Proceedings of the Government of Karnataka

Sub: New Industrial Policy - 2001


  1. G.O. No.CI 30 SPC 96 dated 15th March 1996
  2. G.O. No.CI 30 SPC 96 dated 31st May 1996
  3. G.O. No.CI 30 SPC 96 dated 14th May 1999
  4. G.O. No.CI 30 SPC 96 dated 15th May 1999


  1. Government had formulated a comprehensive Industrial Policy in 1996 vide Government Order read at 1 above. The above policy had extended a Package of Incentives & Concessions for new investors. The policy had been modified from time to time vide orders read from 2 to 4 above. This policy has come to an end on 31st March 1996.

  2. Karnataka has been a pioneer in Industry. For several years now, the State has been consistently pursuing progressive Industrial policies to meet the changing needs of the State's economy and Industry. Over the last 100 years, the State has had the distinction of building a strong and vibrant Industrial base, which combines the intrinsic strengths of large industrial public sector undertakings, large and medium privately owned industries and a very wide and dispersed small scale sector. The State has demonstrated its strength over a wide spectrum of sectors in industry and has outstanding examples of success in the old economy. In recent times, Karnataka has emerged as the knowledge and technology capital of the country making rapid strides in the new economy as well. IT and related industries, bio-technology and strong research and development institutions have given Karnataka a pride of place in the global market.

  3. Karnataka is among the Top five Industrialised States in the country. The achievements in promoting hi-tech industries in key sectors like Electronics, Telecommunication, Information Technology, Precision Engineering, Automobiles, Readymade garments, Bio Technology and Food Processing have been noteworthy. The State has also witnessed considerable foreign direct investment (FDI) both in Bangalore as well as in other parts of Karnataka.

  4. During the period 1996-97 to 2000-2001 the achievements in the industrial sector were as under:



No.of Units Established

Investment in Rs. Cr.

Employment in Numbers


Small Scale Industries





Medium Scale Industries





Large & Mega Industries




  1. Bangalore has the distinction of being the destination for a large number of Multi-National Companies in knowledge based industries and technology driven sectors and is today recognised as one of the Top 10 Technopolises in the World. The growth in the Information Technology Sector has been phenomenal. From a mere US $ 45 Million software exports in the year 1995-96, Bangalore today exports US $ 1.2 Billion

  2. The tremendous growth notwithstanding, there has been a general deceleration in Industrial activity in the country, which, over the last few years, has had its impact on the industrial sector of Karnataka too. The setback to the Asian economies added in no small measure, to the problems of the core sector industry such as steel, cement, automobiles etc. The policy framework will therefore have to give impetus to a steady recovery in industrial production in the coming years.

  3. Due to limitations of land availability and expansion of the irrigation potential, industrial development, particularly in the rural and backward areas, is critical for augmenting employment in the non-farm sector. This is particularly so to meet the aspirations of the educated youths in the rural areas who need to be encouraged to set up micro enterprises not only as an employment generation scheme but also for economic development of the rural and backward areas.

  4. The Industrial Policy of 1996, valid till 31st March 2001, was formulated keeping in mind the challenges of the liberalisation of the Indian economy, globalisation of trade and the logic of privatisation of public sector enterprises. With the dawn of the New Millennium, Industry and Trade have witnessed far-reaching and rapid changes in technology, innovation, new products and processes and business practices. The World is now the market place. The country has also witnessed radical changes in the policy imperatives in recent times. The National consensus of removal of sales tax based incentives, adoption of uniform floor rates for taxes, the threats and opportunities thrown up by the multilateral trading regime under the WTO, the primacy of technology, intellectual property rights and global competition have together given rise to the need for a new and radical approach to Industrial development.

  5. A series of meetings/discussions have been held with all concerned agencies and departments of the Government and also the Industry Associations & Chambers. The Government has considered the suggestions made during these meetings/discussions.

  6. After detailed examination of the matter a need has been felt for formulation of a New Industrial Policy. Hence the following orders:

CI 167 SPI 2001, Bangalore, dated June 30, 2001

    In the circumstances explained in the preamble of this order, Government is pleased to adopt the New Industrial Policy - 2001 as detailed in Annexure-A to this Order. The New Industrial Policy - 2001 will be supported by a Package of Incentives & Concessions as detailed in Annexure-B to this order. The above; Industrial Policy & Incentives Package will be deemed to have come into force with effect from 1st April 2001, and will be valid for a period of 5 years therefrom, i.e., upto 31st March 2006.

    This issues with the concurrence of Finance Dept. vide U.O. Notes No.FD 1120/EXP-1/2000 dated 5.5.2001 & 2.6.2001, Urban Development Dept. vide U.O. Note No. UDD 116 Coord.2000 dated 22.5.2000 RDPR Dept. vide U.O. Note No. RDP 23 SJY 2000 dated 22.7.2000 Revenue Dept. vide U.O. Note No. RD 92 LGP 2000 dated 6.1.2001 & No. RD 250 munomu 2000 dated 12.6.2000 Forest, Ecology & Environment Dept. vide U.O. Note No. FEE 14 ENV 2000 dated 29.12.2000 Labour Dept. vide U.O. Note No. LD 75 KABANI 2000 dated 12.1.2001 & 3.6.2000, Energy Dept. vide U.O. Note No.ED 65 EBS 2000 dated 27.5.2000 and Law Dept. vide U.O.Note No.LAW 1065 OPN-II/2000 dated 19.12.2000.

By order and in the name of
the Governor of Karnataka

Principal Secretary to Govt.
Commerce & Industries Dept.


    The Compiler Karnataka State Gazette - with a request to publish in the next issue of the Gazette and supply 1000 copies of the same to the Department.

    Copies forwarded to:

  1. The Accountant General in Karnataka, Bangalore - 1.
  2. The Chief Secretary, Government of Karnataka.
  3. The Additional Chief Secretary, Government of Karnataka.
  4. The ACS & Development Commissioner, Govt. of Karnataka.
  5. The ACS & Principal Secretary to Govt., Home & Transport Dept.
  6. The ACS & Principal Secretary to Govt., Finance Dept.
  7. All the Principal Secretaries & Secretaries to Govt.
  8. The Commissioner for Industrial Development and Director of Industries & Commerce, Kanija Bhavan, Race Course Road, Bangalore-1.
  9. The Commissioner for Commercial Taxes, Gandhi Nagar, Bangalore - 9.
  10. The Chairman, KPTCL, Cauvery Bhavan, Bangalore-9
  11. The Chairman, KSPCB, P.U.Building, M.G.Road, B'lore - 1.
  12. The Chief Inspector of Factories & Boilers, Gandhi Nagar, B'lore - 9.
  13. The Commissioner for Labour, VISL Building, J.C.Road, B'lore - 2.
  14. The Inspector General of Registration & Commissioner of Stamps, K.R.Circle, Bangalore - 1.
  15. All the Deputy Commissioners of Districts.
  16. All the Joint Directors of District Industries Centres.
  17. The CMD, KSIIDC, 36 Cunningham Road, Bangalore-52.
  18. The CMD, KSSIDC, Industrial Estate, Rajajinagar, Bangalore - 10.
  19. The MD, KSFC, Thimmaiah Road, Bangalore - 560 052.
  20. The MD, KSIMC, Industrial Estate, Rajajinagar, Bangalore - 10.
  21. The MD, Karnataka Udyoga Mitra, UNI Bldg., Thimmaiah Road, B'lore-52.
  22. The MD, VITC, Kasturba Road, Bangalore - 560 001.
  23. The MD, KCTU, UNI Bldg., Thimmaiah Road, B'lore-52.
  24. The Chief Adviser, TECSOK, UNI Bldg., Thimmaiah Road, B'lore-52.
  25. The Deputy Secretary [Cabinet] DPAR.
  26. The Under Secretary [Commercial Tax] Finance Dept.
  27. The President, FKCCI, Chamber of Commerce Building, K.G.Road, B'lore-9.
  28. The Chairman, Karnataka Chapter, CII, Manipal Centre, Dickenson Road, Bangalore - 42.
  29. The President, GMCI, Shariff Chambers, Cunningham Road, Bangalore - 52.
  30. The President, KASSIA, Vijayanagar, Bangalore - 79.
  31. The GM, SIDBI, Centinary Building, No.26, M.G.Road, B'lore-1.
  32. The General Manager, IDBI, Janardhana Towers, Residency Road, B'lore- 25.
  33. The General Manager, ICICI, Raheja Towers, M.G.Road, Bangalore- 1.
  34. The GM, IFCI, No.3, Cubbonpet Main Road, P.B.No.6914, B'lore-2.
  35. The General Managers of all the Commercial Banks.
  36. Guard file/Spare copies/Office copy.

New Industrial Policy - 2001



    Karnataka's Mission is to achieve an economic growth rate of 8% to 9% over the next decade by promoting the rapid growth of a market driven, knowledge based, efficient and competitive industrial sector. This will be done by providing industry access to high quality infrastructure, extending institutional support for technology upgradation, deregulating the business environment for an efficient, proactive and transparent administrative framework and catalysing the entrepreneurial as well as creative capabilities of the human resources. The proposed Industrial Policy will therefore aim to achieve an average industrial growth rate of 10% to 12% per year and attract investments of atleast Rs.20,000 Crores per year and create, on an average, employment potential of atleast 1.5 lakhs per year.


    In achieving this Mission, the focus will be on the objectives set out below:-

  1. Encourage rapid growth of sectors and markets in which Karnataka has strategic advantages.
  2. Enhance value addition in products and processes through rapid technology upgradation.
  3. Enable optimal utilisation of capacity and resources in different sectors viz., Agriculture, Horticulture, Animal Husbandry, Minerals and Human capital.
  4. Enable industry to access new markets - domestic and export - through new products that meet global standards of quality and competitiveness.
  5. Give impetus to knowledge based industries and the service sector.
  6. Create a market driven environment with the private sector being the primary engine for growth.
  7. Provide Industry access to high quality infrastructure.
  8. Fully tap the potential of the Small Scale Sector and encourage establishment of new tiny and Small Scale Industries, particularly in the rural areas to achieve the twin objectives of employment generation and utilisation of local resources. Towards this end Government will undertake, through an expert group, a detailed study of the small scale industrial sector in the state to ascertain their present status; problems and prospects and come out with a separate policy on employment generation in the industrial sector which among other things would also include a suitable incentives scheme linked to employment generation. This Study will be completed in the next six months time.


    In order to achieve these objectives the following strategy will be adopted.
  1. Forge a strong partnership with the private sector in all aspects of Industrial Policy and its implementation to provide for a demand driven decision making process in an increasingly market oriented economy;
  2. Create a policy framework to facilitate competitiveness of local industry and enabling ease of doing business;
  3. Enhance public and private expenditure to build efficient and competitive Industrial infrastructure;
  4. Give impetus to technology upgradation by forging symbiotic and mutually beneficial institutional arrangements between Government Academic - R&D Institutions and Industry;
  5. Focus on catalysing comparative advantages that Karnataka has in the Global market by increasing its exports in information technology, bio-technology, food processing, electronics and communication, garments, machine tools and precision engineering goods;
  6. Assist the tiny, small and medium scale industries to upgrade their technologies and manufacturing processes to face the increasing competition; and
  7. Radical restructuring of the State Public Sector undertakings as well as Government infrastructure agencies and Financial Institutions by promoting private sector initiative in these activities.



    The first principle of the Industrial Policy will be technology. In particular, putting in place an institutional mechanism and a viable revenue model for the rapid technological upgradation of the small and medium industries in Karnataka will receive special attention. The objective will be to facilitate a cluster based approach aimed at meeting the sectoral/sub-sectoral technology needs on a demand driven basis. To catalyze the efforts of technology upgradation, the Government of Karnataka will establish a corpus called The Technology Upgradation Fund of Rs.50.00 Crores over a period of 5 years. The fund will be administered through a Government/ Industry partnership and its deployment dictated by the logic of the market and by industry. In particular, this fund will focus on niche products and processes in the value chain of industries in which Karnataka has comparative advantages and reinforce best practices in technology and business. The following specific schemes and proposals will be implemented under this scheme:
  1. Interest subsidy to SMEs who avail loan from State Financial Corp. for technology upgradation and modernisation for which separate orders have been issued;
  2. Promoting Technology Business Incubators/Accelerators with the active involvement of private sector in identified potential locations in the State. This Technology Business Incubator will aim to build on the strengths of small decentralised Technology Development Groups and are expected to spawn high value SMEs. Government assistance will be in the form of providing financial assistance for creation of basic infrastructure facilities subject to a ceiling of Rs.50 lakhs per incubator.
  3. To establish, over the next 5 years, ten more Science & Technology Entrepreneurs Parks [STEPs] in potential districts of the State. Government assistance will be in the form of capital grants for creating basic infrastructure facilities to the extent of 25% of the cost of each STEP subject to a ceiling of Rs.25 lakhs.
  4. To assist and encourage the private sector to establish material and product testing as well as quality assurance laboratories in different districts of the State. These laboratories will focus on ensuring compliance with Product & Process Methods [PPM] and Sanitary & Phyto Sanitary [SPS] measures of the WTO. Government assistance for establishing such laboratories and testing centres would be in the form of capital grants of 10% of the capital cost subject to a ceiling of Rs.10 lakhs per Centre; and
  5. Government will encourage the SMEs to obtain ISO 9000, ISO 14000 and similar international certification with a view to promote total quality management and best practices in SMEs. Government Assistance will be in the form of; meeting 50% of the cost of obtaining such certification, subject to a ceiling of Rs.75, 000 per industry.


  1. The Government of Karnataka recognises that a key parameter to make local industry globally competitive is to provide industry access to high quality industrial infrastructure at competitive prices. Towards this end the Government will establish an Infrastructure Development Fund with an initial corpus of Rs.100 Crores. This fund will seek to leverage the strengths - technical and financial - of major private infrastructure providers through a Public-Private partnership. The Government will significantly enhance expenditure on infrastructure development and infuse efficiency in the management of industrial infrastructure. The common infrastructure fund will be aimed at meeting the infrastructure needs of sector specific and location specific technology parks/industrial estates/industrial areas/ industrial corridors for the focus sectors. This corpus fund would be used to kick-start investments in common industrial infrastructure, which could be accessed by industry.
  2. In keeping with the Government's objective of developing a market driven and efficient management of industrial infrastructure, the Govt. of Karnataka will establish Industrial townships in major locations that have clusters of industries. The Industrial Townships will provide for management of the Industrial Infrastructure by private industry associations/user groups. The Industrial Townships are expected to allow industry to manage their own assets and ensure a high order of maintenance of the basic infrastructure like roads, power, water supply, telecommunication etc. within the Industrial Estate/Industrial parks.
  3. The Karnataka Industrial Areas Development Board will act as a key Govt. agency to develop sector specific/location specific industry parks over the next five years. Among others, the Government through the KIADB, will promote the following:

    1. Five Agro Food Processing Parks at Malur, Bagalkot, Belgaum, Chitradurga and Maddur.
    2. Two Apparel Export parks, one each at Bangalore and Bellary.
    3. A special Economic Zone in Hassan
    4. An Export Promotion Industrial park in Mangalore.
    5. Three Auto parks, one each at Bidadi, Shimoga and Dharwad.
    6. A knowledge park dedicated to BioTechnology and related industries near Bangalore.
    7. A full-fledged Financial District near Bangalore. These projects will be implemented by KIADB with the active participation of the private sector. While Government of Karnataka will provide margin money support to the KIADB to an extent of 15% of the equity contribution for these projects, financial assistance will be mobilised from the Govt. of India, multilateral funding agencies as well as from Industry.

  1. In order to ensure that cost of land to the entrepreneur is not exorbitant, wherever Government land is available, the same will be transferred to KIADB free of cost so that this could be used as a cushion to reduce the price of land acquired and developed by KIADB for allotment to entrepreneurs;
  2. KPTCL will take steps to ensure uninterrupted and quality power to the Industrial sector by:
    1. Establishing dedicated sub-stations of adequate capacity in all major Industrial Areas/Estates over the next five years; and
    2. Conversion of 11 KVA feeders with more than 50% Industrial loads into exclusive Industrial feeders/express feeders; and


  1. Developing a large skill/knowledge based workforce is fundamental to a self-sustaining industrial sector. Recognising this imperative, the Govt. will, with the active participation of Industry, revitalise the network of Artisan Training Institutes, the District Training Institutes and Polytechnics to upgrade the quality and skill of manpower employed by SMEs. This effort will be driven by market needs dictated by private industry. The effort to retrain the existing Industrial workforce, upgrade training systems/methods, will receive impetus from industry. It is envisaged that the focus of this programme will be to allow industry to manage the training institutions such that skill upgradation is market driven on the supply side of the formal labour market.
  2. As part of the initiative to promote a strong entrepreneurial, base, the Government will strengthen the Centre for Entrepreneurship Development of Karnataka (CEDOK) The objective will be to utilise the creative capabilities of the local people particularly in less industrialised districts. CEDOK will be encouraged to collaborate with recognised National/International organisations involved in Entrepreneurship Development. In partnership with the private sector, the Government of Karnataka will seek to develop CEDOK into a Centre of excellence in Entrepreneurship Development, Business Management and Training.
  3. In order to encourage micro enterprises in rural and backward areas the Government of Karnataka will continue its programme of establishing Rural Development and Self-Employment Training Institutes (RUDSETI’s) in all Districts of the State. Government has successfully established nine RUDSETI’s in collaboration with financial institutions and banks. Over the next five years, the Government of Karnataka will establish one RUDSETI in each District of the State. The Management of these institutions will be largely through private initiative to meet the needs of local industry.
  4. In addition, the Government will also promote specialised training institutes, viz:
    1. Steel Technology Institute at Bellary;
    2. Three Automobile Training Institutes at Bidadi, Shimoga and Dharwad.
    Government will assist the Industry Associations and other stakeholders to establish and run these training institutes. Govt. support will be in the form of making available required lands upto an extent 50 acres and other infrastructure as well as capital contribution of 10% of the cost of the project subject to a ceiling of Rs.2.00 Crore per institute.


  1. The Principal objective of the policy framework for industry in Karnataka will be to provide an enabling environment for the growth of industry. One of the key reform measures will be to simplify the regulatory framework to enable ease of doing business in the State. The regulatory framework extant is fraught with a multiplicity of acts and rules, a multiplicity of registers to be maintained and returns to be filed by entrepreneurs as well as a plethora of approvals to be obtained. Industry is today also subject to several inspections carried out by various Govt. departments/agencies under the provisions of a variety of acts and rules. The existing regulatory framework constitutes in many ways a barrier to the growth of industry. The entrepreneurs encounter difficulties both at the entry/implementation level as well as during operations;
  2. Deregulation of business environment is therefore imperative. With the objective of providing an efficient, responsive and transparent administrative framework for industry, the following is envisaged:
    1. To bring in comprehensive Industries Promotion/Deregulation measures through amendments to the existing rules;
    2. Karnataka Udyog Mitra (KUM) shall be the Nodal Agency to guide and to provide assistance to the entrepreneurs as well as to obtain the required clearances/consents/approvals/registrations/ license from the various departments at the implementation stage of a project.
    3. To reduce the multiplicity of Application forms, a Combined Application Form (CAF) shall be introduced.
    4. Industries to be segregated into two categories:
      1. A restricted list of dangerous hazardous, and polluting industries which will continue to be subjected to the normal approval procedure and
      2. All other Industries in the open list eligible for fast track clearances.
    1. Under ‘Fast Track Clearance’ entrepreneurs will be required to complete the CAF and submit it to KUM as a single window for obtaining necessary clearances from the various departments concerned;
    2. The Multiplicity of Registers/Records to be maintained under various Acts/Rules will be simplified and rationalised by introducing Combined Registers/Records, wherever possible.
    3. The Multiplicity of periodical returns to be filed will be simplified and rationalised by introducing Combined Returns, wherever possible.
    4. Inspections by various authorities of different departments shall be minimized and regulated through a random annual inspection and inspections only on the basis of complaints.
    5. Providing for a scheme of self-certification by the entrepreneur confirming compliance of the extant laws and rules. Such self- certification to be supported by a stringent penalty structure for default;
  1. The Government of Karnataka will also commission a bi-annual survey of industry. This will be aimed at obtaining primary data on key performance indicators of industry, which will serve as the input for policy prescriptions, based on the analysis of empirical data generated. This survey will also serve as a platform for Govt./Industry partnership and provide valuable inputs to direct policy changes/application of corrections.
  2. To enable a real time response both by Govt. as well as industry to the various implications of the multilateral trading regime under the WTO, the Government of Karnataka will in collaboration with Indian Institute of Management, Bangalore and National Law School of India establish a WTO Relay Centre. This relay centre will be managed jointly by KCTU and VITC from Govt. side and by the Industry Associations/Bodies from the Industry side. The objective of this centre will be the following.
    1. Establish a credible and extensive database on WTO and its implications for sectors/sub-sectors as well as products and processes that are likely to be affected by the WTO. This database will be made available to industry as well as policy makers to enable them to design a suitable response.
    2. To lend legal, technical and administrative support to user industries effected by WTO on the one hand as well as to enable them to make use of the opportunities for export markets.
    3. Relay compliance levels expected in terms of quality, technical standards, sanitary and Phyto-sanitary standards, product and Process methods that local industry will have to comply with to meet the global standards prescribed under the WTO; and
    4. Enabling capacity building in institutions in Karnataka to meet sector specific needs for quality testing, and compliance of these standards.


