Package Scheme of Incentive – 2019

Preamble- In order to encourage the dispersal of industries to lesser developed areas of the State, the Government has been giving package of incentives to New Industrial Units / Expansion / Diversification Units set up in the developing regions of the State since 1964 under a Scheme popularly known as the ‘Package Scheme of Incentives.’

The Package Scheme of Incentives, introduced in 1964, has been amended from time to time. The Scheme as amended last is commonly known as the “Package Scheme of Incentives- 2013” (PSI-2013) and was operative since the 1st April, 2013.

The State Government has recently declared the New Industrial Policy – 2019 to ensure sustained industrial growth through various innovative initiatives so as to further improve the conducive industrial climate in the State and to provide global competitive edge to the industries in the State. The policy envisages grant of fiscal and non-fiscal incentives to the Industrial units with a view to help the units achieve higher, sustainable and inclusive economic growth with emphasis on balanced regional development and employment generation through greater Private and Public Investment in industrial sector. It is therefore necessary to amend the Package Scheme of Incentives-2013, in the light of the Industrial Policy-2019 and introduce a new “Package Scheme of Incentives 2019“, containing details of eligibility criteria, quantum of incentives and monitoring mechanism for administering the incentives during the period from 1st April, 2019 to 31 March, 2024 or till the new Package Scheme of Incentives comes into force.

1. Period – The PSI – 2019, as may be amended by the Government from time to time, shall remain in operation from the 1st April 2019 up to 31st March, 2024 or till the new Package Scheme of Incentives comes into force.

2. Coverage – The following categories of Eligible Industrial Units in the Private Sector, Cooperative Sector, State Public Sector/Joint Sector shall be eligible to be considered for incentives under the PSI- 2019

 i)  Industries listed in the First Schedule of the Industries.

ii)  Manufacturing Enterprises as defined in the MSMED Act, 2006.

iii) Information Technology Manufacturing Units registered with the Directorate of Industries or the MIDC or the Development Commissioner, Santa Cruz Electronic Export Processing Zone (SEEPZ) or Software Technology Parks of India (STPI) in the State.

iv) Bio-technology Manufacturing Units as specified by the Government from time to time.

v)Mechanized, Food / Agro Processing Industries in the following sectors:

• • Dairy, Fruit and Vegetable Processing.
  • Grain Processing.
  • Fish / Meat / Poultry Processing.
  • Consumer foods including Packed foods.
  • Non-alcoholic beverages from fruits and vegetables.

(Note: Only secondary and tertiary agro and food processing units shall be eligible for incentives. This condition will not be applicable to processing /manufacturing units set up by Farmer’s Producer Companies and the units set up in government assisted Food Parks and carrying out primary processing activity also)

Note:

• The units manufacturing the following products shall not be eligible for incentives under PSI – 2019 :

(a) Beer, liquor manufacturing industries.

(b) Cigarette, bidi or any other tobacco containing products, manufacturing industries

(c)  Gutka and pan masala manufacturing industries.

(d) Any other product(s) banned by Central / State Government.

• Units manufacturing all types of textiles including cotton ginning and pressing, sizing, spinning, weaving, bleaching, dying, mercerizing etc. covered under the Textile Policy – 2018 -23 of Maharashtra State shall be eligible only for incentives other than those offered by the other State Government Agencies.

3. Classification Of Areas for PSI – 2019

• Group A : Denotes industrially developed areas.
• Group B: Denotes areas where some industrial development has taken place, but are less developed than the areas under Group A.
• Group C: Denotes areas, which are less developed than those covered under Group B.
• Group D: Denotes the lesser-developed areas of the State, not covered under Group A/ Group B/ Group C.
• Group D+: Denotes the least developed areas, not covered under Group A/ Group B/ Group C/ Group D.
• No Industry District: Denotes District having no industries viz Hingoli and Gadchiroli.
• Naxalism Affected Area: Denotes area affected by naxalism, as described in GR No NAVIKA-2008/C.R. 209/Ka. 1416 Dated 31.5.2009 (Annexure II) or as may be amended by the Government.
• Aspirational Districts: defined by Government of India viz. Washim, Gadchiroli, Osmanabad and Nandurbar.

