Hello members,

We all are coming across the buzz of "Special Economic Zones", SEZs, for the past several years. The term itself projects boost to economies and business environment and the topic is debated as if it is the only critical subject for Indian economy today.

Moreover, India took the concept of SEZ from China, where SEZs play a dominating role in export scenario.

Anyhow we enacted an SEZ Act in 2005 for development of commercial infrastructure and promote exports by providing incentives and priviledges to the corporates operating from these tax-havens.

But it is surprising to find that more than 60% of the SEZ projects in the country are focussed on IT today. To be precise, out of the total of 362 projects, 225 SEZs are IT centric.

History tells that Indian IT industry is already export-oriented and has potential to grow without any such incentives proposed by SEZs. So, there is no need to press on IT in this manner at this moment.

In my personal view, if Indian policy-makers are really interested in promoting exports and enriching country's foreign reserves, then they should pay due attention to other potential sectors like pharmaceuticals, automobiles, textiles and telecom, also.
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  • Good thoughts

    Paul
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  • It, It, It......

    It seems that there is nothing beyond IT in India. Sectors of textiles, pharma, communication truly deserve attention. They have potential to employ much larger number of people and this way they can contribute well in the overall development of the country. I think Indian real estate developers must plan something more for these industries. They're a big big market.
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  • Time to Restrict the SEZ

    In the name of SEZ the real estate player are just pilling the Asset size. Now DLF/Unitech/Omexe each they have 2000-3000 acre of land. Many more player to name also. They just bought these may be it will take another 5-8 yrs to build the whole size if we assume that they dont buy any more. And in the name of SEZ the Farming land is going for a toss. Its time to think of restricting these, else we might fall short of food also.
    And if some one tells that, some SEZ is coming in near by then the land price shooot up to 2/3 times immdeate. SEZ is good but now its reached to extra ordinary.
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  • Regulations for Foreigners

    Sorry for sounding so naive. But I am unfamiliar with the regulations.

    Lemme just get this straight: In an SEZ foreigners can invest and buy property. So far so good. But what about the areas outside of the SEZs. In which parts of India can foreigners purchase housing?
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  • SEZs don't work... even in China!

    People,

    SEZs are just another scam to make slush money much like many other fantastic mega projects that are coming in with minimal planning with the future in mind.

    You might think that I only speak doom and gloom whenever I post. But I do have my reasons.

    Arin is generally right. But there are anecdotal reasons why SEZs will go the Singur way!

    First. The SEZs that were supposed to make money in China are all huge loss-making enterprises. But for China they serve as a strategic mechanism and therefore no one dissents - anyways, in China there IS no dissent .

    Special Economic Zones are specifically setup to provide economic incentives to make (our export sector) globally competitive. Basically, its a hidden subsidy. Apparently the cost borne by the Govt (people) will be offset by the increase in revenue, jobs and the downstream secondary effects on the domestic economy. Or so they hope!!!

    There are some fundamental problems with this approach. If you remember, the main reason for the IT outsourcing boom was a genuine cost and competency advantage that our IT/ITES sector had over the West.

    But that was when our IT people were relatively low paid and we were getting to do jobs that the West did not want to do anyway. So it was party time. But now, we are getting bigger and bigger and swallowing up their core work and they are starting to get hurt. Around a decade ago we had unbeatable competitive advantage. That is fast receding from 3 angles:

    1. With the mega bust in the West, people will soon be willing to work for HALF current pay or less in the US. When Obama comes to power we may see REAL and significant pullback of work from India back to US. This may actually become a permanent problem for us over the medium term.

    2. In the last 2 years India has slipped from first position to 6th in desirability for outsourcing in the BPO segment. There are many other countries that do the job cheaper, if not better. Basically, clients are fed up with the traffic, infrastructure woes and constant churn (attrition) of people jumping jobs constantly. REAL ESTATE segment contributed its share by the unimaginable greed with which shoddy and unplanned buildings came up in rapid succession and were priced at exorbitant prices, making our offering cost-ineffective. We thought they had no choice but to put up with it. They found others instead

    3. Technology is fast emerging to slash and burn vast chunks of low-end BPO work (voice, text conversion from scanned images, etc). Technology will continue to put strong pressure on the ITES segment for many years to come.

    The moment the Govt ot any organised movement jumps in, they mess it up by doing precisely the wrong things. So, when ITES needed to be prodded to become MORE competitive, Govt idea of making people more competitive is to give tax breaks and land sops. Its like feeding an athlete all kinds of fatty foods in order to make him more athletic and competitive. It only makes him fatter, lazier and most unfit. Of course, in the short term it seems to work as profits (actually unpaid taxes) seems to be growing. Over time (as you can see by how hugely overpaid our IT executives have become relative to their capability and skills) it only leads to sloth and incompetence.

