Investment Incentives

A) New Industrial Policy (2005-2010)

I) Small Scale Industry (SSI) and Women Entrepreneurs

This refers to units having an investment in Plant and Machinery upto a specific limit defined by the Government. Women entrepreneurs refers to those units established as Sole Proprietress (or) having a 51 per cent share in partnership / private Ltd companies.

The incentives offered to the Small Scale Units and Tiny units are :

• A 100 per cent reimbursement of stamp duty and transfer duty for the purchase of land meant for industrial use and on financial deeds and mortgages.
  
• A 100 per cent reimbursement of stamp duty for the lease of land/shed/buildings.
  
• Power cost is reimbursed at US$0.0162228 per unit during the first year of the policy and Thereafter (Four year period), regulation will be on the basis of the tariff structure. This also applies to Women entrepreneurs.
  
• A 15 per cent investment subsidy on fixed capital investment will be given to a maximum of Rs 15 Lakhs (US$ 0.0324515 million) and an additional investment subsidy of 5 per cent on fixed capital investment limited to Rs 5 Lakhs (0.0108152 million) for SC/ST entrepreneurs.
  
• About 25 per cent of the tax paid during one financial year will be ploughed back as a grant by the government for the payment of tax for the next year. The benefit will be extended to 5 years from date of commencement of the business.
  
• Around 5 per cent of the project cost will be provided as seed capital assistance to SSI/Tiny Units started by SC/ST Entrepreneurs as a grant for industries, which were sanctioned seed capital assistance by Prime Lending Institutions under National Equity Fund Scheme limited to Rs.5.00 Lakhs (0.0108152 million)
  
• A subsidy of 11.8 percent on capital equipment for technology upgradation.
  
• Subsidy of 50 percent on the expenses incurred for quality certification limited to Rs. 1.00 Lakh.(0.00216345 million)

II) Mega Projects: These refer to industrial units that are set up with a capital investment greater than 100 crores (1 billion) or above. These projects are eligible for the incentives offered to large and medium scale industries. The government would also extend tailor-made benefits to suit the specific investment requirements.

III) Existing Tiny / Small Scale Industries / Large and Medium Scale Industries other than Mega Projects: The incentives offered to these units include

• A 50 per cent subsidy on the expenses incurred for quality certification upto a limit of US$ 2170.04
• A 50 per cent subsidy on the expenses incurred for patent registration upto a limit of US$ 10,850.59

IV) Existing Large Industries and Mega projects: The government would offer special package of fiscal benefits to these industries on a case-case basis. The benefits would be decided depending upon the nature of the project, investment, location, employment etc.

Other Benefits: The benefits offered to all categories include:

• Land Conversion from Agriculture use to industrial use will continue to be on an automatic payment. The required fees to be paid will depend upon the rules in vogue.
  
• All Industrial units will continue to be exempted from the payment of NALA tax.
• Stable prices of Municipal water for industrial use is ensured for 3 years.
  
• Reservation of 10 per cent of water for industrial use from the existing projects as well as future projects will continue.

B) Information Technology and Communications (ICT) policy (2005-2010)

The Information Technology and Communications (ICT) policy focuses the development of Human Resources, Infrastructure, Capital and Incentives.

Incentives under the ICT Policy (2005-2010)

• IT/ITES units are exempt from the purview of the AP Pollution Control Act except in
  respect of power generation sets.
  
• IT/ITES units/ companies are exempt from the purview of statutory power cuts.
• IT Industry is exempt from inspections under the following Acts and the Rules
  framed there under, barring inspections arising out of specific complaints. The IT units are permitted to file self-certificates, in the prescribed formats.
  • The Factories Act 1948.
    
  • The Maternity Benefit Act 1961.
    
  • The AP Shops & Establishments Act 1988.
    
  • The Contract Labour (Regulation & Abolition) Act 1970.
    
  • The Payment of Wages Act 1936.
    
  • The Minimum Wages Act 1948.
    
  • The Employment Exchanges (Compulsory Notification of Vacancies) Act 1959.
• General permission of three night shifts operations with women working in the night for IT/ITES units / companies.
• IT/ITES units/ companies and non-hazardous hardware manufacturing industry
  Consisting of IT & Electronics are declared as essential service.

