Himachal – The New Industrial Hub in India
Contrary to common perception, Himachal is now an industrial giant.
An investment of US$ 4 billion (Rs. 17000 crores plus) is being done only by 6679 industries registered during the last 3 years only Some major players: Cadbury, TVS Motors, TVSE, Wipro, WeP Peripherals, P&G, Torrent, Ranbaxy, Hindustan Lever, Wockhardt, LG, Bajaj, Lee Cooper, Johnson & Johnson, Fedders & Lloyed, Colgate Palmolive, Celebrum, Samtel PC Manufacturers are now moving in with the abolition of inverted duty regime.
Sales Tax Incentives
No Sales Tax on IT products [Zero CST with Form C (sales to dealers in other States) and D (sales to Government organizations)]. Extension of this time limit to the year 2012 is under active consideration of the Government.
1% CST without Form C/ D for institutional sales.
Input Tax Credit (ITC) for any kind of Inter State or Intra State sales (other than by consignment transfer). So even if an input is not listed in the list of raw materials as per VAT notification, ITC shall be given to the extent input is taxed. So if an input is taxed @ 12.5% and finished product is tax free, ITC @12.5% shall be given on input values.
Savings due to Income Tax and Sales Tax Concessions in Case of PCs & Servers
Institutional sales are likely to be 40% of the total sales (Sales Tax in Himachal Pradesh 1% against 4% CST followed by 4% GST at the point of sales for a factory located in Karnataka or Tamil Nadu) Sale to Govt. Deptts. and factories giving Form C should be at aleast 30% (Sales Tax 0% against 4% in Tamil Nadu and 2% in Karnataka).
The total price advantage on account of Sales Tax only for above two factors would be 0.40 x 0.07 + 0.30 x 0.04 = 0.040 (4.0 % or 3.4% as compared to Karnataka).
Net Income (???) x Rate of Corporate Tax.
Price Advantage due to zero Central Excise Duty for 10 years for PC’s & Servers
Net impact of CVD on imported components is about 9%.
Excise Duty @ 12% on PC manufacturing since February 28, 2006. Thus, a saving of about 3% for a PC company located in H.P. on hardware components only.
Excise Duty @ 12% on OS also. For a P4-HT machine with XPP, OS cost 19.5% of the total machine cost. So the saving in Excise Duty on OS would be 0.12 x 0.195 = 0.0234 or say 2.34%.
Warranty cost for two year’s additional coverage 10% approx. Hence there would be an additional saving of 1.2% on this score Assume labour, value addition and profit components to be 20% approximately equivalent to an Excise Duty benefit of about 2.4%.
Thus, the arithmetical addition of total saving on account of Excise Duty alone would be 8.94% (approximately 8% in real terms).
The total saving in cost only on account of fiscal incentives (not including other minor concessions and Income Tax benefit) shall be 11.4%.
Freight and insurance cost from Chennai / Mumbai to Himachal Pradesh would be 1% (one way).
Incremental freight cost would be 1.5 – 0.5 or say 1%. Add another 0.15% towards cost of extra inventory that one may need to keep in H.P.
Price Advantage Other Items
In case of motherboard and graphics card manufacturers, the value addition may lead to savings due to exemption from Excise Duty ranging from 4% to 6%. The overall savings may still be high (including ST and IT).
High value addition items like optical storage devices, monitors, LCOS, LCD TVs, Chipsets etc. may have very high value addition, leading to savings higher than what has been worked out for PCs and Servers.
25,000 kms of road length in a geographical area of nearly 56,000 square kms. All proposed sites are on or near National Highways Condition of patches of roads lying in other States is being improved in the next few months.
Power surplus State with cheap and stable power supply.
High literacy rate with excellent social indicators.
8500 kms out of 13500 kms metalled road has optical fibre Possibly the highest per KM density in the country. N x 2 mbps connectivity almost everywhere in the State.
STPI, Power Grid Corporation, Airtel, Reliance and BSNL are various options for Internet Connectivity and dedicated BW.
Ranking of States (among all 35 States and UTs)- India Today nation-wide Survey
Himachal has the following positions in various fields:
Field Position Education 1 Health 2 Basic Infrastructure 2 Investment Environment 4 Budget and Prosperity 2 Consumer Market 2 Overall Ranking 3
Why Himachal ?
