Indian State-Level Reforms: States Driving India’s Economic Transition—Data Centers and Electric Vehicles

Significant state-level reforms continued at a slow pace in the fourth quarter of 2021. This was likely due to a mixture of pending elections in six states and the continued effects of the Covid-19 pandemic. 
 
Goa is the only state with a pending election that made significant improvements to its business environment. Punjab took a step in the wrong direction, passing legislation to revoke two contracts with private power firms. 
 
Still, across India, we witnessed fifteen reforms that should provide a stimulus to business growth and job creation. Throughout the last two years, states continue to move ahead on policies that look toward the future, trying to capitalize on sunrise industries. For instance, Himachal Pradesh and Odisha released policies aimed at expanding the EV market, and both Tripura and Tamil Nadu released policies to attract data center investments. The timing of these last two policies will likely be aided by the union finance minister’s budget announcement on February 1, where data centers will be granted infrastructure status. 
 
During the quarter, Odisha led the way with three positive business reforms. Goa, Tamil Nadu, and Haryana each had two significant reforms. Five other states had at least one reform that should help industrial growth during the period.
 
Center-State:

• 10/8, Ministry of Power: The ministry notifies new rules allowing power plants to sell excess electricity in the market. 

Land

• 12/1, Bihar: The Bihar state assembly passed the Bihar Land Filing (Amendment) Bill, 2021, which will expand digitization of land records during transactions. 
• 11/16, Haryana: The state issues its Policy for Grant & Utilization of Transferable Development Rights. This policy will help landowners to commercialize their land. 

Labor

• No significant state-level changes adopted.

Business Regulations

• 12/4, Goa: The state approves its Goa Electric Mobility Policy, 2021. The policy has both sticks and carrots to press adoption of multiple classes of electric transportation, including boats. The policy also offers incentives to battery and vehicle manufacturers.
• 11/30, Himachal Pradesh: The state approves its Electric Vehicle Policy, 2021, offering incentives for EV purchases and incentives to scrap existing internal combustion engine vehicles.
• 11/23, Tamil Nadu: The state approved a new Data Center Policy, 2021, offering a range of incentives to data center developers. 
• 12/4, Odisha: The state passed its Odisha Electronics Policy, 2021.The policy offers a range of incentives to encourage local manufacturing of electronics. The policy offers additional incentives to women-owned business and to persons with disabilities.
• 11/23, Odisha: The state amends its Industrial Policy Resolution (IPR), 2015, adding new sectors such as automobiles, green energy, electronics, defense, and more. Manufacturers of these goods will be able to avail the industrial incentives under IPR 2015, such as access to land banks, reduced clearances, financial assistance, and more.
• 11/24, Tamil Nadu: The state approved its FinTech Policy, 2021. Under this new policy, the state offers a range of hard and soft incentives to encourage the development of India’s strongest fintech environment. 
• 11/12, Tripura: The state of Tripura released its Tripura Data Center Policy, 2021. Under this policy, the state offers a range of incentives to data center firms, including allowances for procuring clean electric power and exemptions from rules barring overnight work. 
• 11/29, Odisha: The state announced a new incentive policy for EVs, offering 100 percent exemption on tax and registration fees. 
• 10/11, Haryana: The state releases a new Assistance for Waste Management Scheme, offsetting costs to companies that improve electronic waste disposal. 
• 10/6, Goa: The state approves its Goa Startup Policy, 2021. The policy offers a range of incentives to start-ups with a focus on smart cities, mining, tourism, renewable energy, and more. The policy offers a range of inspection exemptions, incubators, new channels to access finance, and other fiscal incentives. 

Power-Water

• 12/17, Haryana: The state passes the Haryana Management of Civic Amenities and Infrastructure Deficient Areas Outside Municipal Area (Special Provisions) Bill, 2021, which strengthens the government’s ability to provide civic infrastructure outside municipal boundaries.
• 12/14, Rajasthan: The Rajasthan Electricity Regulatory Commission expands the state’s renewable purchase obligation to include hydropower. 

Harmful Regulations

• 11/12, Punjab: The state legislature passed the Punjab Energy Security, Reform, Termination and Re-Determination of Power Tariff Bill, 2021, which allows the firm to terminate two power purchase agreements because of high costs.  
• 11/6, Haryana: The state is enforcing a new “local employment rule” called the Haryana State Employment of Local Candidates Act 2020 as of January 15, 2022. Under this act, 75 percent of new hires by the private sector must be locals. This applies to jobs paying less than $5,000 per year.

Other: 

• 10/20, Gujarat: The Gujarat government amended the Gujarat Goods and Services Tax (GST) Act, 2017, to ease compliance with the state GST.