Articles from General Knowledge Today

National Manufacturing Policy & NIMZ

2013- 04- 22 10:04:01 GKToday
National Manuf acturing Policy and National Investment and
Manuf acturing Zones (NIMZ)
The Planning Commission has recent ly released t he draf t of t he count ry's f irst
ever Nat ional Manuf act uring Policy. The object ive of t he Nat ional
Manuf act uring Policy is t o boost t he count ry's share of indust rial product ion,
employment ; development of world-class inf rast ruct ure and invest ment s in
India's manuf act uring space.
Summary of the Policy:
Manufacturing's share in India's GDP has been stuck at 16% since the 1980s. The
policy aims to increase the share of manufacturing in the country's GDP from the
current 16% to 25% by 2022.
The National Manufacturing Policy aims to create 100 million additional jobs in the
next decade.
The draft policy envisages establishment of Nat ional Invest ment and
Manuf act uring Zones
(NIMZ) equipped with world- class infrastructure that would be autonomous and self-
regulated developed in partnership with the private sector.
Each Nat ional Invest ment and Manuf act uring Zones to have 5,000 hectares.
Land will be selected by State Governments. Preference would be given to
uncultivable land.
Both state and central Government would fund trunk infrastructure.
The policy embodies an easy exit policy and single window clearance in zones
The NIMZ would be managed by special entity
The policy has envisaged fiscal sops to boost manufacturing.
Small & medium enterprises to be reimbursed for technology purchase.
Industrial training and skills development programmes
Flexible labor laws and simplified & expeditious exit mechanism for sick units
Relaxation in environmental regulations
Financial and tax incentives to small and medium enterprises
Incentives to states for infrastructure development
Incentives for Green Manufacturing
Rationalization of business regulations to reduce burden of procedural and
regulatory compliance on businesses
Increased focus on employment intensive industries, capital goods industry,
industries with strategic significance and those in which India enjoys a competitive
edge and the SME sector.
Make industrial land (land acquisition) available through creation of land banks by
states.
How the Policy would achieve the above objectives?
Foreign invest ment s and t echnologies will be welcomed while leveraging
t he count ry's expanding market f or manuf act ured goods t o induce t he
building of more manuf act uring capabilit ies and t echnologies wit hin t he
count ry.
Compet it iveness of ent erprises in t he count ry will be t he guiding
principle in t he design and implement at ion of policies and programmes.
Compliance burden on indust ry arising out of procedural and regulat ory
f ormalit ies will be reduced t hrough rat ionalizat ion of business
regulat ions.
Innovat ion will be encouraged f or augment ing product ivit y, qualit y, and
growt h of ent erprises; and Ef f ect ive consult at ive mechanism wit h all
st ake holders will be inst it ut ed t o ensure mid-course correct ions.
Which Industry verticals will be give special attention?
Employment intensive industries such as t ext iles and garment s;
leat her and f oot wear; gems and jewellery; and f ood processing
indust ries
Capital Goods such as machine t ools; heavy elect rical equipment s;
heavy t ransport , eart h moving and mining equipment s.
Industries with strategic signif icance such as aerospace; shipping; IT
hardware and elect ronics; t elecommunicat ion equipment ; def ence
equipment ; and solar energy.
Industries where India enjoys a competitive advantage such as
aut omobiles; pharmaceut icals; and medical equipment .
Small and Medium Enterprises: The Small and Medium Ent erprises
(SME) segment of manuf act uring has in part icular at t ract ed due
at t ent ion in t he new policy as can be seen f rom t he various f inancial and
development incent ives t hat have been envisaged t herein. The need f or
special f ocus on t he segment arises f rom t he f act t hat current ly, 8% of
overall GDP, 45% of manuf act uring out put and 40% of t he count ry's
export s originat e in more t han 26 million SME unit s across t he count ry.
These SME unit s are engaged in t he product ion of more t han 6000
product s, 22% of which are f ood product s, 12% are chemicals and
chemical product s, 10% basic indust ry met als, 8% met al product s, 6%
each of elect rical and machinery part s and rubber and plast ic product s
(36% of miscellaneous product s).
Public Sector Enterprises specially in def ense and Energy sect ors.
