The policy for developing integrated industrial townships has run counter to the provisions of the UPA government’s new land acquisition bill and is at risk of being declared dead at birth. On October 25, commerce and industry minister Anand Sharma announced with fanfare the national manufacturing policy, envisaging, among others, building of industrial townships, or national investment and manufacturing zones (NIMZs). Sharma described the policy a “game changer” and industry leaders such as ITC chairman YC Deveshwar saw it as “one of the most significant developments since economic reforms of 1991”.

“NIMZs are a non-starter. The integrated industrial townships cannot be built under the provisions of the Land Acquisition and Rehabilitation & Resettlement (LARR) Bill, 2011, tabled in Lok Sabha on September 7,” immediate past secretary of department of industrial policy and promotion R P Singh told Financial Chronicle. Singh’s comments assume significance as he was among the main authors of the national manufacturing policy and saw to it that the policy was approved and announced before he demitted office on October 31.

The state governments are supposed to take the lead in creating the integrated industrial townships by acquiring land for industry and infrastructure. They are also supposed to give manufacturing units “bankable” ownership of the land that they are located in. Under redefined “public purpose” provisions of the new land Bill, however, they cannot acquire land for private industries, explained Singh.

Singh said the LAAR Bill was finalised by the rural development ministry, approved by the Union cabinet and introduced by the government in Parliament within just seven days in September. “Our department (DIPP) didn’t raise any objection, although the manufacturing policy envisaging land acquisition by states for industrial townships had been cleared, in principle, by the PM in June,” he said.

Planning Commission member Arun Maira, another policy maker who played a pivotal role, too felt that the development of integrated industrial townships would be almost an impossible task in the face of the new land acquisition legislation. NIMZs run the same risks of running aground as special economic zones (SEZs) – that of land, Maira said.

“At best, we can hope that the seven industrial townships planned under the Delhi-Mumbai industrial corridor (DMIC) project would get going and can then be converted as NIMZs”, he said. But that too would depend on how much of the land is already in possession of the six state governments involved with DMIC. Maira and Singh agreed that NIMZs have an important place in the manufacturing policy, but the policy’s success does not entirely dependent on whether the industrial townships are built or not.

The government on Friday also went about playing down the importance of NIMZs in the manufacturing policy. The proposals in the policy are generally sector neutral, location neutral and technology neutral except incentivisation of green technology, the commerce and industry ministry said. “While the NIMZs are an important instrumentality, the proposals contained in the policy apply throughout the country whether industry is able to organise itself into clusters and adopt a model of self-regulation as enunciated”, it said.

Singh and Maira also pointed out that the policy has, other than NIMZs, many other components including the easing of business regulations and statutory clearances; an exit mechanism for non-viable businesses; facilities for technology acquisition and development; green manufacturing incentives; industrial training and skill development; and a package for small and medium enterprises.

Each of these has a critical role in achieving the policy objectives. Maira agreed that NIMZs, because of the sheer space they occupy in the manufacturing policy document, have come to be seen as the main vehicle for achieving the policy objectives. So, the difficulties now being envisaged in the government acquiring land for setting up these townships do create the apprehension that the entire policy would be derailed.

DIPP officials said the idea of NIMZs was to develop greenfield industrial townships with state-of-the-art infrastructure.

These industrial townships were proposed to be self-governing and autono­mous bodies under Article 243 (Q-c) of the Constitution. NIMZs were to be different from SEZs in terms of size, level of infrastructure planning, and governance structure related to regulatory procedures and exit policy. One major difference, Singh pointed out, was that SEZs were tax-free and duty-free “deemed foreign territories”.

“The manufacturing policy is all about a level-playing field for all units, be they located in NIMZs or outside”, Singh said. Even these “early results” in developing NIMZs, according to DIPP, would be completed by the end of 2019, all going fine.