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India By State - Punjab - Taxation & Legalities




Taxation & Legalities

 

Policies & Incentives

Punjab aims at infrastructure development, lesser number of regulations, and rapid clearance of new projects. Following initiatives are of major importance under this policy.

  • State-level monitoring committees
  • Easy and quick clearance for projects through one-time settlement schemes and Udyog Sahayak
  • Constitution of the Empowered Committee to grant special privileges for projects of significance
  • Value-added tax (VAT) and single point local development tax (LADT)
  • Enhancement of the competitiveness of industrial units through capital subsidy and freight subsidy
  • Infrastructure development through private sector participation
  • Incentives to agro-based industries

Textile Policy

The aim is to facilitate and to promote the growth industry textile. To contribute more export and to encourage textile clusters, the state has developed policies

  • An Apparel Training and Design Centre has been set up in Ludhiana and participation of the private sector is being encouraged to strengthen apparel-related courses of Industrial Training Institutes and Polytechnics in the state
  • Assistance in land acquisition by the state government for setting up of mega textile units, with provisions
  • Creation of sound infrastructure in the form of textile clusters, apparel parks and integrated textile parks, having all necessary facilities at one place, developed mainly through private sector participation;
  • Maximum investment to be attracted under the Technology Upgradation Fund Scheme (TUFS) of the Central Government;
  • Reduction in electricity duty to half the existing rate for mega textile projects for a period of five years and full waiver of electricity duty for a period of seven years for mega textile projects in the districts of Patiala, Sangrur, Mansa, Bathinda, Faridkot, Moga, Muktsar and Ferozepur
  • Setting up of new educational and training institutes for making skilled technical workforce available to the industry, with assistance from the Government of India as well as private sector participation.
  • Maximum utilisation of Central Government's Technology Up-gradation Fund Scheme (TUFS)
  • Creation of infrastructure through clusters, educational and training institutions
  • Reduction of electricity duty for projects
  • Assistance in land acquisition

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Single window Clearance

To help entrepreneurs to obtain speedy clearances for setting up industry in Punjab, the Government has set up a special cell called Udyog Sahayak (industry facilitator). All knowledge driven industries such as IT, electronics and biotechnology have a separate single window service mechanism under Punjab Information and Communication Technology Corporation Ltd.

IT policy

An action plan is being executed to harness the potential benefits offered by IT. The Key initiatives under this policy include:

  • Improving rural and urban connectivity by setting up a "Punjab Wide Area Network"
  • Promotion of IT education among students, both at the school and college level
  • Implementation of e-governance projects
  • Regular monitoring of the implementation of the provisions of IT Policy by an IT vision group
  • Monitoring of IT projects in government departments by Empowered Committee on Computerisation (ECC), which also acts as a single window clearance agency for expeditious implementation of IT projects
  • Fiscal sops
  • Setting up of a venture capital fund dedicated to the IT Industry

The State Government has already started an Integrated Citizens' Service Project on a pilot basis in Ludhiana. Punjab's IT Policy also provides a range of incentives for IT firms located in the state. These include:

  • Investment incentive at 30 per cent of the fixed capital investment
  • Exemption from sales tax for a period of 10 years
  • Exemption from electricity duty for a period of 5 years
  • Human resources development grant for a period of 5 years
  • Exemption from stamp duty and registration fee
  • A venture capital fund to support the growth of the IT industry

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e-Governance

Export Promotion and Facilitation

The Punjab Small Industries and Export Corporation (PSIEC) is the nodal agency for promoting exports from the state. PSIEC educates and updates exporters on export procedures, documentation and quality certification. It also assists small enterprises to obtain funding support from central government schemes for marketing and development assistance.

Public Sector Enterprise (PSE) restructuring and disinvestment

The State Government has undertaken a strategic review of the role of PSEs in the state's economic development. Based on this, it has adopted a multi-pronged approach to redefine the role of various PSEs through privatization and/or restructuring. Of the units earmarked for divestment, the largest among them, Punjab Tractors, was divested in 2003. The Government of Punjab sold its 23.49 per cent stake to CDC Capital Partners for US$ 48 million. The divestment process of four other public sector enterprises is currently underway.