    Corporate greed has risen to new heights where the money has become so huge that any kind of sense, sensitivity to our weaker sections as well as sense of balance is fast disappearing. The blunders of Singur is a pointer to what may come up in other areas also.

    There is no doubt that a one-time and significant move is being seen with people moving from Rural to Urban India. Hundreds of millions are going to end up in Urban India and this can be either hugely beneficial or catastrophic, depending on how we manage it.

    I believe only a more India-specific and Farmer-sensitive approach to growing our comparitive advantage in many other areas like pharma, gems & jewellery, textiles, etc, rather than gifting away vast amounts of land at dirt-cheap prices to our greedy business leaders will eventually enable our exports sector to remain strong. As usual we will make mistakes first before learning from it and doing it right :)

    This "American" fixation on making money without effort (their main Industry today is the Financial Speculation Industry where money i made out of nothing) is catching on fast in India where people just want to buy land cheap anywhere, weave a story about how its going to shoot up, find a sucker and dump it on him for a fortune. This is being done even by the Real Estate Industry by way of "Land Banks". Same wine, different bottle. This must go and people must start going back to fundamentals of working and creating something real to make their fortunes gradually.

    cheers
    CommentQuote
  • Originally Posted by wiseman
    People,

    SEZs are just another scam to make slush money much like many other fantastic mega projects that are coming in with minimal planning with the future in mind.

    You might think that I only speak doom and gloom whenever I post. But I do have my reasons.

    Arin is generally right. But there are anecdotal reasons why SEZs will go the Singur way!

    First. The SEZs that were supposed to make money in China are all huge loss-making enterprises. But for China they serve as a strategic mechanism and therefore no one dissents - anyways, in China there IS no dissent .

    Special Economic Zones are specifically setup to provide economic incentives to make (our export sector) globally competitive. Basically, its a hidden subsidy. Apparently the cost borne by the Govt (people) will be offset by the increase in revenue, jobs and the downstream secondary effects on the domestic economy. Or so they hope!!!

    There are some fundamental problems with this approach. If you remember, the main reason for the IT outsourcing boom was a genuine cost and competency advantage that our IT/ITES sector had over the West.

    But that was when our IT people were relatively low paid and we were getting to do jobs that the West did not want to do anyway. So it was party time. But now, we are getting bigger and bigger and swallowing up their core work and they are starting to get hurt. Around a decade ago we had unbeatable competitive advantage. That is fast receding from 3 angles:

    1. With the mega bust in the West, people will soon be willing to work for HALF current pay or less in the US. When Obama comes to power we may see REAL and significant pullback of work from India back to US. This may actually become a permanent problem for us over the medium term.

    2. In the last 2 years India has slipped from first position to 6th in desirability for outsourcing in the BPO segment. There are many other countries that do the job cheaper, if not better. Basically, clients are fed up with the traffic, infrastructure woes and constant churn (attrition) of people jumping jobs constantly. REAL ESTATE segment contributed its share by the unimaginable greed with which shoddy and unplanned buildings came up in rapid succession and were priced at exorbitant prices, making our offering cost-ineffective. We thought they had no choice but to put up with it. They found others instead

    3. Technology is fast emerging to slash and burn vast chunks of low-end BPO work (voice, text conversion from scanned images, etc). Technology will continue to put strong pressure on the ITES segment for many years to come.

    The moment the Govt ot any organised movement jumps in, they mess it up by doing precisely the wrong things. So, when ITES needed to be prodded to become MORE competitive, Govt idea of making people more competitive is to give tax breaks and land sops. Its like feeding an athlete all kinds of fatty foods in order to make him more athletic and competitive. It only makes him fatter, lazier and most unfit. Of course, in the short term it seems to work as profits (actually unpaid taxes) seems to be growing. Over time (as you can see by how hugely overpaid our IT executives have become relative to their capability and skills) it only leads to sloth and incompetence.

    Corporate greed has risen to new heights where the money has become so huge that any kind of sense, sensitivity to our weaker sections as well as sense of balance is fast disappearing. The blunders of Singur is a pointer to what may come up in other areas also.

    There is no doubt that a one-time and significant move is being seen with people moving from Rural to Urban India. Hundreds of millions are going to end up in Urban India and this can be either hugely beneficial or catastrophic, depending on how we manage it.