    Governments, both at the State and the Central level, have been extending marketing assistance to Small Scale Industries in Government procurements through purchase and price preference. The State has also established the Karnataka Small Industries Marketing Corporation to provide marketing assistance to the Small Scale Industries Sector. These measures have helped the Small Scale Industries Sector to a great extent. However, with the coming into force of the Karnataka [Transparency in Public Procurement] Act 2000, the special preference available to the Small Scale Industries Sector has been negated. While the Act provides for exceptions to the applicability of the Act to procurements from Government Departments, Public Sector Undertakings, Statutory Boards and such other Institutions specified by the Government, there is no such exceptions made in respect of Small Scale Industries Sector. However, Sub Para-G of Para-4 of the Act states that exceptions to applicability will be available “in respect of specific procurements as may be notified by the Government from time to time”. In view of the serious sickness faced by the Small Scale Industries Sector as a whole and the problems getting much more serious with full implementation of the provisions of various agreements signed with the WTO, it is necessary that Small Scale Industries is protected for some more time. In this background it is necessary that purchase and price preference to the Small Scale Industries Sector be continued for at least another 5 years. It is also necessary that the purchase and price preference is adhered to strictly by all Govt. Departments, Public Sector Undertakings, Statutory Board & Corporations. It is therefore proposed to amend the Karnataka [Transparency in Public Procurement] Act 2000 to provide purchase-price preference to SSI units of the State, which manufacture items reserved for SSI sector by Government of India from time to time, in the following manner:
  1. 75% of the items reserved by the SSI Sector shall be procured from the units located within the State, through an open tender system;
  2. SSI units of the state shall be offered a price preference of 15% over the lowest price quoted;
  3. This benefit will be available for a period of 5 years from 1st April 2001.
    The role of KSIMC will also be reoriented to help the SSI Sector to :
    1. Improve quality of the products;
    2. Improve the production-manufacturing processes;
    3. Reduce prices; and
    4. Augment exports.

5.0   Streamlining the Single Window mechanism:

    In order to ensure that the Single Window mechanism for approval/monitoring of projects is made more effective, the following modifications in the existing scheme shall be incorporated:
  1. There will be only one High Level committee chaired by the Hon'ble Minister for Large & Medium Industries to consider and approve all investment proposals in excess of Rs.50 Crores in all sectors including Industry, Tourism, IT, BT, Agro Food Processing & Infrastructure. The composition of the Committee will be suitably modified to include the concerned ministers and officers;
  2. The State level Single Window Agency under the Chairmanship of Principal Secretary to Govt., Commerce & Industries Dept., will henceforth consider and approve all projects of investments upto Rs.50 Crores in each case including Industry, Tourism, IT, BT, Agro Food Processing & Infrastructure. The composition of the Committee will also be modified suitably to include officers of the concerned departments and agencies;
  3. The District level Single Window Agency headed by the Deputy Commissioner will henceforth examine all proposals in all sectors including Industry, Tourism, IT, BT, Agro Food Processing & Infrastructure with investment of up to Rs.3.0 Crores
    Separate orders detailing the powers, authorities and functioning of the above committees will be issued.



    In order to achieve the objectives as set out in this policy and to ensure that the strategy/approach detailed in this policy is implemented successfully, the Government offers the following incentives and concessions for new investments made in industrial sector on or after 1st April 2001. For the purpose of various incentives and concessions as detailed hereunder the State has been classified into four Zones namely -

Developed Areas


Developing Areas


Backward Areas


Growth Centres & Mini Growth Centres,
Specialised Industrial Parks and list of taluks


    The details of classification under various Zones are given in Annexure-1.


  1. The Government will provide subsidy to all new Tiny/Small Scale Sector Industries. The details of investment subsidy available to Tiny/Small Scale Sector Industries in different Zones will be as follows.



Industry Sector
Eligible for Subsidy

Investment Subsidy


Developed Areas




Developing Areas

Tiny Industries

10% value of fixed assets subject
to a max. of Rs.5 lakhs


Backward Areas

Tiny Industries

20% value of fixed assets subject
to a max. of Rs.10 lakhs


As detailed in

Tiny & Small Scale

25% value of fixed assets subject
to a max of Rs.12.5 lakhs

  1. Investment Subsidy for Industrial Units making new Industrial Investments under Expansion, Diversification & Modernisation:
    Investment subsidy as per Para 1 [a] would also be available to all existing Tiny and Small Scale units undertaking expansion, diversification or modernisation without exceeding prescribed monitory ceiling as applicable to new tiny/Small Scale industrial units subject to the condition that grant of this facility as per this order shall be available only on additional investments made.

  1. Additional subsidy to special category of Entrepreneurs :
    In addition to the subsidy at 1 [a] above additional subsidy to an extent of 5% of the value of fixed assets subject to a ceiling of Rs.1.00 lakh shall be available for tiny/Small Scale units, except in zone-A, in respect of entrepreneurs belonging to Scheduled Castes & Scheduled Tribes (SCs/STs) and Women Entrepreneurs. This additional subsidy will however, be within the over all monitory ceiling indicated in Sub Para [a] of Para-1. Entrepreneurs who are covered under more than one special category as defined above will be eligible for special subsidy only under one of the special categories.


    Entry Tax Exemption will be extended to all new industries including large and medium scale industries as detailed below :

  1. During the implementation of the project on production machinery and equipments directly involved in the production process, subject to the condition that the benefit will be available for a maximum period of 3 years from the date of commencement of project implementation.
  2. On commencement of commercial production [during the operational phase], on raw materials, components, semi-finished goods, sub-assemblies, consumables [excluding petroleum products like petrol, diesel, furnace oil, naphtha and LSHS used as consumables or for captive power generation units]. Entry Tax exemption will be available as indicted below:



