J&K’s NCSS industrial scheme struggles. 90% cases of GSTL-incentives unsettled in last 3 years

2 December 2024

By: Danish Khan and Satish Bhairav (Ziraat Times)

Srinagar: The delayed disbursement of incentives under the New Central Sector Scheme (NCSS) for Jammu & Kashmir has raised serious concerns among investors about the financial viability of new industrial units in the Union Territory..These delays, investors told Ziraat Times, are not only jeopardizing the survival of businesses but are also threatening to erode investor confidence in J&K as a credible industrial destination.

Emerging Non-Performing Asset (NPA) threat

A group of industrialists who have made substabtial new investments under the scheme told Ziraat Times that over 90% of cases under the GST-Linked Incentive (GSTLI) component of NCSS remain unsettled over the past three years. This delay has created a critical risk of accounts turning into Non-Performing Assets (NPAs) for many industrial units.

“Businesses that have heavily invested based on the scheme’s promises are facing severe cash flow challenges. The cascading effect on associated sectors, including supply chains, labor markets, and local economies, could be significant”, said one investor.

Investor confidence takes a blow

The NCSS, introduced in February 2021 with a Rs 28,400 crore allocation, was designed to attract investment and promote industrial development in J&K. However, the sluggish implementation and delayed incentives are undermining its credibility, investors believe. The scheme, which promised a 300% reimbursement of investment over ten years through the GSTLI, initially generated strong interest, with 918 units registering and committing Rs 25,000 crore in investments. Yet, the several issues have tarnished investor trust:

“Only Rs 270 crore has been disbursed so far, including a mere Rs 40 crore for GSTLI, while over 1,500 GSTLI cases remain unresolved, with 850 from Jammu and 680 from Kashmir”, another industrialist who has invested in a new plant told Ziraat Times.

As, reportedly, not a single GSTLI case has been sanctioned this financial year, a Kashmir-based industrialist wishing not to be quoted said that repeated changes in the Standard Operating Procedures (SOPs) by the Industries and Commerce Department are the main reason for the misalignment with the original guidelines issued by the Department for Promotion of Industry and Internal Trade (DPIIT).

However, a senior official of the Industries Department when contacted said that while the enforcement of the Model Code of Conduct during the Lok Sabha and J&K Assembly elections stalled the decision-making process, including the functioning of the State Level Committee for sanctioning incentive cases, on this matter; the department was working on addressing certain loopholes.

“We are aligning the SOPs with DPIIT Guidelines, to ensure that revised SOPs do not deviate from the original objectives of the scheme”, the official said, adding that once that is done the department expects to institutionalize regular meetings of the State Level Committee to avoid disruptions caused by external factors such as elections.

However, investors are calling to establish clear timelines for disbursement and maintain open communication with industrial units to rebuild trust.

“If the government sets up a robust monitoring mechanism to track disbursement progress and address grievances promptly that would be a major confidence building measure”, an investor added.

While the NCSS holds immense potential to transform J&K’s industrial landscape, swift and decisive measures must be taken by this government to address implementation challenges and ensure the financial sustainability of industrial units in J&K, he added.