Package of Incentives in Karnataka : Marketing Assistance for the SSI Sector

Governments, both at the State and the Central level, have been extending marketing assistance to Small Scale Industries in Government procurements through purchase and price preference. The State has also established the Karnataka Small Industries Marketing Corporation to provide marketing assistance to the Small Scale Industries Sector. These measures have helped the Small Scale Industries Sector to a great extent. However, with the coming into force of the Karnataka [Transparency in Public Procurement] Act 2000, the special preference available to the Small Scale Industries Sector has been negated. While the Act provides for exceptions to the applicability of the Act to procurements from Government Departments, Public Sector Undertakings, Statutory Boards and such other Institutions specified by the Government, there is no such exceptions made in respect of Small Scale Industries Sector. However, Sub Para-G of Para-4 of the Act states that exceptions to applicability will be available "in respect of specific procurements as may be notified by the Government from time to time". In view of the serious sickness faced by the Small Scale Industries Sector as a whole and the problems getting much more serious with full implementation of the provisions of various agreements signed with the WTO, it is necessary that Small Scale Industries is protected for some more time. In this background it is necessary that purchase and price preference to the Small Scale Industries Sector be continued for at least another 5 years. It is also necessary that the purchase and price preference is adhered to strictly by all Govt. Departments, Public Sector Undertakings, Statutory Board & Corporations. It is therefore proposed to amend the Karnataka [Transparency in Public Procurement] Act 2000 to provide purchase-price preference to SSI units of the State, which manufacture items reserved for SSI sector by Government of India from time to time, in the following manner:

a) 75% of the items reserved by the SSI Sector shall be procured from the units located within the State, through an open tender system; 

b) SSI units of the state shall be offered a price preference of 15% over the lowest price quoted; 

c) This benefit will be available for a period of 5 years from 1st April 2001. 

The role of KSIMC will also be reoriented to help the SSI Sector to : 

i) Improve quality of the products; 
ii) Improve the production-manufacturing processes; 
iii) Reduce prices; and 
iv) Augment exports. 

Top

Package of Incentives in Karnataka : Special Concessions for Export

The following benefits will be extended to Export Oriented Units [EOU]: 
 
I.   100% Export Oriented Units [EOUs]: 

A. Investment subsidy as indicated in Para 1 [a] above. 
B. Exemption from power cut
C. Exemption from payment of Entry tax and ST payable on purchase of raw materials, components, packing materials, consumable, capital goods, spares, material handling equipment, intermediates, semi finished goods and sub assemblies from a registered dealer. While the Entry Tax exemption will be available for the items procured from within the State or outside, the ST exemption on purchase of various items will be available provided the procurement is from a dealer located within the State.

II.  Units other than 100% EOUs with an export effort of a minimum of 25% of the value of total turnover: 

A. Investment subsidy as detailed in Para 1 [a] above.

B. Refund of Entry Tax and ST payable on purchase of raw materials, com-ponents, packing materials, intermediates, semi finished goods and sub assemblies from a registered dealer. While the Entry tax refund will be available for these items procured from items within the State or out-side, the ST refund on purchase of various as detailed above would be available provided the procurement is from dealers located within the State. 

III.  In case of Sub Para II above, the Entry tax and ST on purchases would be payable on raw materials, components, packing materials intermediates, semi finished goods and sub assemblies used for production for sale within the country.

Top

Relief Package for Revival / Rehabilitation of Sick Industries

The following benefits will be extended to sick industries for their revival / rehabilitation:

I  For SSI & Medium Scale Industries which are not covered by the BIFR :

• To continue the existing margin money scheme as spelt out in Government Order No.CI 12 PUM 93 dated 26.12.96.

• KPTCL will not charge fixed charges/ demand charges during closure period.

• Arrears of energy bills to KPTCL to be repaid in 6 half-yearly installments and interest charges for defaults would be reduced to ½% per month.

• Tax arrears to the Commercial Tax Dept. to be repaid in 6 half-yearly installments with a nominal interest of ½% per month.

• Both KPTCL and Commercial Tax Dept. not to calculate interest for the closure period.

• Future taxes payable by the industry to be deferred, without interest, for a period of 3 years.

II  For BIFR cases:

• KPTCL will not levy fixed charges/ demand charges during closure period.

• Arrears of energy bills to KPTCL to be repaid in 6 half-yearly instalments and interest charges for defaults would be reduced to ½% per month.

• Tax arrears to the Commercial Tax Dept. to be repaid in 6 half-yearly installments with a nominal interest of ½ % per month.

• Both KPTCL and Commercial Tax Dept. not to calculate interest for the closure period.

• Future taxes payable by the industry to be deferred, without interest, for a period of 3 years.

All other benefits/ incentives as per the Order No.CI 26 BIFR 95 dated 19.11.97 will continue to be available.

Top

Package of Incentives in Karnataka : Investment Subsidy

a] The Government will provide subsidy to all new Tiny/Small Scale Sector Industries. The details of investment subsidy available to Tiny/Small Scale Sector Industries in different Zones will be as follows.   

[b] Investment Subsidy for Industrial Units making new Industrial Investments under Expansion, Diversification & Modernisation: 

Investment subsidy as per Para 1 [a] would also be available to all existing Tiny and Small Scale units undertaking expansion, diversification or modernisation without exceeding prescribed monitory ceiling as applicable to new tiny/Small Scale industrial units subject to the condition that grant of this facility as per this order shall be available only on additional investments made. 

[c] Additional subsidy to special category of entrepreneurs : 

In addition to the subsidy at 1 [a] above additional subsidy to an extent of 5% of the value of fixed assets subject to a ceiling of Rs.1.00 lakh shall be available for tiny/Small Scale units, except in zone-A, in respect of entrepreneurs belonging to Scheduled Castes & Scheduled Tribes (SCs/STs) and Women Entrepreneurs. This additional subsidy will however, be within the over all monitory ceiling indicated in Sub Para [a] of Para-1. Entrepreneurs who are covered under more than one special category as defined above will be eligible for special subsidy only under one of the special categories. 

Top

Package of Incentives in Karnataka : Entry Tax Exemption

Entry Tax Exemption will be extended to all new industries including large and medium scale industries as detailed below :

a]  During the implementation of the project on production machinery and equipments directly involved in the production process, subject to the condition that the benefit will be available for a maximum period of 3 years from the date of commencement of project implementation.

b]  On commencement of commercial  production [during the operational phase], on raw materials,  components, semi-finished goods, sub-assemblies, consumables [excluding petroleum products like petrol, diesel, furnace oil, naphtha and LSHS used as consumables or for captive power generation units]. Entry Tax exemption will be available as indicted below: