Investment incentives

The Central government's experiment of replacing policy with a scheme for industrialization in the Northeast has failed miserably. A report of the parliamentary standing committee on Home Affairs presented to Rajya Sabha Speaker recently shows that the North East Industrial Scheme, 2017 failed to attract investments to the industry-deficit region. Even as nearly three years have elapsed since the notification of the scheme, only 107 industrial units have been registered at the recommendations of the state governments. Though the Central government announced the scheme with a total outlay of Rs 3,000 crore, the states failed to submit claims of industrial units for availing various incentives against investments which led to allocation of a token amount of only Rs 1 crore in 2019-20. For the financial year 2020-21, an amount of Rs 100 crore has been allocated by the Central government which gives an indication how much investments it can attract assuming that claims for the entire amount are submitted by the states. The report reveals that the amount was later released against claims of six industrial units submitted by Assam government. This central sector scheme replaced the erstwhile North East Industrial Investment Promotion Policy (NEIIPP), 2007 and, therefore, results of implementation of both can be useful in deciding if the region needs a policy or a scheme for attracting investment. Between, 2007 and 2014, when the Central government suspended the NEIIPP, 2007, more than 31,000 industrial units involving investments to the tune of more than Rs 19,000 crore were set up. These units generated over 2.8 lakh employment. There were, however, allegations that subsidies were mostly eaten up by a few large industrial units and desired industrial growth and employment could not be achieved under NEIIPP, 2007. The NEIIPP replaced the erstwhile North East Industrial Policy, 1997 through the idea of providing incentives to attract industrial investments in the region got implemented. Under NEIP only 20,709 employment could be created over a 10-year period through the setting up of 681 units. Total investment received by the region during the period was just Rs. 1067 crore of which Assam and Meghalaya accounted for the major shares of Rs 528 crore and Rs 441 crore. Even when compared to NEIIPP, the NEIDS, 2017 which was pushed to overcome the limitations of the erstwhile policy has not worked at all and needs a critical review why and where it has gone wrong. The report of the parliamentary committee reveals that the first meeting of the State Level Committee to consider the claims of industrial units set up under NEIDS in Assam was held in March 2020, two years after the scheme was notified. The claims for incentives under the scheme are to be submitted after commercial production commences and units are to commence commercial production within 18 months of establishment. When unemployment in the region is rising, rural farm distress is pushing the farmers to migrate to towns and cities outside the state in search of alternative livelihood, such poor pace of industrialization will only drag the region from catching up with the rest of India. The Central government as well state governments by holding consultation with industry associations to review the performance of the NEIDS, 2017 can identify the critical gaps and take corrective measures. It is hoped that the Union Budget for 2021-21 will reflect the outcome of such consultation to set things right. The report also brings to light that under Short Term Training programme 2,80,183 individuals got enrolled in the region and out of the 1,65,896 certified individuals 72,096 got placement, which is approximately 43% placement under Pradhan Mantri Kaushal Vikas Yojana after being certified. The Committee has, however, sounded the alert that merely imparting the training would not serve the purpose and efforts should be made to explore and create avenues for absorption on these skilled/trained persons in the existing and upcoming sectors in the region. Convergence of these training programmes with efforts set up industrial units is needed to avoid a mismatch between availability of skilled persons and that nature of skills required for the units. The region can least afford to waste more years in experimenting with policies and schemes of industrialisation for more than two decades. Governments in the region need to take note of the development of the landlocked region getting access to seaports in Bangladesh and mega connectivity projects with ASEAN becoming reality now. The onus of deriving the benefits of incentives under industrial development rests more with the governments in the region if they want to fully benefit from international connectivity projects that will end the isolation. Most of the benefits of India's engagement with ASEAN nations under Act East Policy have gone to other states. The region has to push for the correct approach for industrialisation so that it does not miss the bus again.