Karnataka Industrial Policy

2009-14

Department of Industries and Commerce

Government of Karnataka

# 49, 2nd floor, South Block, Khanija Bhavan,

Devaraj Urs Road, Bengaluru – 560001.
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Proceedings of the Government of Karnataka

Sub. : Karnataka Industrial Policy 2009-2014.

Read: 1. G.O.No.CI 167 SPI 2001, Bangalore dtd: 30.06.2001
2. G.O.No.CI 319 SPI 2005, Bangalore dtd: 26.08.2006
***
Preamble :

Karnataka is one of the Industrially forward States of India. The State has a
host of large industries ably supported by a strong base of Micro, Small and
Medium Sectors. Due to inherent advantages of the State, the industry and
trade sectors including service sector are propelling the overall economic
development of Karnataka.

Today, Karnataka is one amongst the industrially developed States in the

Country. The State has all potential to stand out on the fore front and has
been focusing on development of industries, trade & service sector in
Karnataka. Due to the progressive policies and proactive measures of the
Government and also the contribution of entrepreneurial fraternity and
investors, today Karnataka has been recognized as one of the preferred
destinations for both investment and to live in.

This fact is evident from the statistics that, during the years 2006-07 and
2007-08 the State High Level Clearance Committee has approved 173
projects with aggregated investment of Rs.2,50,779 crores which will
provide employment opportunities for about 28 lakh persons upon
implementation. Further, the State Level Single Window Clearance
Committee has cleared 1609 projects with investment potential of
Rs.22,234 crores and employment opportunities for about 10.72 lakh
persons.

The State Government enunciated its New Industrial Policy 2006-11 vide
G.O.No. CI 319 SPI 2005, Bangalore dated 26.08.2006. This policy laid
emphasis on development of infrastructure and human resource in addition
to other measures. This policy had its own impact in accelerating the pace of
development of industries & trade. The Gross State Domestic Product
(GSDP) of Karnataka has registered a growth of 6.9% during 2007-08
against 6.2% during the previous year. The share of industry in GSDP has
also increased to 16.65% during 2007-08, when compared to 16.51% during
2006-07.
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Today, SME sector does get special attention and support all over the World,
even in the developed countries. Realizing this fact, the Central Govt.
enacted Micro, Small & Medium Enterprises Development Act, 2006
facilitating the growth of MSME sector in the Country. In line with the
philosophy of the MSMED Act, it is imminent for the State to focus more on
MSME sector. This Act provides a clear status for enterprises engaged in
service activities and a clear cut definitions for medium scale enterprises. It
is felt that, these features need to be suitably incorporated in the current
industrial policy of the State to provide better edge to the MSME sector of
the State.

The Government is committed for implementation of Suvarna Karnataka

Development Corridor Programme throughout the length & breadth of the
State. This corridor will give added fillip the overall development of the
districts covered under the programme. In complement to this corridor four
major industrial corridor with 8 lane roads will also be developed. To
harness the local natural and human resources sector specific zones will also
be established across the State.

Further, the State is endowed with rich natural resources across the State and
such resources need to be optimally utilized for the benefit of local people.
Value addition to the resources is one of the way for optimizing the wealth
available locally. This will also help for uniform spread of industries and
economic activities throughout the State and will accelerate the pace of
development especially the districts of North Karnataka. Through these
measures, the Government would be able to readdress the much talked about
issue of regional imbalances in development.

The State also felt the urgency of providing stimulus measures for industries
and service sector to combat the ill effects of the financial crisis prevailing
globally. The state is committed to initiate certain measures to provide
temporary relief to the industry & service sector to overcome the present
situation.

Keeping all these facts in view, the State Govt. felt the necessity of bringing
out a New Industrial Policy for this period of next five years. The main
objectives of this exercise is to make the policy more attractive to the
entrepreneurs as well as investors irrespective of the size of investment.
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The policy has been drafted through extensive consultation process with
industry associations, trade bodies, related Govt. departments and
organizations & other stakeholders. The Policy has also been discussed in
the Vision Group constituted by the Government. The views and
suggestions offered by all these stakeholders have been incorporated suitably
in the policy with the objective of making this policy most industry friendly.

In light of the above, a decision has been taken by the Govt. to formulate and
adopt a New Industrial Policy for the period 2009-14.

Hence, the following Order :

Government Order No. CI 233 SPI 2008, Bangalore Dtd : 28-2-2009

In the circumstances explained in the preamble, Government is pleased to

announce the Karnataka Industrial Policy 2009-14, as detailed in Annexe to
this order and supported by following Annexes :

Annexe –1 : Classification of taluks into Zones for the purpose of

administering graded scale of incentives and
concessions.
Annexe – 2 : Package of incentives and concessions for investments
Annexe - 3 : Service Enterprises eligible for package of Incentives &
Concessions.
Annexe – 4 : Activities not eligible for incentives
Annexe – 5 : Terms of reference & other conditions for sanction of
Incentives and Concessions.

The salient features of the Karnataka Industrial Policy 2009-14 are as

follows :

(i) Envisions to make Karnataka prosperous through development of

human & natural resources in a systematic, scientific and
sustainable manner.
(ii) Target to provide additional employment for about 10 lakh persons
in the next five years.
(iii) Efforts to increase the Share of industry to the State GDP to 20%
by the year 2014.
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(iv) To double the State’s export from the current level of Rs.1,30,000
crores.
(v) Focus on providing quality infrastructure across the State
(vi) Thrust on Skill Development & Entrepreneurship Promotion
(vii) Added focus on development of MSME sector
(viii) Performance and Employment linked Incentives & Concessions

The above industrial policy and package of incentives and concessions shall
come into effect from 01.04.2009 and will have a span of five years there
from i.e upto 31.03.2014.

This order issues with the concurrence of the Finance Department vide
U.O. Note No. FD/1394/EXP-1/2008 dt. 18.11.2008, Revenue Department
vide U.O. Note No. RD/94/LGP/2008 dt. 01.12.2008, Planning and Statistics
Department vide U.O. Note No. PD/13/FRO/2008 dt. 30.10.2008,
Agriculture and Horticulture vide U.O. Note No.AHD/SECY/220/2008 dt.
31.10.2008, Urban Development Department vide U.O. Note No.
UDD/250/BMR/2008 dt. 01.12.2008, Labour Department vide U.O. Note
No.LD/285/LET/2008 dt. 19.11.2008 , Transport Department vide U.O.
Note No. TRD/102/RIC/2008 dt. 24.11.2008 Co-operation Department vide
U.O. Note No.CD/310/MRE/2008 dt. 27.11.2008, Infrastructure
Development Department vide U.O. Note No. IDD/48/IDM/2008 dt.
6.11.2008, Public Works Department vide U.O. Note No.
PWD/212/PSP/2008 dt. 3.12.2008, IT & BT Department vide U.O. Note No.
ITD/04/PRM/2008 dated 10-2-2009 and on the decisions of the Cabinet
meeting held on 28-2-2009.
By Order and in the Name of
the Governor of Karnataka
- Sd -
(Subir Hari Singh)
Principal Secretary to Government,
Commerce & Industries Department
To
The Compiler Karnataka State Gazette – with a request to publish in the next
issue of the Gazette and supply 1000 copies of the same to the Department.

