Tamil Nadu Industrial Policy 2021

Tamil Nadu Chief Minister Edapaddi K. Palanisami has unveiled the State’s new Industrial Policy 2021 last Tuesday.

The State’s real GSDP has grown at a real compounded annual growth rate of nearly 8% since the previous Industrial Policy in 2014.

The Policy aims to service as a criticial instrument that will help in achieving Tamilnadu’s visison 2023 and will be valid till March 2025. The policy may be periodically revised from time to time.

As a leading industrialized State, Tamil Nadu periodically revises its Industrial Policy to respond to the changing economic scenario and technology; and to offer direction and support for future growth.

The policy is applicable for projects establishing or expanding Industrial units, Industrial parks, R&D projects, warehousing and logistics except those specified in the negative list.

Aim of the Tamil Nadu Industrial Policy 2021:

  • To achieve annual growth rate of 15% in the manufacturing sector during the policy term.
  • To attract investments worth 10 Lakh cr between 2020 and 2025.
  • To create employment opportunities for 20 lakh people by 2025.
  • To increase the contribution of the manufacturing sector to 30% of GSVA by 2030.
  • To provide special incentive package to developers of private industrial parks.
  • The Government is undertaking the construction of 44256 railway over bridges at a cost of Rs. 726 cr. in 2019-20 under the Railway Works programme
  • To develop integrated townships with social infrastructure facilities in the new and existing growth centres and industrial complexes and initially 15% of industrial parks area exceeding 500 acres shall be reserved for social infrastructure.
  • Flexibility in working hours (24*7), employment of women to be provided.
  • Ensure adequate availability of information needed by investors for securing necessary clearances in English/ Tamil.

Incentives to be provided to support projects in manufacturing under Tamil Nadu Industrial Policy 2021:

  • Structured Package for large and above projects
  • Incentives for Sunrise Sector
  • Incentives for Industrial Parks
  • Incentives for R&D Projects
  • Incentives for Logistics Infrastructure
  • Incentives for Foreign Direct Investment
  • Incentives for Sub-Large Projects

For the purpose of administering the incentives, the following four investment commitment ranges have been identified:

Projections creating employment for atleast 50 persons would be eligible for these incentives. The project category shall be determined based on investment in fixed assets made in the above table.

For administering the fiscal incentives, the districts of the state are classified as A, B, C and D categories.

A. Chengalpattu, Chennai, Kancheepuram and Tiruvallur (4 districts)

B. Coimbatore, Erode, Karur, Krishnagiri, Namakkal, The Nilgiris , Ranipet, Salem, Tiruchirappalli, Tirupattur, Tiruppur, and Vellore (12 districts)

C. Ariyalur, Cuddalore, Dharmapuri, Dindigul, Kallakurichi, Kanniyakumari, Madurai, Mayiladuthurai, Nagapattinam, Perambulur, Pudukkottai, Ramanathapuram, Sivagangai, Tenkasi, Thanjavur, Theni, Thiruvarur, Thoothukudi, Tirunelveli, Tiruvannamalai, Villupuram and Virudhunagar (22 districts).

Various projects and the proposed subsidies/ incentives under Tamil Nadu Industrial Policy 2021:

1. Structured Package for large and above projects

Category Benefits/ Conditions
Eligiblity Ultra Mega- A, B and C districts
Large, Mega- B and C districts
Investment Promotion subsidy 1. Full SGST reimbursement for 15 years

2. Flexible Capital subsidy upt to 25% for max 15 years

3. Fixed Capital subsidy- Maximum subsidy of 35%/ 37%/ 40% of Eligible Fixed Assets (EFA)

4. 2% subsidy on turnover for cos having employees above 4000

Training subsidy For Transgenders, specially abled, SC/ STs- INR 6000/- per worker p.m

For others- INR. 4000/-

Land Cost Incentive For SIPCOT eligible projects- 10% concessional rate for A and B dists

50% for C dists for land upto 20% of EFA

Interest subvention 5% as a rebate in the ROI to Ultra- Mega projects upto 4% p.a. for a period of 6 years.
Standard Incentivees 1. EB Tax exemption for 5 years

2. Stamp duty exemption of 50% for A and B dists, 100% for C.

3. 25% subsidy on the cost of setting up nvironmental protection infrastructure subject to 1 Crore.