4. Promotion of Thrust Sectors – With a view to steer industrial development towards high-tech emerging sectors and generate employment, the State Government has identified following thrust sectors. Thrust sectors shall mean and include :

• Electric Vehicles (Manufacturing, Infrastructure and Servicing)
• Aerospace and Defence Manufacturing
• Industry 4.0 (Artificial Intelligence, 3D Printing, Internet of Things and Robotics, Nanotechnology, among others)
• Integrated Data Centre Parks (IDCP)
• Textile Machinery Manufacturing
• Bio technology and Medical and Diagnostic Devices
• Agro & Food Processing (Secondary and Tertiary Food Processing units)
• IT & IT Enabled Services (ITeS)
• Electronic Systems Design & Manufacturing (ESDM) and Semiconductor Fabrication (FAB)
• Logistics & Warehousing
• Green Energy/ Bio Fuel Production
• Sports and Gym Equipment Manufacturing
• Nuclear Power plant equipment manufacturing
• Mineral / Forest based Industries

5. Existing Unit

• Unit set up & is in production prior to 1 st April 2019.
• Has been granted Eligibility Certificate (EC) or availed any incentives under earlier schemes.
• Filed a valid application for grant of EC under PSI-2013 before 31st March 2019.

6. New Unit

Unit set for the first time in any taluka where there is no existing unit by the said entity provided :

• It is not an existing unit.
• At least one of the effective steps completed on or after 1 st April 2019 for setting the unit.
• It is not formed as a result of re-establishment mere change of ownership, change in constitution, reconstruction or revival of an existing unit.

7. Expansion / Diversification

An investment shall be regarded as expansion project or a diversification project provided it satisfies :

• Additional FCI >= 25% of Gross FCI (minimum FCI of Rs. 5 Crs for non MSMEs & 25 Lacs for MSME’s)
• Increase of existing installed capacity by at least 25%.
• increase the employment in non-supervisory category at least to the extent of 10%.
• 80 percent of such additional employment should be from amongst local persons.

8. Effective Steps

• Effective possession of land/shed/gala, having a permission for industrial use.
• Registration, in case of firm/LLP/Company/Trust/Society/Co-operative society.
• LOI for IT/BT manufacturing Units.
• In case of MSMEs- Consent to Establish from MPCB
• Other than MSMEs- Copy of Industrial Entrepreneur’s Memorandum (IEM)

9. Fixed Assets

It shall mean & include :

• Land / Area in effective possession
• Building including administration bldg, resi. Quarters & all facilities regd for mfg. process
• Plant & Machinery including tools & equipments necessary for sustaining the working of the eligible unit
• Cost of development of the location of the eligible unit
• Installation charges & pre-operator exps.
• Royalties paid on account of Technology transfer & Technical know-how including cost of drawings and know-how fees. (Up to max 10% of Capital Cost)
• Deposits with MSEB/MIDC or any other Govt. Agency
• Research and Development- R & D units including stand-alone facilities of eligible industrial units shall be considered as part of FCI for the purpose of availing fiscal incentives up to 25% of FCI (max Rs. 100 cr)
• Investment in captive power plant including solar captive power plant will not be considered as a part of admissible FCI for the purpose of incentives.
• Cold storages which are a part of integrated manufacturing process.

10. FINANCIAL INCENTIVES FOR MSMEs.

• MSMEs shall be construed as per their definition in the Micro, Small and Medium Enterprises Development Act, 2006. (MSMED Act, 2006) published vide GoI’s extraordinary gazette dated 30th September, 2006 and Units outside the definition of MSMEs published vide GoI’s extraordinary gazette dated 30th September, 2006, with total Gross Fixed Capital Investment (FCI) upto Rs. 50 crores.

Note: In case of expansion / diversification project, the sum total of Gross FCI of existing unit and Gross FCI of proposed expansion / diversification project should be upto Rs. 50 crore for qualifying for incentives under this category.

• New MSME Units and Small Industries will be eligible for a Basket of  incentives.
• The total quantum of incentives will be linked upto the percentage actual eligible Fixed Capital Investment as per the Taluka category mentioned in table below
• The incentives will be granted to the units on first-cum-first serve basis.

MSME/Fixed capital investment = 50CR

Taluka/Area	Celling as % of Fixed Capital Investment	No. of Years
1	2	3
A	Nil	NIl
B	30%	7 Year
C	40%	7Year
D	50%	10Year
D+	60%	10Year
Vidarbha, Marathwada, Ratnagiri, Sindhudurg & Dhule	80%	10Year
Aspirational Districts (Osmanabad, Gadchiroli, Washim and Nandurbar) No Industry Districts, Naxalism Affected Area	100%	10Year

Provided that

• The incentives mentioned in heading Additional Incentives for Strengthening MSMEs (Out of Basket)will also be available to MSME Units in Group A and B areas as well.
• The quantum of incentives for food/agro processing units, eligible green energy/bio-fuel manufacturing units & units carrying out industry 4.0 activity  will be 20% over & above the limits mentioned above & will get 2 more years of eligibility to avail incentives. However, in any case total incentives admissible to the eligible unit will not exceed 100 % of eligible FCI. 