Copies to:
1. The Accountant General in Karnataka, Bangalore – 1.
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2. The Chief Secretary, Government of Karnataka.
3. The Additional Chief Secretary, Government of Karnataka.
4. The ACS & Development Commissioner, Govt. of Karnataka.
5. All the Principal Secretaries & Secretaries to Govt.
6. The Commissioner for Industrial Development and Director of Industries
& Commerce, Kanija Bhavan, Race Course Road, Bangalore-1.
7. The Commissioner for Commercial Taxes, Therige Bhavan, Gandhi Nagar,
Bangalore-9
8. The Managing Director, KPTCL, Cauvery Bhavan, Bangalore-9
9. The Chairman, Karnataka State Pollution Control Board, Parisara
Bhavan, Church Street, Bangalore-1.
10. The Director of Factories & Boilers, Karmika Bhavan, Bannerghatta
Road, Diary Circle, B’lore – 29.
11. The Commissioner for Labour, Karmika Bhavan, ITI Premises, Near
Bangalore Diary Circle, Bannarghatta Road, Bangalore-29
12. The Inspector General of Registration & Commissioner of Stamps, # 720,
46th Cross, Shimsa Bhavan, Jayanagar 8th Block, Bangalore-86.
13. All the Deputy Commissioners of Districts.
14. All the Joint Directors of District Industries Centres.
15. The MD, KSIIDC, Khanij Bhavan, Race Course Road, Bangalore-01.
16. The MD, KSSIDC, Industrial Estate, Rajajinagar, Bangalore – 44.
17. The MD, KSFC, Thimmaiah Road, Bangalore – 560 052.
18. The Executive Member & CEO, KIADB, Nrupathunga Road, Bangalore-
1
19. The MD, Karnataka Udyoga Mitra, # 49, Khanij Bhavan, Race Course
Road, Bangalore-01.
20. The MD, VITC, VITC Building, Kasturba Road, Bangalore – 560 001.
21. The MD, KCTU, Basavabhavan, Basaveshwara Circle, B’lore-560 001.
22. The Chief Adviser, TECSOK, 4th Floor, Basavabhavan, Basaveshwara
Circle B’lore-1
23. The Deputy Secretary [Cabinet] DPAR. Vidhana Soudha, Bangalore
24. The Under Secretary [Commercial Tax] Finance Dept. Vidhana Soudha,
25. The Director, Centre for Entrepreneurship Development of Karnataka
(CEDOK), Plot No.1 (A&B), Belur Industrial Area, Belgaum Road,
Dharwad.
26. The Managing Director, Karnataka State Khadi and Village Industries
Boad (KVIB), No.10, Jasma Bhavan Road, Bangalore-52.
27. The Director, Government Tool Room and Training Centre (GTTC),
Industrial Estate, Rajajinagar, Bangalore-44.
28. The President, FKCCI, Chamber of Commerce Building, K.G.Road,
B’lore–9.
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29. The Chairman, Karnataka Chapter, CII, # 551, 9th A Main Road, Behind
HDFC CMH Branch, 1st Stage, Indiranagar, Bangalore-38.
30. The President, BCIC, Sheriff Chambers, 14 Cunningham Road,
Bangalore 560 052
31. The President, KASSIA, # 2/106, 17th Cross Magadi Chord Road,
Vijayanagar, Bangalore-40.
32. The President, Karnataka Chamber of Commerce & Industry, Karnataka
Chamber Building, Jayachamaraj Nagar, Hubli-20.
33. The President, NKSSIA, Gokul Road, Hubli.
34. The President, Bellary District Small Industries Association, No.D-11 &
12, KSSIDC Indl. Estate, Bangalore Road, Bellary-01.
35. The President, Bijapur District SSI Association, Biradar Chemicals, Indl.
Estate, Station Back Road, Bijapur-04.
36. The President, AWAKE, No.B-76, KSSIDC Indl. Estate, Rajajinagar,
Bangalore-44.
37. The General Secretary, Hebbal Industries Association, Jain Industry
Cotton Waste, 441 (E), Hebbal Industrial Estate Opp. Vikranth Radial,
Mysore-16.
38. The President, Peenya Industries Association, 1st Cross, 1st Stage, Peenya
Indl. Estate, Bangalore-58.
39. The President, Karnataka Small Industries Association, Industrial Area
Road, Mangalore-11.
40. The President, Hyderabad Karnataka Chamber of Commerce & Industry,
Chambers Building Complex, Super Market, Gulbarga.
41. The Gen.Manager, Small Industries Development Bank of India [SIDBI],
No.2, Khanija Bhavan, V Floor, East Wing, Race Course Road, B’lore –
01.
42. The General Manager, IDBI, 58, Mission Road, Bangalore-27
43. The General Manager, ICICI, Raheja Towers, M.G.Road, Bangalore- 1.
44. The GM, IFCI, No.3, Cubbonpet Main Road, P.B.No.6914, B’lore–2.
45. The General Managers of all the Commercial Banks.
46. Guard file/Spare copies/Office copy.
 Contents

1 Introduction 1
2 Vision 3
3 Mission 3
4 Strategies 3
5 Policy Measures
5.1 Streamlining of land acquisition through Inclusive 5
Development:
5.2 Management of industrial areas / estates 7
5.3 Quality Infrastructure 7
5.4 Development of Special Economic Zones 11
5.5 Skill Development 11
5.6 Entrepreneurship Development 12
5.7 Focus on MSME Sector 13
5.8 Boost to the Manufacturing Sector 15
5.9 Promotion of Exports 16
5.10 Conservation of scarce resources 16
5.11 Award for best practices 17
5.12 Other Policy initiatives of the State for Encouraging 18
Potential Sectors
5.13 Facilitation 19
5.14 Incentives and Concessions 20
5.15 Miles Stones and review of Implementation 21
Annexes:
1 Classification of taluks into Zones for the purpose of 23
administering graded scale of incentives and concessions.
2 Package of incentives and concessions offered for 27
investments
3 Illustrative list of service enterprises eligible for incentives 37
4 List of industrial activities / Enterprises not eligible for 38
incentives and concessions respectively.
5 Definitions, terms and conditions for sanction of 39
incentives
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Annexure

Karnataka Industrial Policy 2009-14

1 Introduction

Karnataka is one amongst the industrially developed States in the

Country. The State has all potential to stand out on the fore front and has
been focusing on development of industries, trade and service sectors.

The State Government understands that the challenges poised due to

global economic recession have to be addressed to promote economic
growth of the State. A stimulus to boost economic activities needs to be
given to sustain the current pace of over all development. Further, the
State is endowed with rich natural resources across the State and such
resources need to be optimally utilized for the benefit of local people.

Value addition to resources is one of the ways of optimizing the wealth

available locally. This will also help ensure uniform spread of industries
and economic activities throughout the State and will accelerate the pace
of development especially in the districts of North Karnataka. Through
these measures, the Government would be able to readdress the serious
issue of regional imbalances in development.

The State Government realizes the limitation of agriculture sector to

generate large scale employment to the local youths. About 56% of the
State’s workforce is estimated to contribute 19.13% of the GSDP. It is
the agreed fact that, the manufacturing sector has high potential to create
maximum employment that too, to all sections and levels of job
aspirants.
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In order to provide enabling environment for investors, the State
government has already enacted Karnataka Industries (Facilitation) Act,
2002. Due to the progressive measures and pro-active mind set of the
Government, today, Karnataka has been recognized as one of the
preferred investment destinations both for domestic and overseas
investors.

The State Government has introduced Industrial Policy 2006-11 with an

aim to increase the growth of GDP, strengthen manufacturing industries,
increase share of exports from Karnataka, to generate additional
employment of atleast 10 lakh persons in the manufacturing and service
sectors, reduce regional imbalance and ultimately aim at overall socio-
economic development of the State.

In the meantime, the Government of India enacted Micro, Small and

Medium Enterprises Development Act, 2006 and requested all the States
to provide required support and encouragement to make MSMEs more
competitive. In order to make the State more attractive and investor
friendly, there was a need to focus more on inclusive industrial
development, comprehensive HRD programmes, special attention
towards development of sector specific zones, classification of taluks
according to Dr. D M Nanjundappa Committee Report, attractive
package of incentives and concessions, encouragement for existing
industries to take up expansion, modernization and diversification etc.
The State also understands the need to provide stimulus measures for
industries to combat the prevailing financial crisis. Keeping these points
in view, the State intends to formulate a new Industrial Policy with a
determination to provide level playing field to all investors.

This policy is framed with the broad guiding principles of creation of

employment, development of backward regions and value addition to
local resources.
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2 Vision

To build prosperous Karnataka through development of human and

natural resources in a systematic, scientific and sustainable manner.

3 Mission

3.1 To create enabling environment for robust industrial growth.

3.2 To ensure inclusive industrial development in the State.

3.3 To provide additional employment for about 10 lakh persons by

2014.

3.4 To enhance the contribution of manufacturing sector to the

State’s GDP from the current level of 17% to 20% by the end of
policy period.

4 Strategies

4.1 Classification of the taluks of the State into four zones depending
on backwardness of the taluks and also based on broad guidelines
of Dr. D M Nanjundappa Committee Report.

4.2 Thrust on provision of world-class infrastructural facilities for

industries with active participation of private sector/ industry.

4.3 Implementation of Suvarna Karnataka Development Corridor

Programme (SKDCP) through length & breadth of the State and
develop industries at the potential locations along with corridor.

4.4 Development of four 8 lane industrial corridors under SKDCP.

4.5 Development of sector-wise industrial zones for optimal

utilization of local natural and human resources so as to
minimize migration of people to urban centers.
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4.6 Simplification of land acquisition procedures with emphasis on
inclusive development.

4.7 Safeguarding the socio-economic interests of both farmers and

investors while acquisition of land.

