Baddi goes beyond tax break

End of incentives takes a toll on the industrial hub but shortened red tape and cheap power give it a boost
BADDI: Till less than 20 years ago, Baddi in Himachal Pradesh's Solan district was a non-descript, dusty town. The land was barren, there was hardly any industry, and locals had to look for jobs in the neighbouring Punjab and Haryana states.
Then came the tax holiday in 2003.In less than a decade, Baddi transformed into Asia's largest pharmaceutical hub and one of the biggest industrial centres in north India. But, with the tax holiday coming to an abrupt end in 2010, the scenario here has started to change: investments have fallen and there is talk of whether the Himachal Pradesh government is even interested in retaining the Baddi-BarotiwalaNalagarh (BBN) industrial corridor.
According to industrialists, overall production has also fallen in the belt in recent years. Even the numbers have shown a sharp decline. In 2013-14, the total export from the industrial corridor was Rs 4,400 crore. This fell by Rs 1,415 crore in 2014-15 and was recorded at Rs2,885 crore.
The effect of the tax holiday, when introduced and then withdrawn, is clearly visible when considered in figures. The state received investments totalling Rs 6,000 crore in 2008-2009, a year before the tax holiday was discontinued. However, by 2014-15, this figure dropped to just Rs 730 crore. In spite of the figures painting a glum outlook, industrialists feel Baddi still has its base intact. "Till now, only few smaller players have left Baddi. The rest are staying back because they have invested a lot in building assets. Also, there is no other better place to go. There has definitely been a drop in production after the tax holiday," says Shailesh Aggarwal, president of the BBN Industries Association.
However, according to industrialists, the belt requires a much-needed shot in the arm. They also said there were problems like poor connectivity, exorbitant transportation charges and lack of infrastructure. Rajender Guleria, the former president of BBN Industries Associa tion, says Baddi has two major benefits for the industry-ease of doing business due to minimal bureaucratic red tape and cheap electricity. "But these two factors alone won't be enough to keep the industry tied to Baddi. The government needs to work on rejuvenating the industry by improving connectivity and infrastructure and ending the monopoly of local transporters. Also, a rail link connecting Baddi to the rest of the country is a must," says Guleria.
Under the tax holiday scheme, the industry was offered a complete exemption on excise duty and income tax, and also given other fiscal incentives like investment subsidy for setting up units in Himachal Pradesh. To cash in on tax benefits offered by the government, industrial houses, especially big pharmaceutical companies, set foot in Baddi, bringing along huge investments.
In about four years till 2007, the state had received an investment of over Rs 19,000 crore as 861 medium and large-scale enterprises made Himachal their home and almost all of them put money in the BBN industrial corridor.
Experts say a slowdown in Baddi would not only hurt the local economy, but also cause jitters in the Tricity region as thousands of local people are employed in the industry here. "BBN industry is one of the biggest sources of employment for Tricity. Most people who are employed there prefer to live in Panchkula, Mohali and Chandigarh. So, the growth of industry in Baddi, is not only crucial for the local economy but also for the Tricity," says Guleria.
However, officials of the state's industries department say the end of tax holiday should not be seen as the end of industry in Baddi.Himachal Pradesh principal secretary (industries) R D Dhiman said, "The focus of the government in Baddi is to retain the industry and ensure its growth. Though tax holiday has ended, we are continuing to offer incentives in the form of cheap power and land. We believe that end of tax benefits should not be the end of industry in BBN," he added.