Industrial Policy 2020: Propelling Gujarat’s Industries for an

Atmanirbhar Gujarat
7 August 2020

 Gujarat Industrial Policy 2015 has come to an end as on 31st December 2019. It
was further extended up to the date of release of new policy or 31st December
2020 whichever is earlier.

 The Gujarat Industrial Policy 2015 comes to an end and has supported overall
industrial development across the state.

 The success of the policy can be evaluated by the following key points:

1. Gujarat stands 1st in terms of nos. of IEMs (Industrial Entrepreneurship

Memorandum) filed & actual investment reported for 2019 with ~51% share
of IEMs filed in India in terms of value with a proposed investment of USD 49
Bn as per the data released by DPIIT, Govt of India.

2. While India saw an increase of 48% in proposed investments (IEMs) in 2019,

Gujarat recorded a growth of 333% over previous year.

% Growth in Number of IEMs %age share of investments

400

350 333
3 11
4
300
12
250

200
51
150
87 17
100
48
50 34

0
-5 -6 -8
-50 -26 Gujarat Maharashtra Karnataka
Orissa Andhra Pradesh Tamil Nadu
Telengana
 The investments have also been in diversified sectors including textiles,
chemicals, auto & auto components, plastics, energy & power, food
processing amongst others

3. In FY 2019-20; Gujarat saw the highest national increment of 240% in FDI

inflows from previous year as against a growth of 14% in FDI in India.

4. Gujarat also has the lowest unemployment rates in the entire country @3.4%
as per survey report by National Statistical Office, Govt. of India.
 5. The number of MSMEs in Gujarat grew by 60% from 2014-2015 and currently,
Gujarat is home to over 3.5 million MSMEs which are a major source of
employment and also form an important part in the larger industrial
ecosystem.

 If you look at National Statistics,

1. Gujarat stands first in India in terms of Industrial Output with ~17% of
India’s output

2. The state has been recognized as Best Performer State in State Startup
Ranking 2018 by DPIIT, Govt of India

3. Ranked No. 1 in the Logistics Performance Index and LEADS Index by

Ministry of Commerce, Government of India in year 2019

 Gujarat has witnessed 13% growth in GDP at current prices in 2019-20 over
previous year. Gujarat has been constantly achieving double digit growth rate. In the
last 5 years, the state registered an average growth rate of 10.14% at constant price.

 If we look at subsidy amount, it has increased almost 3 times in the last five years
showing an exponential growth.

 Considering similar growth patterns, it is expected that the average annual

outlay for the New Gujarat Industrial Policy 2020 will be upto INR 8,000 crore

 The new Gujarat Industrial Policy 2020 has been formed to further consolidate
this momentum and enhance the current growth rate. Focused efforts have been
made for supporting jobs, value addition across sectors, adoption of state-of-the-
art technology, increase productivity with Industry 4.0 manufacturing,
innovation driven ecosystem with focus on research and development so as to
propel the state further towards “Atmanirbhar Gujarat”. This will enable the
shaping of a Modern Gujarat that spearheads the vision of a Modern India.

 We have made consistent efforts to have more balanced growth with respect to
regions and sectors.

 Gujarat’s strength is in its constant dialogue with its strong and diversified
stakeholders, i.e. Industry, Industrial associations, chambers and academia.
 We had constituted 9 task force committees that held several rounds of serious
and productive meetings that helped us to came up with constructive
suggestions for the New Gujarat Industrial Policy 2020.

 The policy incorporates most of the suggestions indicated by the industry at

large, keeping in mind the Global and National manufacturing trends and
sectors.

The key focus of the policy is towards inclusive & balanced regional
development, employment generation, Next generation Industry 4.0 led
manufacturing so as to contribute significantly to the vision of “Aatmanirbhar
Bharat” as laid out by the Hon’ble Prime Minister of India.