11. Expansion / Diversification Units:

• Existing / New Micro, Small and Medium Manufacturing Enterprises and Small Industries (including Manufacturing IT/BT) Units, qualifying as Expansion / Diversification Units.
• It also be eligible to get the incentives for Expansion / Diversification, equivalent to 80% of the incentives admissible for New Units.
• The eligibility period for availing of the incentives will however be reduced by one year than that admissible to a New Unit in case of Expansion / Diversification Units.

12. Financial Incentives to MSMEs & Small Industries

Type of Subsidy	To whom	Quantum of subsidy
Industrial Promotion Subsidy (IPS)	All eligible New/Expansion units	100% Gross SGST payable on 1st sale of eligible products billed and delivered within Maharashtra
Interest Subsidy	All eligible New Units	5% pa on term loan (not exceeding the bills paid for electricity consumed during the relevant year)
Exemption from Electricity Duty (Out of Basket of Incentives)	All eligible New Units (except units in Grp A&B areas)	Exempt from payment of electricity duty during applicable eligibility period
	In Grp-A &B areas	Only eligible 100% export oriented units, IT/BT manufacturing units will be exempted from payment of electricity duty for a period of 7 years
Waiver of Stamp Duty	All eligible New/Expansion Units (except units in Grp-A&B areas)	Exempt from payment of stamp duty for acquiring land (including assignment of lease rights & sale certificate) & for term loan purposes.
	In Grp-A&B areas	IT/BT manufacturing Units in Public IT/BT Parks:100% -IT/BT manufacturing Units in Private IT/BT Parks:75%
Power Tariff Subsidy	Eligible New MSME & Small Industries in Vidarbha & Marathwada, North Maharashtra & districts of Raigad, Ratnagiri & Sindhudurg in Konkan Region, No Industries Districts, Naxalism Affected Areas & Aspirational Districts	Re.1/- per unit for a period of 3 years from the date of commencement of commercial production for energy consumed & paid.
	Other Area	Rs.0.50 per unit for a period of 3 years from the date of commencement of commercial production for energy consumed & paid.

Additional Incentives for Strengthening MSMEs (Out of Basket):

Expansion projects of MSMEs and Small Industries will be eligible for following incentives.

Type of Subsidy	Quantum of subsidy
Technology Upgradation	5% subsidy only on additional capital equipment acquired for Technology upgradation, subject to maximum of Rs.25.00 lakhs
Quality Certification	75% subsidy on expenses incurred –Limited to Rs.1.00 Lakh
Cleaner Production Measures	25% subsidy on additional capital equipment acquired for cleaner production measures–Limited to Rs.5.00 Lakhs.
Patent Registration	75% subsidy on expenses incurred- Limited to Rs.10.00 lakhs for National Patents & Rs.20.00 lakhs for International Patents.
Water Audit	75% of cost of water audit limited to Rs.1.00 lakh
Energy Audit	75% of cost of energy audit limited to Rs.2.00 lakh
Conserve/Recycle Water	50% of cost of capital equipment-limited to Rs.5.00 lakhs
Improving Energy Efficiency	50% of cost of capital equipment-limited to Rs.5.00 lakhs
Credit Rating	75% of cost-limited to Rs.40,000/-

13. Industrial Incentives in Maharashtra for Large Scale Units/ Project/S LSU under Package Scheme of Incentive 2019:

Taluka / Area Classification	Minimum Qualifying Fixed Capital Investment (INR crore)	Minimum Direct Employment (number of people)	Maximum Ceiling of basket as % of FCI	Incentive period in years
1	2	3	4	5
A & B (Only LSI)	750	1000	25%	7
C	500	750	40%	7
D	250	500	60%	7
D+	150	400	70%	7
Vidarbha, Marathwada, Ratnagiri, Sindhudurg & Dhule	100	300	80%	9
No Industry Districts, Naxalism Affected Areas and Aspirational Districts	100	250	100%	9

Provided that

• Large Scale projects based on employment criteria shall be required to maintain the qualifying direct employment (on the roll and in premises of the eligible Unit) throughout the year and 80% of such employees should be local persons. If the employment criteria is not maintained in any month of the year for which Industrial Promotion Subsidy is claimed, then Industrial Promotion Subsidy shall not be admissible for such year.
• Minimum Direct Employment prescribed in the table above should be created within a period of two years from the date of commencement of commercial production.
• The investment in Captive Power Plant including captive solar power plant shall be considered for determining the qualifying criteria mentioned in above table for eligibility as Large Scale Project. But investment in captive power plant will not be incentivized (However Investment in captive power plant will be limited to 20% of total project cost).