These include:

  • Punjab Tourism Development Corporation
  • Punjab Communication Ltd
  • Punjab State Container and Warehousing Development Corporation
  • Punjab Alkalies and Chemicals Ltd

Infrastructure Policy

The Government of Punjab has been actively pursuing private sector investment to create world-class infrastructure and to upgrade the present infrastructure in the state. Its recent initiatives include:

  • Creating a US$ 4.25 million corpus called the Punjab Infrastructure Initiative Fund (PIIF) to finance project development through public private partnership
  • Enacting the Punjab Infrastructure Development Act in 2002 and setting up the Punjab Infrastructure Regulatory Authority (PIRA). The State Government recognized that to attract private participation, there was a need for an over-arching legislation to secure a level-playing field for private players, and establishing a transparent regulatory framework governed by an autonomous regulator to grant various concessions and incentives to make projects and investment opportunities viable and attractive. The Act provides the necessary legal and policy framework to facilitate private investment in infrastructure projects
  • Encouraging existing Small Scale Industries (SSIs) to undertake modernization and technology up gradation to meet the challenges of the WTO regime. The Government has notified a scheme to provide capital subsidy
  • A scheme of freight neutralization assistance for export units has also been notified, which would neutralize the disadvantage of the state to some extent

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Biotech Policy 2006

Through this policy, Punjab endeavours to facilitate the growth of biotech industries and development of clean biotech technologies. Key initiatives under this policy include:

  • Creation of public awareness through workshops and training sessions on application of clean biotech technologies
  • Creation of the Punjab Biotech Promotion Board (PBPB) to attract investment in the biotech sector
  • Promotion of public-private partnerships (PPP) in agriculture extension, crop diversification and organic farming in the state
  • Provision for setting up a new biotechnology institute, which will act as a biotechnology development centre to meet R&D, pilot scale testing and validation requirements of the biotechnology industry
  • Setting up of agri-clinics and agri-business centres throughout the state to serve as nodal centres for information dissemination and kisan call centres to provide immediate and first-hand information to farmers

Tourism Policy 2003

Punjab emphasizes on promoting tourism and on developing hospitality infrastructure in collaboration with private sector participation. The key initiatives under this policy include:

  • Single window clearance facility for approving tourism-related projects in the state
  • Land allotment to entrepreneurs on easy terms for developing hotels on selective basis
  • Setting up of the Punjab Tourism and Heritage Promotion Board under the chairmanship of the chief minister
  • Constitution of a co-ordination and advisory committee on tourism
  • Incentives to tourism related projects
  • Provision of soft loans for new tourism projects and expansion of existing ones by the PFC and PSIDC

New and Renewable Source of Energy Policy 2006 (NRSE)

Punjab gives stress on new technologies based on renewable sources of energy and energy conservation. Following are the main areas under this policy.

  • Power generation though small/micro hydro projects, co-generation of power in industries like sugar, paper, chemicals and fertilisers, and power generation from bio mass, agricultural waste and solar energy
  • Clearances for all projects related to NRSE through single window mechanism
  • Purchase of electricity by state as well as provision of land for projects

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Doing Business in Punjab

An indicative list of approvals with timeframe for setting up business in Punjab

Department

Agency

Timelines

Environment Punjab State Water and Air Pollution Board Site/environment clearance: 60 days
No Objection Certificate (NOC) for green category: 15-30 days
NOC for red category: 30 - 45 days
Renewal of consent: 90 days
Industries Directorate of Industries Approval of factory plan: 30 days
License for running factory: 15 days
Incentives Udyog Sahayak
PFC
Investment incentive: 1 month
Sales tax exemption: 1 week
Electricity Punjab State Electricity Board Loads up to 20 Kilo Watt (KW): 3 months
Loads up to 100 KW: 4 months
Loads above 500 KW: 8 months
Revenue PSIDC
Udyog Sahayak
Site Clearance: 60 days
PSIDC/ PFC PSIDC
PFC
Sanction of loan: 2 months

Source: PwC research

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Cost of setting up business

An indicative table on cost of setting up business in Punjab

Indicator

Value (in US$)

Industrial land (per sq mt) Mohali - 35.42
Ludhiana - 17.71
Amritsar - 11.10
Office space rent (per sq foot per month) .17-.32
Residential rent (for a 2,000 sq mt house, per month) 287 - 478.72
5-star hotel room (per night) 57.45 - 80.43
Electricity (per kWh) .086
Water (per 1000 litres) Commercial & Industrial: 0.14

Source: PwC research
Note: Exchange rate used is INR 47 per US$

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More Information on Punjab

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