 As the figures speak for themselves, there has been very fast growth in our
vibrant state and therefore manifold features of the Gujarat Industrial Policy 2015
have been continued. However, some of the important features where
modifications have been made are as follows:
1. Thrust Sectors:
15 Thrust Sectors have been conceptualized with a view on global
investment trends, the need for strengthening the integrated value chains,
exports, policies by government of India, NITI Aayog etc. The thrust sectors
have been categorized in two major groups i.e Core sectors & Sunrise Sectors.
Core sectors include areas where Gujarat already has a strong manufacturing
base and has potential to accelerate further on a global scale. Sunrise Sectors
are sectors which have a significant potential for technological advancement
and can contribute to sustainable economic development. Thrust sectors will
be given incremental incentives as part of the policy.
Core Sectors 1. Electrical machinery & equipment
2. Industrial Machinery & equipment
3. Auto & Auto Components
4. Ceramics
5. Technical Textiles
6. Agro & Food Processing
7. Pharmaceuticals & Medical devices
8. Gems & Jewelry
9. Chemicals (in designated area)
Sunrise 1. Industry 4.0 manufacturing
Sectors 2. Electric Vehicle and its components
3. Waste management projects
4. Green Energy (Solar & Wind Equipment)
5. Eco-friendly compostable material (substitutes to
traditional plastics)
 6. 100% export oriented units, irrespective of sector

2. Capital Subsidy:
Since GST has been implemented, companies were being compensated as per
“Net SGST” on goods sold within the state. There were several complexities
in calculation of the tax of goods consumed within the state.
Hence, Gujarat is the first state to undertake a bold decision to de-link
incentives from SGST. Upto 12% of fixed Capital investment will be given
to large industries for setting up manufacturing operations in the state in
the form of capital subsidy. Therefore, the incentive amount will now be
more predictable and transparent and thus help industry to take fast
decisions.
There is no upper ceiling on the amount of incentive to be given to any
particular unit. This will help in grounding major investments in the state.

Taluka Category General Sectors Thrust Sectors (15)

Category 1 • 10% of FCI • 12% of FCI

Category 2 • 8% of FCI • 10% of FCI
Category 3 • 4% of FCI • 6% of FCI
• This benefit will be given over a period of 10 years subject to annual ceiling of
INR 40 Crore.
• If the eligible cash subsidy could not be disbursed within period of 10 yeras due
to upper ceiling of Rs. 40 cr per annum, for such unit the eligible period of 10
years will be extended upto additional 10 years with the condition that annual
ceiling will remain Rs. 40 cr per annum.
• If the eligible cash subsidy is not disbursable within period of 20 years due to
upper ceiling of Rs. 40 cr per annum, the total entitlement of cash subsidy will be
disbursed in equal installments of 20 years without any upper ceiling

Besides this, new industries will continue to get exemption from Electricity
Duty for 5 years.
With this, Gujarat will be giving significantly high incentives to industries as
compared to other states:
 Eg. For an investment of INR 500 crore by an enterprise, the approximate incentive
given by different states would amount to:

Approximate incentive (INR

State
Crore)

Maharashtra 37.9
Punjab 41.1
Rajasthan 25.7
Gujarat 48.9

Assumptions
Capex (in Rs. Cr.) 500 (350- P&M; 125 – Building, Infra; 25 – Land)
Sales in 1st yr. 300 cr.;
Sales Growth 10% yoy
Sales within State 0.25
Procurement within State 0.3
D/E 0.65
Interest Rate 0.09
Taluka Category 2
SGST 0.09

3. MSMEs:
MSME definition will be in alignment with the Government of India
definition so that a large number of units may take advantages of the
provisions under MSME policies.
The policy focuses to promote MSMEs to of the policy with an aim to make
domestic MSMEs globally competitive. Government will support MSMEs in
upgradation of technologies, adopting globally accepted certifications and in
marketing their products internationally.
3.1 Capital Subsidy: MSMEs will be eligible for Capital Subsidy upto 25% of
eligible loan amount upto INR 35 lakhs. Additionally, if the eligible fixed
capital investment is above INR 10 crores, the unit will be eligible for an
additional capital subsidy upto INR 10 lakhs.

