Hails LG Sinha for securing J&K IDS 2021 from centre
Srinagar, Jan 11: Hailing Lt Governor Manoj Kumar Sinha for securing an industrial package for Jammu and Kashmir from the central government, FCIK has sought categorisation of entire Kashmir division, and other far-flung districts, under ZoneB.
LG on Thursday announced a special industrial package, ‘Central Sector Scheme for Industrial Development of Jammu and Kashmir (J&K IDS 2021)’ approved by the PM Modi led Union Government with an outlay of Rs 28,400 crore for a period of 16 years from 2020-21 to 2036-37.
While appreciating some of the incentives incorporated in the scheme, the Federation Chambers of Industries Kashmir (FCIK), an apex body of the valley-based industrialists, said that entire Kashmir division and some other disadvantageous districts needed to be put under Zone B for obtaining maximum benefit for the scheme.
All the districts of J&K are categorised in ZoneA and ZoneB, as per the industrial development, quantum of investment and ease of setting of industries like communication, infrastructure, and other facilities. Those districts, which fall under B Zone due to lack of facilities are provided extra incentives in capital investment, interest subvention etc to encourage industrialisation and attract investment in those industrially backward districts.
Presently Kulgam, Shopian, Bandipora and Kupwara in Kashmir, and Reasi, Ramban, Doda, Kishtwar, Rajouri and Poonch in Jammu district are categorised as ZoneB.
FCIK, in a written statement, said the members of the federation in a meeting called to discuss the new scheme while analysing components of the package observed that some of the incentives incorporated in the scheme were worth appreciating. But at the same time some vital incentives which should have found a place in the scheme were missing causing apprehensions on the achievement of the ambitious objectives, it said.
“Affording differential incentives to different zones had the potential to take industrialisation programme to far-flung areas for an equitable, balanced and sustainable socio-economic development of the region as was stated by the Lt Governor,” it said.
Justifying the reason for placing entire Kashmir in Zone B category, the FCIK said, “The members during the meeting regretted that the previous policy of 2002 that provided for uniform incentives lacked this basic understanding which led to inequitable growth and concentrated investment in just three out of 22 districts of the erstwhile state with about 90% of the incentives going there only.”
Whereas the new enterprises might take time to complete their ventures and initiate the process of employment, FCIK said the existing enterprises, if supported, had the potential of generating jobs immediately besides putting their fully or partially locked up assets to use.
While appreciating the ‘intention and vision’ of the Lt Governor for promotion of industry equitably in every nook and corner of J&K, FCIK said as such it was important that the package announced fulfilled his vision and does not miss the targeted objectives.
Vital interventions missing: FCIK president
FCIK also said that along with the central package, the industry would require many interventions at the UT level for facilitating and boosting the morale of entrepreneurs.
The federation expressed gratitude to the Lt Governor for putting in his hectic efforts in convincing the central government that the industrial sector in J&K had been craving for support and obtaining Centre’s approval for the scheme.
President FCIK Shahid Kamili said that the new industrial policy despite having many fruitful provisions had some deficiencies to meet the targeted objectives.
He said despite presenting difficulties and aspirations of the local industry to the central ministers and UT authorities, and their assurances, some of the vital interventions required for revival and growth of industry were missing in the package.
J&K Govt approves privatisation of JK Cements Ltd
Bid to be invited soon for disinvestment of the PSU
SRINAGAR: J&K Government has approved a proposal for the privatisation of JK Cements Ltd, a public sector undertaking of Jammu and Kashmir incorporated in 1974.
An official statement released here on Sunday said, “after exploring all possibilities for revival of the Jammu and Kashmir Cements Ltd, the Administrative Council (AC) which met here under the chairmanship of the Lieutenant Governor, Manoj Sinha, approved the proposal for disinvestment of Jammu and Kashmir Cements Limited.”
Rajeev Rai Bhatnagar, Advisor to the Lieutenant Governor and Dr Arun Kumar Mehta, Chief Secretary, J&K attended the meeting.
It said the disinvestment in the JK Cements Ltd was necessitated as the company was not able to sustain and manage its finances properly and maintain efficiencies of operations over the period of time.
The company was also not able to fully exploit the potential and sustain stiff competition in the market despite having dedicated limestone mining leases at its disposal.
Inspite of enjoying economy of scale, the company failed to show requisite growth and generate cash flows and operating margins during the last more than two decades.
The company despite having assured demand from the Government against advance payments has not grown even marginally over the long period of time and has rather shown sharp decline in its production and revenues from 2012-13 on wards. Managerial and financial inefficiencies, coupled with failure to exploit locational advantage, has made the company defunct further depreciating plant and machinery without any resultant productivity.
