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SEZs touching 3-digits increase Finmin’s worries


SEZs touching 3-digits increase Finmin’s worries

Last updated: May 4 2007
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  • SEZs touching 3-digits increase Finmin’s worries

    The most controversial issue of recent times has been the Special Economic Zones (SEZs). Especially after the blazing Nandigram battle over the land acquisition issue by the West Bengal state government.
    A ban on SEZs notification was then issued in February this year i.e., the ceiling of 5,000 hectares of land procurement. Now with the freeze lifted, the total number of SEZs notified since February 2006 (when SEZ Act came into force) has touched the 100 mark. Though still there are 134 proposals with formal clearance lying with the board of approval, they are expected to be notified by the coming October. The big names that are notified in the present 100 are Wockhardt, Mahindra, Ranbaxy and Bajaj Auto.

    So what does this entail for the economy? According to industry estimates, the new SEZs would bring in investments worth Rs 3,00,000 crore and also create job opportunities for over 3.5 million. Exports in 2005-06 from SEZs stood at Rs 22,839.53 crore, which increased by 52.31 percent to Rs. 34,787.47 crore during 2006-07. It is thus estimated that the exports from SEZs will touch Rs 67,300 crore this fiscal and Rs 1,00,000 crore by the end of 2008-09.

    Traditionally SEZs are believed to have been providing jobs to the localites. However, as seen it is the IT companies that have been making maximum utilisation of SEZs, but interestingly they are not employing local people. The irony is that as much as 60 percent of lands allotted for SEZs are being utilised by such IT companies.

    Keeping in mind that SEZs contribute a huge amount to the country's exports; the Ministry of Small Scale Industries (SSIs) has also proposed a reservation of 50 percent of SEZ land for small and medium scale enterprises (SMEs) as these SMEs contribute around 35 percent of the country's exports.

    But the problem is all these benefits at the same time have proved to be a costly affair for the government. The Finance Ministry has revealed that revenue loss on account of fiscal sops to SEZs is estimated to be Rs 1,02,621 crore during 200607 to 2009-10. The revenue loss on account of direct taxes alone is estimated to have been Rs 53,740 crore and the same on account of indirect taxes is at Rs 48,881 crore. Looking at the scenario the ministry is considering steps to reduce the loss by continuously fine-tuning the SEZ policy. So with the count of SEZs in India steadily zooming up, changes to the SEZ Act is also on the cards.
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