Employment Incentive under Motivation of Entrepreneurs to Start Industries and Fiscal Assistance to Industries - Various Incentives

What is the Employment Incentive in Puducherry?

Employment Incentive is a component of the umbrella scheme "Motivation of Entrepreneurs to Start Industries and Fiscal Assistance to Industries - Various Incentives", run by the Industries and Commerce Department, Union Territory of Puducherry. Departmental listings often shorten the umbrella scheme to MESIFAI. The component came into force with effect from 1 April 2017 and operates in the whole of the Union Territory; Puducherry, Karaikal, Mahe and Yanam.

Most industrial incentives subsidise machines. This one subsidises payroll. According to the details published on myScheme, the scheme grants a wage or employment subsidy of 20% of the wage or salary, subject to a ceiling of Rs 5,00,000 per annum, in the case of workers who are covered under Provident Fund.

The design intent is straightforward. Puducherry is a small Union Territory whose young people have historically migrated to Chennai and Bengaluru for work. By paying employers a fifth of the wage bill for formally employed, PF-covered staff, the government pushes industry both to hire more and to hire on the books rather than through informal arrangements.

How long does the incentive run?

Mahe and Yanam are the two smallest enclaves of the Union Territory, physically separated from Puducherry and surrounded by Kerala and Andhra Pradesh respectively. Their two extra years are a deliberate concession to how much harder it is to run and staff an industrial unit there.

Who is eligible for the Employment Incentive?

Units that can claim:

• All micro, small, medium and large industries in the Union Territory of Puducherry.
• Units that have made the investment on or after 1 April 2017.
• Units providing direct employment to at least 10 persons.
• Units whose workers are covered under Provident Fund.
• Units meeting the 60% local employment test, that is, providing at least 60% of total employment strength to people of the Union Territory of Puducherry, and maintaining that share during the period specified in the affidavit.

Units making additional investments after an earlier claim may also claim, up to the applicable ceiling limit.

Special case, two units under the same ownership: if two or more industrial undertakings are set up by the same person as proprietor, or with common partners, common board of directors or common shareholders, those units are eligible as separate entities, provided their locations are different and licences, clearances and registrations have been obtained separately for each enterprise.

Who is not eligible:

• Units that have already availed investment subsidy for the same investment from the Central Government, a State Government or any other agency. The same investment cannot be subsidised twice.
• Claims resting on second-hand or used machinery, whether imported or indigenous, which is excluded.
• Units employing fewer than 10 persons directly.
• Units whose workers are outside Provident Fund coverage. Wages paid to workers not on the PF roll do not build the claim.
• Units that fall below the 60% local employment share at any point in the period specified in the affidavit.
• Units whose investment predates 1 April 2017.
• Individual employees. The incentive is paid to the employer. A worker cannot apply for a personal payment under this scheme.

The unit also must not transfer or dispose of fixed assets, including plant and machinery, in any manner until five years from the date of submitting the application or the date of disbursement of the subsidy, whichever is later.

What documents are required?

The unit must also furnish details of production, employment and other information every year, and from time to time as sought by the Industries and Commerce Department. That reporting obligation is what allows the department to verify that the 60% local employment share has actually been maintained, so it is worth treating as part of the scheme rather than as paperwork after the fact.

How to apply for the Puducherry Employment Incentive

1. Download the prescribed common application form for subsidies from industry.py.gov.in/common-application-subsidies. One form set covers the several components of the Motivation of Entrepreneurs scheme, so tick the Employment Incentive component clearly.
2. Fill in every mandatory field, including total employment strength, the number of persons employed directly, the Puducherry share of that strength stated separately, and the wage or salary bill of PF-covered workers for the claim period.
3. Attach self-attested copies of all mandatory documents, above all the list of PF-covered employees with wage particulars, the PF remittance records for the claiming period, and the notary affidavit on 60% local employment.
4. Submit the duly filled and signed application with enclosures to the Directorate of Industries and Commerce, Industrial Estate, Thattanchavady, Puducherry 605009. Units in Karaikal, Mahe and Yanam can file through the Assistant Director's office in their region.
5. Obtain a receipt or acknowledgement carrying the date and time of submission and a unique identification number, and keep it safe.

What happens after you apply?

1. The Directorate of Industries scrutinises the application on merit to determine the quantum of incentive admissible.
2. The file is placed before the State Level Committee, which goes into the merits of each case, decides whether the unit qualifies, and recommends the quantum of incentive payable.
3. Sanction and release follow the committee's recommendation.

How is the Employment Incentive disbursed?

The incentive is released in single or multiple instalments, depending on the availability of funds in the year of sanction. A unit budgeting on the incentive should therefore assume the money may arrive in tranches.

• Financed units — the subsidy is disbursed through the financial institution or bank only, and is adjusted against the loan availed by the entrepreneur, or applied to the creation of additional fixed assets or to working capital.
• Self-financed units, the subsidy is disbursed directly to the entrepreneur or the unit.

For this purpose "financial institution" means PIPDIC or any other government corporation, and scheduled banks including co-operative banks.

How to check the status of your claim

1. Keep the unique identification number from your acknowledgement to hand.
2. Contact the Directorate of Industries and Commerce, Thattanchavady, on +91-413-2248476, 2248168 or 2248320 and ask whether the file is under scrutiny, awaiting inspection, or listed before the State Level Committee.
3. Karaikal applicants can follow up with the Assistant Director at the Rural Industrial Estate, Kottucherry, on +91-4368-265438; Yanam on +91-884-2321257; Mahe on +91-490-233235.
4. If the unit is bank-financed, ask the branch separately when the sanctioned amount has been credited against the loan account.

Because the incentive runs for five or seven years, the annual return of production and employment details is effectively the renewal step. A unit that stops filing it will find later years of the claim stalled.

Why Employment Incentive claims fail

• PF remittances do not match the wage list. The department cross-checks the employee list against the PF remittance for the claiming period, and workers who appear on one but not the other are struck out.
• The 60% local employment share is not maintained through the period specified in the affidavit. This is a continuing condition, and a drop in the Puducherry share mid-period puts the claim and earlier disbursements at risk.
• Fewer than 10 persons in direct employment, or a headcount padded with contract workers who are not on the unit's PF roll.
• Investment dated before 1 April 2017 claimed under a component that runs from that date.
• Fixed assets sold or transferred within five years of application or disbursement, which breaches the lock-in.
• The same investment already subsidised by the Centre, a State Government or another agency.
• Second-hand machinery relied on in the claim.
• Filing beyond one year of the commencement of production certificate, or of completing expansion, diversification or modernisation.
• Annual production and employment returns not filed, which stalls the later years of a multi-year claim.

Grievance redressal

Complaints about delay or rejection are taken up through the Industries and Commerce Department's grievance redressal mechanism at industry.py.gov.in/grievance-redressal-mechanism. Above that, the Director of Industries and Commerce, Industrial Estate, Thattanchavady, Puducherry 605009, and the Secretary to Government (Industries and Commerce) at the Chief Secretariat, Puducherry 605001, phone +91-413-2336115, are the escalation points.

The prescribed application form is free to download. No consultant or agent has any special standing before the State Level Committee, and no payment is required to have a claim listed for consideration.