By Rana Ajit
New Delhi, Dec 24 (IANS) The Punjab government has moved the Supreme Court challenging the federal government’s fiscal sops to industries since 2002 for setting up shop in the neighbouring states of Jammu and Kashmir, Himachal Pradesh and Uttarakhand.

The state government has contended that the “discriminatory fiscal incentives” in form of excise duty waiver, income tax holidays and investment subsidies to industries in the three states had led to mass exodus of industries from Punjab.

Its suit this week has pleaded to the court to stop such sops to neighbouring states.

“The grant of discriminatory fiscal incentives to industries set up in the neighbouring states has led to a mass exodus of industries from Punjab to its neighbours, resulting in crippling of its industrial and economic growth,” said the lawsuit.

Detailing the various orders, the lawsuit said the federal government first ordered tax concessions to new industries in Jammu and Kashmir in June 2002 and accorded similar benefits to existing ones for making substantial expansion.

“Similar fiscal concessions were provided to industrial units of Himachal Pradesh and Uttaranchal in January 2003,” said the state government, adding that 100 percent excise duty exemption was granted for 10 years from the date of commercial production.

Attracted by the concessions, 160 industrial units of Punjab have either shifted out or set up their expansion units outside with an investment of about Rs.3,000 crore, said the lawsuit.

The collection of central excise from Punjab has also fallen from Rs.2,786.46 crore in 2003-04 to Rs.819.21 crore in 2005-06.

The lawsuit said the chief ministers of Punjab have also been asking for either parity in tax incentives to units in their state or withdrawal of such concessions, as the mass exodus of units was alarming.

The lawsuit said such soaps were applicable to the entire geographical area of the three states, including areas adjacent to Punjab that had no locational disadvantages — which was discriminatory and went against the desired intent of the concessions.

The lawsuit also lamented that Punjab government’s plea for tax incentives in districts bordering Jammu and Kashmir and Himachal Pradesh was rejected by the federal government, as it feared that similar requests may be made by other states and shrink the tax base.

“Income tax and central excise waiver to the states neighbouring Punjab has resulted in discrimination against Punjab and preference for tax-holiday-enjoying states, whereas it is prohibited by Article 303 of the Constitution of India.”