Thrust Areas for IT Investment

The Government has placed on focus the following areas that could channel potential investments in the IT sector

• IT Infrastructure e.g. IT Parks including IT Parks developed by the private developers and companies building own IT campuses.
• Development of talent pool.
• Development of entrepreneurship in IT.
• Development of R&D.
  
• Development of Tier-II Cities.
  
• Special incentives for SMEs engaged in IT.
  
• Development of Hardware Manufacturing.

C) Infrastructure Policy

Allotments of land to the IT industry will be channeled through the APIIC which is the nodal agency that provides State Government Clearances on Building Plan Approvals and the support infrastructure provided by these industries.

Incentives Offered

• Power: The IT industry is classified as an Industrial unit while levying the industrial power tariff.
• Rebate on Cost of Land: The rebate on the cost of land is calculated at US$ 433.605. This rebate is not available on acquired lands.
• Stamp Duty: 100 per cent reimbursement of stamp duty, transfer duty and Registration fee will be allowed on the first time transaction only.
• Zoning regulations & Special Stipulations for IT Parks on Private lands and IT Campus: IT/ITES units/ companies will be exempt from the zoning regulations and the payment of the conversion fee.
  
• Supporting Infrastructure: The Government of Andhra Pradesh will provide infrastructure for power, water, sewerage and roads upto the site boundary of designated/notified IT Park clusters.
  
• Telecom Infrastructure: The Government has facilitated the availability of investing companies to cater to their communication requirements at competitive rates.
• Other Areas
  • Talent pool
    
  • Entrepreneurship
    
  • High end research and Development
    
  • Quality Certification
    
  • Special Package for Small and Medium Enterprises
    
  • Mega Projects and Hardware Industry in the IT sector.
• Special Focus Areas ( Special package of incentives are offered).
  • Nano Technology.
    
  • Smart Appliances.
    
  • Next Generation Communications.
    
  • Broadband Internet Equipment.
    
  • Robotics.

D) Food Policy (2005)

The government issued a fresh State Policy on " Food Processing Industries " in the year 2005 in tandem with the earlier policies.

Investment Incentives under the Food Policy 2005

• Reimbursement of the cost of power for all eligible units would be allowed at US$ 0.0126761 (Re 1) per unit as against US$ 0.0162745 (Re 0.75) per unit for eligible industries under IIPP
• The commissionerate of industries will evolve a separate bar coding procedure for food processing industries in the state.

E) Special Economic Zone (SEZ) Policy

The following key incentives available for private sector developers and operators of SEZ (or its components) are as follows:

• 10-year tax holiday in a block of the first 20 years. Reduced peak corporate tax applicable is under consideration.
  
• Exemption from duties on all imports for project development
  
• Exemption from excise/VAT on domestic sourcing of capital goods for project development
  
• Full freedom in allocation of developed plots to units on purely commercial basis
  
• Full authority to provide services such as water, electricity, security, restaurants and recreational facilities within the zone on purely commercial basis.
  
• No foreign ownership restrictions in developing zone infrastructure and no restrictions on repatriation
  
• Freedom to develop township adjacent to the SEZ with residential areas, markets, play grounds, clubs and recreation centres without any restrictions on foreign ownership
  
• Income tax exemptions benefits to bonds and capital raised by zone infrastructure developers
  
• In summary, a competitive policy and incentive framework is available for zone developers & operators.

Key incentives available under the existing policy framework for locating industries:

• Income tax holidays on business income
  
• Exemption from import duty, VAT and other taxes
  
• 100% FDI allowed through the automatic route for all manufacturing activities
• No restrictions on repatriation of profits
  
• Procedures for ease and efficiency for speedy approvals, clearances and customs procedures are under consideration
  
• Setting up an empowered authority for approvals, clearances, zone administration, maintenance and dispute resolution is under consideration
  
• Flexibility to engage contract labour and retrench & close units engaging manpower up to 1000
  
• Other incentives such as relaxation on external commercial borrowings, reduced peak corporate tax rates and concessional capital gains tax are under consideration.