4.8 Preferential treatment for MSME sector enabling to meet the

global challenges.

4.9 Attractive employment and performance linked package of

incentives and concessions to attract investments to backward
regions and also to provide a leverage to MSME sector.

4.10 Thrust on development of MSME Sector through attractive

package of Incentives & Concessions.

4.11 Tailor made package of incentives to larger projects having wider

positive implications on the State’s economy to leverage a better
edge over other competing states.

4.12 Additional incentives for entrepreneurs belonging to under-

privileged sections of the society to bring them to the main
stream in order to achieve much needed inclusive growth.

4.13 Focus on skill development in order to enhance the employability

of youth especially women and also to make ready-to-employ
human resource to the industry.

4.14 Inculcate entrepreneurial qualities amongst local youth in general

and women in particular and motivate them to take up self
employment by extending handholding support.
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4.15 Create level playing environment for all investors / private sector
players by enhancing the facilitation mechanism enabling to do
their business with ease and less transaction cost.

4.16 Appropriate provisions for the protection of environment and to

encourage energy & water conservation measures in industry/
projects through go-green strategy.

5 Policy Measures:
5.1 Streamlining land acquisition process through inclusive
development

5.1.1 Efforts will be made to identify and utilize government waste lands in
different parts of the State for employment generating industrial
activities.

5.1.2 Inventory of surplus and unused land available with PSUs, State Govt.,
ULBs and suitable private land will be made to create a Land Bank.
This will enable the State to offer ready to use land to investors.

5.1.3 In order to speed up the process of land acquisition for the purpose of
industries, a clear cut land acquisition policy will be evolved in
consultation with farmers and industry. In this policy, necessary
measures will be spelt out to ensure that only dry land and single crop
land will be acquired for industrial purposes. Further, while issuing
notification, lands wherein temples, crematoria, schools, playground and
residential houses are located shall be excluded. The policy will also
ensure offering an adequate Relief & Rehabilitation (R&R) Package to
the land owners whose land is acquired for development purpose.
Suitable amendments will be made to Section 109 of Karnataka Land
Reforms Act to facilitate investors for purchasing agricultural land.
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5.1.4 Broad R & R guidelines would be evolved in consultation with land
owners and industry based on which suitable R&R package is required
to be worked out in case of acquisition of land for industrial purposes.

5.1.5 The policy will also have a provision to take the land owners as partner
in the project by offering certain equity to them. Alternatively land
owners will be offered adequate compensation based on the set
guidelines.

5.1.6 Land owners except in case of acquisition for Single Unit Complex and
infrastructural projects, will have an option to get part of the developed
land depending on the location by KIADB in lieu of specified
compensation. Land owners are free to use this portion of land for
residential / commercial / industrial purposes subject to the prior
approval of KIADB. Further plan for building construction required to
be approved by KIADB. Appropriate clause will be in place in the policy
to ensure that the land is developed within the stipulated time frame and
the project is implemented as per the declared schedule.

5.1.7 While developing industrial areas, measures will be taken to earmark at

least 20% of the land for MSME sector for necessary vendor
development support to the large projects.

5.1.8 In case of large extent of land, certain portion of the land will be
reserved for social infrastructure such as housing areas, schools,
hospitals etc., to reduce the distance between work and other facilities.

5.1.9 While development of infrastructure projects, investors are compelled to

create adequate facilities for persons engaged in attendant services, in
order to avoid additional burden on public infrastructure.
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5.2 Management of industrial areas / estates

5.2.1 KIADB will create all the basic amenities in industrial areas and the
maintenance of facilities will be transferred to local bodies / industry
associations. Wherever, these arrangements can not be materialized,
KIADB itself will take up the responsibility of maintaining the basic
amenities. A proper policy in this regard will be evolved and necessary
MOUs will be signed between KIADB and Caretakers of facilities.

5.2.2 In order to encourage self management of industrial areas by the

Enterprises, the Government will expedite the establishment of Industrial
Township Authorities in major industrial areas / estates. The bottlenecks
if any, in this regard will be sorted out in consultation with the respective
departments.

5.3 Quality Infrastructure

5.3.1 Efforts will be made to provide world class infrastructure to investors

like all-weather road, uninterrupted power supply, adequate water,
warehouse and logistic facilities, connectivity through railways/ports etc.
This sort of ready-to-use infrastructure will enable the investors to
operate on plug & play concept.

5.3.2 While developing large industrial areas/estates 20-25% of the land will
be earmarked for townships facilitating walk to work concept in such
areas.

5.3.3 In the process of infrastructure development, due care will be taken to

save water bodies, ecology and greenery adopting integrated
environment management plan for the region as a whole.
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5.3.4 The Government will implement Suvarna Karnataka Development
Corridor Programme throughout the length & breadth of the State.
An extent up to 25 kms. on both sides of the corridor will be developed
through orderly establishing industrial clusters, township, satellite towns
and sector-specific industrial zones.

5.3.5 As part of SKDC Programme, following major industrial corridors with

8 lane roads will be developed: Bidar-Bangalore via Chitradurga,
Tumkur-Honnavar via Shimoga, Chitradurga-Mangalore via
Shimoga-Udupi and Bangalore-Belgaum via Davanagere -Hubli.
Additional corridors will also be developed to cover Bidar, Bijapur and
other potential locations.

5.3.6 To harness the local natural resources and also to optimize its value
addition, following sector specific industrial zones will be developed :

i) Steel : covering Bellary, Koppal, Bagalkot, Haveri,

Gadag & Raichur Districts
ii) Cement : covering Gulbarga, Bagalkot, Chitradurga,
Belgaum and other Districts.
iii) Food Processing : covering Bangalore Rural, Kolar,
Belgaum, Gadag, Koppal, Shimoga, Bagalkot, Bijapur,
Davangere, Mandya and Dharwad Districts.
iv) IT / BT : covering Mysore, Mangalore, Hubli-Dharwad,
Belgaum, Shimoga, Gulbarga, Kolar and Mandya
Districts
v) Automobile : covering Ramanagara, Shimoga Dharwad
and Kolar Districts.
vi) Readymade garments : covering Bangalore Rural,
Tumkur, Kolar, Mandya, Belgaum, Bidar, Dharwad
and other Districts.
Sugar and co-gen, power: covering Bidar, Belgaum,
 9
vii) Bagalkot, Shimoga and Mandya Districts.
viii) Pharmaceutical/Bio-Technology: covering Bangalore,
Mysore and Hassan Districts.
ix) Power Generation: covering Raichur, Bellary, and
Bijapur & Chitradurga Districts.
x) Media & Entertainment : Bangalore (R) and
Ramanagara

5.3.7 An Aerospace Park in association with Society of Indian Aerospace

Technologies and Industries (SIATI) will be developed near Bangalore.

5.3.8 All efforts will be made to develop required infrastructural facilities and
provide need based facilitation for timely development of these zones
based on the recommendations of exclusive task forces set up by the
Government to take the proposals forward.

5.3.9 Food processing parks will also be set up at Shimoga and other
potential locations. Establishment of similar parks at Malur, Bagalkot,
Hiriyur and Jewargi will be expedited.

These sector specific zones will be developed on time bound manner

and are expected to create ample employment opportunities for local
people at all levels. Efforts will be made to attract industrial giants to
invest in these zones by offering structured incentives and concessions.

5.3.10 Initiatives of the investors in developing private industrial areas / estates

either in PPP mode / individual entrepreneurs / Companies /
Co-operatives will be encouraged with a supportive package.

5.3.11 In order to upgrade and maintain infrastructural facilities on a

sustainable basis, it is proposed to have a dedicated Infrastructure
 10
Development Fund with an initial corpus of Rs.500 crores to be
operated through KIADB.

5.3.12 The State has taken initiatives to develop Airports at Shimoga, Hassan,
Gulbarga, Bellary, Bidar, and Bijapur under PPP mode. Expansion /
upgradation of Mangalore, Belgaum and Hubli Airport are also
envisaged. Further, it is proposed to develop Air Strips in 11 districts /
locations.

5.3.13 In the budget speech of Hon’ble Chief Minister for 2009-10

following schemes are announced.

State will allocate Rs.1000.00 crores for acquiring 1000 to 2000 acres of
land in each district through KIADB. This will facilitate establishment of
thousands of small and medium enterprises. It is also proposed to attract
foreign capital to the State Industrial Sector by establishing industrial
colonies.