Entry Tax Exemption Period


Developed Areas



Developing Areas

3 years


Backward Areas

5 years


As detailed in Annexure-1

8 Years


  1. FOR LOAN DOCUMENTS: All new industries and also such units taking up expansion, diversification and modernization will be eligible for 100% exemption of Stamp Duty and reduction of Registration charges to Re.1 per Rs.1000 in respect of loan agreements, credit deeds, mortgage and hypothecation deeds executed for availing financial assistance from State Government and/or State Financial Corporation, Industrial Investment Development Corporation, Nationalised Financial Institutions, Commercial Banks, LRRBs, Industrial Co-op. Banks, KVIB/KVIC Karnataka State SC/ST Development Corporation, Karnataka State Minority Development Corporation and other institutions which may be notified by the Government from time to time. This exemption from payment of Stamp Duty & Concessional Registration Charges will also be available for loan documents in respect of working capital facilities to be availed by all new industries, both in respect of the working capital loan sanctioned at the time of commencement of commercial production and also for renewal/enhancement.
  2. FOR REGISTRATION OF LAND/SHED: The concession of Stamp Duty exemption and reduction of Registration Charges will be available for lease deeds, lease-cum-sale and absolute sale deeds executed by industrial units in respect of industrial plots, sheds, flats allotted by State Infrastructural Developmental Agencies viz. KIADB, KSSIDC, KEONICS, KSIIDC etc. and industrial co-operatives. Industrial workers housing tenements and residential plots developed by KIADB, KSSIDC and KEONICS will also be eligible for concession of stamp duty exemption and reduction of registration charges.
    The concessions will be as under:


Extent of exemption on stamp duty

Regn.Charges applicable

Tiny and Small Scale Industry

Medium & Large Scale Industry

Tiny and Small Scale Industry

Medium & Large Industry









Re. 1.00 per Rs. 1000

50% of normal charges

C & D



Re. 1.00 per Rs. 1000

Re.1 per Rs.1000

  1. Registration of Land-Sheds allotted by Govt. Agencies will be at original allotment price: The registration of lease, lease-cum-sale and absolute sale deeds shall be registered on the basis of allotment price of plots, sheds, flats allotted by State Infrastructural Developmental Agencies viz. KIADB, KSSIDC, KEONICS, KSIIDC and industrial cooperatives. The above concession shall also be available at the time of registration of final sale deed in respect of lands, sheds, flats, housing tenements and residential plots after the expiry of lease period.
  2. For registration of lands allotted by KIADB to KSSIDC and other similar Government agencies for purposes of developing industrial estates, industrial sheds/plots or other common facilities 100% exemption from stamp duty and registration charges will be available in all Zones.
  3. KSIIDC is the designated agency of the Government to plan and formulate proposals for infrastructure development projects after assessing the need in different sectors/areas [viz., Industrial Parks/Townships, Airports/Ports and such other areas as may be specified by government.] for consideration of Government in concerned Depts. For registration of lands procured by KSIIDC from KIADB and other similar Government agencies either on lease basis or otherwise for purposes of developing industrial estates, industrial sheds, plots, office complex or other common facilities 100% exemption from stamp duty and registration charges will be available in all Zones.
  4. Key projects in core areas: In order to give an impetus for growth of certain sectors of industries for which the State has significant resource/ technology base, 100% exemption from payment of stamp duty and registration charges will be available to the industries listed in Annexure 2. These industries will be classified as key projects in core area and this benefit will be available to such industries set up in Zones B, C & D.
  5. Section-29 units: Industrial units which are taken over by industrialists/ entrepreneurs under Section 29 of the State Financial Corporation Act from KSIIDC or KSFC would be eligible for exemption from payment of stamp duty and registration charges as indicated in the Table in Para 3-B based on the size and location of the industry.


    The following benefits will be extended to Export Oriented Units [EOU]:

  1. 100% Export Oriented Units [EOUs]:
    1. Investment subsidy as indicated in Para 1 [a] above.
    2. Exemption from power cut
    3. Exemption from payment of Entry tax and ST payable on purchase of raw materials, components, packing materials, consumable, capital goods, spares, material handling equipment, intermediates, semi finished goods and sub assemblies from a registered dealer. While the Entry Tax exemption will be available for the items procured from within the State or outside, the ST exemption on purchase of various items will be available provided the procurement is from a dealer located within the State.
  1. Units other than 100% EOUs with an export effort of a minimum of 25% of the value of total turnover:
    1. Investment subsidy as detailed in Para 1 [a] above.
    2. Refund of Entry Tax and ST payable on purchase of raw materials, com-ponents, packing materials, intermediates, semi finished goods and sub assemblies from a registered dealer. While the Entry tax refund will be available for these items procured from items within the State or out-side, the ST refund on purchase of various as detailed above would be available provided the procurement is from dealers located within the State.
  1. In case of Sub Para II above, the Entry tax and ST on purchases would be payable on raw materials, components, packing materials intermediates, semi finished goods and sub assemblies used for production for sale within the country.


    Projects having investments in fixed assets in excess of Rs.100 Crores shall be considered as mega industries/projects. Such mega industries/ projects will be eligible for exemption from Entry Tax and reduction of Stamp Duty and registration charges depending on the location of the project in different zones, as per details given below:


Entry Tax Exemption

Stamp Duty/

Regn. Charges



No Concession

No Concession


8 years

Full exemption [100%]



10 years

Full exemption [100%]



12 years

Full exemption [100%]



    The payment of conversion fee for converting the land from agriculture use to industrial use will be waived for tiny and SSI units set up in all areas other than Zone-A. This concession will be limited to a maximum extent of 2 acres only. Conversion of agriculture land to industrial land in identified industrial zones of respective Municipal/Town Planning Authorities and other Local Bodies will henceforth be automatic and orders issued in 45 days by the respective DCs, failing which conversion will be deemed to have been given.