Expansion / Diversification Units: Units will be eligible to get the incentives for Expansion / Diversification, equivalent to 80% of the incentives admissible for New Units. The eligibility period for availing of the incentives will be reduced by one year than that admissible to a New Unit in case of Expansion / Diversification Units.

14. Financial Incentives to LSI & Special LSI:

Type of Subsidy	To whom	Quantum of subsidy
Industrial Promotion Subsidy (IPS)	All Eligible new & Expansion/Diversification LSI	50% of Gross SGST payable on 1st sale of eligible products billed & delivered within Maharashtra.
	All Eligible new & Expansion Special LSI (except units in Grp-A&B areas)	40% of NET SGST paid on 1st sale of eligible products billed & delivered within Maharashtra
Exemption from Electricity Duty	All eligible New Units (except units in Grp A&B areas)	Exempt from payment of electricity duty during applicable eligibility period
	In Grp-A &B areas	Only eligible 100% export oriented units, IT/BT manufacturing units will be exempted from payment of electricity duty for a period of 7 years.
Waiver of Stamp Duty	All eligible New/Expansion Units (except units in Grp-A&B areas)	Exempt from payment of stamp duty for acquiring land (including assignment of lease rights & sale certificate) & for term loan purposes.
	In Grp-A&B areas	IT/BT manufacturing Units in Public IT/BT Parks:100% IT/BT manufacturing Units in Private IT/BT Parks:75% Large Projects & Mega & Ultra Mega Projects:50% for first lease/conveyance deed only.

15. Mega Projects / Ultra Mega Projects: Industrial Units satisfying the minimum threshold limits of Fixed Capital Investment OR Direct Employment prescribed in the following table shall be classified as Mega Projects / Ultra Mega Projects.

Taluka / Area Classification	Minimum Qualifying Fixed Capital Investment (INR crore)	Minimum Direct Employment (number of people)	Ceiling  as % of FCI
1	2	3	4
A & B (Only LSI)	1500	2000	The template for quantum of incentives for Mega Projects and Ultra Mega Projects shall be decided by the High Power Committee under the chairmanship of the Chief Secretary, Government of Maharashtra. However, the Cabinet Sub Committee for mega projects, under the chairmanship of the Chief Minister of Maharashtra will have the powers to sanction customized package of incentives and even offer special / extra incentives for prestigious Mega Projects/ Ultra Mega Projects, on a case to case basis with recommendation of High Power Committee.
C	1000	1500
D	750	1000
D+	500	500
Vidarbha, Marathwada, Ratnagiri, Sindhudurg & Dhule	350	500
No Industry Districts, Naxalism Affected Areas and Aspirational Districts	200	350
Ultra- Mega Industrial Units (Entire State)	4000	4000

• The investment in Captive Power Plant including solar power plant would be considered for determining the qualifying criteria for eligibility as Mega Project /Ultra Mega Project. But, shall not be incentivized (However Investment in captive power plant will be limited to 20% of total project cost).
• If Ultra-Mega/ Mega projects is based on employment criteria, Minimum Direct Employment to be generated  within a period of two years from the date of commercial production. 80% of the employment to be  Local.
• The projects based on employment criteria have to maintain the qualifying direct employment on rolls of the company throughout the year. If the employment criteria is not maintained for any period of the year, then Industrial Promotion Subsidy shall not be admissible for such year(s).
• The financial refunds / incentives to an industrial units from all sources put together shall not exceed admissible Fixed Capital Investment as per respective Taluka category.

16.Yearly Cap for the Package Scheme of Incentives 2019

The amount of incentives to be disbursed to the MSMEs, LSI, Special LSI and Mega / Ultra Mega Units every year will be limited to the total quantum of incentives divided by the number of years. As per the applicable Eligibility period with the provision of carrying forward the surplus differential between the actual sanctioned amount for a given year and the yearly disbursement limit.  Deficit differential will not be carried forward.

Disclaimer: This article is based on the understanding and interpretation of author and same is not intended to be a professional advise.