AP initiates an innovative and crucial reform in industrial subsidy disbursements !!

In a first, the Andhra Pradesh government is planning to pay industrial subsidies directly to utilities and do away with the current system of reimbursing subsidies years after industrialists had paid for power consumption, taxes and interest charges.

The move, which comes after clearing pending payments of subsidies, is aimed at providing a major relief to new industrial units, especially small and medium enterprises, and ensuring an enabling environment for ease of doing business. The decision to do away with the existing system was also prompted by grievances by the companies that delayed payments were not serving the purpose of such incentives and that they needed initial support to stabilise operations. The move is expected to leave a burden of over RS 1,000 crore a year on the state government, with power subsidy alone accounting for nearly 60%. In a bid to attract big investments, the AP government has recently reimbursed nearly Rs 2,100 crore of industrial incentives that were pending for a decade or so. This benefited over 3,000 industrial units comprising nearly 90% small and medium enterprises.

Andhra Pradesh is the eighth-largest state even after carving out Telangana from it last June and its GSDP now stands at ` RS 5.2 lakh crore with the industrial sector contributing around 21%. Chief minister N Chandrababu Naidu recently said he would attract at Rs 2 lakh crore of investments over five years and improving the contribution of the sector to at least 25% of GSDP.

State industries secretary SS Rawat said consultations are on with various government departments on the issue.“It may take a quarter or so for us to complete consultations with various government departments to prepare them for appropriate financial structures and electronic payment systems to roll out the new system of direct payment to the utilities,“ he told ET.

In fact, Naidu, widely known as an industry-friendly politician, assured a large gathering of industrialists in Visakhapatnam last month that his government would devise a mechanism where industrial units need not wait for years to receive incentives. Confederation of Indian Industry’s (CII) state chapter chairman Suresh Rayudu Chitturi said such moves would help ease doing business. “While most states offer industrial incentives, it is those states that will succeed in attracting investments that execute the policies effectively.“

After succeeding in attracting Hero Moto Corp to set up its largest two wheeler manufacturing facility and making several Japanese and Singapore firms evince interest to invest, the state is pinning its hopes on greenfield capital city to attract investors.

Source: Economic Times

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