The Hindu Business Line : Himachal woos pharma majors with tax sops

THIS summer, the major draws in Himachal Pradesh for corporate India may not be the pleasure spots, as quite a few are headed to the hill State solely for investment purposes.

Lured by the tax sops on offer as part of the Himachal industrial policy, some of the big names in the country are cutting a swathe towards locations like Baddi, some 50 km off Chandigarh, and Kalaamb, a similar distance from Ambala.

The State is looking at an annual investment to the order of Rs 4,000 crore in the coming years.

The industry-specific concentration is noticeable in the pharmaceuticals sector, with Ranbaxy and Morepen having put up their plants already.

Close on their heels are Torrent, Zydus Cadila, Alembic (all from Gujarat), Dr Reddy's and Cipla.

Some 240 provisional registrations have been made by industries and the Himachal Government is pinning its hopes on at least half of them coming good.

Speaking to Business Line, Dr Rajinder Chauhan, Industrial Advisor to the State's Department of Industries, said that the State had moved up in reckoning as a strategic destination for companies in sectors as varied as pharmaceuticals, food processing, consumer care and engineering.

To that extent, the State's industrial policy, with its share of tax incentives, has been a success, he added.

"Some of the industrial clusters like Baddi, Barotiwala, Nalagarh, Kalaamb and Paonta match the growth needs of these companies on a long-term basis as a window to the northern Indian markets. We are looking at 90 per cent conversion of the provisional investment registrations leading to an annual investment of Rs 4,000 crore."

Getting left behind in this scramble are destinations such as Gujarat, despite showcasing Kutch with its tax holiday. One of the early birds to fly out was the Morbi-based Ajanta India Ltd.

Though Gujarat has managed to draw a number of edible oil refineries in the country to put up new plants in Kutch district, by offering a plethora of tax sops, clearly it seems no match for the Himachal initiative, especially in the pharmaceuticals sector.

"The value addition in the pharmaceutical sector being high, the actual excise on finished goods is much more than the excise Modvat that one gets on raw material purchase. The extra margins on account of the Income-Tax sops lead to positions where companies can have healthier balance sheets. This may be why many pharma majors are making a bee line for Himachal," said an industry analyst.

The sops on offer in Himachal include 100 per cent excise duty exemption for 10 years, 100 per cent Income-Tax exemption for five years, followed by 30 per cent for the next five years.

There is also sales tax deferment for five years, Central sales tax at one per cent for 10 years and power at Rs 2.5 per unit.

Big banners moving to Himachal include Colgate Palmolive, Pidilite Industries, Samsung, Bajaj Electricals and Dabur.

According to Mr Ruchir Modi, Head of HRD and Corporate Communications, Torrent Pharmaceuticals Ltd, the Ahmedabad-based company is going ahead with a project to put up a Rs 80-crore plant in Baddi.

And it would be the company's initial investment for a 250-crore tablet plant, as there is scope for further investment in Himachal, he added.

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