A foundry park will be established in Mache Village of Belgaum district

in addition to a spice park in Byadagi of Haveri district. An auto park
will also be established in Basava Kalyan, Bidar district. It is proposed
to develop a residential workshop and infrastructure facilities for the
artisans engaged in the preparation of silver ornaments in Mangoor
village of Chikkodi taluk in Belgaum district.
 11
5.4 Development of Special Economic Zones

5.4.1 The State Govt. realises the potential of SEZs in driving industrial /
economic growth and committed to facilitate exports and expedite
establishment of Special Economic Zones (SEZs) in the State.

5.4.2 Single point clearance will be given for SEZ proposals before
recommending to the Govt. of India for approval. Attractive fiscal
benefits will be offered to developer and unit operating in the SEZ in
accordance with the SEZ Act 2005, enacted by Govt. of India.

5.4.3 State Govt. will pronounce an exclusive SEZ Policy to support and
encourage healthy proliferation of SEZs in the State.

5.5 Skill Development

5.5.1 Emphasis will be given for development of skilled manpower for the use
of industry and trade. Focus will be given on skill upgradation in the
emerging skill sets while phasing out redundant skills.

5.5.2 The State Govt. will promote private sector investments for skill
development through a market driven approach.

5.5.3 Thrust will be given for skill development amongst women to enhance
their employability.

5.5.4 Regular industry-institution interface is encouraged to identify skill sets

required for the industry and to develop such skill sets in the training
institutions.

5.5.5 The Directorate of Employment and Training will spearhead all the
activities related to skill development. Initiatives taken by the Skill
 12
Development Commission constituted by the Govt. and activities of the
newly established Karnataka Skill Development Corporation would be
integrated suitably to achieve best results.

5.6 Entrepreneurship Development

5.6.1 Thrust will be given for promotion of self employment by local youth
through proper backup support and facilitation. All efforts will be made
to inculcate entrepreneurial qualities amongst youth, with a special focus
on women entrepreneurs. More thrust will be given to motivate youth
belonging to under privileged sections of the society. CEDOK will take
a leading role in these activities.

5.6.2 Counseling and handholding mechanism will be strengthened by

dovetailing Rajiv Gandhi Udyami Mitra Yojana introduced by the
Central Government.

5.6.3 To motivate the prospective entrepreneurs, Guidance Cell in the DICs

will be strengthened. This cell will help entrepreneurs both at entry and
implementation level.

5.6.4 Necessary support will be provided to micro level Enterprises to

graduate to higher level in due course of time. Escort services will be
provided by the Guidance Cell in this growth process. ‘Karnataka
Kaigarika Darshana’ will be arranged every year benefiting the
entrepreneurs to have wider exposure on successful ventures across the
State/ other States.

5.6.5 Industries are also encouraged to participate in trade fairs / exhibitions

both national and international not only to promote their products and
services but also as learning process.
 13
5.7 Focus on MSME Sector

5.7.1 The former President of India, Dr. A P J Abdul Kalam, in his address to
the members of the Karnataka Legislature on the occasion of Suvarna
Karnataka Celebrations, had advocated 11 Missions for Karnataka’s
prosperity.

5.7.2 Of these, Missions on Textiles, Bio-fuel, Agro processing and

Entrepreneurship are related to industries sector. As envisaged by the
Government, exclusive task forces will be set up to take the Mission of
Dr. Kalam forward and achieve tangible results during the policy period.

5.7.3 Price preference of 15% will be allowed for the goods manufactured by
MSM manufacturing industrial Enterprises located in the State in case of
purchases by the Govt. departments and State owned PSUs.

5.7.4 Attractive package of incentives will be offered especially in backward

areas to provide competitive edge to the sector. Emphasis will be given
for industrialization of border taluks. Efforts will be made to develop
industrial infrastructure in these taluks in addition to offering added
incentives to attract investments especially from the neighboring States
to these taluks.

5.7.5 Market development and promotion will be supported through setting up

virtual and physical exhibition centres at State & district levels.
Common branding and promotion of MSME products are also
encouraged.

5.7.6 Cluster development approach will be encouraged for development of

enterprises in order to harness natural resources and skills concentrated
in the respective cluster. A thorough analysis of the industries that have
competitive advantage and resource availability in the surrounding
 14
regions will be made. This will lead to identification of clusters and
their pillar industries at the taluk / district / region level. An action plan
for each cluster / region will be made once they are identified and
pro-active measures through policies, concessions and promotions will
be made to selectively promote them. KCTU will be made a Nodal
Agency to promote clusters in the State.

5.7.7 Realising the need for encouraging Khadi & village industries, the State
will come out with a special programme for promotion of this sector.

5.7.8 Thrust will be given to increase the labour productivity as that is the
key to improved returns and greater output especially in MSMEs.
Simplification of laws and procedures will also be attempted to reduce
the transaction cost.

5.7.9 While developing new industrial areas by KIADB, atleast 20% of the
developed land will be reserved for MSME sector. Further, preference
will be given to the local entrepreneurs/underprivileged sections of the
society while allotting the land earmarked for MSME sector. Relocation
of industries from city centres to out skirts will also be supported
suitably.

5.7.10 Relevant schemes like ASIDE, Credit Guarantee Fund Trust Scheme,
Cluster Development Programme for MSMEs, Credit Linked Capital
Subsidy Scheme, Technology Upgradation Scheme being operated by
Government of India and various Promotional Schemes of different
Ministries of Govt. of India will be suitably dovetailed for the benefit of
MSM Enterprises. The State will also suitably complement these
schemes enabling the entrepreneurs to avail maximum advantage of
these schemes. A separate cell to co-ordinate and monitor
implementation of these schemes will be set up in the Department
of I & C.
 15
5.7.11 The role and responsibilities of support organizations which are
engaged in providing services either to entrepreneurs or artisans will be
revisited and redefined in the context of changed scenario.

5.7.12 The slow down in global economy has seriously impacted several
industries especially those in MSME sector. Some of these have been
able to re-structure and have turned around. Many continue to languish
while some have become totally unvialable. The State proposes to
help in the revival of the viable Enterprises through a relief
package and facilitate smooth exit of unviable one. Accordingly,
a separate Scheme will be formulated in consultation with all
stakeholders.

5.8 Boost to the Manufacturing Sector

5.8.1 Manufacturing is recognized as the main engine for economic growth

and creation of wealth. Robust growth of manufacturing sector is
necessary for creating overall growth and employment opportunities.
Competitiveness and innovation are the key to robust growth of the
manufacturing sector.

5.8.2 Focus will be given on reducing transaction cost by addressing vital

areas like taxation, availability of land and other infrastructure
requirements, implementation of regulatory laws dealing with labour,
environment etc. as enunciated in the National Strategy for
Manufacturing.

5.8.3 Necessary investment climate will be provided for the growth of

manufacturing in broad guidelines of the recommendations of National
Manufacturing Competitiveness Programme.
 16
5.9 Promotion of Exports

5.9.1 The State has initiated several measures to promote exports of both
primary and manufactured products as also services. The State has all
strengths to increase its exports manifold and it is targeted to double the
exports of State from the current level by the end of policy period.

5.9.2 VITC, the Export Promotion Centre for Karnataka will provide initial
services in market intelligence, export documentation, finance and other
critical areas to the Enterprises. Incentives will also be provided for
technology upgradation / sourcing of technology to meet the
specifications of international buyers.

5.9.3 Special incentives will be offered for Export Oriented Enterprises for
obtaining compulsory certifications like Conformity Europeenne (CE),
China Compulsory Certificate (CCC), etc., for enhanced export
competitiveness.

5.9.4 Industries will be encouraged to participate in International exhibitions

and trade fairs. Visits of trade delegations will also be supported
financially by dovetailing the schemes of Govt. of India.

5.10 Conservation of scarce resources

5.10.1 Industries will be encouraged to adopt and implement appropriate

measures for rational use of scarce resources. Thrust will be laid on
conservation of water by adopting appropriate technologies.

5.10.2 Industrial water supply schemes will be expedited. Feasibility of

desalination plants and supply of recycled and treated waste water to
industries will be explored to enable better cost recovery and project
feasibility. Government would facilitate implementation of mega water
 17
supply schemes for industries at potential locations through Special
Purpose Vehicles (SPVs).

5.10.3 Enterprises are encouraged for recycling of water and treatment of

waste water.

5.10.4 Generation and utilization of non-conventional energy sources like

wind, solar, bio-mass etc., will be encouraged.

5.10.5 Industries are encouraged to secure better waste management through

innovative technology for pollution prevention and abatement.