F) Biotechnology Policy

The incentives offered under the Biotech policy are as follows

Sales Tax:

Keeping in view the special difficulties and risks involved in commercialising cutting-edge technologies in the field of biotechnology, Government of A.P. has fixed a nominal sales tax of 1% for "high-end" biotech products manufactured by units located in the Biotech Park in Turkapalli village, Shamirpet mandal, Ranga Reddy district. This sales tax rate will be applicable only for a period of 7 years from the date of commencement of commercial production of a biotech unit, and will be extended only to those units, which go into commercial production on or before March 31st, 2006. The cut-off date for this confessional rate is 31st March 2010, beyond which date no new unit in this Park will be extended this incentive.

The Department of Science and Technology, Government of India will notify products, which do not fall in the category of 'high end' from time to time.

• Similar incentives will be offered to units in other Biotech Parks that may be set up in the State.
  
• Government of Andhra Pradesh will introduce a separate entry for biotech products in the schedule of sales tax
  
• Govt. of Andhra Pradesh will propose to Govt. of India that high-end biotech products should be exempt from all taxes for a period of 10 years. The Department of Science and Technology, Govt. of India will provide the definition of high-end biotech products.

Land for Biotech Parks/Activities

• Government of Andhra Pradesh will provide, wherever possible, government land on lease or as equity to other Biotech Parks, if the site is otherwise found suitable for such projects.
• In order to encourage the setting up of bio-informatic centres, Government of Andhra Pradesh will offer a rebate in the cost of government land allotted to a bioinformatics company at Rs. 20,000 (Twenty thousand only) per job created, subject to the following conditions:
  • The rebate shall be applicable only in respect of lands allotted by Government/AP IIC with prospective effect
  • The rebate shall be restricted to Rs. 20,000 per job created for persons specializing in Bio-informatics or the cost of the bare land (excluding development charges/cost), whichever is less. A maximum of 1 acre of government land will be allotted to any company for setting up a bioinformatics centre.
  • Bioinformatic centres will be permitted to be established without any locational restrictions.They can be established in residential, commercial or industrial zones
  • Companies setting up Bioinformatics Centres in the Genome Valley will get a rebate of Rs. 30,000 per job created, subject to the value of a maximum of 2 acres of government land and a 100% exemption from registration and stamp duties. Similar incentive will be provided to the Bioinformatic units to be set up in Biotech Parks.

Exemption from Power Cuts

• The biotech industry is exempt from the purview of statutory power cuts
  
• Industrial power tariff (and all other admissible incentives and concessions for industry) will be applicable to the biotech industry.

Labour Concessions

• General permission will be accorded to run a three-shift operation to the biotech industry (subject to Government of India concurrence)
  
• Allow women to work in the 3rd shift, subject to certain safety norms (subject to Government of India concurrence).
  
• A system of self-certification will be introduced for the biotech industry under various Factories' and Labour Acts.
  
• Permit flexibility in the opening and closing times and in the weekly holiday of a biotech unit by amending relevant provisions of the A.P. Shops and Establishment Act.
  
• Exempt biotech units from the provisions of Contract Labour Act 1970, in so far as non-core activities are concerned ( with concurrence of Government of India).
  
• Delegate all or some of the powers of the Labour Commissioner to
  designated officers to tackle the labour problems efficiently and promptly in Biotech Parks.
  
• Set up exclusive Special Industrial Tribunals for Biotech Parks to give top priority to the settlement of disputes that may arise in units located in the Biotech parks.

Land and Grants for Training Institutes

Government will allot government land either free of cost, or at a concessional rate and give grants for capital expenditure to Institutes of Training in the field of biotechnology and related areas on a case-by-case basis in the Genome Valley. Training and extension for farmers and technicians in the area of biotechnology will also be taken up through such institutions and users of ICICI-Knowledge Park.

Land for Housing

Government will provide Government land at concessional rate, wherever suitable land is available for developing housing and recreation facilities for personnel working in Biotech field in designated areas in and around Genome Valley.

Mega Projects

Special incentives will be offered, on a case-by-case basis, to mega projects with an investment of more than Rs. 50 crores in a new company, or in the expansion of an existing company, which provide employment to more than 250 persons technically qualified in the area of biotechnology or allied fields.

Useful Web Links

Government of Andhra pradesh

National Informatics Centre, Andhra Pradesh

Commissionerate of Industries

A.P.Industrial Development corporation Ltd