Maharashtra tweaks integrated industrial area policy

Maharashtra chief minister Devendra Fadnavis-led government decided to amend the policy in order to compete with states such as Tamil Nadu, Gujarat and Karnataka. Photo: Abhijit Bhatlekar/Mint

Mumbai: The Bharatiya Janata Party (BJP)-led government in Maharashtra on Wednesday announced a number of changes to the state’s Integrated Industrial Area (IIA) policy to boost investment and employment generation.

The Maharashtra cabinet decided to amend the IIA policy, adopted in 2013, with the aim of competing with states like Gujarat, Tamil Nadu, and Karnataka which, according to the state’s industry department, are luring away investors due to “more attractive and business-friendly policies”.

The most significant change in the policy is that the area that can be now be declared as an integrated industrial area has been revised to 20 hectares from 40 hectares.

“Now, a project which has only 20 hectares under its possession including a special economic zone (SEZ) can be declared an IIA by completing other necessary formalities. Also, the condition for a mandatory 24-metre-wide entry road to an IIA has been relaxed to 12 metres now,” said an industry department official who did not wish to be named.

The 2013 IIA policy was adopted to offer an exit route to SEZs that failed to take off for various reasons, including hurdles to acquiring land, the economic slowdown and changes in the tax structure for SEZs.

While the Devendra Fadnavis-led government has retained the 60% for industrial use and 40% for commercial, residential, and infrastructure facilities use provision, it has empowered the industry department to tweak the policy to facilitate what the industry official termed as “cross-use” of these areas.

“The purposes not currently included in the industrial activity in 60% of the land can be added later on if the industry department permits and if the promoter has obtained the necessary legal, environmental, and security clearances and has provided the necessary infrastructure. A high-powered committee under the industry department secretary can approve these changes as and when necessary,” the official said.

He admitted that this was a “grey area” in the policy that could be interpreted to mean “non-specified” use of 60% land allocated for industrial purposes, including for “commercial and residential purposes”.

The change is likely to trigger significant real estate activity, both in commercial and residential sectors.

An expert on urban development policy and a former Maharashtra bureaucrat who did not wish to be named said this was “clearly a back door entry to the realty sector in areas earlier earmarked for industrial purposes”.

“While I was not surprised by the arguments given in favour of adopting the IIA policy in 2013 to bail out SEZs since a large amount of industrial land was locked up in non-starter projects, the changes now signal an olive branch to the realty sector. The policy, on the face of it, looks like an exercise to unlock industrial plots for industrial activity but it is open to liberal interpretation for non-industrial use,” the expert said.

He compared the changes in policy to similar tweaks in Development Control Rules (DCR) during the early 2000s that facilitated conversion of large chunks of textile mill land in Mumbai into commercial zones for putting up malls and multiplexes.

According to the industry department official cited above, changes in the IIA policy were thought necessary after the policy evoked a “lukewarm response” since 2013.

“In contrast, the integrated special township policy proposed and implemented by the urban development department has evoked a better response because it offers better concessions and incentives. For instance, the requirement of 40 hectares to declare an IIA was thought to be impractical given the difficulties in land acquisition. Between 2013 and 2018, there have been only two or three proposals for IIA which proves the policy has been a failure in its current form,” the official said.

The incentives mooted now include waiver of 50% of the stamp duty on the first agreement between the promoter and the buyer of a plot. The Maharashtra Industrial Development Corporation (MIDC) charges 1% of the ready reckoner rate of the land as development charges for IIA promoters. Now, the MIDC will give a 50% waiver on this duty as well. The promoters have also been allowed to set up captive power plants.

The changes in the policy, according to the expert cited above, are likely to benefit SEZs which have been denotified or are in the process of being denotified.

In January, the state government offered a similar exit route under the IIA policy to the Mukesh Ambani-promoted Navi Mumbai SEZ Pvt. Ltd where government agency City and Industrial Development Corporation (Cidco) is a partner. However, in the case of the Navi Mumbai SEZ, the government has allowed the promoters to use 15% of the total land for residential purposes and 85% for industrial.

The industry official said the change in the policy was specifically aimed at those SEZs which were proposed and approved between 2006 and 2012.

“This was a boom time for SEZ proposals and Maharashtra was at the forefront of receiving such proposals. But many of them were proposed and sanctioned indiscriminately. As a result, they could not sustain and later changes in the tax structure for SEZs as well as global recession posed challenges before them,” the official added.