5.10.6 Enhancement of revenue through carbon credit mechanism will be

encouraged. A nodal agency will be identified for promotion of
carbon credit trading that will provide technical, financial and
institutional support to interested firms.

5.10.7 Schemes of other departments / agencies available for conservation of

scarce resources will be suitably integrated.

5.11 Award for best practices

5.11.1 Enterprises will be encouraged to adopt cleaner production techniques

in their activities. They will also be motivated to go for green
technologies and processes to protect the environment and ecology.
Enterprises adopting such best practices will be recognized with state
awards every year.

5.11.2 Adoption of Corporate Social Responsibility (CSR) by large investors

will be persuaded. They will be urged to provide training to local
people, fine tune the available skills and also promote finishing schools.
 18
These investors will be required to participate in society building and
contribute their might for welfare of local people.

5.12 Other Policy initiatives of the State for encouraging potential

sectors

5.12.1 Textile and Garment sectors are providing large employment especially
to women. The State is committed to achieve balanced, higher and
sustainable growth in the entire value chain form fiber to finished
products with emphasis on balanced regional development. An exclusive
promotional policy- Suvarna Vastra Neethi – 2008-2013 has already
been announced by the state to give an added support to this sector.

5.12.2 Realizing the fact that minerals are the treasures of the State, the
Government focuses on systematic and sustainable harnessing of mineral
wealth. There is a need to optimize the geological potential by way of
scientific and detailed prospecting. To guide the orderly development
of mining sector, the Government has announced Karnataka Mineral
Policy – 2008. The provisions of this policy will be made use of for the
rapid development of mining related industries in the State.

5.12.3 The State is an ideal location for promotion of agro food processing
industries due to its agro climatic conditions. Efforts will be made for
further promotion of this sector through establishing food parks at
potential locations with active participation of private sector. Mega food
parks will also be established in the state dovetailing the schemes of
Government of India. A separate Policy for promotion of Agro Food
Processing sector is envisaged by the State.

5.12.4 The State has a strong presence of sugar industries especially in the
districts of North Karnataka. The sugar sector will be further
encouraged to compete with the neighboring states. Factories going for
 19
cogeneration and ethanol production will be suitably supported. The
State will come out separate Policy for the benefit of sugar sector.

5.13 Facilitation

5.13.1 Karnataka Udyog Mitra will be strengthened to provide better single

point contact services for investors. KUM will continue to provide
post-approval support to investors in order to ensure high conversion
rates.

5.13.2 Information kiosks will be set up in major district centres for easy
access of information from entrepreneurs and investors. Karnataka
Diaspora Cell will be made more effective to attract foreign investors to
the State.

5.13.3 Single Window Clearance mechanism will be made more effective so

that most of clearances / approvals are accorded at the time of approval
by SHLCC / SLSWCC / DLSWCC. Relevant provisions of Karnataka
Industries (Facilitation) Act 2002 will be used more effectively to reduce
the transaction cost and to do the business with ease. Efforts will be
made to accord all the required approvals within a specified time of 45
days.

5.13.4 Proposals of all micro, small and medium enterprises will be cleared by
the District Level Single Window Clearance Committee (DLSWCC).
Necessary amendments will be brought to the Karnataka Industries
(Facilitation) Act in this regard.

5.13.5 Investors guide / Information booklets will be made available for

information of investors. All relevant information will also made
available to the investors in website / on-line.
 20
5.13.6 (1) Investors’ meets and road shows will be organized regularly at State
/ National / International level to attract large scale investment to the
State.

5.13.6 (2) Industrial Adalats will be organized regularly at District / Regional/

State level with a view to understand the problem of industries and to
settle pending cases.

5.13.7 Inter departmental co-ordination will be strengthened to achieve better

results. Benefits of supportive policies will be taken to the maximum
extent. Comprehensive labour reforms will be brought in consultation
with industry by the Labour department.

5.13.8 Efforts will be made to expedite implementation of a host of envisaged

mega projects, enabling the local Enterprises to avail spin off benefits
of such larger projects.

5.13.9 Industry Vision Group constituted by the Govt. will guide the orderly
development of industries and trade in the State. Regular interaction
will also be held with financial institution / banks and such agencies to
sort out various issues coming on the way of implementation and
successful operation of projects.

5.13.10 State level Industrial Development Council will be constituted

involving representative from industry and trade to regularly review
the progress of implementation.

5.14 Incentives and Concessions

5.14.1 As a commitment to provide a level playing environment to the

entrepreneurs in the globalised economy, attractive package of
 21
incentives and concessions is evolved. The concept of performance and
employment linked incentives is adopted to achieve the expected results.

5.14.2 Special package of incentives over and above the standard package will
be offered for Mega projects based on the recommendations of SHLCC
depending on the merits and advantages of such projects to the State.

5.14.3 For the purpose of administering package of incentives and concessions,

taluks of the State have been categorized into four zones. The
classification of taluks into zones is in Annexe - 1.

5.14.4 Package of Incentives and Concessions offered for investments is in

Annexe - 2.

5.14.5 List of Service enterprises eligible for package of incentives and

concessions is in Annexe - 3.
5.14.6 Activities not eligible for incentives are listed in Annexe - 4.
5.14.7 Terms and conditions for sanction of incentives & concessions are in
Annexe - 5.
5.15 Milestones and review of Implementation

5.15.1 In order to achieve the targets spelt out in the policy within the stipulated
time frame, following milestones are set for ensuring periodical
progress :
Creation of additional Generation of
By the end of
employment additional investment
the year
(lakh Nos.) (Rs.crores)
2009-10 1.00 30,000
2010-11 3.00 90,000
2011-12 5.00 1,65,000
2012013 7.50 2,40,000
2013-14 10.00 3,00,000
 22
5.15.2 A high level Inter Departmental Review Committee will be constituted
to regularly monitor implementation of all provisions of the policy.
This committee will also ensure issue of necessary Govt. orders by
various departments in relation to the policy without loss of any for
mid-course corrections, if required for smooth implementation of the
Policy. The committee will also bring out annual reports indicating the
progress in implementation of the Policy.

$ $ $
 23
Annexe - 1

Classification of Taluks in Karnataka into Zones for the

purpose of administering Incentives & Concessions

Zone - 1 Zone - 2 Zone - 4

Total Zone - 3
Sl. (Most (More (Industrially
Districts No.of (Backward
No. Backward Backward Developed
Taluks Taluk)
Taluks) Taluks) Taluks)
South Karnataka Region
1 B’lore (U) 4 - - Anekal
B’lore
(North)
B’lore(South)
B’lore(East)
2 B’lore (R) 4 - Devanahalli
D B Pur
Hoskote
Nelamangala
3 Rama- 4 Kanakapura Ramanagaram
nagara Magadi Channapatna
4 Chitradurga 6 Hosadurga Hiriyur Chitradurga
Molakalmur
Hololkere
Challakere
5 Davanagere 6 Channagiri Honnali Davangere
Harapana Jagalur
halli Harihar
6 Chikka- 6 Bagepalli Gudibande Chikka-
ballapura ballapura
Gowribidanur Siddlaghatta
Chintamani
7 Kolar 5 Mulbagal Kolar
Bangarpet
Srinivasapura
Malur
 24

Zone - 1 Zone - 2 Zone - 4

Total Zone - 3
Sl. (Most (More (Industrially
Districts No.of (Backward
No. Backward Backward Developed
Taluks Taluk)
Taluks) Taluks) Taluks)
8 Shimoga 7 - Soraba Shimoga
Bhadravathi
Sagar
Shikaripura
Hosanagara
Thirthahalli
9 Tumkur 10 Kunigal Turuvekere Tumkur
Madugiri Koratagere Tiptur
Gubbi Sira Chikkanaya-
Pavagada kaanahalli
10 Chamaraja- 4 Chamaraja- Gundlupet Yelandur
nagar nagar Kollegal
11 Chikka - 7 - Kadur Chikka -
magalore magalore
Tarikere
Shringeri
Mudigere
Koppa
N R Pura
12 D Kannada 5 - - Bantwal Mangalore
Mangalore (only
(excl. Corporation
Corpn.limits) limits)
Puttur
Sulya
Belthangadi
13 Hassan 8 - Arakalgud Hassan
Arasikere
C R Patna
H N Pura
Belur
Alur
Sakleshpura
14 Kodagu 3 - - Madikeri
Somwarpet
Virajpet
 25

