Apart from investment subsidies, the policy proposes subsidies on power, stamp duty and also concession for those industries that set up effluent treatment plants within their premises.

Karnatakas draft Industrial Policy proposes subsidies for MSMEs industrial parksRepresentation photo
news Policy Friday, July 17, 2020 - 11:59

The Karnataka Ministry of Industries and Commerce has proposed a draft of the five-year plan for industrial development in the state, which is pending cabinet approval. The Industrial Policy 2020-25 offers various investment subsidies to micro, small and medium enterprises as well as for large, mega, ultra-mega and super mega industries. 

Apart from investment subsidies, the policy proposes subsidies on power, stamp duty and also concession for those industries that set up effluent treatment plants within their premises. 

Read: How Karnataka govt is planning to make the state the ‘factory of the future’

Concessions for MSMEs

The policy has divided various taluks in the state into four zones. The zones are divided from one to four with zone 1 containing the most backward districts and zone 4 containing urban centres like Bengaluru and Mysuru. 

Investment promotion subsidies up to 30% of value of fixed assets (VFA) will be offered to micro enterprises in zone 1, 25% of VFA for enterprises in zone 2 and 15% VFA for those in zone 3.

For enterprises run by those under the special category including women, members of the Dalit and Adivasi communities, ex-servicemen, those from minority communities and persons with disabilities, the policy proposes separate incentives. For those under special category in zone 1, 35% of VFA will be offered, while those in zones 2, 3 and 4 will get 30%, 20% and 10% VFA as promotion subsidies. 

If the policy gets the cabinet’s approval, MSMEs will be given interest subsidy on technology upgradation loans up to 10% for a period of five years. These concessions will not be applicable to loans obtained from Karnataka State Financial Corporation and commercial banks not listed under credit linked capital subsidy scheme of the government of India. 

MSMEs will be exempted from stamp duty on registration of land depending on the zone where the enterprise will be established. The policy proposes waiving 100% stamp duty for enterprises in zones 1 and 2, and 75% of the stamp duty in zone 3.

However, for those enterprises run by persons under special category, a 100% concession of stamp duty is proposed in zones 1, 2 and 3 and 75% concession in zone 4. It also proposes reimbursement of land conversion fee up to 100% for enterprises in zone 1 and 2 and 75% for those in zones 3. Micro and small enterprises will be offered interest subsidies if loans are obtained from public service banks at a rate of 3% per annum for 5 years.

MSMEs will also be offered a 100% exemption from tax on electricity tariff for a period of 7 years in zone 1, 6 years in zone 2 and 5 years in zone 3. Micro and small enterprises will also be able to avail reimbursement of power tariff at the rate of Rs 1 per unit for a period of three years. 

MSMEs will also be offered subsidies for setting up rainwater harvesting systems, waste water recycling, reimbursement of expenses for water audit and also recycling of electronic and plastic waste. In addition, subsidies are being offered for those enterprises setting up effluent treatment plants within their premises. 

Large, mega, ultra mega and super mega enterprises

For large enterprises with investment on fixed assets between Rs 10 crore and Rs 250 crore, the policy proposes investment promotion subsidy based on turnover. These subsidies are also handed out with priority given to those in zones 1, 2 and 3.

The draft policy mandates minimum direct employment for 100 employees for the first Rs 250 crore and additional employment of 20 personnel for every additional investment of Rs 50 crore. 

In zone 1, 65% of VFA will be offered for a turnover rate of 2.75% for a period of seven years. In zone 2, 55% VFA is being offered for 2.5% turnover for six years and 45% VFA for large enterprises in zone 3 with 2.5% turnover rate. 

Industrial Parks will be exempted from tax on electricity tariff on sale of self-generated or purchased electricity for a period of 9 years in zone 1, 8 years in zone 2 and 7 years in zone 3.

A one-time capital subsidy of 50% of the total cost of setting up an effluent treatment plant up to Rs 500 lakh within the premises of the industrial area will be offered. A one-time subsidy up to Rs 1 crore for setting up a sewage treatment plant within the industrial area is also being proposed. 


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