3.2 Interest Subsidy: MSMEs will be eligible for Interest subsidy upto 7% of
interest levied on term loan upto INR 35 lakhs per annum for a period upto 7
years.
 1% additional interest subsidy to SC/ST Entrepreneur/ physically
challenged entrepreneur/ Women entrepreneur/ Start Up in manufacturing
sector.
Besides this, 1% additional interest subsidy to young entrepreneur below age
of 35 years on the date of sanction of loan

3.3 Service Sector MSMEs: Service sector is a major contributor to the national
GDP. Many services are key inputs for facilitating other primary and
secondary industries. The New Gujarat Industrial Policy 2020 will offer
interest subsidy upto 7% to these service sector MSMEs in the state
including those engaged in Financial Services, Healthcare Services, Audio
Visual services, Construction related engineering services, Environmental
services etc.

We will be shortly announcing a dedicated Service sector policy for large

enterprises.

3.4 Acquisition of foreign technologies by MSMEs: The government for the

first time, will provide support upto 65% of the cost of acquiring foreign
patented technologies. (Maximum support upto INR 50 lakh). This will help
raise the manufacturing prowess of our MSMEs making them globally
competitive.

3.5 Market development assistance to MSMEs: In order to encourage MSMEs to

market their products at a national & international level, the new Industrial
Policy will provide fiscal assistance to MSMEs @75% of stall rent upto INR 2
lakh for exhibitions in India and @60% of stall rent upto INR 5 lakh for
exhibitions outside India.

3.6 Encouraging MSMEs to use Solar Power: With an aim to further ease the
process of utilizing rooftop Solar Power in MSMEs, the power cycle for
calculation of consumption of units has been increased from 15 minutes to 7
AM - 6 PM. Also, for purchase of surplus solar power from MSMEs, the price
has been increased from INR 1.75/unit to INR 2.25/unit.
Additionally, existing industries who switch to Solar Power, Interest
Subsidy will be provided on term loan

3.7 Besides these, Incentives will be given to MSMEs for implementation of

Enterprise Resource Planning (ERP), Information & communication Technology,
 obtaining quality certifications including ZED certification, patent filing, Service line
and Power Connection charges, Rent assistance etc.

4. Government land to be given on long term lease basis:

In order to further give a thrust to a balanced regional development in the
state, the government will facilitate industries in getting “Government Land”
on long term lease upto 50 years (further extendible as per prevailing policy) to
industrial enterprises @6% of the market rate.

5. Balanced Regional Development:

In order to promote a balanced regional development in the state the incentives
to all MSMEs as well as large industries have been categorized based on
industrial development in respective talukas. Incremental benefits will be given
to industries setting up operations in industrially less developed talukas

6. Support to Startups:
6.1 Seed support has been increased from INR 20 lakh to upto INR 30 lakh.
6.2 Sustenance Allowance has been increased from INR 10,000 per month for
one year to INR 20,000 per month per startup for one year & INR 25,000 per
month per startup for one year for start-ups having at least 1 woman co-
founder.
6.3 Additionally, for mid-level Pre-Series A funding of startups, a separate fund
shall be created under Gujarat Venture Finance Limited (GVFL). Besides this,
the startups will get additional 1% Interest subsidy (i.e. upto 9% on term
loans.
6.4 Additional grant of upto INR 10 lakh for startups with significant impact on
society.
6.5 Additional fiscal support upto INR 3 lakh per startup will be provided to
enroll for national/international recognized acceleration programs.
6.6 Soft skill assistance: Funding of upto INR 1 lakh per startup for trainings
specific to “Managerial Training, Soft Skills, Marketing skills, Fundraising,
Finance” on reimbursement basis
6.7 Mentoring assistance of INR 1 lakh per startup will be given to recognized
Nodal Institutes (maximum INR 15 lakh per annum per institute)