1. Low capital cost compared to other states.
2. Industry friendly Labour Laws: No notification under section 10 of the Contract Labour Act.
3. Low extent of unionisation. For instance, an industry with 5000 plus workers has no Unions at all.
4. Housing Projects by HIMUDA and some private players (for workers in Baddi) going on.
5. 45 private builders have got themselves registered and 2 have even got license to construct 2128 flats.
6. HIMUDA has acquired 1884 bighas of land for constructing the houses.
7. With amendment in TCP Act also having taken place, all registered builders will also get licenses and the number of flats will become sufficient for the workers and other staff in Baddi.
8. ICD in Ludhiana and very soon in Baddi (approved by the Commerce Ministry) and Chandigarh .
9. Highest Telephone and Mobile density (barring metros).
10. Low crime rate and virtually no industrial unrest (Only two strikes in the last 6 years and that too specific to 2 industries).
11. General permission for 3 shift operation in BPO/ ITES and 2 shift operation for women in hardware also.
12. Good quality of life (old summer capital of India).
13. Top class educational facilities for the children of IT professionals.
14. Excellent road infrastructure.
15. No air-conditioning required.
16. Cool and Salubrious climate far from the madding crowd and just the right kind of environment for microelectronics products. Himachal Pradesh can be a fabrication zone in North India.
17. An ideal location for R&D base of any company.
Availability of Electricity
Normal Tariff : Rs. 2.40 per unit.
Electricity availability in Baddi during 3 hours in the evening at a tariff of Rs. 4.40.
Weighted average of above two figure Rs. 2.72 per unit (including both tiers of tariff).
World standard frequency stability :49.6 Hz. To 50 Hz.
Round the clock power to all consumers.
Voltage regulation (maximum fluctuation + or 3 %) leading to lowest T&D losses in the country.
100 % villages electrified and 100% metering.
95% households electrified (against national average of 40%).
As per high level meeting between CMs, Haryana portion of NH 21-A between Pinjore and Baddi shall be upgraded within a few months. Upgradation of short cut from Chandigarh to Baddi also is being expedited.
Work on upgradation to NH standards for first 10 kms from Baddi (NH-21A) to Nalagarh shall be completed by June, remaining within a few months. Nalagarh to Addowal shall be resurfaced immediately to make the road of highest standards.
Average transit time from these sites to Bangalore / Chennai : approximately 4 days using North-South corridor.
All kinds of transport vehicles are available.
Availability of Labour and Manpower
Universities – 4, IT University 1, Engineering Colleges 5, Polytechnics 7 and ITIs 47. The above mentioned numbers are very high for a small State like H.P.
Nearly 6500 technical professionals churned out every year from the above institutes. More than half of these come from districts / locations surrounding proposed locations in Solan.
Number of graduates, diploma-holders and certificate holders registered in Employment Exchanges in Civil, Electrical and Mechanical branches only is 46930.
This entire database is being shortly hosted on the web as a part of the Job Portal where requisition can be submitted online and issuance of call letters shall be automatic.
Comparative Advantages of H.P. Compared to Neighbouring States.
Proximity to well developed city i.e. Chandigarh / Mohali will be a major plus point for the middle and senior level management of the factory.
Location of an Intra-land Container Depot at Baddi and Chandigarh (in Uttaranchal it is only at Saharanpur, which is far away from Pant Nagar). Location of ICD will improve logistics (particularly for inbound goods).
Availability of skilled workers in abundance (very high numbers of ITIs, Polytechnics, Engineering Colleges).
There are virtually no law and order problems in H.P. and crime occurrence in the area and on way to the proposed locations is much negligible.
Proximity to a well developed airport with 3 flights a day at Chandigarh. If you decide on Raja Ka Bagh, international airport also is nearby.
There is complete tax holiday (both VAT and CST) for 10 years at places as close as 70 kms from Chandigarh.
Advanced level of telecommunication infrastructure with more than 60% of metalled road length having OFC.
Leader in all developmental indices in the country as per an independent survey.
Very low extent of unionisation and virtually no industrial unrest.
Much better condition of roads from Delhi up to Delhi.
Large base of IT companies [keyboards, CRT/ LCD monitors, motherboards (proposed shortly) etc.] for fulfilling supply chain.
Proposed IT parks locations:
IT Industries in Himachal Pradesh
Quite a few such units are in the pipe-line and one of the MNCs has major plans to make LCD Monitors, Keyboards, Motherboards etc.
One more national level company is planning to make UPSs, speakers, SMPS, Fax Modem etc.
Options for SMT also will be available.