Southern states may offer common industrial incentives

The five southern states today agreed to hold consultations in a bid to arrive at a uniform approach in the grant of industrial incentives to curb unhealthy competition in attracting investment, Home Minister Sushil Kumar Shinde said today.

Karnataka, Tamil Nadu, Andhra Pradesh, Kerala and Puducherry agreed to "sit together and work out a formula", Shinde told reporters after a meeting of the Southern Zonal Council here.

The issue was flagged by Karnataka Chief Minister Jagadish Shettar, who argued that there was a need for a coordinated and uniform approach in the grant of industrial incentives.

He said there was an 'unhealthy' competition among states in offering incentives disregarding their long-term adverse impact on their revenue as well as an on old and tax-paying industries.

States are now extending interest-free loans based on the sales tax/VAT by the new industries, he told the meeting attended by his Andhra Pradesh and Puducherry counterparts Kiran Kumar Reddy and N Rangaswamy respectively, senior Tamil Nadu Ministers O Panneerselvam and Natham R Viswanathan and Kerala Finance Minister K M Mani.

"However, there is no uniformity in such schemes and the industries are playing one State against another to garner liberal incentives far in excess of the investments made by them and the benefits that would accrue to the state on account of such investments made," Shettar said.

The levels of industrial development, infrastructure availability and skilled manpower, among others, in the southern states are comparable and equally suitable for establishment of new industries, he opined.

"The decision of location of a new industry thus should not be determined by the tax incentives available in a State", he said.

"Hence, there is a need to have common package of industrial incentive in the Southern states. To achieve this, a standing committee consisting of Finance Secretaries and Commissioners of Commercial Taxes of the Southern States may be constituted to recommend common industrial incentives," he added.