Punjab draft industrial policy: Industry bodies oppose proposed hikes in power tariff, water usage charges

CHANDIGARH Industry associations and industrialists have conveyed their anguish over the proposed hike in power tariff and groundwater extraction charges besides suggesting a slew of changes in other proposed norms while reacting to the draft ‘Punjab Industrial and Business Development Policy-2022.’

The state industry submitted its suggestions after the Punjab industries department put the draft policy in the public domain for feedback from stakeholders. It termed the power tariff hike and water extraction charges as “excessive” in the present competitive business environment. The state government, which has a two-part fixed and variable electricity tariff, proposed to provide power to industry at a variable tariff of 5.50 per unit – up from 5 earlier, for five years with an annual increase of 3%.

Industry body CII has suggested to the government to keep the power tariff at 5.25 per unit with a maximum of 1.5% annual increase thereafter with the formula proposed in policy, as the increase of 10% in tariff will be “very steep”. The total compounded increase is over 28%, it said. Another suggestion was regarding rationalization of fixed power tariff based on industry seasonality identifying the sectors which use air cooling, conditioning, humidification in summers or any other process due to weather changes and lowering of charges to 65% of contracted demand from October 1 to February 28.

PHD Chamber of Commerce and Industry (PHDCCI), Punjab state chapter, has also opposed the power tariff revision with an annual increase. “These levies need to be brought down. Also, fixed charges levied on contracted demand should be reduced from 80% to 60%,” it said. Another industry body, Focal Point United Industrial Association, has asked the government to clarify how the fixed and variable tariffs will be determined and charged and their proportion.

The industries and commerce department, which released the draft policy on September 9 after approval from chief minister Bhagwant Mann, had asked the stakeholders to give their suggestions and comments within 15 days. Over 100 suggestions have been received by the department so far. Besides CII, PHDCCI and Focal Point United Industrial Association, Punjab Pradesh Beopar Mandal, Punjab Factory Association and Textile Manufacturers have also submitted their suggestions. The industry has also termed the proposed groundwater charges as high, stating that these will render it “uncompetitive”. It said that a 50% rebate on these charges should be given for new investments to all micro, small and medium enterprises (MSMEs), thrust sectors and large and anchor units. Another suggestion from the industry bodies was regarding the employment generation subsidy under which only directly recruited employees of Punjab domicile will be considered. “It is impossible in a state like Punjab to get all workers of state domicile,” it said.

CII has strongly suggested restricting domicile condition to 25% of the total employees, besides seeking a defined subsidy reimbursement mechanism and payment after filing quarterly returns. The suggestions were submitted by a delegation led by CII Punjab chairman Amit Thapar last week.

Another suggestion from most industry associations was regarding the reimbursement of net state goods and services tax (SGST) which will be available to manufacturing units only on eligible goods sold for consumption in Punjab. Suggestions were also given regarding a special incentive for the development of border zone areas falling within 30 km of the international border. While one industry association wants the government to extend this incentive to the whole of the border districts, another one has suggested the limit be increased to 40 km.

Industry’s feedback:

Hike proposed in variable tariff for electricity is steep, soften the blow

Levy fixed tariff for electricity on 60% of contract demand instead of 80%

Do away with the domicile clause for employment generation subsidy

Give 50% rebate on groundwater charges for new investments to all MSMEs, thrust, large and anchor units

Extend special incentive for new units within 30kms of the international border to the whole border district border

Consumption clause in SGST reimbursement is restrictive, not possible to track where goods are consumed

Don’t link incentives for expansion & modernization of existing units with a 25% increase in installed capacity

Bring back stamp duty exemption for anchor units