Industrial Park in India


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.

An industrial park (also known as industrial estate, trading estate) is an area zoned and planned for the purpose of industrial development. An industrial park can be thought of as a more "heavyweight" version of a business park or office park, which has offices and light industry, rather than heavy industry. Some industrial parks offer tax incentives for businesses to locate there, such as tax increment financing.
Industrial parks are usually located on the edges of, or outside the main residential area of a city, and normally provided with good transportation access, including road and rail. For example, the Wilmington Industrial Park in Los Angeles is located near a major international shipping facility (the Los Angeles and Long Beach ports), a railroad, and numerous freeways with access to major trucking routes. Types of businesses located there include a cold-storage facilities, food distribution warehouses, engine parts companies and many others.
Objectives of the industrial park
Any project, being an industrial park, shall aim at setting up of -
(a) an Industrial Model Town for development of industrial infrastructure for carrying out integrated manufacturing activities including research and development by providing plots or sheds and common facilities within its precints; or
(b) an industrial park for development of infrastructural facilities or built-up space with common facilities in any area allotted or earmarked for the purposes of industrial use specified in explanation to para 6 subclause (c); or
 (c) a Growth Centre under the Growth Centre Scheme of the Government of India:
Provided that the scheme referred in this clause is implemented by an undertaking and the Growth Centre is distinctly developed as a separate profit centre.
Industrial Park Scheme, 2008 
The Government has notified the Industrial Park Scheme, 2008 dated 8.1.2008. “Industrial Park” under the scheme means a project in which plots of developed space or built up space or a combination, with common facilities and quality infrastructure facilities, is developed and made available to the units for the purposes of industrial activities or commercial activities in accordance with this scheme.
The Criteria for approval as Industrial Park is as under:
An undertaking shall be considered as Industrial Park, if it fulfills all of the following conditions, namely:-
(i) The date of commencement of the Industrial Park should be on or after the 1st day of April 2006 and not later than 31st of March 2009;
(ii) The area allocated or to be allocated to industrial units shall not be less than ninety per cent of the allocable area;
(iii) There shall be a minimum of thirty industrial units located in a industrial park;
(iv) For the purpose of computing the minimum number of industrial units; all units of a person and his associated enterprises will be treated as a single unit.
(v) The minimum constructed floor area shall not be less than 50,000 square meters;
(vi) No industrial unit, along with the units of an associated enterprise, shall occupy more than twenty five per cent of the allocable area;
(vii) The industrial park should be owned by only one undertaking; and
(ix) Industrial units shall undertake only manufacturing activity as defined in section D of the National Classification, 2004, Code issued by the Central Statistical Organisation, Department of Statistics.
History the Scheme
The Industrial Park Scheme was first introduced by the Government of India in 1997 to give impetus to the infrastructure sector. The scheme was revised in 2002 and was valid up to March 2006. A Draft Industrial Park Scheme was prepared in 2006. And the new scheme was finally introduced this year.
The scheme extends 100 per cent tax holiday on profits derived by an undertaking from the activity of developing, developing and operating, or maintaining and operating an Industrial Park and is applicable to all Industrial Parks set up between April 1, 2006 and March 31, 2009.
The objective of providing a tax holiday is to promote and incentivise capital investment. The industrial units set up under the new scheme can undertake certain specified manufacturing activities.
To gain the tax benefits, a developer essentially needs to comply with certain conditions, such as minimum requirement of 30 units, all units of same group would be considered as a single unit, a single unit cannot occupy more than 25 per cent of total area, minimum area of 50,000 sq mt needs to be developed, etc.
Limitations of the Scheme
Specification of Minimum Constructed Area
According to the new scheme, the developer needs to develop a minimum of 50,000 square meters of constructed area. It seems the condition has been imposed to bring the scheme on a par with the FDI (foreign direct investment) policy in the real-estate sector.
However, it may be appreciated that in the case of industrial parks for the manufacturing sector (as provided in the new scheme), the developer typically does not construct a factory. He merely provides land on lease with surrounding infrastructure since every manufacturer wishes to construct a factory according to his own requirement.
Treatment of Group Units
All units of a group company would be treated as a single unit for the purpose of minimum units requirement. Purely because of common interest, different entities of a group are not going to be able to co-locate. The Government may, therefore, consider allowing the development to take place according to market demand and requirements.
A developer may choose to set up an IT park for a single user or for multiple users depending upon commercial prudence. Imposing a condition of minimum number of units for tax holiday is an artificial and unwarranted mechanism, which may cause supply scarcity.
Ceiling in Allocable Area
The new scheme requires that no single unit will have more than 25 per cent of allocable area. The market reality is that entrepreneurs demand large spaces at single location. Hence, the area restriction for a single unit may come in the way of benefits of scale an entrepreneur might otherwise wish for in a single industrial park.
Retrospective Application.
The new scheme is applicable retrospectively. Many of the developers had gone ahead with their projects in accordance with the Draft Scheme.
 

Saturday, 27th Dec 2014, 11:52:51 PM

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