State Policy: Spurring industrial growth in the state1
The state has formulated its policies with a vision to use information technology (IT) as a vehicle for economic development. Its policies for Industrial Development, Exports, Mineral Development, Technology, Agriculture, Film, Tourism and IT aim to:
- Create facilitative administrative systems
- Reduce lead time in setting up of industries
- Remove bureaucratic hindrances
- Provide internationally competitive infrastructure
- Unfetter industries in the conduct of their business
Infrastructure policy: Upgrading the state’s support framework
Under the Road Policy, the government encourages an active role for the private sector in construction and maintenance of roads, bridges, overbridges, underbridges, expressways and highways. A Road fund of nearly US$87 million, set up for the first time by any state in India, seeks to upgrade infrastructure facilities to world-class standards.
The state has set up a US$2.1-million Infrastructure Initiative Fund, the first of its kind in any state, to prepare pre-feasibility studies of infrastructure related major projects to facilitate easy entry of the private sector.
Uttar Pradesh is keen to encourage private participation in the power sector. The state was one of the first to privatise distribution with its project in Greater Noida. The government has taken initiatives to:
- Privatise power distribution in industrial hubs like NOIDA, Kanpur and Moradabad
- Offer power distribution rights to industry associations in industrial areas
- Set up an Independent Regulatory Commission
- Place some of the major generating power stations under a separate generation corporation
Develop industrial estates
The state plans to expand on the success of the NOIDA and Greater NOIDA model and proposes to develop all industrial areas in future as Integrated Industrial Townships. It is also actively inviting private sector participation in infrastructure development. Areas to be developed as industrial corridors are:
- NOIDA-Greater NOIDA-Ghaziabad-Gautam Buddha Nagar
- Agra-Aligarh-Firozabad-Khurja (Bulandshahr)-Kosi (Mathura)
Governance: Facilitating business in the state
The state has introduced a single window registration system to ease the project approval process. Projects with investments of up to US$5.5 million, export-oriented units of NRIs with investments above US$5.4 million and electronic and food industries with investments above US$2.2 million can avail of this facility.
All 100 per cent export-oriented units, which export over 50 percent of production, are declared as public utilities to free them from the threat of flash strikes. The government plans to inspect industrial units only with the prior approval of the District Magistrate.
The state plans to make the entire tax system more progressive to ensure greater profitability for entrepreneurs. Rules, procedures and practices are being liberalised to bring them at par with global standards.
Industrial policy: Incentives for growth
Incentives for investment:
- Subsidy of 20 percent of fixed capital investments for new units in most backward areas
- Subsidy of 15 percent of fixed capital investments for new units in less backward areas
- Subsidy of 10 percent of fixed capital investments for new units in least backward areas
- Special subsidy of US$32,500 for prestigious units with fixed capital investments of over US$5.4 million
- Special subsidy of US$22,000 for pioneer units with fixed capital investments of over US$1.1 million
- Deferment of luxury tax in thrust areas for 5 years
- Octroi rebate on plant machinery and building material for new units for 5 years
- Exemption from minimum power demand charges for sick units during the closure period
- Land at 20 percent of market prices for star hotels
- Special incentives, including electricity, equity participation and other assistance for NRI entrepreneurs
The government aims to increase the penetration of the Internet in the state supported by high-speed telecom connectivity. The state has committed to improve IT infrastructure by developing electronic cities and gateways to global destinations. It offers special incentives to investors to ensure a supportive business climate.
Business Opportunities in Uttar Pradesh
There are several factors that affect evolution of an industry in a particular region:
Policy proactiveness: The policy that a state government adopts towards a sector directly affects its attractiveness for further investments. For example, the Uttar Pradesh State Government provides many concessions for the IT Sector. This has prompted IT majors such as HCL and Cadence to set up software development operations in the state.
Availability of natural resources: Certain industries such as agro-based sectors have a high dependence on availability of natural resources. A large livestock population spurred the growth of the leather industry in the state.
Capability: Availability of good quality manpower is a must for all industries to flourish. Highly cost-effective manpower in the state attracted many players to establish their manufacturing facilities in the state.
Based on an assessment of the above factors, some of the industries with potential for investments and growth in the state of Uttar Pradesh are illustrated below
Key industries: Uttar Pradesh’s industrial core 2
Agro based and Food processing industry
Size: Total sales in the food and beverages sector accounted for 24 percent of sales by industries in the state in 2003.
The state accounts for 22 per cent of irrigated land in the entire country. It has a net sown area of about 16.8 million hectares out of which about 49.3 percent is sown more than once.
One of the largest producers of agricultural commodities in the country, Uttar Pradesh produces 34 percent of the total groundnut, 17.5 percent of rapeseed, 8 percent of fruits and 14 percent of vegetables. It has the largest livestock in the country and its milk production is the highest in the country. It is the largest producer of sugarcane and ranks second in the manufacture of sugar3 .
- Second largest producer of vegetables at 13,030 MT in 2000-01
- 17.8 percent of the total fertiliser consumption in the country in 2001
- Largest cattle population at 11.5 percent of total milch in the country
1As per New Industrial Policy 1998
2Source for sizes (sales) of various sectors: CMIE Prowess data base
3Sugarcane 2002-03, Milk, Wheat, Food grain, Maize, Rice: 2001-02, Potato, Molasses: 2000-01, Alcohol, sugar: 2000.