(a)   The Principal objective of the policy framework for industry in Karnataka will be to provide an enabling environment for the growth of industry. One of the key reform measures will be to simplify the regulatory framework to enable ease of doing business in the State. The regulatory framework extant is fraught with a multiplicity of acts and rules, a multiplicity of registers to be maintained and returns to be filed by entrepreneurs as well as a plethora of approvals to be obtained. Industry is today also subject to several inspections carried out by various Govt. departments/agencies under the provisions of a variety of acts and rules. The existing regulatory framework constitutes in many ways a barrier to the growth of industry. The entrepreneurs encounter difficulties both at the entry/implementation level as well as during operations;

(b)  Deregulation of business environment is therefore imperative. With the objective of providing an efficient, responsive and transparent administrative framework for industry, the following is envisaged:

1. To bring in comprehensive Industries Promotion/Deregulation measures through amendments to the existing rules;

2. Karnataka Udyog Mitra (KUM) shall be the Nodal Agency to guide and to provide assistance to the entrepreneurs as well as to obtain the required clearances/consents/approvals/registrations/ license from the various departments at the implementation stage of a project.

3. To reduce  the  multiplicity  of  Application  forms,  a  Combined  Application  Form   (CAF)  shall  be introduced.

4. Industries to be segregated into two categories: a) A restricted list of dangerous hazardous, and polluting industries which will continue to be subjected to the normal approval procedure and b) All other Industries in the open list eligible for fast track clearances.

5. Under 'Fast Track Clearance' entrepreneurs will be required to complete the CAF and submit it to KUM as a single window for obtaining necessary clearances from the various departments concerned;

6. The Multiplicity of Registers/Records to be maintained under various Acts/Rules will be simplified and rationalised by introducing Combined Registers/Records, wherever possible.

7. The  Multiplicity  of periodical  returns to  be filed  will  be  simplified  and  rationalised by introducing Combined Returns, wherever possible.

8. Inspections by various authorities of different departments shall be minimized and regulated through a random annual inspection and inspections only on the basis of complaints.

9. Providing for a scheme of self-certification by the entrepreneur confirming compliance of the extant laws and rules. Such self- certification to be supported by a stringent penalty structure for default;

(c)  The Government of Karnataka will also commission a bi-annual survey of industry. This will be aimed at obtaining primary data on key performance indicators of industry, which will serve as the input for policy prescriptions, based on the analysis of empirical data generated. This survey will also serve as a platform for Govt./Industry partnership and provide valuable inputs to direct policy changes/application of corrections.

(d)  To enable a real time response both by Govt. as well as industry to the various implications of the multilateral trading regime under the WTO, the Government of Karnataka will in collaboration with Indian Institute of Management, Bangalore and National Law School of India establish a WTO Relay Centre. This relay centre will be managed jointly by KCTU and VITC from Govt. side and by the Industry Associations/Bodies from the Industry side. The objective of this centre will be the following.

i)    Establish a credible and extensive database on WTO and its implications for sectors/sub-sectors as well as products and processes that are likely to be affected by the WTO. This database will be made available to industry as well as policy makers to enable them to design a suitable response.

ii)    To lend legal, techsnical and administrative support to user industries effected by WTO on the one hand as well as to enable them to make use of the opportunities for export markets.

iii)   Relay compliance levels expected in terms of quality, technical standards, sanitary and Phyto-sanitary standards, product and Process methods that local industry will have to comply with to meet the global standards prescribed under the WTO; and

iv)   Enabling capacity building in institutions in Karnataka to meet sector specific needs for quality testing, and compliance of these standards.

Governments, both at the State and the Central level, have been extending marketing assistance to Small Scale Industries in Government procurements through purchase and price preference. The State has also established the Karnataka Small Industries Marketing Corporation to provide marketing assistance to the Small Scale Industries Sector. These measures have helped the Small Scale Industries Sector to a great extent. However, with the coming into force of the Karnataka [Transparency in Public Procurement] Act 2000, the special preference available to the Small Scale Industries Sector has been negated. While the Act provides for exceptions to the applicability of the Act to procurements from Government Departments, Public Sector Undertakings, Statutory Boards and such other Institutions specified by the Government, there is no such exceptions made in respect of Small Scale Industries Sector. However, Sub Para-G of Para-4 of the Act states that exceptions to applicability will be available "in respect of specific procurements as may be notified by the Government from time to time". In view of the serious sickness faced by the Small Scale Industries Sector as a whole and the problems getting much more serious with full implementation of the provisions of various agreements signed with the WTO, it is necessary that Small Scale Industries is protected for some more time. In this background it is necessary that purchase and price preference to the Small Scale Industries Sector be continued for at least another 5 years. It is also necessary that the purchase and price preference is adhered to strictly by all Govt. Departments, Public Sector Undertakings, Statutory Board & Corporations. It is therefore proposed to amend the Karnataka [Transparency in Public Procurement] Act 2000 to provide purchase-price preference to SSI units of the State, which manufacture items reserved for SSI sector by Government of India from time to time, in the following manner:

