SEZs needs a re-think It was touted as the engine of growth and it did live up to the promise to a certain extent, the growth rate of exports peaking at 120 and reaching to 15 percent last fiscal, investment worth 2.3 lakh crore, and close to 8.50 lakh jobs created these are enviable stats under any circumstances. Not only that, they have corporate friendly labour laws, tax laws besides and land allocations which proved to be the magnet in attracting top foreign exchange earners to the SEZ. The raging bull called SEZ is finding it hard to sustain on the very success it built India is China and China is India – FLAWED PHILOSPHY (pic2) The whole SEZ concept was believed to have born out of the success of China, where SEZs were set up to boost exports in order to create valuable Forex and create jobs, alas it had its costly side effects. The fundamental difference between Indian and the Chinese economy is that the former is consumption driven and the latter is export driven, this difference is quite often overlooked by our policy makers. While the Chinese did and succeeded in expanding their export base, India is blessed with vast consumers whose demands are ever rising and hence it would make good economic sense to re vitalise our domestic production through hastle free business environment. This makes it a win win for India instead of pushing a Chinese Centralist model in Democratic India where people’s and the scarce resource of land is intrinsically linked. Jeopardizes Food Security (pic3) As mentioned earlier land is very important to India, where agriculture still accounts close to 50 percent of employment. And to evict people of valuable land resource armed by an archaic coloial land acquisition law has led to many movements and protests across the country. A 10000 ha land could feed 2 lakh people and a 100 SEZ could feed little less than 20 percent of the population. This is very important considering the food requirement of India is going to surge to 350 million from the present 270 million and this cant happen just by increasing productivity while shrinking valuable agricultural land to increase exports. Aggressive pursuit of valuable land resource to make it a tax heaven for export promotion given the massive role land plays wrt Food Security of the nation. Level Playing field The Domestic Tariff Area (DTA) where all the excise duties apply, the Export Oriented Units (EOU) which has flexible location features coupled with flexible taxes wrt to imports however they are not immune from CST, while SEZ which has a lot of tax incentives cannot avail the export promotion schemes like the FMS, FPS, MLFPS etc. Given the discrepancies among these three areas, all three representatives SEZ, EOU and DTA have pleaded for a level playing field ad most importantly the lack of level playing field has laid constraints on domestic production and sometimes it also does take away the advantages which India’s production and labour has to offer. Misuse of Land (pic4) Given the large land requirement (5000 ha) to be classified as SEZ, Corporate and governments have acquired large tracts of land and not used for the purposes it was deemed to, later gets diverted to real estate purposes making windfall profits. Haryana is replete with such cases. The corporate political nexus is pretty evident here going by the acquisition pattern and windfall gains which the companies made. This is beside the slow rates of approval of SEZs coupled with valuable agricultural land, the While India can take a lot of pride in being a democracy, the manner in which land is acquired and people rehabilitated should be democratized. Aggressive pursuit of SEZ should be abandoned and should be taken up in step keeping in mind the delicate equilibrium which exists between the incentives for DTA, EOU and SEZ.
Posted on: Fri, 11 Jul 2014 04:23:35 +0000
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