4. 50% subsidy on Quality Certification (ISO, ISI, BIS, FPO, BEE, AGMARK, and ECOMARK ) subject to 25% on investment to be certified by CA

5. Intellectual Property Incentive of 50% upto 30 Lakhs

2. Special Incentive for Sunrise sectors

Category Benefits/ Conditions
Eligiblity Mega and Ultra Mega- A districts
Large, Mega and Ultra mega- B and C districts
Investment Promotion subsidy Additional capital subsidy of upto 7.5% of EFA (Sunrise Booster)
Land Cost Incentive For SIPCOT eligible projects- 10% concessional rate for A and B dists
50% for C dists for land upto 20% of EFA- For Private Lands, subsidy would be upto 2 crores on the cost of land as per guideline value upto an extent of 50 acres
Stamp duty incentive 100% stamp duty exemption for land obtained from SIPCOT
Quality certification 50% subsidy as certified by CA subject to limit of 1 crore
Training subsidy For Transgenders, specially abled, SC/ STs- INR 6000/- per worker p.m
For others- INR. 4000/-
Intellectual Property Reimbursement of 50% of the expenditure upto 1 Crore
Interest subvention 5% as a rebate in the ROI to Ultra- Mega projects upto 4% p.a. for a period of 6 years with the ceiling limit of INR 20/100/400 lakhs for large, Mega, Ultra- Mega Projects respectively
Standard Incentives 1. EB Tax exemption for 5 years

2. Green industry incentives of upto 1 cr

3. Projects availing the enhanced quality certification/

4. IP incentive shall not be eligible for Quality Certification/ IP Incentive

3. Special Incentives for Industrial Parks

Category Benefits/ Conditions
Eligiblity Mega and Ultra-Mega Industrial Parks- B and C districts (Investments greater than INR. 500 crores)
Capital Subsidy B- 12%, C- 15% of investment in internal infrastructure
Industrial Housing Incentive 10% Housing incentive on the cost of developing the residential facitilies developed within the Industrial park over 10 years subject to ceiling of INR. 10 Crores.
Green Industry Incentive 25% subsidy on cost of capital of setting up of undertakings such initiatives, subject to a limit of INR. 5 Crores.

4. Special incentives for R&D Projects

Category Benefits/ Conditions
Eligiblity Minimum investment of INR. 50 crores in EFA and creation 50 employees
Registered with the Dept of of Scientific and Industrial Research, GOI
Capital Subsidy reimbursement of 50% of cost of purchase or lease of land upto 20 acre upto 50 lakh/ acre
R&D Training Incentive INR. 10,000/- pm for 12 months
The employees shall be UG grad in technology/ sciences with 7 years of work experience or PG grand in tech/ science with 5 years of experience or Doctorate in Sciences/ technology.
Enhanced Quality Certification Incentive 50% of the total cost incurred for obtaining certificate as certified by CA subject to limit of 1 cr for the period of investment
Enhanced Intellectual Property Incentive Reimbursement of 50% of the expenditure upto a max of INR. 1 crore for in house R&D for a patent, copyrights, trademarks and geographical indicators registration upto INR. 5 cr for standalone R&D assets
Standard Incentives EB Tax exemption for 5 years
Stamp duty exemption and Green Industry Incentives for 5 yrs up to 1 cr
SGST refund on Capital goods
Other Conditions Projects availing the Enhanced Quality Certification
Incentive/Enhanced IP Incentive shall not be eligible for Quality Certification/IP Incentive under Standard Incentives, respectively

5. Special incentives for Logistics Infrastructure

Category Benefits/ Conditions
Meaning of Logistics Infrastructure a) Min investment of INR. 50 Cr and Min area of 10 acre land in Multimodal Logistics Park comprising Inland Container Depot (ICD)
b) Cold Chain Facility with a minimum investment of Rs. 15 cr. and minimum area of 20,000 sq. ft, and/or
c) Min investment of INR. 25 Cr in warehousing facility and Min area of 1 Lakh sq ft
Industry status 1. To include Logistics in I A Category for Electricity Tariff applicable to Industries