Zone - 1 Zone - 2 Zone - 4

Total Zone - 3
Sl. (Most (More (Industrially
Districts No.of (Backward
No. Backward Backward Developed
Taluks Taluk)
Taluks) Taluks) Taluks)
15 Mandya 7 - Malavalli Mandya
Nagamangala Maddur
K R Pet Srirangapatna
Pandavapura
16 Mysore 7 H D Kote Hunsur Periapatna Mysore (only
T N Pura Mysore (excl. Corporation
Nanjangud Corpn. limits) limits )
K R Nagara
17 Udupi 3 - - Udupi
Kundapura
Karkala
North Karnataka Region
18 Bellary 7 Sandur Siraguppa Bellary
Kudligi H B Halli Hospet
Hadagalli
19 Bidar 5 Bhalki - Bidar
Humnabad
B Kalyana
Aurad
20 Gulbarga 10 Sedam - Gulbarga
Shourapur
Yadgir
Chitapur
Afzalpur
Shahapur
Aland
Chincholi
Jewargi
21 Koppal 4 Kushtagi Koppal Gangavathi
Yelburga

22 Raichur 5 Sindanorr Raichur

Manvi
Lingasugur
Devadurga
 26

Zone - 1 Zone - 2 Zone - 4

Total Zone - 3
Sl. (Most (More (Industrially
Districts No.of (Backward
No. Backward Backward Developed
Taluks Taluk)
Taluks) Taluks) Taluks)
23 Bagalkote 6 Bilagi Hunagund Bagalkote
Badami Mudhol
Jamkhandi
24 Belgaum 10 - Athani Belgaum
Gokak Khnanapur
Soundatti Hukkeri
Ramdurga
Bailhongal
Chikkodi
Raibag
25 Bijapur 5 Muddebihal - Bijapur
B Bagewadi
Indi
Sindgi
26 Dharwad 5 - Kalghatagi Dharawad
Hubli
Kundaggol
Navalgund
27 Gadag 5 - Mundargi Gadag
Nargund
Ron
Shirahatti
28 Haveri 7 - Savanur Haveri
Shiggaon Ranebennur
Hirekerur Byadagi
Hanagal
29 U Kannada 11 - Supa Karwar
Bhatkal Haliyal
Sirsi
Mundagod
Yellapura
Honnavar
Ankola
Siddapura
Kumta
TOTAL 176 39 40 85 12
 27

Annexe 2

Package of Incentives and Concessions offered for Investments

1 Investment Promotion Subsidy

a) Micro Mfg. Enterprises

Zone – 1 : 25% VFA (max. Rs.10 lakhs)

Zone – 2 : 20% VFA (max. Rs.7.5 lakhs)
Zone – 3 : 15% VFA (max. Rs.5.00 lakhs)
Zone – 4 : Nil

b) Small Mfg. Enterprises

Zone – 1 : 20% VFA (max. Rs.20 lakhs)

Zone – 2 : 15% VFA (max. Rs.15 lakhs)
Zone - 3 : 10% VFA (max.Rs.10 lakhs)
Zone – 4 : Nil

c) Med. Mfg. Enterprises (Those who employ minimum 25 workers)

Zone – 1 : Rs.30 lakhs

Zone – 2 : Rs.20 lakhs
Zone – 3 : Nil
Zone – 4 : Nil
 28
Notes :
(i) 25% of the subsidy sanctioned amount will be released every year on
refund basis towards the payments made by the unit in respect of gross
VAT, ESI and PF and power tariff.

In cases of enterprises which do not use power and not covered under
VAT, EPF, ESI the investment subsidy will be released against the loan
dues.

(ii) This incentive is available to enterprises availing term loan to an extent

of minimum 50% cost of fixed assets only.
(iii) The unit shall avail the sanctioned subsidy within the period of five
years.

1.1 Additional subsidy to SC/ST, Women, Physical challenged,

Ex-Servicemen Entrepreneurs and enterprises coming up in most
Backward taluks of Hyderabad Karnataka region.

Additional 5% subsidy subject to a maximum of Rs.1.00 lakh,

Rs.3.00 lakhs and Rs.5.00 lakhs for Micro, Small and Medium
Manufacturing Enterprises respectively.

2 Exemption from Stamp Duty

MSME, Large and Mega Projects :

Stamp duty to be paid in respect of (i) loan agreements, credit deeds,

mortgage and hypothecation deeds executed for availing term loans
from State Govt. and / or State Financial Corporation, Industrial
Investment Development Corporation, National Level Financial
Institutions, Commercial Banks, RRBs, Co-operative Banks, KVIB /
KVIC, Karnataka State SC/ST Development Corporation, Karnataka
State Minority Development Corporation and other institutions which
may be notified by the Government from time to time for the initial
period of five years only and (ii) for lease deeds, lease-cum-sale and
absolute sale deeds executed by industrial Enterprises in respect of
industrial plots, sheds, industrial tenements, by KIADB, KSSIDC,
 29
KEONICS, KSIIDC, Industrial Co-operatives and approved private
industrial estates shall be exempted as below :

Zone – 1 : 100%
Zone – 2 : 100%
Zone – 3 : 75%
Zone – 4 : Nil

3 Concessional Registration Charges

MSME, Large and Mega Projects:

For all loan documents and sale deeds as specified in 2 above, the
registration charges shall be at a concessional rate of Re.1 per Rs. 1000.

Note :(i). The exemption of stamp duty and concessional registration

charges are also applicable to lands purchased under Section 109
of the KLR Act nd also for direct purchase of industrially
converted lands for the projects approved by SHLCC / SLSWCC /
DLSWCC. This incentive will also be applicable for the land
transferred by KIADB to land owners as compensation for the
acquired land.
(ii) The exemption of stamp duty and concessional registration charges
are also available for registration of final sale deed in respect of
lands, sheds, plots, industrial tenements after the expiry of lease
period at the rate as specified in the Industrial Policy which was in
vogue at the time of execution of lease-cum-sale deed.

4 Waiver of Conversion Fine

MSME, Large and Mega Projects

The payment of conversion fee for converting the land from agriculture
use to industrial use including for development of industrial areas by
private investors will be waived as detailed below:

Zone – 1 : 100%
Zone - 2 : 100%
Zone – 3 : 75%
 30
Zone - 4 : Ni.

Note: The waiver of conversion fine will be on reimbursement basis

after implementation of projects.

5 Exemption from Entry Tax

MSME, Large and Mega Projects:

In Zone – 1, 2 and 3 :

100% exemption from payment of ET on ‘Plant & Machinery and

Capital Goods’ for an initial period of 3 years from the date of
commencement of project implementation. For this purpose, the term
‘Plant & Machinery and Capital Goods’ also includes Plant &
Machinery, equipment etc. including machineries for captive generation
of Electricity.

On raw materials, inputs, component parts & consumables (excluding

petroleum products) [wherever applicable] for a period of 5 years from
the date of commencement of commercial production.

Zone – 4 : Nil

6 Incentives for Exported Oriented Enterprises

MSME, Large and Mega Projects

(i) Exemption from payment of ET

For 100% EOUs, 100% exemption from payment of ET on ‘Plant &

Machinery and Capital Goods’ for an initial period of 3 years from the
date of commencement of project implementation irrespective of zones.

For other EOUs, (Minimum Export obligation of 25%of their total

turnover) 100% exemption from payment of ET on raw materials,
inputs, component parts & consumables (excluding petroleum products)
for an initial period of 3 years from the date of commencement of
commercial production in Zone 1, 2, and 3 and 50% in Zone 4.
 31
(ii) Refund of Certification Charges :

Refund of expenses incurred for compulsory marking like Conformity

Europeenne (CE), China Compulsory Certificate (CCC), etc., to the
extent of 50% of expenses subject to a maximum of Rs. 2.00 lakhs per
unit for both 100% and other EOUs in all zones.

7 Exemption of APMC Cess / fees

MSME, Large and Mega Projects

APMC Cess/ fees in respect of procurement of agriculture produce as

specified in the Schedule (inserted by Act No.17 of 1980 and effective
from 30.06.1979) Sl.No. II, III, IV, VI, VII, IX and X to the Karnataka
APM (Regulation & Development) Act, 1966, directly from farmers for
processing by new and existing industries in Zone – 1, 2 & 3 shall be
exempted for a period of five years, four years and three years
respectively.

Zone – 4 : Nil

8 Subsidy for setting up ETPs

MSME, Large and Mega Projects

One time capital subsidy upto 50% of the cost of Effluent Treatment
Plants (ETPs), subject to a ceiling of Rs.100 lakhs per manufacturing
enterprise in Zone – 1, 2 & 3 and a ceiling of Rs. 50 lakhs in Zone – 4.

