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With the Nitish Kumar government giving its nod to the new Industrial Promotion Policy, 2011, the decks have been cleared for big ticket investments even as the fate of investment proposals worth around Rs 1 lakh crore hangs fire due to alleged non-cooperation from the Centre.

The new policy, effective from July 1, 2011, will replace the Industrial Policy of 2006 much before its extended term expires on December, 2011, and will have a thrust on addressing basic problems like shortage of power.

Terming the new policy as "progressive, competitive and quality promoting", Bihar Industry Minister Renu Kumari said it would attract big ticket investment.

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"Key areas where we will seek investments on a priority basis are food processing, agro-based industries, tourism, super-specialty hospitals, high and technical institutions, IT, textiles, energy and renewable energy," she said.

The new policy would provide an additional 10 per cent incentive over and above the cap fixed in the earlier policy, the Industry Department said and pointed out that emphasis would be laid on social justice.

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According to the policy, if a unit appoints 100 persons in a given fiscal on the basis of the government's reservation policy, the entire employee pension fund (EPF) contribution borne by the company for that year would be fully reimbursed.

Furthermore, a unit with an investment of Rs 500 crore (Rs 5 billion) or more would be entitled to a capital subsidy of Rs 33 crore (Rs 330 million) and the same would be applicable in the case of other incentives, the sources said.

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The new policy, prepared after a thorough study of the policies in six neighbouring states, has four segments with incentives under each head.

Under the policy, the state government has proposed incentives for pre-production, post-production, taxes and others during the establishment of an unit.

The post-production incentives would include a 50 per cent subsidy on captive power, both on DG sets and power plants, which would go up to 60 per cent in the case of renewable energy and special purpose vehicles set up in industrial clusters or areas for common captive consumption.

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To promote quality products and expansion, the policy would allow incentives for the preparation of detailed project reports (DPR), ISO certification and carbon credits.

The government would also try to promote quality and reimburse 75 per cent of the fees involved in getting quality certifications.

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There would also be exemption in stamp duty for registration as part of pre-production incentives, sources said.

The new policy would exempt new units from luxury tax and reimburse 80 per cent of the value-added tax (VAT) deposited by a fresh unit for a period of 10 years with a cap of 300 per cent of the capital invested in setting up the unit.

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A special provision has also been made to encourage entrepreneurship by SC/ST and physically challenged persons.

If the sum invested were to the tune of Rs 30 lakh, entrepreneurs falling under this category would be entitled for 100 per cent reimbursement of VAT.

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The policy would facilitate creation of a corpus fund for the revival of sick units and a separate fund for the creation of a land to encourage small and medium units, attract big investments through adequate promotion and address the basic problems in the way of investment flows that were impending growth till now.

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Chief Minister Nitish Kumar has accused the Centre of blocking huge investment proposals worth over Rs 1 lakh crore in the thermal power and ethanol sectors.

"The fate of investment proposals worth over Rs 1 lakh crore in Bihar in the fields of thermal power and ethanol hang in balance following non-cooperation from the Centre," Kumar had said.

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He said the state had received investment proposals amounting to Rs 90,000 crore (Rs 900 billion) for setting up ethanol manufacturing units and Rs 20,000 crore (Rs 200 billion) for establishing thermal power plants.

The state government has sought clearance from the Centre for removing restrictions in manufacturing of ethanol from sugarcane juice, but no decision has been taken as yet, he said.