The company had not only accumulated losses but is also burdened with liabilities on account of salaries and outstanding wages and payments in addition to default in statutory deductions like CP fund, GST etc.
Earlier also the Administrative Council vide its decision No. 113/15/2021 dated 19.10.2021 had given in-Principle approval for complete sale of JK Cements Ltd by exploring the option of ascending e-auction and an authorization to utilize 240 kanals of land adjacent to Khrew Plant at Industrial Estate.
The Interested Bidder should have a Minimum Net-worth of Rs 250 Crore. The Interested Bidder should have a net positive EBITDA in at least three out of the immediately preceding last five financial years. Eligible Entities are permitted to form a Consortium to participate in the Transaction. The maximum number of members, including Lead Member, in a consortium can be four.
Key principles and actions underlying the recommended disinvestment modality includes 100% ownership in JKCL in favour of a private company/consortium. Further all the assets of JKCL on an as-is-where-is basis, along with approvals and licenses (including mining license) will be transferred as part of the share purchase sale.
It was further decided that the Government of J&K will take over all employees of JKCL and the Acquirer will be responsible for staffing requirements to get the plant operational. Moreover all legacy and material liabilities will be carved out and assigned to the Union territory.
All the pre-bid requirements including renewal of lease in favour of the Corporation, power availability, finalization of accounts and their audits etc. shall be completed before the start of auction process. While disinvesting, it shall be ensured that the provisions of Mines and Minerals (Development and Regulation) Act, 1957and rules framed there under are not violated in any case. It was also decided that the process of reverse auction will be adopted for the purpose of disinvestment.
The step was expedient as the company has turned defunct for more than two years. The attempts of revival of the company have failed in absence of fund flow that could have paved way for the revival of the Company.
FICCI holds workshop on ATA Carnet for J&K importers, exporters
Srinagar, Sept 26: The apex trade and industry body of the country Federation of Indian Chambers of Commerce and Industry (FICCI) here on Monday organised an awareness workshop on ATA Carnet and its operational aspects for exporters and importers of J&K.
The workshop was held in collaboration with the Kashmir Chamber of Commerce and Industry (KCCI).
ATA Carnet ‘facilitates green channel route for doing business in India and abroad’. Also known as ‘Passport for Goods’, it is an international customs document that permits the tax-free and duty-free temporary export and import of nonperishable goods for up to one year.
The event provided an opportunity for exporters, importers and business experts to share their mutually beneficial knowledge and experiences. They discussed issues involved in the temporary import of goods and drew benefits from the deliberations of the session. The experts and guests interacted with the workshop participants on ATA Carnet and responded to several queries while clarifying doubts about the operational aspects of ATA Carnet.
Divisional Commissioner, Kashmir, Pandurang K Pole, in his address, said the ATA Carnet should be promoted with the ‘One District One Product initiative’ of the Government of India to reap its benefits for exporting local produce.
Deputy Commissioner of Customs, Srinagar, Danish Inder Singh Gill said, “It is right to call ATA Carnet as FICCI Green Channel Route to make it more popular with the business community in India”.
Director, Handicrafts & Handloom, Kashmir, Mehmood Ahmad Shah, talked about the initiatives, issues & challenges of the Handicrafts & Handloom sector of Kashmir.
Highlighting the importance of the workshop for the local export community, Chairman FICCI Jammu & Kashmir, Irfan Ahmad Guju, in his welcome remarks, said it is an initiative in educating people on the use of ATA Carnet and appreciating the value it brings to the export community”.
President, KCCI, Sheikh Ashiq Ahmad, also spoke at the occasion. Senior Consultant, FICCI & Former Member Customs Excise & Service Tax Appellate Tribunal (CESTAT), PS Pruthi; Deputy Secretary General, FICCI, Nirankar Saxena; and Co-Chair, FICCI Jammu & Kashmir, Rajesh Sharma interacted with the participants of the workshop and responded to several queries to clarify doubts on the operational aspects of ATA Carnet.
Carnets are like passports for goods replacing normal customs documentation enabling fast trouble-free importation into member countries without having to pay duty or tax. The system gives a number of advantages to businessmen seeking new opportunities on foreign markets. It can benefit business travellers, sales executives, fair exhibitors, film and tv crews, artists, engineers, educationalists, entertainers, sports teams and many more during their overseas trips.
The key benefit is that it can be used for multiple trips throughout its one-year validity. It reduces delays and standardises procedures that are vital in today’s economic world. In addition, it significantly simplifies customs paperwork.
FICCI has been functioning as the National Issuing & Guaranteeing Association (NIGA) for the operation of the ATA Carnet system in India.
