COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

Goa desperate for tax holiday extension

Sandesh Prabhudesai in Panaji

It is a question of one more year! The Goa government is fervently hoping for an extension of the tax holiday scheme till March 1999, which will benefit over 160 large industrial firms. The five-year tax scheme ended on March 31, 1998.

The scheme, declared by former finance minister Manmohan Singh, covered Goa, a few northeastern states, and several union territories.

By now it is also clear that the state government's announcement made in Panaji on March 31 of an extension was a hoax. Goa Industries Minister Luizinho Faleiro, along with the state's two Congress members of Parliament, had declared that the Centre has already extended the tax holiday period by one more year.

"It was a cruel joke played on us," commented one industrialist, who is planning to go into production this year. Many more like him are unable to start their production lines in time due to the acute power shortage in the state.

In spite of such infrastructural hurdles, several industries rushed into symbolic production by March 31 last to avail of the tax benefits. The industry department still shows a figure of 163 large and medium scale industries and around 9,000 small scale units, provisionally registered, in the pipeline.

Apparently, a bill extending the tax holiday had already been prepared by the erstwhile United Front government. Bharatiya Janata Party legislators in the state intend to visit Delhi to plead with the central government to expedite the matter.

The five-year tax holiday has been availed by 962 industries, roping in an investment of Rs 9.3 billion. This includes 904 small scale units which invested Rs 817.7 billion and 58 large and medium scale units with an investment of Rs 8.5 billion.

Prior to the tax holiday, Goa had only 55 large and medium scale industries and 4,558 small scale units. Though the tax scheme began in 1993, it took two long years for the Goa government to actual gain from it. The state needed to prepare the minimum infrastructure facilities such as industrial estates. It is still struggling to provide better roads while the rail link became operational only in January this year with the start of the Konkan Railway.

When the scheme began from April 1, 1993, seven to eight big industries set up projects in Goa in the first two years, while over 400 local entrepreneurs jumped set up small units. The number suddenly zoomed to 15 big projects in 1995-96, roping in an investment of around Rs 4 billion.

Probably due to worsening power situation since then, the response suddenly dropped to only five more units in 1996-97, with a meagre investment of around Rs 350 million.

The projects includes over 25 multinationals, mainly in the field of pharmaceuticals, electronics, and industrial accessories. Seven projects are being set up by non-resident Indians, followed by Germany with units of Hoechst, Benchemie, Bosf group, and Siemens. German firms account for 39 per cent towards investment here.

United States-based multinational corporations like Kodak, Richardson Vicks, and Essef Corp have also come in, though their contribution to the total foreign investment amounted to only eight per cent.

Firms from the United Kingdom, Portugal, Australia, Luxembourg, Korea, Switzerland, Canada, the Netherlands, Hong Kong, and Taiwan have also been attracted to Goa during this period, mainly to set up industrial accessories in steel, aluminium, and plastics.

Though the power situation has worsened over the years, 23 big companies have "officially" begun production as a symbolic gesture to avail the tax holiday facility. But they are still waiting for the power situation to improve before going in for full-fledged production.

One private, mini power project of 50 mw, coming up shortly, cannot save the state since the total requirement has reached 445 mva while Goa presently gets only 190 mva from the national grid.

Industry also seems unenthusiastic about the new open sky policy for private power producers announced in Panaji last month, since no government guarantee is assured. "Having your own captive power generation facility is the best option," says Sangya Shenga, a director on the industries department.

She admits that power scarcity is the major hurdle, but fails to assure when would it improve. Industrialists also complain about water shortage, lack of transport and road conditions, she confesses.

All the projects in pipeline may not be able to start production this year. But if the tax benefit scheme is extended by another year, a few industries like the Rs 5.2 billion automobile parts project of Taksid Kalyani, and the Rs 300 million Hindustan Coca Cola's project will certainly benefit.