7. Relocation incentives:
In light of CoVID-19, several industries are planning to relocate their
operations and/or diversify supply chains. Gujarat will offer Special
Incentives to such companies planning to relocate from other countries.
8. Research & Innovation
8.1 Research & Innovation plays an important role in development of a robust
industrial ecosystem. Therefore, we have consciously focused on
development of new R&D institutions. The policy will provide support upto
INR 5 crore to private companies/institutions for setting up R&D and
product development centres
8.2 Assistance for Contract/Sponsored research work from any industrial
enterprise/Industrial association to recognized R&D institution / technical
collages approved by AICTE, will be considered @ 50% of project cost,
excluding cost of land and building, subject to maximum Rs. 50 Lakhs

9. Development of Industrial Infrastructure:

9.1 Policy will provide incentives to private developers for setting up Private
Industrial Parks in the state @25% of Fixed Capital Investment upto INR 30
crore. In case of Vanbandhu Talukas, the policy will support setting up of
industrial parks @25% of Fixed Capital Investment upto INR 30 crore. This
will support industrial infrastructure creation & developing last-mile
connectivity. Stamp Duty reimbursements will be given to developers (100%
of Stamp Duty) and individual units (50% of stamp duty.
9.2 In order to promote clusters, financial assistance of up to 80% of the Project
Cost upto INR 25 Crore for set up of Industrial Infrastructure such as
construction and up gradation of roads, warehousing facilities, fire stations,
underground utilities, etc. will be provided.
9.3 The policy will provide 80% of financial assistance upto INR 25 crore for
Dormitory Housing in manufacturing clusters in order to provide better
living conditions for labourers in industrial clusters.

10. Sustainable Manufacturing:

10.1Upto INR 75 lakh for Zero Liquid Discharge plants: 50% of capital subsidy
upto INR 75 lakhs will be given to industries practicing at least 50% waste
recovery through Zero Liquid Discharge as certified by GPCB.
10.2Assistance for Cleaner production measures: The policy will give Incentives
to MSMEs @35% of cost of Plant & machinery and to large units @10% of cost
of Plant & machinery (maximum: INR 35 lakh) for Implementation of cleaner
production technology in place of existing process such as substitution &
optimization of raw material, reduction in water consumption or energy
consumption or waste generation
11. Common Environment Infrastructure:
11.1 Support for Common environment infrastructure facilities increased from
existing 25% to 40% of the project cost upto INR 50 crore
11.2 Development of Green Estates: Assistance of up to 25% of project cost upto
INR 25 crore for set up/ relocation / retrofitting of existing polluting
industrial units into Green Industrial Estates
11.3 Common Boiler Project by SPV constituted by minimum 10 MSME’s will
receive incentives upto 50% of fixed installation cost upto INR 2 crore.

12. Skilling and Training Support:

The state will undertake a gap analysis of Skill requirement of industries &
available workers across various sectors in the state. This will help create a
roadmap for training local population in relevant skills and thus bridge the
gap.
State will also give fiscal support in setting up Skill development Anchor
institutes, specialized skill development centres, Skill upgradation centres etc.
Besides this, the policy will give incentives for skill enhancement upto INR
15000.

13. A dedicated organization “GARUD” has been formed by the state

government to ensure easy movements of goods inter & intra state and
increase exports. The infrastructure created under this authority will support
industries to incur less production costs and therefore will have a competitive
edge against other developing economies.

14. Dedicated “Relationship Managers” will be nominated by Industrial

Extension Bureau (iNDEXTb) for investors as single point of contacts for all
government related queries & approvals.

15. Investor Facilitation Portal (IFP) – Mega Online Permission: Almost 5 lakh
applications have been processed from state Single Window: Investor
Facilitation Portal (IFP). To further strengthen the Ease of Doing Business
Environment in the state, a framework for “Mega Permission” has been
prepared, which requires investor to submit only one application form for 26
different state related approvals and compliances to be processed in an
expedited manner.

16. Centralized Inspection System: The state has also initiated the process for
streamlining Central Inspection System to further bring transparency and
facilitate ease of doing business.
17. Pipeline enterprises: New projects which are yet to be commissioned will
be eligible under the previous policy (Gujarat Industrial Policy 2015). Such
manufacturing projects will need to commission within 1 year and common
infrastructure projects will need to commission within 2 years from the
date of release of New Gujarat Industrial Policy 2020.