How they want to rationalize the Business Regulations?
The policy not es t hat on an average, a manuf act uring unit needs t o
comply wit h nearly 70 laws and regulat ions. Apart f rom f acing mult iple
inspect ions, t hese unit s have t o f ile somet ime as many as 100 ret urns in
a year.
This kind of compliance burden put s-of f young ent repreneurs and t hey
are not willing t o t ake up an ent repreneurial role. As a result , a large
number of people who could have been self employed and would
cont ribut e t o f urt her employment and enhance economic act ivit y, end
up accept ing jobs much below t heir pot ent ial.
The policy suggest s t hat Cent ral/ St at e Government s may provide
exempt ions subject t o f ulf ilment of condit ions as provided in t he
st at ut e. SPV may act as a f acilit at or in t his regard. Mechanisms may be
developed f or cooperat ion of public or privat e inst it ut ions wit h
government inspect ion services under t he overall cont rol of st at ut ory
aut horit ies.
In respect of laws and regulat ions pert aining t o environment ,
Cent ral/St at e Government s may delegat e t he power as allowed by t he
relevant st at ut es t o an of f icial of t he St at e Pollut ion Cont rol Board
(SPCB) post ed in t he zone.
The Environment al Clearances f or NIMZ unit s under t he EIA Not if icat ion,
2006 shall be considered on a high priorit y, and t he unit s t hereon will be
exempt ed f rom public hearing provided under t he EIA Not if icat ion, 2006
in cases where such est at es have undergone public hearing as a whole.
Furt her, f acilit at ive inst ruct ions and guidelines may be issued at t he
Cent ral and St at e level f rom t ime t o t ime aiming at promot ion of NIMZ
invest ment while saf eguarding environment al int egrit y.
Technology Acquisition and Development Fund
The policy proposes est ablishment of a Technology Acquisit ion and
Development Fund (TADF) f or acquisit ion of appropriat e t echnologies
including environment f riendly t echnologies; creat ion of a pat ent pool;
and development of domest ic manuf act uring of equipment s used f or
cont rolling pollut ion and reducing energy consumpt ion.
Operat ion, Monit oring and Review of t he Fund will be done by t he Green
Manuf act uring Commit t ee. Green Manuf act uring Commit t ee will
comprising represent at ives f rom t he concerned Minist ries/Depart ment s
of t he Cent ral Government and relevant sect oral expert s f rom out side
government . GMAC will give incent ives f or Green Manuf act uring.
Please not e t hat Technology Acquisition and Development Fund will
also f unct ion as an aut onomous pat ent pool and licensing agency. It will
purchase Int ellect ual Propert y (IP) right s t o invent ions f rom pat ent
holders. Any company t hat want s t o use t he IP t o produce or develop
product s can seek a license f rom t he pool against t he payment of
royalt ies. This company may t hen produce t he product f or use in
specif ied geographical areas subject t o meet ing agreed qualit y
st andards. The TADF would reserve t he right t o license more t han one
company f or a part icular pat ent .
Skill Development:
NIMZ, t he SPV will undert ake skill up gradat ion in co-ordinat ion wit h t he
Nat ional Skill Development Corporat ion (NSDC). Furt her, t he policy
seeks t o expand t he net work of ITIs.
There are current ly 8306 it is / ITCs (as on July 15, 2010) wit h a capacit y
of t raining 1.16 million persons per year. Though t he 11t h plan already
envisages set t ing up of 500 new ITIs in indust rial clust ers/SEZs and 1000
new ITIs in ot her areas based on demand via t he PPP rout e, t he overall
availabilit y of t raining inf rast ruct ure will remain grossly inadequat e.
So, t o encourage t he privat e sect or t o set up t heir own inst it ut ions, t he
government will provide weight ed st andard deduct ion of 150% of t he
expendit ure (ot her t han land or building) incurred on Public Privat e
Part nership (PPP) project f or skill development in t he ITIs in
manuf act uring sect or in separat e f acilit ies in coordinat ion wit h NSDC.
