Karnataka clears Special Incentives Scheme for ESDM sector

Bengaluru: The Karnataka cabinet on Thursday gave its approval to the “Special Incentives Scheme” for Electronics System Design and Manufacturing (ESDM) sector in the state, through which it expects investment of over Rs 5,000 crore and 43,000 direct employment in 5 years.

The incentives announced for investment in the ESDM sector include- capital investment subsidy of 25 per cent on land and 20 per cent on plant and machinery, also 100 per cent reimbursement of stamp duty and registration charges, and 100 per cent reimbursement of land conversion fee.

It provides for power tariff reimbursement of Rs 1 per unit for 5 years from the month of commencement of commercial production, and 100 per cent exemption from electricity duty for 5 years from the month of commencement of commercial production.

The government will also give a production linked incentive for new investments as well as expansion of 1 per cent of annual turnover during the policy period of five years.

Under the scheme 25 per cent capital investment subsidy on land will be eligible to those industries which are setting it up in areas other than Bengaluru Urban and Bengaluru Rural districts, an official release said.

Capital investment subsidy on land will be provided for land area up to and not exceeding 50 acres and on actual procurement cost if procured from Karnataka Industrial Areas Development Board (KIADB) or any other agencies of state government, it said.

Subsidy for land procured from other sources will be as per the guidance value of land at the time of procurement, it added.

As per the scheme, 20 per cent capital investment subsidy on plant and machinery will include expenditure on used/second hand/refurbished plant, machinery, and equipment, whether imported or procured domestically, not exceeding 20 per cent of the total eligible plant, machinery and equipment.

Production linked incentive will be based on annual sales turnover (includes sales within the state, inter-state and exports), as evidenced by annual audited accounts/audited balance sheets, it said.

Incentives will be provided only to new investments or for capacity expansion, and will not be applicable for existing companies, it clarified.

Stating that the total quantum of incentives sanctioned to a manufacturing/assembly unit under this package shall not exceed 100 per cent of the value of fixed assets created by the unit, the government said the scheme will be applicable for new investments or investments in expansion of existing units for a period of 5 years from the date of its announcement.

The state”s incentive scheme can be availed in addition to incentives and subsidies provided under any of the policies of Government of India (GOI). However, industries availing this package of incentives cannot avail incentives under any of the other policies of the Karnataka government.

Products/activities eligible for incentives include- manufacturing and design of electronics products, semiconductor manufacturing and design, electronic manufacturing services, solar cells manufacturing, LED, and any other electronics verticals/products covered by the national policy on electronics.

The release notes that incentives are over and above the schemes notified by GOI encompassing the entire range of products and activities under ESDM and not limited to only certain products as in central schemes. According to the release, the government is also subsidising the land procurement under the special incentive scheme. “An investment of over Rs 5,000 crore is expected to the State through this Scheme, with a potential to generate 43,000 direct employment over next 5 years,” it added.