Context:

• The recent announcement by the Indian government regarding the continuation of the New Central Sector Scheme (NCSS) for Jammu and Kashmir until 2037 marks a significant step in promoting industrial development in the region.
• This scheme, which was initially launched in January 2021, aims to stimulate economic growth, create jobs, and attract investment in Jammu and Kashmir, especially following the abrogation of Article 370 and the subsequent bifurcation of the state into two Union Territories.

Key Points:

New Central Sector Scheme

• The NCSS is designed to facilitate industrial development in Jammu and Kashmir by providing a robust framework of financial incentives. The scheme will remain effective from April 1, 2021, until March 31, 2037, with a total budget allocation of ?28,400 crore. This allocation was established during its initial announcement and remains unchanged despite the extension of the scheme's duration.

Key objectives

The primary objectives of the NCSS include:

• Employment generation: The scheme is expected to create job opportunities beyond traditional government employment by fostering both manufacturing and service sectors.
• Investment: By providing substantial financial incentives, the scheme aims to attract new investments and encourage existing businesses to expand their operations.
• Sustainable development: Emphasizing sustainable practices, the scheme seeks to ensure that industrial growth aligns with environmental considerations and community welfare.

Financial incentives offered

The NCSS offers several financial incentives aimed at making Jammu and Kashmir an attractive destination for businesses:

1. Capital Investment Incentive:
   • New units can receive up to 30% of their investment in plant and machinery as a capital incentive, capped at ?5 crore for units in Zone A and ?7.5 crore for those in Zone B.
2. Capital Interest Subvention:
   • Eligible businesses can benefit from interest subvention on loans taken for investments in new plant and machinery or durable physical assets. This subvention is offered at an annual rate of 6% for a maximum period.
3. Goods and Services Tax Linked Incentive (GSTLI):
   • The scheme provides a unique GST refund mechanism where businesses can claim up to 300% of their GST paid over a period of ten years, which is unprecedented compared to other regions.
4. Working Capital Interest Subvention:
   • Existing units can avail a 5% interest subvention on working capital loans for up to five consecutive years from registration under the scheme.

Looking ahead:

• The New Central Sector Scheme for Jammu and Kashmir represents a critical initiative aimed at revitalizing industrial activity in a historically underdeveloped region. By extending this scheme until 2037 with significant financial incentives, the government hopes to foster an environment conducive to business growth and job creation. However, addressing concerns regarding budgetary constraints and operational challenges will be essential for maximizing the potential benefits of this ambitious program.