2. To be eligible for affordable loans from TIIC Eligible for Exemption u/s Sec 37-A under the Land Ceiling Act

3. Facilitating Change of Land Use in Unplanned Areas
Single window clearances for Building and Operational approvals

4. To permit allotment for industrial warehousing facilities

5. Logistics and Warehousing facilities shall be allowed to operate 24 X 7 (3 shifts)

Incentive for Integrated Logistics Parks The Developer of an Integrated Logistics Parks in “B” & “C” Category Districts shall also be eligible for Special Incentives for Warehousing & Logistics as applicable in Special Incentives for Industrial Parks subject to Approved Industrial Park status with relaxation on the non-processing area (including arehousing) of up to 50% of the park area.
Skilled and Capacity Building To impart necessary skills to the youth through TNSDC to ensure the availability of skilled manpower.
Reimbursement of 50% of the training cost to logistics and warehousing projects (in “C” Districts) for technical training upto Rs. 10,000 per employee ( to be claimed as reimbursement within 1 year from commencement)
Apex Skill Development Centre An Apex Skill Development Centre is being established for Transportation and Logistics and an SPV has been registered in Chennai to implement the above plans.

6. Special Incentives for Foreign Direct Investment

Category Benefits/ Conditions
Eligibility FDI Investments in Projects that are Mega and above
Investment Promotion subsidy 40% of EFA
Investment proposals from relocating companies may be provided a higher set of incentives on a case-to-case basis.
Imported Machinery Relocation of industrial projects would include the relocation of machinery from the country of relocation. Thus, new and second-hand machinery can be included under EFA.
Transport Subsidy Reimbursement of 75% of the cost incurred on transportation and logistics towards the relocation of capital goods from the source country to Tamil Nadu within the investment period subject to 10 Crores.
Land Cost Subsidy land allotment will be made at a 10% concessional rate in “A” & “B” districts and at a 50% concessional rate in “C” districts for land up to 20% of EFA
For private land in “C” districts, the condition would be land cost not exceeding 20% of EFA and a cap of Rs. 1 cr., provided that at least 70% of the land is used for manufacturing operations.
R&D Training Institute INR. 10,000/- pm for 12 months
The employees shall be UG grad in technology/ sciences with 7 years of work experience or PG grand in tech/ science with 5 years of experience or Doctorate in Sciences/ technology.
Standard Incentives 1. EB Tax exemption for 5 years

2. Stamp duty exemption and Green Industry Incentives for 5 yrs up to 1 cr

3. Quality Certification Incentive

4. IP Incentive

5. SGST refund on Capital goods

7. Special incentives for Sub- Large Projects

Category Benefits/ Conditions
Eligibility Sub- Large Projects (Invesments 50 crores and above to 300 crores) in EFA and employment of 50 persons.
Capital subsidy Subsidy of Rs. 1 cr upon the completion of the investment within the standard investment period of 4 years “C” Districts can avail a Fixed Capital Subsidy of 5% of EFA upon the completion of the investment, disbursed in equal annual instalments over 5 years.
EB Tax exemption New or expansion manufacturing projects will be given an EB exemption for a period of 5 years on power purchased from TANGEDCO or generated and consumed from captive sources.
Stamp duty exemption 50% Concession on Stamp duty payable on lease or purchase of land/shed/buildings meant for industrial use shall be offered in parks promoted by SIPCOT/SIDCO.
Green Industry Incentive 25% subsidy on the cost of setting up such environmental protection infrastructure upto 1 crore in Safety & Energy Efficiency Solutions, Water Conservation Solutions Greening Solutions and Pollution Control Solutions

Policy implementation: A clear guidance and implementation mechanism of the policy has been laid out to being a business- friendly state. The mechanism covers the following:

i. The procedures for Application and sanction of the various projects

ii. The authority of Inter- Departmental committee,

iii. SIPCOT is mandated to act as implementing and disbursal agency of the incentives.

iv. The mode and procedures of the incentives disbursal mechanism

v. Implementation guidelines (Annexure IV to the policy).

Comments on Tamil Nadu Industrial Policy 2021:

While the state is nearing its Legislative elections, the CM is keen on unveiling various announcements that would be restricted post announcement of election conduct. The progress of these announcements/ Policies would purely depend on the success of the incumbent Government in the fore coming elections. In case of change of the Governance, the Policy would undergo a strategic change as the new Government would always have their own way of Introducing policies/ strategies according to their promises in the election Manifesto.

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