Strategic move: Centre to incentivize MSME industrial parks on private land

According to a person in the know, while existing schemes allow for setting up of industrial parks on government land, the Centre plans to launch an incentive scheme that will allow industrial parks for MSMEs to come up on private land.

“The government wants to develop industrial parks on private lands. It will give permission for industrial parks, be it for 50 or 500 acres, but with certain conditions: amenities, including hospitals and schools must be there in the vicinity, besides a robust transportation system. Initially one or two such parks will be developed in each state," the person said seeking anonymity.

The Union ministry of MSME is working on a draft to do away with certain regulatory requirements and relaxing guidelines for setting up such parks and ensuring ease of doing business. “The ministry will send the (proposal) to the finance ministry to seek approval (for implementation of the scheme)." The incentive could be in the form of subsidy or viability gap funding for setting up the parks, or rental subsidies for the small businesses working out of those parks, said a second person, also requesting anonymity.

The MSME ministry did not respond to queries till press time.

“MSMEs have supported the view of industrial parks on private land either in the form of flatted factories or a plug-and- play, low-rise industrial area for small businesses. Not much government land is available for building small factories or workshop sheds and these micro and small businesses need facilities in the plug-and-play mode, which can be easily financed or leased. These parks can be developed by state agencies or private developers on a small parcel of land, constructed on a ‘basement-plus-five floor’ model, accommodating over 1,000 enterprises in a single premises," said Vinod Kumar, president, India SME Forum. Policy discussions are also underway at the state level and many are likely to allow setting up of industrial parks on private land.

The Centre has already been running the Micro and Small Enterprises Cluster Development Programme (MSE-CDP) since 2011-12, but it has failed to live up to the expectations. The new scheme may be an effort to overhaul existing rules, the second person said.

According to the annual report of the MSME ministry for FY23, development of clusters for micro and small enterprises moved at a slow pace with only three out of 28 approved projects completed as of 1 January. The report said that out of the revised budget estimates of ₹120 crore for the scheme, only ₹78.68 crore was spent.

The draft policy for MSMEs, released in March 2022, mentions the need for financing cluster developments with special incentives. “Create MSME clusters to collaborate with firms offering innovation infrastructure, research and development institutions and universities specializing in specific industries or knowledge area,“ it said.

Mint recently reported that the draft policy has been revised and the final version is expected to be published by the ministry in 3-4 months.

MSMEs are receiving renewed government focus as they grapple with high inflation, mounting input costs, and a slump in exports on fears of a global recession.

Besides, small businesses are still struggling to recover from the covid-led disruptions.The Centre has taken a series of measures to provide targeted support to small firms. The definition of MSMEs was expanded, granting more business access to the sector-specific assistance available.