The Bengal government cancelled 30 years of signed commitments retrospectively.
Kolkata: In a move that has stunned industrial circles and triggered a wave of litigation, the Mamata Banerjee-led West Bengal government has scrapped all industrial incentives promised over the past three decades, redirecting the resources to welfare schemes in the runup to the 2026 Assembly elections. Business leaders call this the “biggest betrayal of investor trust” in Bengal since liberalisation, warning that the decision will irreparably damage the state’s already fragile investment climate.
The new law, passed quietly in March 2025 as the Revocation of the West Bengal Incentive Schemes and Obligations in the Nature of Grants & Incentives Act, 2025, cancels every industrial support scheme announced since 1993. It also permits the state to recover “excess disbursements” from companies—effectively clawing back subsidies already granted.
The Banerjee government insists the move is a fiscal necessity. “We have to choose whether subsidies should go to the poor or the rich,” the Chief Minister declared in the Assembly. But industry insiders say the decision is nothing less than an assault on legal commitments, contract sanctity, and Bengal’s reputation as an investment destination.
The retrospective design of the Act has sparked particular outrage. Schemes dating back to Jyoti Basu’s 1993 Industrial Policy, Buddhadeb Bhattacharjee’s drive for industry in the early 2000s, and Mamata’s own post-2011 incentive plans have all been voided with one stroke.
This means that companies which invested hundreds or even thousands of crores on the strength of formal incentive agreements have, overnight, been denied what they were contractually entitled to. Unlike other policy reversals elsewhere in India, no transition clause, grandfathering provision, or stakeholder consultation was undertaken in Bengal.
Dalmia Bharat, which operates a four-million-tonne cement plant in Salboni, West Midnapore, learnt about the law not from the government but from lawyers on June 5. Its claim: a staggering Rs 236 crore with 8% interest under the abolished 2013 State Support for Industries Scheme.
Birla Corporation Ltd., operator of a cement plant in Murshidabad, found out a day later, on June 6, and has Rs 55.6 crore in dues, besides Rs 138.5 crore in pending receivables under other schemes.
“These are not policy changes, these are broken contracts,” said a senior counsel involved. “It destroys confidence in Bengal’s word.”
Both Dalmia Bharat and Birla Corporation have now approached the Calcutta High Court. They are joined by Nuvoco Vistas, UltraTech Cement, Ambuja Cements, Electrosteel Castings Limited, and Grasim Industries. All contend that the Act violates Constitutional principles of promissory estoppel and legitimate expectation, which prevent governments from reneging on promises when businesses have relied upon them in good faith.
The first consolidated hearing of these cases is listed for November 7. Dalmia’s suit cites the High Court’s earlier judgment in its favour, which held that the state could not indefinitely delay incentive disbursals. The new legislation, by retrospectively voiding that entitlement, throws existing judicial orders into jeopardy.
Electrosteel has specifically appealed for the Act to be declared ultra vires, unconstitutional, and void ab initio. Legal observers say the challenge will inevitably climb to the Supreme Court, setting up one of the most significant confrontations over Centre-State industrial relations in decades.
Few sectors have been hit as hard as cement. Bengal’s 40-million-tonne installed capacity, straddling West Medinipur, Purulia and Murshidabad districts, is heavily dependent on the state incentive regime. Sector estimates suggest Rs 2,000-3,000 crore in dues are now in limbo.
Nuvoco Vistas has Rs 7.3 billion pending, and already wrote off Rs 4 billion in FY23, citing Bengal’s refusal to release subsidies.
Ambuja Cements accrued Rs 1.4 billion in FY25 based on court-affirmed entitlements. UltraTech Cement, with huge investment in Dankuni and adjoining districts, is preparing similar claims.
The disruption is not limited to cement. Electrosteel Castings has petitioned against the withdrawal of electricity duty rebates and deferred tax incentives critical to its Durgapur operations.
Smaller textile, food processing, and tea industry players—particularly in the northern hills—say they have been left without support at a time when competition from other states is intense.
“This is not just anti-industry, it is anti-employment,” a senior industry association official warned. “Every incentive scrapped means fewer jobs created and weaker ancillary development.”
For Chief Minister Banerjee, however, the cancellation is part of a broader electoral strategy. With the state’s debt nearing Rs 6 lakh crore and dearness allowance arrears to employees standing at Rs 44,000 crore, the administration is under intense financial strain. This year’s Budget allocates Rs 1.58 lakh crore to social services—a record sum that government insiders admit was made possible only by diverting funds away from the incentive pipeline.
The Chief Minister defends the shift as “prioritising the poor” over “corporate handouts.” Speaking in the Assembly, she argued that infrastructure bottlenecks which once required incentive schemes have now been resolved.
“We must decide what to continue with and what to revoke. Welfare of the people cannot be compromised,” she declared.
Critics accuse her of dressing up electioneering as socialism. “This is vote-bank economics,” said a Kolkata-based economist. “Instead of fixing corruption in welfare outlays, the government has defaulted on its word to industry, precisely to free up money for populist schemes.”
Leading law firms have rubbished the state’s arguments. Arvind Baheti of Khaitan & Co LLP termed the Act “maliciously retroactive” and warned that allowing governments to walk away from solemn promises would make contractual obligations meaningless.
The legal principle of promissory estoppel has long been a bulwark for businesses. The Supreme Court itself, in past cases involving state incentive schemes in Rajasthan and Madhya Pradesh, ruled that once industries act in reliance on government promises, those commitments are binding. “Mamata’s Act flips that principle on its head,” Baheti said.
Investors are equally scathing. A senior global portfolio manager tracking Indian states noted: “This precedent is horrifying. If Bengal can cancel 30 years of signed commitments retroactively, why wouldn’t Maharashtra or Gujarat tomorrow in case of a fiscal crunch?” He predicted an immediate deterioration in Bengal’s ranking in ease-of-doing-business index—already well below India’s industrial leaders.
The Banerjee government’s volte-face cuts across political regimes. Incentive schemes of Jyoti Basu and Buddhadeb Bhattacharjee in the 1990s and 2000s, which survived regime changes, have now been dumped by Mamata herself. Ironically, her government had in 2013 introduced its own flagship state Support Scheme for Industries, which wooed 75 big corporates into Bengal with promises of tax rebates and infrastructure support.
One by one, those commitments have been abrogated.
“Mamata has junked not just CPM’s policies but her very own,” said a political observer.
Across Kolkata and the industrial districts, the mood is grim. Several top executives privately admit they are halting new investments in Bengal until the legal outcome is clear.
“No CFO will budget for Bengal after this,” one said.
