Context: The Jammu and Kashmir administration announced a new industrial developmental scheme on Thursday. With a total outlay of Rs 28,400 crore, the scheme aims to encourage new investment and to take industrial development to the block level. While making the announcement, Lt Governor Manoj Sinha said the scheme will go a long way in ushering an era of socio-economic development of the region and for catering to the aspirations of people. The industrial development scheme is from the period of date of notification up to the year 2037 and aims at creating 4.5 lakh jobs, while also attracting Rs 20,000 crore investments in the Union Territory.
Key Points
Aim

• To take industrial development to the block level in Union Territory (UT) of J and K, which is the first time in any Industrial Incentive Scheme of the Government of India and attempts for a more sustained and balanced industrial growth in the entire UT.

Beneficiaries: Scheme is made attractive for both smaller and larger industrial units.
Expenditure: The financial outlay is Rs. 28,400 crore for the scheme period 2020-21 to 2036-37 (17 years).
Role of J&K in Implementation

• Scheme envisages a greater role of the UT of J&K in registration and implementation of the scheme while having proper checks and balances by having an independent audit agency before the claims are approved.

Incentives Under the Scheme
Capital Investment Incentive

• It provides an incentive at the rate of 30% in Zone-A and 50% in Zone-B on investment made in plant and machinery (in manufacturing), or construction of building and other durable physical assets (in service sector).
• Zone-B includes far-off areas and will receive higher incentives so as to ensure equal opportunities of growth in far-flung areas and major towns.
• Zone-A includes areas other than Zone-B.
• A capital investment is a sum of money that goes towards furthering the objectives of a business or towards purchasing long-term assets for the business.

Capital Interest subvention

• It provides for 6% capital interest subvention for a maximum of seven years on loans up to Rs. 500 crore for investment in plant and machinery (in manufacturing), or construction in building and all other durable physical assets (in service sector) for 10 years.
• Capitalized interest is the cost of borrowing to acquire or construct a long-term asset.

GST Linked Incentive

• It is based on Gross Goods and Services Tax (GST).
• This will incentivise output up to 300% of the eligible value of actual investment made in the plant and machinery (in manufacturing), or construction in building and all other durable physical assets (in service sector).

Working Capital Interest Incentive

• This will provide all existing units incentive at the annual rate of 5% for maximum 5 years. Maximum limit of incentive is Rs. 1 crore.
• Working capital, also known as net working capital (NWC), is the difference between a company's current assets, such as cash, accounts receivable (customers' unpaid bills) and inventories of raw materials and finished goods, and its current liabilities, such as accounts payable.

Significance

• The scheme will encourage new investment, substantial expansion and also nurture the existing industries in the Union Territory.
• It will also provide employment to 4.5 lakh people besides leading to equitable, balanced and sustainable socio-economic development of the region.

Other Initiatives

• Earlier Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) Social Endeavour for Health and Telemedicine (SEHAT) scheme was launched to extend health insurance coverage to all residents of J&K.
• The Union Cabinet has also approved a special package worth Rs. 520 crore in the Union Territories (UTs) of J&K and Ladakh for a period of five years under the Deendayal Antyodaya Yojana-National Rural Livelihood Mission (DAY-NRLM).
• In August 2019, the Central government had suspended all modes of communications in the wake of revocation of Jammu and Kashmir's special status, granted under Article 370. Eventually, services were partially restored, with internet speed restricted to 2G.