9 Interest Free Loan on VAT

Large and Mega Projects :

All new large and mega manufacturing Enterprises established in

Zone – 1, 2 and 3 shall be offered interest free loan on VAT as specified
below:
 32

Investment
range on fixed Quantum of interest free loan
Min. Direct Emp. (Nos.)
assets
(Rs. cr.)
Minimum 100 employ- 50% of assessed gross VAT for
ment and additional 20 initial 5 yrs. subject to the max. of
10 (value of
employment for every 100% of total value of fixed assets.
plant &
Rs. 10 cr. investment.
machinery) –
Repayment of the loan shall be in 3
50
annual instaments after 5 yrs.

Minimum 200 employ- 50% of assessed gross VAT for

ment and additional 20 initial 6 yrs. subject to the max. of
employment for every 75% of total value of fixed assets.
51 – 250
Rs. 50 cr. investment.
Repayment of the loan shall be in
3 annual instaments after 6 yrs.
251 - 1000 Minimum 400 up to 25% of assessed gross VAT for
Rs.300 Crs and 50 initial 7 yrs. subject to the max. of
additional employment 50% of total value of fixed assets.
for every Rs.100 Crs
additional investment Repayment of the loan shall be in
4 annual instaments after 7 yrs.
1001-3000 Minimum 750 for 25% of assessed gross VAT for
Rs 1000 Crs and initial 10 yrs. subject to the max. of
additional 25 for every 50% of total value of fixed assets.
Rs. 100 Crs additional
investment Repayment of the loan shall be in
4 annual instaments after 10 yrs.
More than 1250 25% of assessed gross VAT for
3000 initial 15 yrs. subject to the max. of
50% of total value of fixed assets.

Repayment of the loan shall be in

5 annual instaments after 12 yrs.

Zone – 4 : Nil
 33
10 Anchor Unit Subsidy

Anchor unit subsidy of Rs.100 lakhs shall be offered for the first two
manufacturing Enterprises with minimum employment of 100 members
and minimum investment of Rs.50 crores in each of the taluks coming in
Zone-1, 2 & 3 will be offered. This subsidy will be applicable only in
taluks where no industrial Enterprises with investment of Rs.50 crores
and above exist at present.

11 Special incentives for Enterprises coming up in low HDI districts

Only for Large & Mega Projects :

New large scale Enterprises setting up facilities in six districts having

bottom most Human Development Index (HDI) and employing atleast
75% local persons as defined in the Sarojini Mahishi recommendations
will be offered 75% reimbursement of expenditure on account of
contribution towards Employees State Insurance (ESI) and Employees
Provident Fund (EPF) scheme for a period of initial five years.

However, these benefits over a period of five years will be limited to

25% of value of fixed capital investment. The amount of reimbursement
will be paid annually based on minimum statutory limit subject to the
condition that the unit has paid its contribution towards ESI & EPF on
the due dates. Following are the six districts having bottom most Human
Development Index:

Sl. HDI*
District
No. (2001)
1 Bagalkot 0.591
2 Bijapur 0.589
3 Koppal 0.582
4 Chamarajanagar 0.576
5 Gulbarga 0.564
6 Raichur 0.547

* As per Karnataka Human Development Report – 2005 published by the Department

of Planning & Statistics, Government of Karnataka
 34
12 Interest Subsidy

Micro manufacturing enterprises:

Interest subsidy @ 5% on term loans. The interest subsidy is payable

only on the interest actually paid to financial institutions and not
defaulted in payment of principle or interest installments. The amount of
interest subsidy will be effective rate of interest (after deducting interest
subsidy) receivable by any institutions / under any Govt. of India scheme
or 5% per annum whichever is less). The period of interest subsidy is
5 years, 4 years and 3 years in Zone -1, Zone 2 and Zone 3 respectively.

13 Exemption from Electricity Duty

Micro & Small Mfg. Enterprises

100% exemption of electricity duty / tax for the initial period of five
years, four years and three years in Zone – 1, Zone-2 and Zone-3
respectively.

14 Technology Upgradation, Quality Certification and Patent

Registration

Micro & Small Mfg. Enterprises

(i) Interest Subsidy on TU Loan :

Zone 1, 2 & 3 : 5 % on loans availed from KSFC, KSIIDC &
Scheduled commercial banks, which are not covered under
CLCSS of GOI.

(ii) ISO series certification :

Zone 1, 2, 3 & 4: 75% of cost (max. Rs.75,000).

(iii) BIS Certification:

50% of fees payable to BIS. (max. Rs.20,000) and 25% of cost
(max.Rs.50,000) for purchase of testing equipments as approved
by BIS.
 35

(iv) Patent registration :

75% of cost of fees payable to Patent Office (max. Rs.1.25 lakhs)
and 50% of cost (max. Rs.75,000) towards attorney fees, patent
search etc.
(v) Technology Adoption :
25% of cost (max. Rs.50,000) for adopting technology from
recognized national laboratories.

(vi) Technology Business Incubation Centre : 25% of the project cost

(Max : Rs.50 lakhs).

15 Water harvesting / Conservation Measures

Small & Medium Mfg. enterprises in all Zones.
(i) Rain water harvesting : 50% of cost (max. Rs. 1 lakh)
(ii) Waste water recycling : 50% of cost (max. Rs. 5 lakh)
(iii) Zero discharge process : 50% of cost (max. Rs. 5 lakh).

16 Energy Conservation

Small & Medium mfg. enterprises in all zones.

Practicing Energy Conservation measures resulting in reduction of

Energy Consumption of atleast 10% of earlier consumption: 10% of
capital cost (max Rs.5 lakh).

Use of non-conventional energy sources: 10% of capital cost

(max. Rs.5 lakh).
 36
17 Addl. Incentives to the enterprises following Reservation Policy of
the State

Medium, Large and Mega Manufacturing Enterprises in all zones

employing more than 100 persons :

50% reimbursement of expenditure incurred for employees coming

under reserved category towards contribution to ESI & EPF schemes
for a period of initial 5 years.

18 Refund of cost incurred for preparation Project Reports

Micro & Small Mfg. Enterprises

Zone 1, 2 & 3 : The cost incurred for preparation of project reports by

TECSOK/CEDOK/KSFC or any other recognized institutions for
availing loans shall be reimbursed to the maximum of Rs.10,000/- per
unit subject to financing of the unit.

19 Support to Sugar Sector

New sugar factories and existing sugar factories who have not availed
purchase tax deferement having co-generation facilities and ethanol
production would be considered for conversion of purchase tax on sugar
cane as interest free loan on case to case basis depending on the
financial position of the factory

In case of existing Sugar factories which establish co-generation plants,

ethanol plant, such investment will be treated as expansion for availing
incentives & concessions as per this Policy, but limited to the investment
made on such additional projects.
 37

Annexe- 3

List of Service Enterprises eligible for package of

Incentives and Concession

1 Logistics facilities supporting to industries only (Defined

Separately)
2 Material Testing Centre
3 R & D Centres
4 Technical testing and analysis servicing
5 Maintenance and repair of equipment
6 Packaging services
7 Refuse disposal services
8 Tailoring
9 Flour mills
10 Printing
11 General engineering, fabrication, motor winding, automobile
servicing and repairs, electro plating, industrial paintings, etc.,
engaged in job work

12 Weigh bridges and health care facility set up within the KIADB /
KSSIDC industrial areas

State Level Co-ordination Committee is empowered to add / delete

service activities listed in this Annexe.
 38

Annexe – 4
List of Industrial Activities / Enterprises not eligible for
Incentives and Concessions

1 Breweries & Distilleries of all types excluding winery

2 Enterprises utilizing molasses / rectified spirit / denatured spirit as
main raw material for manufacture of potable alcohol
3 Khandasari and Jaggary making enterprises
4 Photo Studios & Color Processing Enterprises
5 Photo Copying & Xerox Machines
6 Fertilizer Mixing
7 Re-packing of Drugs / Medicines / Chemicals, without any
processing or value addition
8 All types of Saw Mills
9 Beedies / Cigarettes / Cigars / Gutka & Tobacco based products
10 Azoic / Reactive Dyes
11 Fire Crackers
12 Industries manufacturing and or utilizing Ozone depleting substances
13 Power Laundries
14 Brick making Enterprises Excluding Cement Hallow Blocks, wire cut
& fly ash bricks and Refractory bricks
15 Poultry excluding hatcheries
16 Popcorn, Ice Cream, Kulfi & Ice candy making Enterprises
17 Coffee Roasting and Grinding
18 Clock and Watch Repair shops
19 Cassette recording [Audio & video]
20 Cyanide
21 Mining
22 Lime kiln / burnt lime
23 Hotels and motels
24 X-ray clinics and clinical / pathological laboratories and scanning,
M.R.I. tests
25 All industries of mobile nature like rigs, concrete mixing plants, hot
mix plants including site oriented industries.
 39
Annexe – 5

