In what comes as a big relief for the battered UP Inc, the Akhilesh Yadav government has made it clear that it would go ahead with the Industrial Investment Promotion Policy (IIPP), which means doling out subsidies to business houses that attract investments of more than R100 crore.
When in power, BSP leader Mayawati had cancelled IIPP, announced in 2006 by the previous Mulayam Singh Yadav government.
In a verbal assurance to the Allahabad High Court on April 17, the state government?s counsel submitted that ?the state government is considering to withdraw the impugned policy and a decision will be taken in four weeks.?
The decision benefits as many as 12 companies that had applied for the benefits. These include Tata Motors, Gallantt Ispat, Sukhbir Agro, Vacmet Packaging, Bindal Agro, KR Pulp, Vam Organys, Grashim Ind, Bajaj Equitex, Rimjhim Ispat and Laksmi Cotsyn.
The state government has sought opinion of the finance and tax departments on the financial implications of the move. Speaking to FE , industrial development commissioner Anil Kumar Gupta said the government will take a final view on the matter after the said departments submit their reports. ?A final decision on this will be taken by the chief minister,? he said.
Sources in the government say the decision to withdraw the notification ?may prove to be a costly affair for the state, as the subsidy bill would swell to Rs. 7,000-odd crore. ?And if the subsidy is extended to the expansion of the units, as is indicated in the policy, the subsidy bill could well go up to R15,000 crore. It will be a Pandora?s box for the present government, which has its own agenda of doling out unemployment allowance and laptops to as many as 30,000 students every year,? said an officer requesting anonymity.
Interestingly, though most of the investment in this scheme came during Mayawati?s rule and the credit of investment flowing in was being given to her, the scheme was still cancelled by her government as it was seen as a veritable scam box. ?The subsidies were overlapping one another and the sales tax clause seemed to have overreaching repercussions. The older a unit, the more its turnover; and more turnover meant more subsidy. Also, the scheme was riddled with irregularities and the previous government thought it fit to cancel one flawed policy rather than honouring one bad decision at a very heavy cost to the state for years to come,? said another official, adding, ?the state government had put forth its arguments before the court favouring cancellation.?
?The decision to withdraw the subsidy was taken after long running deliberations, when it became increasingly evident that the scheme was riddled with irregularities to please a few people and the burden on the state exchequer would be immense in the coming years,? said an official.
It may be mentioned that Mulayam government?s initiative resulted in a number of industries applying for and setting up base in the state or going in for massive expansions to reap the benefits of the scheme. Of the companies which had applied for the benefits, 12 were found eligible for the sops and letters of comfort had been issued to them. However, when the scheme was suddenly scrapped by Mayawati in November last year, five of the beneficiaries moved court saying it was a betrayal of sorts by the state government.
?By withdrawing these facilities and refusing to pay the dues, the state government is going back on its word. So, we challenged that notification in the Allahabad High Court,? said an industrialist.