Jammu and Kashmir, Himachal Pradesh, Uttaranchal and the Northeast have rarely featured in the country's industrial map.
Now, however, the contours are changing. Leading home appliance companies like LG, Samsung, Videocon and Hitachi are making a beeline for these states.
Videocon is setting up a Rs 30 crore (Rs 300 million) facility in Jammu and Kashmir to manufacture 500,000 colour televisions and 200,000 air-conditioners and refrigerators.
"The facility will be operational by next Diwali. It will employ around 500 people," says Videocon chairman V N Dhoot.
Samsung is sourcing 50-60 per cent of its air-conditioners from Jammu and Kashmir, and is likely to source more products from these states soon.
Arch-rival LG currently sources about 20 per cent of its air-conditioners from Jammu and Kashmir and Assam. This is likely to go up to 30-35 per cent in the next two years.
The company is also exploring the possibility of outsourcing products for its microwave ovens from these states, though a decision is yet to be taken.
After setting up a plant for manufacturing 30,000 air-conditioners in Jammu and Kashmir, Hitachi is planning to add a similar line in Himachal Pradesh.
If things work out, it could later manufacture refrigerators and washing machines, too, in these states.
The companies are being lured by tax sops thrown in by the Centre as well as the states. While the Centre has provided an excise duty exemption, the states have waived sales tax.
Inputs procured within the state, too, are exempt from sales tax. Here is how it works: most companies raise their bills in these states even if the product is sold elsewhere. As a result, they save not only on excise but also on sales tax.
In air-conditioners, for instance, companies are able to save up to 30 per cent of the net price. "The excise duty of 16 per cent is a huge part of an air-conditioner's price. The saving, therefore, justifies the cost involved in taking all the components there, assembling them and bringing the product to other states," an industry source pointed out.
Earlier, sales tax benefits were available in Silvassa and Daman and Diu, whereby shipments could be made to other states by paying a 1 per cent central sales tax.
As a result, appliance makers rushed to these places. But with excise benefits now available in Jammu and Kashmir, Himachal Pradesh, Uttaranchal and the Northeast, the same companies have now found new destinations.
Gold Rush
- Videocon to make 500,000 CTVs and 200,000 ACs/refrigerators in J&K.
- Samsung sources 50-60% of its ACs from J&K.
- LG gets 20% of its ACs from J&K and Guwahati.
- Hitachi has a line for 30,000 ACs in J&K.
