How to Set Up Industrial parks

By Accommodation Times Bureau

By Rajkumar S. Adukia
Chartered Accountant, www.carajkumarradukia.com

The term industry originated from the Latin word industrius meaning “diligent, industrious”. It is generally used for the economic activity of manufacture and production of goods. Industry began in its present form during the 1800s, aided by technological advances, and it has continued to develop to this day. Industries, the countries they reside in, and the economies of those countries are interlinked in a complex web that may be hard to understand at first glance.
Industry in the second sense became a key sector of production in European and North American countries during the Industrial Revolution, which upset previous mercantile and feudal economies through many successive rapid advances in technology, such as the steel and coal production. Railroads and steam-powered ships began speedily establishing links with previously unreachable world markets, enabling private companies to develop to then-unheard of size and wealth. Manufacturing is a wealth producing sector in an economy. Following the Industrial Revolution, perhaps a third of the world’s economic output is derived from manufacturing industries—more than agriculture’s share. The term industry also comprises the service sector activities. With the growth of the service sector, the same cannot be precluded from the meaning.
In economics and urban planning, industrial is a type of land use and economic activity involved with manufacturing, production or service sector.
A park is a bounded area of land, usually in its natural or semi-natural (landscaped) state and set aside for some purpose.
Thus, an industrial park is an area of land set aside for industrial development. It refers to the industrial estate where infrastructure facilities required for industries and service sector activities, like land, water, sewerage, roads, electricity, communication network, effluent treatment and disposal facilities for effluents, etc. are to be developed.
Industrial parks may be prepared for:
1. SEZs
2. STPs
3. EHTPs
4. BTPs
5. Agro parks
6. Industrial estates
7. Multiplexes, or
8. Otherwise
This article aims at consolidating the procedure for setting up industrial parks and the various benefits and incentives available to industrial parks.
Setting up an industrial park
Approvals required before starting the construction activity:
1. the plan has to be approved from the local authority
2. for water requirement from river or public service, application has to be made to regional authority (executive engineer of the irrigation scheme)
3. for power requirement, application has to be made to the regional agency/authority
4. the environmental clearance and forest clearance should be taken where necessary
5. for financial requirement, application has to be made to the financial institutions or banks. FDI is also allowed to a certain extent. All infrastructure and Greenfield projects can raise up to 50% of the total project cost from outside India.
Scheme for financial assistance for setting up industrial estate
Eligibility
Any entrepreneur interested for development of contiguous land into industrial estate/area can avail financial assistance where the minimum land is 10 acres. Proposals should include construction of industrial sheds.
Purpose
Loan can be availed of for purchase of land, cost of land development, cost of stamp duty etc, for development of infrastructural facility such as approach roads, drainage, water supply system, power distribution lines, central effluent treatment plant, construction of industrial shed/multi-storied industrial bldgs, etc.,
Limit
Cost of project should not exceed Rs.12.00crores
Application for loan
The particulars to be submitted for financial assistance generally include:
1. the general details as to the name of the organization, date of incorporation/ registration, location of the project, etc.
2. the details of the promoters
3. the details of the project
4. the cost of the project
5. means of finance
6. marketing and selling or own use arrangements, as the case may be
7. profitability and other economic considerations
8. government approvals like licenses, permission or clearances
Key financial institutions
? Industrial Finance Corporation Of India (IFCI)
? Industrial Credit And Investment Corporation Of India (ICICI)
? Industrial Development Bank Of India (IDBI)
? Export-Import Bank Of India (Exim Bank)
? Industrial Reconstruction Bank Of India (IRBI)
? Shipping Credit And Investment Corporation Of India (SCICI)
? Infrastructure Leasing And Financial Services Ltd. (IL&FS)
? Technology Development And Information Corporation Of India Ltd. (TDICI)
? Risk Capital And Technology Finance Corporation Ltd. (RCTFC)
? Tourism Finance Corporation Of India (TFCI)
? National Bank For Agricultural And Rural Development (NABARD)
? National Small Industries Corpration (NSIC)
? State Financial Corporations (SFCS)
? State Industrial Development Corporations
? State Industrial Investment Corporations (SIICs)
? State Small Industries Development Corporations (SSIDCs)
? Small Industries Development Bank Of India (SIDBI)
? National Co-Operative Development Corporation (NCDC)
The Industrial Policy of the particular State should be referred to for any exemptions or incentives available. Also, the minimum area and other related requirements under such policy should be adhered to.
The Industrial Park Scheme, 2002
In exercise of the powers conferred by clause (iii) of sub section (4) of section 80IA, the Central Government framed the Industrial Park Scheme, 2002. The scheme came into force in 1-4-2002.
Setting up an industrial park
An industrial park may be set up for either of the following:
1. Industrial Model Town
An industrial park may be set up as an Industrial Model Town for development of industrial infrastructure for manufacture, including research and development, by providing plots/sheds and common facilities. Common facilities include facilities of air conditioning, roads, water supply and sewerage, common effluent treatment facility, telecom network, generation and distribution of power used by two or more industrial units in an industrial park.
Criteria for automatic approval
a. minimum area of 1000 acres
b. minimum 50 units to be provided for and no single unit to occupy more than 50% of the allocable industrial area
c. minimum 66% of total allocable area to be allocated for industrial use
d. not more than 10% of the allocable area earmarked for commercial use
e. minimum 50% of the total project cost invested on infrastructural development
f. approval for foreign direct investment or non resident Indian investment to be obtained from FIPB/RBI/any other specified authority
2. Industrial Park
An industrial park may be set up for development of infrastructure facilities or built up space with common facilities for industrial use.
Criteria for automatic approval
a. minimum area specified according to activity
b. minimum 30 units to be provided for and no single unit to occupy more than 50% of the allocable industrial area
c. minimum 66% of total allocable area to be allocated for industrial use
d. not more than 10% of the allocable area earmarked for commercial use
e. minimum 50% of the total project cost invested on infrastructural development and minimum 60% invested on infrastructural development including cost of construction of industrial space
f. approval for foreign direct investment or non resident Indian investment to be obtained from FIPB/RBI/any other specified authority
3. Growth Centre
An industrial park may be set up as a Growth Centre under the Growth Centre Scheme, distinctly developed as a separate profit centre. The Growth Centre Scheme of the Government of India was introduced in June 1988 for the promotion of industrialization in backward areas.
