FMCG companies make a beeline for Assam following tax sops

Assam is rapidly becoming the favourite destination of investment for the fast-moving consumer goods (FMCG) industry after the Union government rolled out various tax incentives for companies setting up units in the Northeast with the Assam government topping it up with other perks as well.

 

The primary benefit, accorded in the North East Industrial and Investment Promotion policy (NEIIP policy), is an income tax holiday for a period of 10 years and excise duty exemptions. After the roll out of the goods and services tax (GST), the excise duty exemption is likely to be replaced by a 58 per cent refund on the Central GST component.

While the NEIIP policy is up for revision, Amritanshu Khaitan, managing director of Eveready Industries, said the notification for the GST refund was expected anytime now.

Industry executives confirmed that in the new tax regime, which aimed to usher in price parity across India, the Northeast, including Assam, would continue to enjoy the fiscal benefits.

This calendar year so far, the cumulative investments by FMCG majors such as Hindustan Unilever, Patanjali, Dabur, Emami and others stand at nearly Rs 4,000 crore with greenfield projects accounting for around Rs 700 crore.

In recent months, Emami’s third plant in Pacharia, where it invested Rs 300 crore, was completed and Eveready plans to pump another Rs 50-100 crore into its Rs 100-crore Goalpara unit.

Earlier this year, Hindustan Unilever invested Rs 1,000 crore to set up a new facility near its existing plant at Dooma while Dabur commissioned a plant in Tezpur investing Rs 250 crore. Marico and Berger Paints also commissioned their respective plants in the state.

Earlier, Assam Industry Minister Chandra Mohan Patowary stated that in the last one-and-a-half years the state, owing to the fiscal benefits, had received Rs 6,500 crore in investments.

However, the NEIIP policy expired in March and is up for revision. Assam witnessed a rush of FMCG companies commencing production from their plants in the state in March, making them eligible for the fiscal benefits.

Industry executives are of the view that the existing perks may continue in the new NEIIP policy and other fiscal benefits may be added.

“In case the new NEIIP policy does away with some fiscal benefits, the Assam government is expected to fill the gaps,” said an executive whose company has invested in Assam. The fiscal benefits offered in the old NEIIP policy and the 2014 state government policy were enough to make up for the investments in fixed assets in the state, he added.

Apart from incentives offered in the central government policy, the state government is also offering its own set of perks. Naresh Bhansali, chief executive officer, finance strategy and business development, Emami, said the state also offered mega project status to investors, which reduced interest payments as well as the expenditure on plant and machinery.

According to the Industrial and Investment Policy of Assam, 2014, projects can be accorded mega project status if fixed capital investment above Rs 100 crore is made and the project generates a minimum of 1,000 jobs.

Apart from these fiscal incentives, companies are also eyeing the hitherto untapped consumer market in the branded FMCG category.

The second consideration for companies flocking to this north-eastern state is Assam’s infrastructure and logistics, which have long been a matter of concern for industry, are poised to improve. An 890-km expressway along the Brahmaputra from Sadiya to Dhubri has been proposed and the Bogibeel bridge, which will connect Assam to Arunachal Pradesh and save a 600-km detour, is nearing completion.

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