NEW DELHI, March 4 ? In a development that may have an adverse impact on industrial development of the North East, the Union Finance Ministry has rejected the demand for removing the locational restrictions introduced in the special industrial policy drawn up for the region. The plea for removal of the locational restrictions was made by the Federation of Industries and Commerce of the North Eastern Region (FINER) in a memorandum to the Central Government.
According to Finance Ministry sources, the demand has not been accepted by the Ministry and the restrictions would continue. The apparent reasoning being that removal of the locational restrictions would lead to concentration of investments in a particular zone making the special industrial policy redundant. In the new industrial policy, the Centre has specified that all the incentives dolled out including cent per cent Excise duty exemption could be availed by only those industries located in the notified areas and industrial growth centres in the region. The provision has evoked sharp criticism from other States as well as trade bodies who have all termed it as a flaw in the industrial policy. Under pressure from the States including Assam and Tripura, the Centre agreed to review it.
However, with the Finance Ministry disapproving it, the proposal is unlikely to be approved. Sources said that the other demands of FINER like admissibility of transport subsidy against transportation of iron and steel materials to the units in Assam, is under review of the Finance Ministry. The FINER has among other demands called for freight subsidy and removal of Minimum Alternative Tax (MAT). This demand is also likely to be turned down, sources indicated. MAT is intended to ensure that companies which avail multiple benefits under the Income Tax Act, 1961, also pay a minimum amount of tax, sources pointed out. It may be mentioned here, all the Northeastern States are listed in VIIIth schedule of Income Tax Act. Under section 10-C the industries in the identified locations like the ?Growth Centres? and the ?IIDCs? in the north eastern Region are exempted from income tax for a period of 10 years.
Sources pointed out that under Section 80 IB, notified industries in the region have also been given 10 years tax holiday besides the benefits already available in the VIIIth Schedule. According to the available figures, release of funds under the transport subsidy scheme to the Northeast has gone down to Rs 2000 crore for the year 2000-2001 from Rs 3532.10 crore in 1999-2000. Assam has received the highest allocation of Rs 1669 crore of Transport Subsidy, while Tripura was released only Rs 69 crore. Meghalaya was released Rs 262 crore. All the North eastern States received a raw deal as far as release of Central Capital Investment Subsidy is concerned. Till last December, the Centre disbursed a meagre Rs 26 lakh out of the total released amount of Rs 2 crore. The balance amount of Rs 1.74 crore is lying with the Centre. The Central assistance under the Growth Centre Scheme is also pegged at Rs 9.95 crore, which was released to the States of Assam (Rs 2 crore), Manipur (Rs 1 crore), Mizoram (Rs 2.50 crore), Nagaland (Rs 1.95 crore) and Tripura (Rs 2.50 crore).
Meanwhile, the Credit-Deposit (CD) ratio in the Northeast is among the lowest in the country. The CD ratio of Assam for instance has further slipped to 31.10 per cent last September from 32.40 per cent last March. This is against the all India average of 56.13 per cent. The story is same in the rest of the Northeastern States with Manipur recording the highest CD ratio of 33.88 per cent in the region for the same period. The other States have the following CD ratios ? Arunachal Pradesh (18.85), Meghalaya (16.28), Mizoram (29.58), Nagaland (14.75) and Tripura (22.87).