Special emphasis on the industrial development of backward, tribal and hilly areas has been the concern of the Government of India expressed in all the Five Year Plans and industrial policy statements. Realising that backward areas development is a long-term process, several committees were appointed to identify the criteria for identifying backward areas and also to suggest schemes to take up the Herculean task of balanced regional development.
The implementation of integrated rural development programme is one such attempt made by the government to develop backward areas. The rural industries project programme initiated by the Government of India was meant to develop small business units in select rural areas. Though the backward area development programmes varied from state to state, they cumulatively represented a significant package of incentives to attract industries in backward areas. Some of the common incentives offered to small scale industries in rural areas are:
- Land – Every state offers developed plots for setting up of industries. The terms and conditions may vary. Some states don’t charge rent in the initial years, while some allow payment in installments.
- Power - Electricity is supplied at a concessional rate of 50 per cent, while some states exempt such units from payment in the initial years.
- Water – is supplied on a no-profit, no-loss basis or with 50 per cent concession or exemption from water charges for a period of 5 years.
- Sales Tax - In all union territories,industries are exempted from sales tax, while some states extend exemption for 5 years period.
- Raw materials - Units located in backward areas get preferential treatment in the matter of allotment of scarce raw materials like cement, iron and steel etc.
- Finance - Subsidy of 10-15 per cent is given for building capital assets. Loans are also offered at concessional rates.
- Industrial estates - Some states encourage setting up of industrial estates in backward areas.
- Tax holiday - Exemption from paying taxes for 5 or 10 years is given to industries established in backward, hilly and tribal areas.
To sum up, it may be stated that the small business sector in India is getting the support of government through various institutions in different forms for different purposes. Despite special attention being given to backward areas, it is observed that imbalances in development are still there. There is a need to develop infrastructural facilities in these areas, as no amount of subsidies or concessions can overcome the natural handicaps caused by a lack of such facilities.