Definitions and Terms &Conditions for sanction of

Incentives and Concessions

1 Definitions
a) As per the MSMED Act, 2006, Manufacturing Enterprises have
been defined based on of investment in plant and machinery and
classified into:
- Micro Enterprises - Investment upto Rs.25 lakhs
- Small Enterprises - Investment above Rs.25 lakh and upto
Rs.500 lakhs.
- Medium Enterprises - Investment above Rs.500 lakhs and upto
Rs.1,000 lakhs.
b) As per the MSMED Act, 2006, Service Enterprises have been
defined based on investment equipment and classified into:
- Micro Enterprises - Investment upto Rs.10 lakh
- Small Enterprises - Investment above Rs.10 lakh and upto
Rs.200 lakhs.
- Medium Enterprises - Investment above Rs.200 lakhs and upto
Rs.500 lakhs.
c) Large Scale Industry:
An Industrial Unit which is not classified as Micro, Small and
Medium Enterprise and with investments upto Rs. 250 cr. shall be
classified as large scale industry.

d) Mega Project:
Projects with an investment of Rs.250 crores and above
 40

e) 100% Export Oriented Enterprises [Export Oriented Enterprises]

A 100% Export Oriented Enterprises is one which undertakes to

export its entire production of goods subject to relaxation as
permitted by Govt. of India from time to time. Such Enterprises
may be set up either under the Export Oriented Enterprises or
under EPIP [Export Promotion Industrial Park] Scheme or under
the EHTP [Electronic Hardware Technology Park] Scheme or
Software Technology Park Scheme or Special Economic Zone.

f) Fixed Asset: Fixed assets shall mean the total investment made on
land, building and plant and machinery and such other productive
assets like tools, jigs, and fixtures, dies, utilities like boilers,
compressors, diesel generating sets, cranes, material handling
equipments and such other equipments directly related to
production purposes.

II) Sanction of Incentives & Concessions as per this Government Order

is Subject to the following terms and Conditions:

a) All new industrial investments shall create maximum possible

additional employment opportunities and provide a minimum 80%
of employment to the local people on an overall basis [100%
employment to local people in case of Group C & D categories
will be insisted] and this will be monitored during disbursement of
incentives and concessions.
 41

The above requirements regarding employment to local people

will be monitored by the DIC for a period of 5 years. Failure of
the industries to provide employment to local people as stipulated
above will be reported to the concerned DLSWCC/ SLSWCC/
SHLCC, which will recommend for recovery of incentives and
concessions sanctioned to the unit, for which purpose a suitable
under-taking will have to be furnished by the unit concerned
before sanctioning incentives and concessions.

b) These incentives and concessions shall not be available for the

Enterprises listed in Annexe – 4 irrespective of the location.

c) The incentives and concessions as per this Government Order

shall be applicable only to all new and additional investments
made on or after 01.04.2009.

d) The incentives and concessions under this policy will be available

to all new investments both for establishment of new Enterprises
or for expansion, diversification and modernization of existing
industries. To be eligible for considering as expansion /
diversification / modernization, enterprises shall make an
additional investment of at least 50% of the original investment of
the existing unit.

e) The quantum of investment subsidy shall be computed on the

value of fixed assets as approved by the financial institutions or
commercial banks.
 42

f) The definition of Micro, Small, Medium Enterprises and Large

Scale Industry as indicated above shall automatically stand revised
as and when Government of India makes any changes in such
definition and benefits under this package shall be available to the
Micro, Small, Medium Enterprises and Large Scale Industry as
per the new definition from the respective dates.

g) The validity of incentives and concessions as per this order shall

st
be for a period of five years from 1 April 2009 [i.e., upto
st
31 March 2014].

h) Wherever industrial Enterprises avail subsidy / interest subsidy

under any other schemes of Govt. of Karnataka / Govt. of India,
only differential amount of Subsidy/ interest subsidy, if any,
would be provided under this policy.

i) Incentives and concessions under this policy shall be available

only for manufacturing Enterprises. However, specified categories
of industry related service enterprises as listed in Annexe – 3 shall
also be eligible for incentives and concessions as per this order.

j) The incentives and concessions under this policy will come into
force from 1st April 2009. With the announcement of this policy,
all other Industrial Policies announced earlier stands withdrawn.
However, industrial Enterprises which have already been
sanctioned incentives and concessions under the earlier package/
Government Order shall continue to enjoy those benefits as per
the sanction order already issued.
 43

k) Industrial Enterprises which were in the process of being

established at the time of announcement of Industrial Policy 2006-
11 vide G.O.No. C I 319 SPI 2005 dt. 26.8.2006 shall be eligible
for incentives and concessions under the 2001-06 policy vide
G.O.No. C I 167 SPI 2001 dt. 30.6.2001 subject to the following
terms and conditions:

(i) For Bank finance cases:

All cases where loan is sanctioned by the financial institutions

prior to 1.4.2006 will be considered under 2001-06 Policy
subject to fulfillment of all the following conditions before
01.04.2006.

1) The unit should have obtained valid PRC/IEM before

31.3.2006.
2) First release of loan amount should have been released.
3) Orders should have been placed for plant and machinery.
4) 50% of the building should have been constructed and such
Enterprises shall have commenced commercial production
on or before 30.09.2006.

(ii) For self financed cases:

In case of self financed Enterprises the following conditions

shall be satisfied as on 31.3.2006 to become eligible under
2001-06 Policy for availing incentives and concessions.

1) The unit should have obtained PRC/IEM acknowledgment

before 31.3.2006.
 44
2) Land should have been acquired/ land should have been
converted in case of agriculture land or should have entered
into lease agreement in respect of leased land/building.

3) 50% of the building should have been constructed in respect

of Own/Leased land.

4) Orders should have been placed for plant and machinery

and the Enterprises should have commenced commercial
production before 30.09.2006.

However, such cases shall make an application for grant of

investment subsidy before 30th September, 2009. After which no
applications will be entertained under 2001-06 policy. The
Enterprises not satisfying the above condition, automatically falls
under 2006-11 policy. New investment in 2006-11 industrial
policy shall mean establishment of new units and also existing
units making additional investment undertaking expansion/
diversification / modernization.

Industrial Enterprises which are in the process of being established

at the time of announcement of this Industrial Policy 2009-14,
shall have an option of availing incentives and concessions under
the 2006-11 policy provided, loan is sanctioned by the financial
institution prior to 01.04.2009 and subject to fulfillment of
following conditions.

1) First release of the loan should be before 01.04.2009.

2) Orders should have been placed for plant and machinery
3) Such Enterprises shall commence commercial production on
or before 30.09.2009.
 45
The above option should be exercised prior to 30.06.2009 and
should be registered with Commissioner for Industrial
Development and Director of Industries and Commerce,
Bangalore or in Office of the concerned District Industries Centres
with necessary documentary evidence. Options once exercised
cannot be withdrawn and shall be binding. Enterprises which do
not exercise such option prior to 30.06.2009 shall automatically be
governed by the provisions of this order.

l) All eligible Enterprises under 2006-11 and 2009-14 policies shall

submit application for sanction of incentives before the concerned
District Industries Centres within a period from 6 months from the
date of commencement of commercial production. Enterprises
who fail to comply this deadline will not be eligible for investment
subsidy.

m) Investments made by an existing unit/ new unit on the land,

building, plant and machinery acquired from financial institutions
under Section 29 of the SFCs Act shall not be eligible for any
incentives and concessions.

n) Incentives and concessions for investments in the IT / BT /

Tourism / Wine Sector / Neera processing sector / Infrastructure
Development sector will however continue to be governed by the
respective policies of the Government.

o) Unit shall avail incentives and concessions under one Industrial

Policy only unless otherwise specified.
 46

p) Separate guidelines for administration of these incentives and

concessions will be issued for the guidance of the concerned
agencies and officers with the approval of the State Level
Coordination Committee under the Chairmanship of the Principal
Secretary to Government, C&I Department. Interpretation of
Government Orders (including of previous policies) and the
decision thereon of this State Level Coordination Committee shall
be final.