In a controversial move with wide-ranging industry implications, the West Bengal government decided to revoke financial incentives promised to industry over the past three decades, prompting likely legal pushback and concerns over retrospective policy changes. JM Financial said that the affected companies are likely to explore a legal course, including challenges to the Act’s constitutional validity and its retrospective enforcement.
Policy overview
The West Bengal Legislature enacted the Revocation of West Bengal Incentive Schemes and Obligations in the Nature of Grants and Incentives Act, 2025 (Revocation Act) in Apr’25. The Act retrospectively annuls all grants sanctioned under various state incentive schemes listed in its schedule.
The government has said that the Act is meant to free up funds for social welfare schemes aimed at helping disadvantaged and marginalised communities. It argued that continuing to give financial incentives and special benefits to companies would come at the cost of these groups. The policy change, it says, is needed in the “larger public interest” because the incentives involved large and long-term spending.
According to the brokerage firm, this move will impact incentive receivables of companies across sectors, particularly in cement and infrastructure, such as Adani group, Dalmia Bharat, Birla Corp, Nuvoco Vistas, etc. The cement grinding capacity in West Bengal is likely to be around 40mt.
Likely impact on industry players
Based on the analysis report, incentive receivables from the West Bengal government (post provision) stands at Rs 2 billion- 3 billion (~0.2- 2.5 per cent of Mcap) and comprise 10-50 per cent of total outstanding incentive receivables for various companies.
For Nuvoco Vistas, JM Financial said, total incentive receivables from the West Bengal government stood at Rs 7.3 billion. However, the company has already provided for Rs 4 billion as an exceptional item in FY23. Ambuja Cement has accrued incentives income of Rs 1.4 billion in FY25 for its Sankrail unit based on independent legal opinion and court orders in a similar set of cases.
To conclude…
The revocation of industrial incentives by the West Bengal government marks a sharp policy shift that could have far-reaching consequences for investor sentiment and future industrial participation in the state.
While the government has defended the move as necessary to prioritise social welfare spending, affected companies are expected to challenge the Act’s constitutional validity.