DIPP moots unified industrial corridor body

The Pune-headquartered NICA was proposed in Budget 2014-15 by finance minister Arun Jaitley to coordinate the development of industrial/economic corridors.

DIPP moots unified industrial corridor body

The department of industrial policy and promotion (DIPP) will circulate a Cabinet note next week seeking the views of all ministries concerned on a proposal for a new law ? the National Industrial Corridor Authority (NICA) Act ? on the lines of the National Highways Authority of India (NHAI) Act.

The Pune-headquartered NICA was proposed in Budget 2014-15 by

finance minister Arun Jaitley to coordinate

the development of industrial/economic corridors. These include the Delhi-Mumbai Industrial Corridor (DMIC), Amritsar-Kolkata Industrial Corridor, Chennai-Bangalore Industrial Corridor, Bangalore-Mumbai Economic Corridor and the Vizag-Chennai corridor. DIPP is the nodal government body to formulate policies such corridors.

A separate legislation is to give certainty to foreign investors, including multilateral funding agencies such as the Asian Development Bank (backing the Vizag-Chennai corridor) and government agencies such as Japan Bank for International Cooperation and Japan International Cooperation Agency (supporting DMIC), official sources told FE. Many states have also supported the idea, they said, adding that NICA will have representatives from state governments, industry, funding agencies and central government ministries.

The proposed NICA will subsume the DMIC Project Implementation Trust and the DMIC Development Corporation (implementing the DMIC project) and the funds received by DMIC. The NICA will then have a common pool of funds to be allocated to different corridors as per their needs. Though the Budget proposed an initial corpus of only Rs 100 crore for NICA, this could be hiked to Rs 1,000 crore.

The proposed Act will define ?industrial corridors? for the first time (it has neither been defined under any Act nor in the Constitution of India) and will include it under the Union List of the Constitution through an amendment.

Sources said Prime Minister Narendra Modi had sought a central body for ease of doing business, better coordination for government approvals as well as funding and faster implementation. Modi was against multiplicity of authorities slowing down the projects.

The urgency for a new Act is also because in the next three to four years, many of these corridors will reach the implementation stage and finalisation of equities/grants/loans (currently feasibility studies and finalising of masterplan/blueprint is going on).

Japan had already announced an assistance of $4.5 billion for DMIC, while India was to pitch in with an equal amount for the project. This amount will soon be used for all the corridors and therefore there will be changes in the structure of DMIC Trust and DMICDC, the sources said, adding that it would mean that the even the 26% shareholding of the Japanese government in DMICDC will be transferred to NICA on a proportionate basis.

However, NICA is not being envisaged as a corridor regulator (as land and many other approvals including on industries fall in the ambit of states) and so will not have powers to impose penalties.

A separate Act is also necessary as foreign funding is also coming in the form of not just equity but also grants and loans that need to be repaid. The government, the sources said, learnt its lessons from the DMIC experience so far, where there was an issue of low-cost Japanese funding (the $4.5-billion Special Terms for Economic Partnership loan) having many riders including a clause that 30% of goods and services for projects in DMIC should be from Japanese companies.

The finance ministry had pointed out that the clause would make bids for the projects uncompetitive. FE had reported in January that the the Japanese government, to expedite the DMIC project, had agreed to relax the conditions for the STEP loan to specify that 30% of goods and services can also be from joint ventures in India where Japanese firms have a shareholding of 10% or more. This was to ensure that more non-Japanese firms bid for the project.

The new Act will, therefore, have clauses that prevent tied aid from funding agencies and ensure more transparency.

The proposed NICA Act will also ensure that state government approvals for projects are done away with in many cases or are minimised through a single-window clearance mechanism.

It is envisaged that these corridors will have smart cities linked to transport connectivity, which will be the cornerstone of the strategy to drive the country?s growth in manufacturing and urbanisation, Jaitley had said.

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First published on: 05-09-2014 at 00:40 IST