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Land, transport subsidy and more! Tamil Nadu goes all out to get foreign investment

Joe C Mathew     February 17, 2021

The government of Tamil Nadu has announced a host of incentives including subsidies on land cost, transport, and refund of state GST levied on capital goods for foreign direct investments (FDI) flowing into the state in the next one year. The special scheme is meant to attract foreign companies that seek to diversify their business operations and supply chain amid Covid-19. The minimum investment commitment has to be Rs 500 crore over a four-year period. For projects over Rs 5,000 crore, the investment period is seven years.  

The scheme and a range of other incentives for industrial development in the state are part of Tamil Nadu Industrial Policy 2021, unveiled by chief minister Edappadi K. Palaniswami on February 16 in Chennai.

The FDI firms will be eligible for an investment promotion subsidy which can be in the form of SGST reimbursement for final products, fixed capital subsidy, flexible capital subsidy, or turnover-based subsidy. The size of the subsidy can be up to 40 percent of the eligible fixed assets, including new and second-hand machinery in case of relocation. The policy states that the four options are mutually exclusive, and a one-time choice has to be exercised at the beginning of the project by the investor. It also says investment proposals from companies having relocation plans may be provided a higher set of incentives on a case-to-case basis.

To facilitate transition of foreign firms to Tamil Nadu, a transport subsidy of 75 percent of the cost incurred on transportation and logistics (with a Rs 10 crore ceiling) has been permitted.  

The policy states that land will be provided at 50 percent concessional rates in less industrialised districts of the state. The projects will also enjoy electricity tax exemption for five years, stamp duty exemption, green industry incentives of upto Rs 1 crore, quality certification incentive, and intellectual property (IP) creation incentive.  

The new investment policy talks of equity financing, industrial ecosystem fund, R&D fund, venture capital fund, and digital accelerator fund. Provision for term loans of up to Rs 40 crore for new industries through Tamil Nadu Industrial Investment Corporation is also part of the new policy.  

The policy targets an annual growth rate of 15 percent in the state's manufacturing sector during the policy term. It strives to attract investments worth Rs 10 lakh crore by 2025. Creation of employment opportunities for 20 lakh people by 2025 and increase the contribution of manufacturing to 30 percent (from the current 25 percent) of the state economy are the larger objectives.  

Also read: Budget 2021 rationalises tax rules, removes difficulties faced by taxpayers

Also read: Business Today honours business leaders of Tamil Nadu


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