7   Relief Package For Revival/Rehabilitation Of Sick Industries:

    The following benefits will be extended to sick industries for their revival / rehabilitation:
  1. For SSI & Medium Scale Industries which are not covered by the BIFR :
    1. To continue the existing margin money scheme as spelt out in Government Order No.CI 12 PUM 93 dated 26.12.96.
    2. KPTCL will not charge fixed charges/ demand charges during closure period.
    3. Arrears of energy bills to KPTCL to be repaid in 6 half-yearly installments and interest charges for defaults would be reduced to ˝% per month.
    4. Tax arrears to the Commercial Tax Dept. to be repaid in 6 half-yearly installments with a nominal interest of ˝% per month.
    5. Both KPTCL and Commercial Tax Dept. not to calculate interest for the closure period.
    6. Future taxes payable by the industry to be deferred, without interest, for a period of 3 years.
  1. For BIFR cases:
    1. KPTCL will not levy fixed charges/ demand charges during closure period.
    2. Arrears of energy bills to KPTCL to be repaid in 6 half-yearly instalments and interest charges for defaults would be reduced to ˝% per month.
    3. Tax arrears to the Commercial Tax Dept. to be repaid in 6 half-yearly installments with a nominal interest of ˝% per month.
    4. Both KPTCL and Commercial Tax Dept. not to calculate interest for the closure period.
    5. Future taxes payable by the industry to be deferred, without interest, for a period of 3 years.
    6. All other benefits/ incentives as per the Order No.CI 26 BIFR 95 dated 19.11.97 will continue to be available.


    8.1   The incentives and concessions under this policy will come into force from 1st April 2001. With the issue of this order incentives and concessions available as per the Industrial Policy, Incentives package extended vide G.O. No.CI 30 SPC 96, dated 15th March 1996 and subsequent amendments/ modifications thereto and those available under the Agro-Food Processing Industry Policy 1999 and Package of Incentives & Concessions vide G.O. No.CI 20 SPI 99, dated 13th April 1999 and Auto Policy vide G.O. No. CI 65 SPI 99 dated 18th January 2000 will stand withdrawn. However, industrial units which have already been granted a Package of Incentives & Concessions as per the above policies will continue to enjoy the benefits already granted till the expiry of the said sanction orders. Industrial units, which are in the process of being set up as on 1st April 2001 and are expected to commence commercial production after 1st April 2001, but before 30th June 2001, will also be eligible for incentives and concessions as per the earlier orders referred to above. However all new investments made after 30th June 2001 will be covered by this policy only. Projects cleared during the period 1.1.2000 to 31.3.2001 including those cleared during the Global Investors' Meet in respect of which specific Government Orders had been issued vide Nos.CI 125 SPI 2000 to CI 195 SPI 2000 dated 8.7.2000 will also be eligible for the incentives under this Policy; provided they have not been sanctioned or have not availed any other incentives under any other policy.

    8.2   The incentives and concessions under this policy will be available to all new investments both for establishment of new units or for expansion, diversification and modernisation of existing industries - both in the manufacturing and non-manufacturing categories [to the extent they are applicable]. For existing industries which undertake expansion, diversification and modernisation, existing tax liability, based on an average tax liability for a period of 3 years prior to commencement of expansion, diversification, modernisation project will continue

    8.3   Incentives and concessions for investments in the Information Technology/ Bio Technology Sectors will however continue to be governed by the IT policy as per Government Order “ MAHITI “ and the Bio Technology Policy.

    8.4   Incentives and Concessions as per this Policy will not be available for the industries specified in Annexure - 3.

    8.5   Definitions:

    1. Tiny Industry: Tiny Scale industry is one in which the investment in plant and machinery is less than Rs.25 lacs irrespective of the location of the unit
    2. Small Scale Industry: An industrial undertaking in which the investment in fixed assets in plant and machinery whether held on ownership terms or on lease or by hire purchase does not exceed Rs.100 lakhs.
    3. Medium & Large Scale Industry: An industrial unit which is not classified as Tiny/Small Scale/Ancillary Industry shall be classified as Medium/ Large Scale Industry.
    4. 100% Export Oriented Units [Export Oriented Units]: A 100% Export Oriented Units is one which undertakes to export its entire production of goods subject to relaxation as permitted by Govt. of India from time to time and as defined by it. Such units may be set up either under the Export Oriented Units or under EPIP [Export Promotion Industrial Park] Scheme or under the EHTP [Electronic Hardware Technology Park] Scheme or Software Technology Park Scheme or Special Economic Zone.
    5. Mega project means: Projects with an investment of Rs.100 Cr. and above.
    6. Fixed Asset: Fixed assets shall mean the total investment made on land, building and plant and machinery and such other productive assets like tools, jigs, and fixtures, dies, utilities like boilers, compressors, diesel generating sets, cranes, material handling equipments and such other equipments directly related to production purposes.

    8.6   Sanction of incentives and concessions as per this Govt. Order is subject to the following terms and conditions:

    1. All new industrial investments shall create maximum possible additional employment opportunities and provide minimum 80% of employment to the local people on an overall basis [100% employment to local people in case of Group C & D categories will be insisted] and this will be monitored during disbursement of incentives and concessions.

      The above requirements regarding employment to local people will be monitored by the DIC for a period of 5 years. Failure of the industries to provide employment to local people as stipulated above will be reported to the State Level Committee under the Chairmanship of Principal Secretary to Govt., Commerce & Industries Dept. which will recommend for recovery of investment subsidy sanctioned to the unit, for which purpose a suitable under-taking will have to be furnished by the Company before disbursal of subsidy.

