The Baddi Special Economic Zone – a review

The Baddi Special Economic Zone – a review

By Purva Sethi, S Chidambar

Infrastructural bottlenecks inhibit growth although well known pharmaceutical and FMCG companies have built new plants there. More than 100 packaging units have set up their plants as well.

Several states in India have set up Special Economic Zones (SEZs) with the intention of promoting investments in production facilities that would generate substantial local employment and help develop the relatively “backward” areas. One of the much touted schemes was that set up by the Government of Himachal Pradesh, a state in North India, in 2003 at Baddi, situated about 45 kilometers from the city of Chandigarh. The Baddi-Nalagarh-Barotiwala belt was designated a SEZ and several financial and tax incentives were announced to encourage development in that area.

The incentives were as follows:
– Exemption from payment of excise duty (presently 16.36 per cent) on all products manufactured at new units set up here.
– 100 per cent exemption from payment of income tax for the first 5 years and 30 per cent exemption for the subsequent 5 years.
– Capital investment subsidy of 15 per cent on plant and machinery subject to a ceiling of INR 3 million.
– Adequate allotment of cheap land and faster clearances from all government departments.
– Creation of the necessary basic infrastructure

The incentives were made available to all new units as well as existing units going in for expansions or fresh investments. However, one condition laid down was that at least 70 per cent of the workforce at these units would have to be local.

Many companies, especially those in the pharmaceutical and FMCG sectors, have consequently set up new plants in the Baddi-Nalagarh-Barotiwala belt. These include well-known names like Ranbaxy, GSK, Cadila, Torrent, Alembic, Panacea Biotec, Sun Pharma, Dr. Reddy’s Labs, Nicholas Piramal, Wockhardt, Zydus Cadila, Hindustan Unilever, Dabur, Colgate Palmolive, Balsara, VVF, Wipro, Bajaj Electricals, Gillette, Cadbury, Lenovo and Singer.

They also persuaded several of their packaging suppliers to set up shop in this area so that they could source duty-exempt packaging materials from close by. More than 100 packaging units have set up facilities here and some of the larger ones are Essel Propack, Hindustan Tin Works, Jauss Polymers, Borkar Packaging, Baddi Print Pack, Best Packaging and Janus Packaging.