'The chief minister believes that the poorest of the poor have the first right on government resources.'
Mamata Banerjee's economic priorities have long been clear.
In 2011, she created history by ending the Left Front's 34-year rule in West Bengal piggybacking on the movements against land acquisition in Singur and Nandigram -- sites for a Tata Nano factory and a proposed 14,000-acre chemical hub, respectively.
More than a decade later, Banerjee-led government's move to revoke industrial incentives to free up resources for welfare schemes, underscores that strategic direction once again, ahead of the assembly elections next year.
Welfare over industry?
The Revocation of West Bengal Incentive Schemes and Obligations in the Nature of Grants And Incentives Act was notified by the state government on April 2, 2025.
The Bill, passed in the assembly in March, received the governor's assent thereafter.
The Act revokes all incentives granted to industries since 1993 and takes effect retrospectively from the date of implementation of each of the schemes.
The stated objective is to free up state finances for various social welfare schemes for the socio-economically disadvantaged and marginalised sections and not to expend on providing special assistance, financial incentives, state support, benefits, concessions, or special privileges (to the industry) at the cost of the marginalised.
The Bill tabled in the assembly had highlighted that the positive impact of the incentives had been largely confined to a limited number of beneficiaries and had a minimal effect on the broader process of industrialisation.
Sources in the government point out that when resources are limited, spends need to be prioritised. "The chief minister believes that the poorest of the poor have the first right on government resources."
Small wonder, given that 'Ma-Mati-Manush' is central to Banerjee's narrative.
The ripple effect
Incentives -- or the lack thereof and outstanding dues -- have long been a pet peeve of the industry.
Also, the Revocation Act is stirring unease in business circles within the state- drawing a line on the issue with unmistakable finality.
Even though the Act was notified in the first week of April, companies are just about taking note of it. There are financial implications and many are said to be weighing legal options.
The legislation, which takes effect retrospectively, is bad in law, says N G Khaitan, Senior Partner, Khaitan & Co.
"The industry has a strong case in this--many companies are likely to challenge it," he says.
"If companies don't challenge it, they will have to write-off any outstanding amount," he added.
Cement maker Nuvoco Vistas Corporation, informed stock exchanges that its wholly owned subsidiary NU Vista, had filed a writ petition before the Calcutta high court challenging the constitutional validity of the Revocation Act.
And Nuvoco is in the process of filing its own plea.
On account of the Revocation Act, incentives of Rs 427.14 crore and Rs 300.44 crore to be received by the Nuvoco and NU Vista Limited, respectively, were likely to be impacted, the notice said.
Earlier this month, Dalmia Bharat said that it was examining the Revocation Act and considering all legal options, including challenging the legal validity and retrospective applicability.
MP Birla group's flagship Birla Corporation echoed the same view.
A competitive landscape
Will this blunt West Bengal's industrial pitch -- that's the big question doing the rounds.
Communist Party of India-Marxist's West Bengal state secretary Mohammed Salim says all states are wooing industries with incentives.
"In West Bengal, we are having investor summits, but proper steps are not being taken to get investment. The investment climate that we created, is lost," he adds.
An industry executive believes that a new industrial policy may be in the works for employment generating industries.
"State finances are tight. The approach is that incentives, if any, should go to sectors that create jobs rather than handing it out to capital-intensive industries."
But states are vying with each other to bag big-ticket investments and offering incentives.
"Therefore, large investments are going elsewhere," the executive points out.
Abhirup Sarkar, former professor of economics at the Indian Statistical Institute, concurs that there is competition among states, but adds that this is a signal from the government about its priorities -- which is welfare schemes.
"From an ethical standpoint, it can be argued that it is the government's responsibility to support the underprivileged. Those setting up industries should be subjected to market competition. If they can't, their efficiency comes into question," says Sarkar.
More welfare push expected
It is widely expected that the state government will put more money into welfare schemes ahead of the Assembly election.
Political analyst Sabyasachi Basu Ray Chaudhury expects Banerjee to lean heavily on her welfare agenda.
"We could see more money flowing into welfare schemes later this year or early next year."
Welfare schemes are seen to be the cornerstone of Banerjee's success -- and Lakshmir Bhandar (monthly financial support for women), launched in 2021, a clear showstopper.
The Budget speech in February had mentioned that the scheme had benefitted 22.1 million women in the state.
But that's just one among many -- the Mamata Banerjee government has schemes galore. So far, they seem to have paid rich political dividends, keeping the Opposition at bay.
It is likely that the government's priority for the next one year would be to double down on that effort.
Reallocating scarce resources from industry could be seen as a move in that direction.
Feature Presentation: Aslam Hunani/Rediff
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