a)   75% of the items reserved by the SSI Sector shall be procured from the units located within the State, through an open tender system;

b)   SSI units of the state shall be offered a price preference of 15% over the lowest price quoted;

c)   This benefit will be available for a period of 5 years from 1st April 2001.

The role of KSIMC will also be reoriented to help the SSI Sector to :

i)     Improve quality of the products;

ii)    Improve the production-manufacturing processes;

iii)   Reduce prices; and iv) Augment exports

In order to ensure that the Single Window mechanism for approval/monitoring of projects is made more effective, the following modifications in the existing scheme shall be incorporated:

a)   There will be only one High Level committee chaired by the Hon'ble Minister for Large & Medium Industries to consider and approve all investment proposals in excess of Rs.50 Crores in all sectors including Industry, Tourism, IT, BT, Agro Food Processing & Infrastructure. The composition of the Committee will be suitably modified to include the concerned ministers and officers;

b)   The State level Single Window Agency under the Chairmanship of Principal Secretary to Govt., Commerce & Industries Dept., will henceforth consider and approve all projects of investments upto Rs.50 Crores in each case including Industry, Tourism, IT, BT, Agro Food Processing & Infrastructure. The composition of the Committee will also be modified suitably to include officers of the concerned departments and agencies;

c)    The District level Single Window Agency headed by the Deputy Commissioner will henceforth examine all proposals in all sectors including Industry, Tourism, IT, BT, Agro Food Processing & Infrastructure with investment of up to Rs.3.0 Crores. Separate orders detailing the powers, authorities and functioning of the above committees will be issued.

In order to achieve the objectives as set out in this policy and to ensure that the strategy/approach detailed in this policy is implemented successfully, the Government offers the following incentives and concessions for new investments made in industrial sector on or after 1st April 2001. For the purpose of various incentives and concessions as detailed hereunder the State has been classified into four Zones namely -

The details of classification under various Zones are given in Annexure-1.  

a]  The Government will provide subsidy to all new Tiny/Small Scale Sector Industries. The details of investment subsidy available to Tiny/Small Scale Sector Industries in different Zones will be as follows.  

[b] Investment Subsidy for Industrial Units making new Industrial Investments under Expansion, Diversification & Modernisation:

      Investment subsidy as per Para 1 [a] would also be available to all existing Tiny and Small Scale units undertaking expansion, diversification or modernisation without exceeding prescribed monitory ceiling as applicable to new tiny/Small Scale industrial units subject to the condition that grant of this facility as per this order shall be available only on additional investments made.

[c]  Additional subsidy to special category of entrepreneurs :

      In addition to the subsidy at 1 [a] above additional subsidy to an extent of 5% of the value of fixed assets subject to a ceiling of Rs.1.00 lakh shall be available for tiny/Small Scale units, except in zone-A, in respect of entrepreneurs belonging to Scheduled Castes & Scheduled Tribes (SCs/STs) and Women Entrepreneurs. This additional subsidy will however, be within the over all monitory ceiling indicated in Sub Para [a] of Para-1. Entrepreneurs who are covered under more than one special category as defined above will be eligible for special subsidy only under one of the special categories.

Entry Tax Exemption will be extended to all new industries including large and medium scale industries as detailed below :

a]   During the implementation of the project on production machinery and equipments directly involved in the production process, subject to the condition that the benefit will be available for a maximum period of 3 years from the date of commencement of project implementation.

b]   On commencement of commercial production [during the operational phase], on raw materials, components, semi-finished goods, sub-assemblies, consumables [excluding petroleum products like petrol, diesel, furnace oil, naphtha and LSHS used as consumables or for captive power generation units]. Entry Tax exemption will be available as indicted below:

