Karnataka has a new Industrial Policy. The Karnataka Industrial Policy 2020-25 is aimed at the states holistic development and the promotion of Tier II and Tier III cities.
The new Karnataka Industrial Policy envisions emerging as a “global leader in advanced manufacturing, research and development, and innovation and to create an ecosystem for an inclusive, balanced and sustainable development of the State.”
To achieve this, it mentions a number of changes to existing laws as well as concessions, particularly for MSMEs.
Karnataka Industrial Policy 2020 – 25 – Objectives
The main objectives of the new industrial policy in Karnataka are:
- Create at least 2 million jobs
- Facilitate investments in advanced R&D, manufacturing and innovation
- Maintain an annual industrial growth rate of 10%
- Attract investments of at least 5 lakh crore
- Reach the 3rd rank amongst Indian states for merchandise exports in the next 5 years
Industrial Policy In Karnataka 2020-25 – Highlights
Zoning Of Karnataka’s Districts
The new industrial policy categorizes the state’s districts into zones. This is aimed at developing industrially backwards areas.
- Zone 1 and 2: industrially backward districts
- Zone 3 and 4: industrially developed districts like Bengaluru and Mysuru
Identification Of Focus Sectors
The key sectors identified by the policy include
- Automobiles and auto components
- Electric vehicles
- Pharmaceuticals and medical devices
- Knowledge-based industries
- Engineering and machine tools
- Renewable energy
Special Investment Regions
The Special Investment Region (SIR) Act will be enacted to create, operate and regulate investment regions. Each SIR will be categorized as an industrial township and have an area of 100 sq. km.
The first SIR will encompass the Dharwad, Belagavi, Gadag and Haveri districts. The second SIR will encompass the Davanagere, Shivamogga, Chitradurga, and Chickamagaluru districts as well as Kalaburagi.
MSMEs To Get Subsidies
Micro, Small, and Medium-Sized Enterprises (MSMEs) will be given production turnover-based subsidies to encourage innovation. The subsidy will be based on 10 percent of their turnover each year for five years and will be limited to 20 – 30 percent of the value of their fixed assets (VFA) based on the zone. Other incentives include:
- Exemption from stamp duty and concessional registration charges
- Tax exemption on electricity tariff
- Interest subsidy on loans for technology upgradation taken from public service banks
- Reimbursement of land conversion fee
- Subsidies for sustainable operations strategies
- Power subsidy
Creation Of Direct Employment
The new policy encourages local hiring and as much direct employment as possible. At least 70% of the workforce should ideally comprise of locals. In the case of Group F employees, i.e. non-technical staff, drivers, housekeeping staff, etc. 100% of the employees should be hired locally.
A number of reforms have been introduced under the policy.
- The Factories Act, 1948 has been amended with respect to women working the night shift in factories.
- Sections 64 and 65 have been amended to extend overtime hours to a total of 125 hours per quarter.
- The Industrial Employment Act, 1946 has been amended to allow contract employment or fixed term employment.
The minimum wage will be revised periodically based on consumer price index, inflation and other such factors.
Karnataka Industrial Policy 2014-2019
The industrially progressive state of Karnataka aims to improve the financial status of its people and alleviate poverty through inclusive, sustainable and balanced industrial development.
The state’s approach of ushering in an environment of industrialization reflects its objective of improving per capita income, promoting higher capital formation and creating large employment opportunities.
The Government of Karnataka launched the New Industrial Policy for 2014-2019 with the intention to revive the state’s financial growth and improve employment prospects.
Let us take a look at the salient features of Karnataka Industrial Policy for 2014-2019.
Karnataka Industrial Policy Objectives
- To establish brand Karnataka in the global market
- To make Karnataka one of the top 3 investment destinations in the country
- To create a business friendly environment in the state in order to project Karnataka as a state that promotes and encourages entrepreneurship
- To maintain an industrial growth rate of 12 % per annum
- To increase the manufacturing sector’s contribution to the State GDP to 20% by 2019
- To attract minimum investments worth Rs 5 lakh crore by 2019
- To create additional employment for 15 lakhs people by 2019
Karnataka Industry Policy Highlights
Promote Karnataka as a hub for entrepreneurs: The State Government wants to promote Karnataka as a hub for entrepreneurs. To fulfil this objective it has plans for establishment of new industrial areas through KIADB (Karnataka Industrial Areas Development Board). The policy highlights the government’s plan to make sufficient land readily available for business. It plans to make arrangements for adequate availability of power, water and transportation for industrial areas.
Upgrade existing industrial areas: The government also has plans to upgrade existing industrial areas and estates by providing monetary assistance to improve their infrastructure.
Establish new industrial corridors: The policy proposes the establishment of new industrial corridors within the state to boost industrial growth. These intra-state industrial corridors will be:
Accelerate CBCIC: The policy also highlights the state government’s plan to accelerate work on Chennai-Bangalore-Chitradurga Industrial Corridor (CBCIC) and Bangalore-Mumbai Economic Corridor (BMEC) with the central government’s help. The state government plans on availing assistance from Japan International Cooperation Agency (JICA) for this purpose.
Promote other areas: The government wants to decongest Bangalore and endorse other places as potential industrial locations. For this purpose it plans to set up Special Investment Regions (SIR) in Northern Karnataka. Several areas are under considered for Special Investment Regions, like Dharwad, Gadag, Haveri and Belgaum Districts, Bagalkote, Bijapur, Bellary, Hassan, Koppal, Mysore, Mangalore and Raichur.
Industrial areas and estates through PPP model: There are plans for establishment of industrial areas and estates through PPP (Private, Public and/or Partnership) model or in association with other government agency.
Quality training and certification: The policy highlights on upgradation of skills in order to foster economic growth in the state. It says that the Department of Industries and Commerce along with the Department of Employment and Training would concentrate on issues related to quality training and certification. Various beneficial schemes like Suvarna Kayaka Kaushalyabhivruddhi Yojana (SKKY) are set to be revised.
Improved Labour Market Information System: The policy focuses on creation of an improved Labour Market Information System (LMIS) in order to help in the assessment of labour market and their needs
The government proposes to make Single Window Clearance Mechanism simplified and more effective for conducting business in the state.
Special focus on MSME: There is special focus on the micro, small and medium (MSME) sector to strengthen it in the state. The policy mentions funding (VC fund, angel funding), providing subsidies for allocating spaces to entrepreneurs to set up business, technological support and good infrastructure among the facilities to be extended for the growth of the sector in the state.
Encourage women entrepreneurship: The policy encourages women entrepreneurship as well as entrepreneurship from Special category like SC/ST/Differently abled/Ex-servicemen. The government has proposed a number of subsidies and incentives to promote entrepreneurs belonging to the women and special categories.
The policy focuses on export promotion, renewable energy projects and is focused on providing support to enterprises that adopt energy efficiency measures
The policy extends support to Research & Development and Direct Digital Manufacturing.
The policy highlights aerospace, machine tool, steel & cement sectors as focus industries.
The policy focuses on treating all energy projects, including renewable energy projects, as industry and makes them eligible for all incentives
Karnataka Industrial Policy Incentive & Concession Highlights
- Exemption from entry tax
- Interest free loan availability
- Exemption from payment of electricity tariff to ultra-mega and super-mega projects
- Exemption from stamp duty
- Reimbursement of land conversion fee
- Concessional registration charges
- Investment subsidy
- Subsidy for setting up Energy Effluent Treatment Plant
- Interest subsidy for water harvesting, technology up-gradation
- Reimbursement of cost of preparing project reports