What is the concept behind the National Investment and Manufacturing Zones (NIMZs)?

Global experience shows that clustering and agglomeration of manufacturing units provides distinct advantages as it gives substantial economies of scale in the use of industrial infrastructure, enhances supply chain responsiveness, provides easier access to market and human resources, and substantially lowers logistic costs. This concept was operationalised earlier by the government through special economic zones, which catered broadly to the export sector, and cluster development schemes formulated for the small and medium enterprises. The new manufacturing policy attempts to further broadbase these efforts by using the cluster approach as one of the key instruments to catalyse the growth of manufacturing as a whole.

How will NIMZs be operationalised?

According to the policy document, NIMZs will be developed as integrated industrial townships with state-of-the-art infrastructure and land use on the basis of zoning, clean and energy efficient technology, necessary social infrastructure and skill development facilities. These NIMZs will be administered by SPVs that would take up master planning of the zone and get pre-clearances for setting up the industrial units in the zones. Further, NIMZs will function as self-governing and autonomous bodies as the state governments will designate them as industrial townships under Article 243 Q(c) of the Constitution. Thus, NIMZs will provide developed land with adequate infrastructure and the needed ecosystem for promoting world-class manufacturing activity.

How large will NIMZs be and who would own them?

A typical NIMZ will be of at least 5,000 hectares in size and will be chosen by the state governments from its own land or through acquisitions. The preference will be for non-agricultural land with adequate water supply. States will have to ensure that at least 30% of the total land will be utilised for setting up manufacturing units. If needed, the states may reserve a certain share of the land for MSMEs.

Ownership of an NIMZ will either be with the state government, a state government undertaking in joint ownership with a private partner or under any other appropriate model. But whatever be the ownership model of an NIMZ, the the state government will ensure that the land provided to the manufacturing units can be mortgaged by the prospective allottees for securing financial assistance from banks and financial institutions.

How will an NIMZ be administered?

The administrative structure of an NIMZ will include four entities, namely an SPV, a developer, the state government and the central government. After the central government notifies an NIMZ in the official gazette, an SPV will be constituted to exercise the powers, discharge the functions and manage the affairs of the NIMZ. This SPV can be a company, including a Section 25 company, depending upon the MoU between stakeholders.

The appropriate financial and administrative structure of the SPV will depend on the financial participation of different stakeholders who will also have their nominees on the board of the SPV. However, the CEO of the SPV will be a senior central or state government official. The SPV will include an official/expert conversant with the work relating to pollution control/environmental protection. There will also be representation to the industrial units functioning in NIMZs. The main functions of the SPV will include master planning of the zone, preparation of a development strategy and an action plan for self-regulation to serve the purpose of the policy, formulation of rules and procedures for development, operation, regulation and management of NIMZs and their enforcement.

The SPV will also expedite environmental clearance and clearances under the air and water Acts, work out an arrangements with the state government regarding revenue streams including the levy of user or service charges or fees or rent for the use of infrastructure/properties in NIMZs and the creation of specific mechanisms for specialised services.

The SPV can take up the development work on its own through various agencies/contractors or take up the development in partnership with a developer who shall be selected through a transparent process.

What are the specific advantages that an NIMZ will provide as regards to labour?

NIMZs will put in place a comprehensive exit policy that will promote productivity while providing flexibility by reducing some of the moving rigidities in the labour market and by ensuring protection of workers? rights as laid down in the statute.

An exit policy will be worked out, keeping in view the provisions for the protection of workers? rights within the statutory framework. Mechanisms may be developed for cooperation of public or private institutions with government inspection services under the overall control of statutory authorities. Subject to setting up a suitable mechanism, the government will delegate the powers of inspection and enforcement to the CEO of the SPV who shall be a senior government official and conduct periodic audit of the enforcement mechanism to ensure compliance of all labour welfare provisions.

Firms operating in NIMZs will have a job-loss policy to insure workers against loss of employment in the event of closure or retrenchment. This policy will be used to make compensation payment to workers at the time of closure or right sizing. The SPV can also opt for a sinking fund mechanism, instead of a job-loss policy, to be funded by contributions to provide compensation to workers.

Similarly, the SPV will help redeploy labour from one unit to another in case of closures. This redeployment shall be from the date of closure at the same remuneration and on the same terms and conditions of service as that immediately before the closure.

What specific advantages do the NIMZ units get in the case of environmental clearances?

Major environmental aspects will be investigated by an NIMZ at the beginning itself by having an impact study while selecting the site and subsequently by having proper zoning while working on the master plan.

With respect to laws and regulations pertaining to environment, the central or state government may delegate the power as allowed by the relevant statutes to an official of the state pollution control board posted in the zone. The environmental clearances for the NIMZ units shall be considered on a high priority, and the units will be exempted from public hearing provided under the EIA Notification, 2006, in cases where such estates have undergone public hearing as a whole.

Are there any tax advantages?

The policy states that relief from capital gains tax on the sale of plant and machinery of a unit located in an NIMZ will be granted in case of re-investment of sale consideration within a period of three years for purchase of new plant and machinery in any other unit located in the same or another NIMZ. This is to encourage re-investment of income generated from the disposal of assets (other than land) owned by a company operating within an NIMZ, in the manufacturing sector.