A.   FOR LOAN DOCUMENTS: All new industries and also such units taking up expansion, diversification and modernization will be eligible for 100% exemption of Stamp Duty and reduction of Registration charges to Re.1 per Rs.1000 in respect of loan agreements, credit deeds, mortgage and hypothecation deeds executed for availing financial assistance from State Government and/or State Financial Corporation, Industrial Investment Development Corporation, Nationalised Financial Institutions, Commercial Banks, LRRBs, Industrial Co-op. Banks, KVIB/KVIC Karnataka State SC/ST Development Corporation, Karnataka State Minority Development Corporation and other institutions which may be notified by the Government from time to time. This exemption from payment of Stamp Duty & Concessional Registration Charges will also be available for loan documents in respect of working capital facilities to be availed by all new industries, both in respect of the working capital loan sanctioned at the time of commencement of commercial production and also for renewal/enhancement.

B.   FOR REGISTRATION OF LAND/SHED: The concession of Stamp Duty exemption and reduction of Registration Charges will be available for lease deeds, lease-cum-sale and absolute sale deeds executed by industrial units in respect of industrial plots, sheds, flats allotted by State Infrastructural Developmental Agencies viz. KIADB, KSSIDC, KEONICS, KSIIDC etc. and industrial co-operatives. Industrial workers housing tenements and residential plots developed by KIADB, KSSIDC and KEONICS will also be eligible for concession of stamp duty exemption and reduction of registration charges.

The concessions will be as under:

C.   REGISTRATION OF LAND-SHEDS ALLOTTED BY GOVT. AGENCIES WILL BE AT ORIGINAL ALLOTMENT PRICE:

       The registration of lease, lease-cum-sale and absolute sale deeds shall be registered on the basis of allotment price of plots, sheds, flats allotted by State Infrastructural Developmental Agencies viz. KIADB, KSSIDC, KEONICS, KSIIDC and industrial cooperatives. The above concession shall also be available at the time of registration of final sale deed in respect of lands, sheds, flats, housing tenements and residential plots after the expiry of lease period.

D.  For registration of lands allotted by KIADB to KSSIDC and other similar Government agencies for purposes of developing industrial estates, industrial sheds/plots or other common facilities 100% exemption from stamp duty and registration charges will be available in all Zones.

E.   KSIIDC is the designated agency of the Government to plan and formulate proposals for infrastructure development projects after assessing the need in different sectors/areas [viz., Industrial Parks/Townships, Airports/Ports and such other areas as may be specified by government.] for consideration of Government in concerned Depts. For registration of lands procured by KSIIDC from KIADB and other similar Government agencies either on lease basis or otherwise for purposes of developing industrial estates, industrial sheds, plots, office complex or other common facilities 100% exemption from stamp duty and registration charges will be available in all Zones.

F.   KEY PROJECTS IN CORE AREAS: In order to give an impetus for growth of certain sectors of industries for which the State has significant resource/ technology base, 100% exemption from payment of stamp duty and registration charges will be available to the industries listed in Annexure 2. These industries will be classified as key projects in core area and this benefit will be available to such industries set up in Zones B, C & D.

G.  SECTION-29 UNITS: Industrial units which are taken over by industrialists/ entrepreneurs under Section 29 of the State Financial Corporation Act from KSIIDC or KSFC would be eligible for exemption from payment of stamp duty and registration charges as indicated in the Table in Para 3-B based on the size and location of the industry.

The following benefits will be extended to Export Oriented Units [EOU]:

I.    100% Export Oriented Units [EOUs]:

A.   Investment subsidy as indicated in Para 1 [a] above.

B.   Exemption from power cut

C.   Exemption from payment of Entry tax and ST payable on purchase of raw materials, components, packing materials, consumable, capital goods, spares, material handling equipment, intermediates, semi finished goods and sub assemblies from a registered dealer. While the Entry Tax exemption will be available for the items procured from within the State or outside, the ST exemption on purchase of various items will be available provided the procurement is from a dealer located within the State.

II.    Units other than 100% EOUs with an export effort of a minimum of 25% of the value of total turnover:

A.   Investment subsidy as detailed in Para 1 [a] above.

B.   Refund of Entry Tax and ST payable on purchase of raw materials, com-ponents, packing materials, intermediates, semi finished goods and sub assemblies from a registered dealer. While the Entry tax refund will be available for these items procured from items within the State or out-side, the ST refund on purchase of various as detailed above would be available provided the procurement is from dealers located within the State

III.   In case of Sub Para II above, the Entry tax and ST on purchases would be payable on raw materials, components, packing materials