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Manufacturing policy suffers setbacks

Industry Ministry's proposal has not found support from the labour and environment ministries.

Written by Agencies | New Delhi |
July 20, 2011 3:25:42 pm

The Industry Ministry’s proposal to ease labour and environment laws in special manufacturing zones (SEZ) has not found support from the labour and environment ministries,senior official said today.

“… Labour Department is citing ILO (International Labour Organisation) obligations… One serious difference of opinion I got is that everybody is talking about (their) sovereign functions,including Environment (Ministry),” Department of Industrial Policy and Promotion (DIPP) Secretary R P Singh said here at a Ficci function on Manufacturing Policy.

The draft national manufacturing policy,which aims to attract overseas investment,besides increasing the share of manufacturing in the GDP,has been stuck due to inter-ministerial differences,with the opposition coming mainly from the labour and environment ministries.

“I did not expect the Labour Department response to be so lukewarm. We are coming on some kind of consensus,but I am not fully satisfied,” Singh said.

He asked industry to talk directly with the Labour Department and labour unions regarding the issue.

The draft policy has also suggested that the proposed National Manufacturing Investment Zones (NMIZs) – big enclaves which could even subsume special economic zones – should be given the flexibility to downsize labour.

Likewise,it recommended changes in environment norms that come in the way of investment.

Meanwhile,Singh also said the Revenue Department is veering round to the proposal for extending capital gains tax exemptions on equity investment in NMIZs.

On the revenue side,the DIPP has asked for an exemption of capital gains tax in the NMIZs in case equity investment is made in the manufacturing sector.

“Finally,Revenue Department has seen merit in this and hopefully they are agreeing to this. Now,we are working modalities with them as to how to check the misuse of this…,” he said.

Meanwhile Commerce and Industry Minister Anand Sharma today met new Environment Minister Jayanthi Natarajan and discussed industry concerns over the clearance of projects and the proposed policy.

Prime Minister Manmohan Singh had called a meeting of the key ministers last month in the backdrop of differences between the ministries of environment,labour and finance and the DIPP. At the meeting,the draft Manufacturing Policy was given in-principle approval and a Committee of Secretaries,chaired by Prime Minister’s Principal Secretary T K A Nair,was asked to work out a consensus.

According to the paper,the NMIZs would enjoy all the tax benefits that SEZs and EOUs have.

“We had a good discussion on many matters. One is related to industry and second about manufacturing policy… I think we are in a position now to move forward for taking a final view in the matters,” Sharma said.

Sharma is also expected to meet the Labour Minister and Finance Minister soon to discuss the policy.

Further,Singh said they have asked for treating skill upgradation at par with R&D in the policy.

“We have have asked to treat skill upgradation at par with R&D to allow weighted deduction of 150 per cent as it is being done in the case of R&D,” he said,adding that the suggestion was also accepted by the T K A Nair committee.

The secretary also said the NREGA fund can be used to provide skill development.

India aims to increase the share of the manufacturing sector,which contributes over 80 per cent to the country’s overall industrial production,from 16-17 per cent to 25-26 per cent of the gross domestic product by 2025.

The draft policy also aims to create 100 million new jobs.

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