The policy also speaks of est ablishment of inst it ut es of specialized
learning such as a specialized Polyt echnic f or t he aut omobile sect or, or
a Polyt echnic f ocused on high-t ech manuf act uring and semiconduct ors
f or t he elect ronics sect or, or one t hat f ost ers innovat ion and product
development in t he IT/ITES sect or
National Investment and Manuf acturing Zones
Nat ional Invest ment and Manuf act uring Zones (NIMZs) will be developed
a s int egrat ed indust rial t ownships wit h st at e-of -t he art inf rast ruct ure
and land use on t he basis of zoning; clean and energy ef f icient
t echnology; necessary social inf rast ruct ure; skill development f acilit ies,
et c., t o provide a product ive environment t o persons t ransit ioning f rom
t he primary sect or t o t he secondary and t ert iary sect ors.
These NIMZs would be managed by SPVs (Special Purpose Vehicles)
which would ensure mast er planning of t he Zone; pre-clearances f or
set t ing up t he indust rial unit s t o be locat ed wit hin t he zone and
undert ake such ot her f unct ions as specif ied in t he various sect ions of
t his policy.
To enable t he NIMZ t o f unct ion as a self governing and aut onomous
body, it will be declared by t he St at e Government as an Industrial
Township under Art icle 243 Q(c) of t he Const it ut ion.
In sum, t he NIMZs would be large areas of developed land, wit h t he
requisit e eco-syst em f or promot ing world class manuf act uring act ivit y.
What is major dif f erence f rom SEZ?
NIMZ would be dif f erent f rom SEZs in t erms of size, level of
inf rast ruct ure planning, and governance st ruct ures relat ed t o regulat ory
procedures and exit policies.
Size:
An NIMZ would have an area of at least 5000 hect ares in size.
Land Availability:
The St at e Government will be responsible f or select ion of land suit able
f or development of t he NIMZ including land acquisit ion if necessary.
Government owned land or Privat e Lands f alling wit hin t he proposed
NIMZ, t o be acquired by t he St at e Government or Land under exist ing
indust rial areas/est at es/sick and def unct unit s including PSUs.
NIMZ would be pref erably developed on wast e lands; inf ert ile and dry
lands not suit able f or cult ivat ion.
The use of t he agricult ural land will be kept t o minimum. There should be
reasonable access t o basic resources like wat er.
It should not be wit hin any ecologically sensit ive area or closer t han t he
minimum dist ance specif ied f or such an area.
Who will own NIMZ?
It is lef t t o t he St at e Government t o adopt a model t hat it considers
most workable. The St at e Government may keep t he ownership of NIMZ
it self or t ransf er t he ownership t o a st at e government undert aking.
The st at e Government may have joint ownership wit h a privat e part ner
and aopt any ot her appropriat e model.
How NIMZ will be administered?
The administ rat ive st ruct ure of NIMZ will comprise of a Special Purpose
Vehicle, a developer, St at e Government and t he Cent ral Government .
A NIMZ will be not if ied by t he Cent ral Government , by not if icat ion in t he
Of f icial Gazet t e. Once not if ied, an SPV will be const it ut ed t o exercise
t he powers conf erred on, and discharge t he f unct ions assigned t o it
under t his Policy t o manage t he af f airs of t he NIMZ.
Every SPV shall be a legal ent it y by t he name of t he NIMZ. This SPV can
be a company.
The appropriat e f inancial and administ rat ive st ruct ure of t he SPV will be
agreed t o among dif f erent st akeholders giving due represent at ion t o
nominees of dif f erent st akeholders on t he Board of SPV.
The CEO of t he SPV will be a senior Cent ral/St at e government of f icial.
This SPV will prepare a Mast er Plan f or t he Zone. It will prepare a
st rat egy f or development of t he Zone and an act ion plan f or self
regulat ion t o serve t he purpose of t he policy.
These shall be submit t ed t o t he Board of Approval. Af t er t he approval,
t he Zone will be developed by t he SPV. Please not e t hat Cent ral
Government will bear t he cost of mast er planning f or t he NIMZ.
The SPV can t ake up t he work of development on it s own t hrough
various agencies/cont ract ors or t ake up t he development in part nership
wit h a developer who shall be select ed t hrough a t ransparent process.
t he St at e Government would help in Wat er Requirement , Power
connect ivit y, Inf rast ruct ure Linkages.