    2. The quantum of investment subsidy shall be computed on the value of fixed assets as specified in Sub Para-[f] of Para 8.5 and as approved by the financial institutions, commercial banks. In cases where the entrepreneurs have not availed loans from financial institutions or banks the incentives will be calculated on actual investment as certified by the Chartered Accountant.
    3. The definition of tiny, small or medium and large scale industries as indicated above shall automatically stand revised as and when Government of India makes any changes in such definition and benefits under this package shall be available to the Tiny, Small Medium & Large scale units as per the new definition from the respective dates.
    4. The validity of incentives and concessions as per this order shall be for a period of five years from 1st April 2001 [i.e., upto 31st March 2006].
    5. Separate guidelines for administration of these incentives and concessions will be issued for the guidance of the concerned agencies and officers. Interpretation of this Government Order and the decision thereon of the State Level Co-ordination Committee, under the Chairmanship of the Principal Secretary to Govt., Commerce & Industries Dept. shall be final.

Annexure - 1

Classification of Zones





Bangalore [U] & Bangalore [R] [Excluding Kanakapura & Magadi Taluks]



Dakshina Kannada






Tumkur [Excluding Pavagada, Sira, & Gubbi Taluks]



Belgaum [Excluding Ramdurga Taluk]



Mysore [Excluding Heggadadevankote Taluk]






Bellary [Excluding Kudligi, Hadagalli, Sandur & Hagarihalli Taluks]



Davangere [Excluding Harapanahalli Taluk]






Kanakapura & Magadi of Bangalore Rural District






Bidar [Excluding Aurad, Basavakalyan, Bhalki & Humnabad Taluks]



Raichur [Excluding Devadurga, Manvi & Lingsugur Taluks]









Kolar [Excluding Bagepalli & Srinivasapur Taluks]



Chitradurga [Excluding Molakalmuru, Hollalkere & Hosdurga Taluks]






Gulbarga [Exclg. Jevargi, Chincholi, Aland, Yadgir, Afzalpur, Shorapur & Shahpur Tqs.]



Uttara Kannada [Excluding Mundagod & Joida {Supa} Taluks]






Gadag [Excluding Ron, Shirahatti, Naragund & Mundargi Taluk]






Haveri [Excluding Shiggaon & Byadgi Taluk]



Bagalkot [Excluding Bilgi Taluk]



Koppal [Excluding Kushtagi & Yelbarga Taluks]



Kudligi, Hadagalli, Sandur & Hagarihalli of Bellary District



Ramdurg of Belgaum District



Harapanahalli of Davangere District



Pavagada, Sira & Gubbi of Tumkur District



Heggadadevankote of Mysore District



Growth Centres at Raichur, Dharwad & Hassan



Mini Growth Centres at Bijapur, Bellary, Malur, Nippani, Gadag, Chikkabalapur & Chitradurga.



Agro Parks, Apparel Parks, Special Economic Zone, Export Promotion Industrial Parks at Mangalore, Auto Parks, Chemical Industrial Parks and Jewelry Parks [excluding those set up in Zone A]



Aurad, Basavakalyan, Bhalki & Humnabad of Bidar District



Jevargi, Chincholi, Aland, Yadgir, Afzalpur, Shorapur & Shahpur of Gulbarga Dist.



Kundgol of Dharwad District


Devadurga, Manvi & Lingsugur of Raichur District


Kushtagi & Yelbarga of Koppal District


Bilgi of Bagalkot District


Mundargi, Ron, Naragund & Shirahatti of Gadag District


Shiggaon & Byadgi of Haveri District


Molakalmuru, Hollalkere & Hosdurga of Chitradurga District


Bagepalli and Srinivaspur of Kolar District


Mundagod & Joida [Supa] of Uttar Kannada District

Annexure - 2

List of key projects in core areas

  1. Electronics
  2. Electronics
  3. Telecommunication
  4. Informatics
  5. Precision Tooling/ Tool Room Industries including units manufacturing dies, jigs and fixtures
  6. Ready-made Garments including Leather Garments [excluding leather tanning units]
  7. Units manufacturing equipment for pollution control, effluent treatment plant and water recycling
  8. Bio-technology industries.
  9. Bio-Informatics
  10. Agro Food Processing industries
  11. Equipment for utilization of renewable/non-conventional source of energy and energy conservation
  12. 100% Export Oriented Industries
  13. Spinning Mills, Weaving units, Powerloom, Knitting & Textile Processing
  14. Cutting, polishing and processing of semiprecious stones
  15. Pharmaceuticals industry including bulk drug and formulations
  16. Floriculture
  17. Industries manufacturing equipment for water conservation i.e. drip irrigation, etc.
  18. Automobile industries for manufacture of Two wheelers/ passenger cars, LCVs/HCVs
  19. Machine Tools/ Auto Components
  20. Jewelry
  21. Cold Storages
  22. Cement and Steel/Steel Alloys
  23. Sugar industry
  24. Grey Iron and other Foundries

Annexure - 3

List of Industries not eligible for Incentives and Concessions

  1. Pop-Corn & Ice Candy making units.
  2. Coffee Roasting & Grinding
  3. Khandasari units
  4. Breweries & Distilleries of all types
  5. Photo Studios & Colour Processing Centres
  6. Photo Copying & Xerox Machines
  7. Power Laundries
  8. Clock & Watch Repair Shops
  9. Cassette Recording [Audio & Video]
  10. Fertilizer Mixing
  11. Units using molasses/ rectified spirit/ denatured spirit as main raw material for manufacturing of potable alcohol
  12. Repacking of drugs/ medicines/ chemicals, etc. without any processing and value addition, excluding formulation units.
  13. All types of Saw Mills.
  14. Beedies
  15. Cigarettes
  16. Cigars
  17. Gutka
  18. Tobacco Based Industries
  19. Azoic Dyes
  20. Fire Crackers
  21. Reactive Dyes
  22. Cyanide
  23. Industries Manufacturing and/or utilizing Ozone depleting substances