Criteria for automatic approval
a. minimum area specified according to activity
b. minimum 30 units to be provided for and no single unit to occupy more than 50% of the allocable industrial area
c. minimum 66% of total allocable area to be allocated for industrial use
d. not more than 10% of the allocable area earmarked for commercial use
e. minimum 50% of the total project cost invested on infrastructural development and minimum 60% invested on infrastructural development including cost of construction of industrial space
f. approval for foreign direct investment or non resident Indian investment to be obtained from FIPB/RBI/any other specified authority
Application for approval
1. Apply to the Entrepreneurial Assistance Unit of the Secretariat for Industrial Assistance, Department of Industrial Policy and Promotion in the Ministry of Commerce and Industry, Udyog Bhawan, New Delhi – 110011
2. The application should be in Form IPS-1 and be accompanied with an affidavit certifying the details required, and a fee of Rs. 6000/- payable by a demand draft drawn in favour of Pay and Accounts Officer, Department of Industrial Development payable at State Bank of India, Nirman Bhawan branch, New Delhi – 110011
3. On receipt of application, the Secretariat shall give acknowledgement receipt and a registration number.
4. Application eligible for automatic approval shall be disposed of in 15 days
5. Where application is not eligible for automatic approval, application to be placed before the Empowered Committee within 15 days. The Committee shall consider each application on its merits and compliance of statutory requirements prescribed by the Ministry of Finance and other statutory rules/obligations
6. A fresh approval may have to be taken if the commencement of the industrial park gets delayed by more than one year from the date indicated in the application
Withdrawal of approval
The approval given may be withdrawn by the Central Government on failure to comply with any of the conditions of grant of approval after giving the undertaking an opportunity of being heard.
Reports
On grant of approval, each undertaking is required to furnish to the Central Government on 1st January and 1st July of every year, a report in Form No. IPS – II during the period of availment of income tax benefits. The Form requires the following disclosures:
1. Name of the Undertaking
2. Name of the persons holding more than 20% equity investment in the Industrial Park
3. Item(s) of industrial activities (Specify item codes as defined under NIC code, 1987)
4. Location of the Industrial Park
5. Terms of approvals (Proposed Actual /Reasons for variations)
a. Capital outlay for the project
b. Foreign equity
c. Area of the project
d. Allocable area of the project
e. Number of industrial units in the project
f. %age of allocable area for Industrial use
g. %age of allocable area for commercial use
h. Expenditure on infrastructure development including investment on built up space for Industrial use
i. Date of commencement of Industrial Park
6. If foreign equity investment is involved, whether approval of FIPB/RBI taken. If yes, indicate amount and date. If not, indicate reasons and likely date
7. Indicate briefly the effective steps taken towards implementation e.g. installation of common facilities, No. of units sold or leased, No. of units commencing the industrial activity
8. Specific problems, if any, being faced in implementation, the reasons thereof and the agency/organisation concerned
Exemption available to an industrial park notified under the Industrial Park Scheme, 2002 as per:
? Section 80IA of the Income Tax Act, 1961
? Income Tax Rules, 1962
? Industrial Park Scheme, 2002
Under clause (iii) of sub section (4) of Section 80IA of the Income Tax Act, 1961, deduction in respect of profits and gains applies to any undertaking which develops, develops and operates or maintains and operates an industrial park notified by the Central Government in accordance with the scheme.
For the purpose of availing the tax benefit, the minimum number of units indicated in the Industrial Park Scheme, 2002 should be located in the industrial park.
Deduction available
An amount equal to hundred per cent of the profits and gains derived from such business is deductible for ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops an industrial park.
Eligibility of Industrial Parks for benefits under section 80-IA(4)(iii)
Rule 18C of the Income Tax Rules, 1962 states the following conditions for the undertaking to be eligible for deduction:
1. It should begin to develop, develop and operate or maintain and operate an industrial park during the period beginning on the 1st day of April, 1997, and ending on the 31st day of March, 2006.
2. It should be duly approved by the Ministry of Commerce and Industry in the Central Government under the Industrial Park Scheme, 2002 and notified by the Central Board of Direct Taxes for benefits under section 80-IA.
3. It should continue to fulfil the conditions envisaged in the scheme.
Where an undertaking develops an industrial park on or after the 1st day of April, 1999 and transfers the operation and maintenance of such industrial park to another undertaking, the deduction shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking. In case of such transfer, the transferee and the transferor shall jointly intimate to the Entrepreneurial Assistance Unit of the Secretariat for Industrial Assistance, Department of Industrial Policy and Promotion, Udyog Bhawan, New Delhi – 110011 alongwith a copy of the agreement of transfer.
The Industrial Park Scheme, 2002 was extended till 31st December 2006. The Government has announced extension of this scheme. The Scheme is available at http://dipp.nic.in/.
Benefits available to SEZ developer
? 100% FDI is allowed for townships with residential, educational and recreational facilities, and for franchise for basic telephone service in SEZ
? Deduction under Section 80 IAB of the Income Tax Act, 1961
o 100% of the profits and gains derived from the business of developing a Special Economic Zone, notified on or after the 1st day of April, 2005 under the Special Economic Zones Act, 2005 for ten consecutive assessment years out of fifteen years beginning from the year in which a Special Economic Zone has been notified by the Central Government.
o Where deduction under section 80IA had been claimed, the deduction can be availed for only the unexpired period of ten years
o In case of transfer, the transferee can claim for the remaining period of ten consecutive years
? Duty free import and domestic procurement of goods for development, operation and maintenance of SEZ
? Exemption from Central Sales Tax and Service Tax
? Income of infrastructure capital fund/company from investment in SEZ is exempt from Income Tax
? Developer is permitted to transfer infrastructure facility for operation and maintenance.
? Generation, transmission and distribution of power in SEZ is allowed
? Full freedom in allocation of space and built up area to approved SEZ units on commercial basis.
? Authorised to provide and maintain service like water, electricity, security, restaurants and recreation centres on commercial lines.
? Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA.
? Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act.
? Exemption from dividend distribution tax under Section 115O of the Income Tax Act.
? Allocation of power to SEZs from central quota
Guidelines have been issued on generation, transmission and distribution of power in SEZs. SEZ developers are permitted to provide and maintain services like water, electricity, security, restaurants and recreation centres on commercial lines.