Role of Central Government
As ment ioned above, a NIMZ will be not if ied by t he Cent ral Government ,
by not if icat ion in t he Of f icial Gazet t e. The Depart ment of Indust rial
Policy and Promot ion will act as t he nodal agency f or t he cent ral
government in mat t ers pert aining t o t he NIMZs.
The applicat ion f or set t ing-up of NIMZ will be f orwarded by t he st at e t o
t he DIPP f or approval. DIPP will const it ut e a Board of Approval, which will
consider all applicat ions f or est ablishment of NIMZs and approve such
proposals as are f ound f easible.
Each NIMZ will be not if ied separat ely by DIPP. In case an amendment is
required t o t he concept and design of t he project , as encapsulat ed in
t he preliminary project report submit t ed by t he St at e Government , t he
same will be considered by t he Board of Approval.
Cent ral Government will also improve/provide ext ernal physical
inf rast ruct ure linkages t o t he NIMZs including Rail, Road (Nat ional
Highways), Port s, Airport s, and Telecom, in a t ime bound manner.
This inf rast ruct ure will be creat ed/upgraded t hrough Public Privat e
Part nerships t o t he ext ent possible. Viabilit y Gap Funding t hrough
exist ing schemes will be provided. Wherever necessary, requisit e
budget ary provisions f or creat ion of t hese linkages will also be made.
How many NIMZ will be established?
It has been report ed t hat at least seven Nat ional Invest ment and
Manuf act uring Zones (NIMZ) are proposed t o be set up in t he Nort h and
West .
A survey has been commissioned t o set up similar zones in t he Sout h.
As ment ioned above, t hese zones would be greenf ield int egrat ed
indust rial t ownships and t he area would be at least 5,000 hect ares.The 7
t owns are as f ollows:
1. Ahmedabad-Dholera Gujarat )900 sq km
2. Shendra-Bidkin (Maharasht ra) 84 sq km
3. Manesar-Bawal (Harayana) 380 sq km
4. Khushkhera-Bhiwadi-Neemrana (Rajast han) 150 sq km
5. Dighi Port Area (Maharasht ra) 230 sq km
6. Dadri-Noida-Ghaziabad (Ut t ar Pradesh) 250 sq km
7. Pit hampur-Dhar-Mhow (Madhya Pradesh)- 370 sq km
Conclusion:
We come t o t he conclusion t hat t he plan is bot h ambit ious and impressive,
int ending t o give mega indust rial t ownships aut onomy, incent ivise public
privat e inf rast ruct ure development and f acilit at e access t o green
t echnologies. It 'll boost t he Made-in-India label's global compet it iveness. It 'll
also hast en f act ory expansion, a must f or absorbing India's young workf orce
growing by around 20 million annually. Wit h manuf act uring wages rising in
China, we can leverage t he advant age of cheaper, abundant labour t o at t ract
invest ors.
The NIMZ are t o be limit ed t o government -acquired wast e and inf ert ile land,
which seems t o be logical and sensit ive decision. The core idea of t his seems
t o skirt land-relat ed st rif e and conserve ecologically sensit ive areas. But , we
also not e t hat t he project viabilit y rides on logist ics, t here would be a
requirement of f ast development of t he int egrat ed inf rast ruct ure. Furt her,
t hese zones will not appear overnight . We have an experience of procedural
over delays and missed t imelines. There should be a rule based process f or
expedit ious development of t hese mega Hubs.
Viability Gap Funding f or NIMZ
To promot e manuf act uring in t he count ry, t he Government in March 2013
issued norms f or set t ing up of Nat ional Invest ment and Manuf act uring Zones
(NIMZs) wit h a host of benef it s, including exempt ion f rom capit al gains t ax.
NIMZs will be eligible f or viabilit y gap f unding, which cannot exceed 20 per cent
of t he project cost . As per t he norms, t he developers of NIMZs will be allowed
t o raise f unds t hrough ext ernal commercial borrowings (ECBs) f or developing
t he int ernal inf rast ruct ure of NIMZs.
A scheme f or a job loss policy will be put in place t o enable unit s t o pay
suit able worker compensat ion in t he event ualit y of closures, t hrough
insurance.