J&K’s Dwindling Corrugation Industry
J&K’s Dwindling Corrugation Industry! The corrugation industry is a sub-category of the paper industry. It essentially deals with the manufacturing of customised boxes made from the amalgamation of cardboard, kraft paper, adhesives, stitching, wiring etc. Corrugation boxes are an improvisation over ordinary cardboard boxes. These boxes are stronger, durable, environment friendly, cost-effective, sustainable, recyclable and easy to customise. The corrugation industry has revolutionised the modern-day world because of its environment-friendly nature. The main output produced by this industry is (customised) packaging material for multiple purposes across various intermediate and final uses.
India’s corrugation market is estimated to be worth Rs 30,000 crore. Over time, this sector has grown steadily and sustainably. Given the enormous size of the Indian economy, there has always been a high demand for the goods and services supplied by this sector. It has consistently been a highly popular business among potential entrepreneurs. The Covid-19 pandemic has, however, caused this industry to experience a recent nationwide decline. The cost of all raw materials, including the fuel for running the machinery and the cost of transportation, has skyrocketed. The sector has been further restricted by the limited import of less expensive raw materials and the increased tax burden on businesses.
In Jammu and Kashmir, the corrugation industry is directly linked to the horticulture sector. Cardboard boxes have replaced traditional wooden boxes for apple packaging to a large extent. Though the corrugation industry of J&K produces boxes for beverages, bakery, medicines, yoghurt, processed foods etc. apart from horticulture the main demand comes from the latter itself. As such the corrugation industry has been a very popular venture amongst the potential entrepreneurs in J&K. However, the post-pandemic world hasn’t been the same for the corrugators of J&K. The corrugation industry in the region has been running in losses since the beginning of the pandemic.
All of a sudden it was decided that the GST on the corrugated boxes would be increased by 6 percentage points. Initially, the purchase sale tax was 12% and so was the sales tax. After this decision, while the purchase tax is the same, the sales tax has increased to 18%. There is a direct 6% dead weight loss created, the brunt of which is born by the manufacturer. Meanwhile, the rates of the boxes have tended to remain constant declining the profit of the manufacturers by a big slash.
The first blow came with the beginning of the Covid-19 pandemic right in China. Kraft paper, one of the essential raw materials, is imported into India from China. As soon as the pandemic was declared the imports were halted and the basic raw material shortage was felt. Steadily this had to be substituted with the indigenous craft paper which increased the cost of production. Other imported substitutes coming from the rest of the world also got expensive and the production cost of the industry rose immediately. This sudden nature of the shock gave the least time to the corrugators of J&K to come to terms with the outcomes.
Another major shock came with the updated taxation decision from the ministry of finance. All of a sudden it was decided that the GST on the corrugated boxes would be increased by 6 percentage points. Initially, the purchase sale tax was 12% and so was the sales tax. After this decision, while the purchase tax is the same, the sales tax has increased to 18%. There is a direct 6% dead weight loss created, the brunt of which is born by the manufacturer. Meanwhile, the rates of the boxes have tended to remain constant declining the profit of the manufacturers by a big slash.
The most important source of demand for corrugated boxes however comes from the horticulture sector in the region. And here the major concern is the competition given to the locally manufactured corrugation boxes by the imported ones coming from the neighbouring states. There are two main reasons behind this competition. One of the reasons quoted by the local manufacturers is that the business houses outside J&K are multi-project ventures, keeping the cost of production very low for the producers. As such, in the local market, these boxes are sold at a cheaper rate than those coming from our local producers. The second reason comes from the consumers who claim that the boxes coming from outside are not only superior in quality but are affordable too. The joint impact of both these reasons is a decline faced by this otherwise brimming and quoted ‘high potential’ industry in the region.
Another important local source of demand for the corrugation industry of J&K is the beverage industry located across the region. Corrugation boxes have been a preferred choice for these units. However, the growing prices of these boxes have forced this industry to look for alternatives and substitutes. After a brief research, it turns out that the beverage industry is substituting corrugation boxes with plastic and polythene packaging. At the same time posing a long-run threat to the fragile environment of the region!
In Kashmir, the corrugation business has a direct and indirect impact on about 20,000 households. These people in a majority of the cases are not affiliated with any other economic activity. A loss to this industry will impact the members across all these households. In light of these events and factual realities, there arise some critical policy implications. For starters, the local government must restrain the unquestionable import of corrugation boxes from the rest of the country. Given that the horticulture sector is at the back of this industry, it is important that the two grow mutually and with an interdependence that is conjointly and positively reinforcing the overall growth. Immediate intervention and curtailment of the taxes is the most pressing pre-requisite for the sustenance and then eventual growth of this sector. From a longer-run perspective, the use of corrugation products instead of plastic and polythene is J&K is the basic need to keep up with the fragile ecosystem that the region is bestowed with.
The authors work with the Department of Economics, Islamic University of Science & Technology & can be reached at [email protected]
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