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2 thoughts on “How to Set Up Industrial parks

  1. Industrial Park Under Joint Venture.

    Dear Sir,
    We would like to develop two projects, 1) Industrial Park (Duty Free Industrial Economic Zone) & 2) 5-Star Hotel on more than of an acre of land in the Center Place of Dhaka City, Bangladesh in association with your company. We have already made an arrangement of approx. 600 acres of land in a very suitable location connected by Roads (Highways) & Rivers to Build up Industrial Park (duty free economic zone). The spot is very near to the sea port also. Since you have acquired vast experience in this arena, we want to develop this zone & the hotel in association with your company on mutual understanding. On receipt of your return mail, we will let you know all the details of our program including the facilities to be available along with budgetary cost in the Industrial Park & Hotel. We may arrange a meeting for face to face discussion at your place or at Dhaka. We are in diversified business. Our brief company profile is attached herewith for your reference.

    You may show your interest for any of the projects or for both the projects.

    With best regards,
    Md. Imam Hossain
    Chairman & CEO,
    EPDS Group,
    Bangladesh.
    Phone : +8801712062474

  2. i have got 12.5 acres of industrial zone land which is now transferred to a pvt ltd company and now i am planning to take its industrial n.a approval…so pls suggest me steps which i have to take care before starting ndustrial park

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