Developers will be allowed to raise funds through ECBs
The Central Government, on Friday, came out with sops for setting up of National Investment and Manufacturing Zones (NIMZs) doling out various benefits, including exemption from capital gains tax and eligibility for viability gap funding.
According to the document notified by the Department of Industrial Policy and Promotion (DIPP), the units in the NIMZs will be exempted from capital gains tax on sale of plant and machinery.
The tax break will be granted in case of re-investment of sale consideration within three years for purchase of new plant and machinery in any other unit located in the same NIMZ or another NIMZ.
NIMZs will now be eligible for Viability Gap Funding, which cannot exceed 20 per cent of the project cost. As per the norms, developers of NIMZs will be allowed to raise funds through external commercial borrowings (ECBs) for developing the internal infrastructure. Soft loans from multilateral institutions will be explored for funding infrastructure development in NIMZ.
Similarly, assistance would be provided for negotiating non-sovereign multilateral loans by providing back-to-back support, if necessary. On the issue of labour policy, the government will put in place a job loss scheme to enable units to pay suitable compensation, in the eventuality of closures, through insurance.
The compensation under this instrument would be equivalent to 20 days’ average pay for every completed year of continuous service, or any part thereof in excess of six months, it said.
The government has proposed to set up 11 NIMZs to enhance the share of manufacturing in gross domestic product (GDP) to 25 per cent within a decade and creating 100 million jobs. Welcoming the new norms, Federation of Indian Chambers of Commerce and Industry (FICCI) said these guidelines provided a clarity and direction to investors on how the NIMZs needed to be developed.
Rationalisation of procedures
It also welcomed the guidelines as they provided for rationalisation and simplification of regulatory procedures in case of environment, labour and other important areas for the NIMZs.
The provision of ‘deemed approval’ would ensure that manufacturers got timely clearances in NIMZs which would reduce their transaction cost significantly, it said in a statement here.