity, Inclusion of Partner and Transfer, Merger, Substantial Expansion

The Director industries and commerce Kashmir vide DI&C/dev/circular/2021/3050-64 dated: 25.11.2021, has made it cumbersome to change of constitution, line of activity, Addition of Partner, Transfer. The major issue in this circular is that a unitholder intending to change the constitution needs to get permission from the General Manager DIC for execution and for registration of deeds such as partnership deed, dissolution deed/ retirement deed, transfer deed or relinquishment deed. The Director Industries has also directed the sub-registrar not to register any deed without permission/NOC from the concerned GM DIC’s. Procedural Guidelines of checklist or documents required for making the change in the line of activity says “Any other document that is as notified by the government of J&K” which has created confusion and procedural wrangling for the unitholder.

Further, those units going for substantial expansion does not need to execute supplementary or fresh lease deed as nothing has been changed in the basic lease deed i.e. the terms and conditions and the constitution of the unit. The only change that has occurred is the investment in plants and machinery.

The government should allow and facilitate the existing disinterested and tired entrepreneurs to transfer their units to a new breed of entrepreneurs with fresh blood and mind.  Further, provide an exit route to the sick unit by allowing transfer of its ownership/leasehold rights to another entrepreneur if the revival & rehabilitation is not possible.

  1. Extension of relief in Regulations and Taxation

A review and revisit of all regulation and taxation policies concerning MSMEs need to be initiated in due consultation of stakeholders. In the short run following issues need to be addressed:

  1. Amnesty for all defaults for the pre GST period be announced and any recovery process in this regard be dropped.
  2. Amnesty in the renewal of all obligatory certificates be announced and any penalty for any default be waived off.
  3. A clean slate for the VAT regime should be provided as the benefits of this tax exemption was being extended by the industry and no tax collected from them. Before the introduction of GST regime, the industry was promised of a clean slate for VAT regime.
  4. Revival and Rehabilitation of Industrial Sector

A robust revival and rehabilitation policy regarding sick MSMEs need to be framed after taking a cue from Government order No 1558-Ind and 47 of 1999 and after due consultation with the concerned stakeholders. The government first issued the order vide No: 215-IND-OF 2021 Dated: 02/11/2021 that the Soft loan Margin and Principle both will be provided by the J&K Bank and government will provide interest portion to bank, but simultaneously after a few days the same order has been withdrawn. The Procedural Guidelines needs to be issued for disbursement of soft as the matter is pending for the last year despite being included in the new Industrial Policy.

The Government of India had already approved a corpus of Rs 100 crore on the recommendations of PM’s Task Force on MSMEs in 2009 which needs to be pursued and a matching sum can be added by the local government.

  1. Conversion of Leasehold rights to Freehold rights

The Delhi State Industrial Infrastructure Development Corporation Board has decided to transfer or regularize leasehold rights into freehold of Industrial plots on nominal charges.

FCIK demands that Conversion of Lease Hold Right to Free Hold Right to the existing unitholders, for the land allotted by J&K SIDCO and J&K SICOP in the notified Industrial Estates/Areas. The grant of freehold rights to the unit’s holder will enhance it is credit facilities from the financial institutions. It will also provide the facility for the transfer of property by General power of attorney, time-barred lease deed, change of constitution, change of shareholding etc.

  1. Promotion of Entrepreneurship by Safeguarding Interests

The Fundamental requirement of the Industrial Sector is to have a legally correct and safeguarded “Standard Bidding Document” (SBD) covering the protection of bidders as per governing Law. We face hardships due to the absence of such legally correct SBD. Thus it is to be demanded from the Government to frame a committee of experts comprising a team of Technical/ Engineering, Legal, Planning and Procurement experts along with FCIK representatives.

Ovees Qadir Jamie (FCIK)

The government is forecasting infrastructure development and projected it as the prime focus of the current Government, but it lags capacity building measures for the current infrastructure developers of J&K. Special Conditions to handhold and to build capacities are to be demanded by way of seeking relaxed eligibility/qualification Criteria and to make special Provisions for Joint Venture and strategic Tie-ups, Consortium, Partnerships and so on.

  1. Pending Payments& Delayed Payment Act

Our industry is facing hardships due to the Clandestine approach of Government towards the burning issue of ‘Non Payment of work done Dues” this requires special attention. Payment Schedules as per Law governing the contracts need to be implemented and release of payments along with financial charges are required to be implemented.

Despite the “Delayed payments Act” in force, the due payments to the enterprises are not being made in time resulting in huge losses incurred by the unit holders besides undermining their reputation with creditors and bankers.

(Author is Secretary-General of the FCIK. The opinions expressed in this write-up are those of the author’s and do not purport to reflect the views of Kashmir Life.)

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