    I believe only a more India-specific and Farmer-sensitive approach to growing our comparitive advantage in many other areas like pharma, gems & jewellery, textiles, etc, rather than gifting away vast amounts of land at dirt-cheap prices to our greedy business leaders will eventually enable our exports sector to remain strong. As usual we will make mistakes first before learning from it and doing it right :)

    This "American" fixation on making money without effort (their main Industry today is the Financial Speculation Industry where money i made out of nothing) is catching on fast in India where people just want to land cheap anywhere, weave a story about how its going to shoot up, find a sucker and dump it on him for a fortune. This is being done even by the Real Estate Industry by way of "Land Banks". Same wine, different bottle. This must go and people must start going back to fundamentals of working and creating something real to make their fortunes gradually.

    cheers

    You seem to be some Pakistani mole despiscing Indian growth! Your background needs to be studied!
    CommentQuote
  • Interesting reading. nice one
    CommentQuote
  • Tax Uncertainty Keeping Investors away from SEZs -30/12/2010

    Finance ministry has also failed to establish a panel meant to review tax incentives to SEZ units and revenue losses incurred. Suneet MaheshwariEven as the government wrangles with when to bring in the Direct Taxes Code (DTC) and a goods & services tax (GST) to rationalise the country’s tax regime, the much-hyped special economic zone (SEZ) policy is seeing fewer investors as a result of uncertainty over the future tax regime.

    The ministry of commerce & industry is learnt to have asked the finance ministry to leave policy for SEZs untouched in order to allow exports from them grow. The finance ministry has also failed to establish a committee that was supposed to review the tax incentives given to SEZ units and revenue losses incurred. The ministry was asked to form the panel by the parliamentary standing committee on finance, headed by BJP leader and former finance minister Yashwant Sinha.

    “We have not received any communication from the finance ministry to set up such a committee. They (the finance ministry) were asked to form a group to assess revenue losses, which has not yet seen the light of day. This is bound to shake investors’ confidence. Even though developers and units have a 2014 sunset clause, investors are still shying away,” a senior commerce department official told Business Standard.

    The number of fresh proposals being considered by the board of approval under the commerce ministry has also seen a visible decline. According to officials, this is more because a number of SEZ projects already approved will take time to come up. On the other hand, those who had aggressive plans to build SEZs around the country have put their projects on hold.

    “I think it is high time the government takes a call on whether India needs SEZs, how many of them are required and the related tax breaks. If a project has been promised tax breaks, then it should be given. We need a clear tax regime and grandfather clauses. At the moment, there is considerable inconsistency and that is definitely shaking investors’ confidence,” said Suneet Maheshwari, chief executive, L&T Infrastructure Finance.Ravindra Sannareddy.

    Critically, SEZs have over the years failed to gain popular support, largely due to the problem of land acquisition. “There are still a lot of problems pertaining to SEZs. This country has no definite land acquisition policy, which is the biggest problem. This has made the whole SEZ issue a land-grab problem, even as the global slump has tempered the irrational exuberance,” said a Mumbai-based developer, who refused to be identified.

    SEZ units are given 100 per cent tax exemption for the first five years, 50 per cent for the next five years and 50 per cent on the ploughed back export profit for the next five years under Section 10AA of the Income-Tax Act. Under section 115JB, they are also exempted from minimum alternate tax. Besides, SEZ units are also exempted from central sales tax, service tax, state taxes and levies.

    “There is a need to provide stability and ongoing support to the SEZ scheme. The proposed DTC Bill must adequately provide for such support. It is imperative that all central and state government agencies make coordinated efforts for the proper and smooth implementation of the SEZ scheme,” said Ajay Nijhawan, vice-president, Reliance Haryana SEZ, and convener, Export Promotion Council for EOUs & SEZs. The draft DTC Bill has suggested continuation of the 15-year tax holiday for units that are operational by March 31, 2014. In other words, units have to actually start exporting before this date to avail of income-tax concessions.

    Developers, however, have mixed reactions to the entire imbroglio. According to Naveen Raheja, managing director, Raheja Developers, investors have “withdrawn from discussions with SEZ developers due to the proposed changes. DTC and GST are new concepts in India, but there are no firm plans to implement them. For a real estate player, both are critical and affect the general business scenario. The concept of taxation is changing, especially after the implementation of service tax on developers.”Naveen Raheja.
    However, Sri City, southern India’s largest private SEZ, has not been affected by such instability at all. “We have not yet been affected by the DTC imbroglio. It has not been difficult to rope in big names,” said Ravindra Sannareddy, managing director, Sri City SEZ. Sri City is currently developing the region’s largest multi-product SEZ located at Tada, Andhra Pradesh, spread over 6,000 acres at an investment of Rs 1,200 crore.

    Exports from SEZs continued to rise unabated, even though merchandise shipments from the country as a whole plummeted during the worldwide financial crisis. In 2009-10, exports from SEZs stood at Rs 13,937.04 crore, while exports to the domestic tariff area were Rs 19,201.78 crore. Between April and September of this fiscal, exports from SEZs topped Rs 1,39,842 crore, up 55.8 per cent over the corresponding period of 2009-10.
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  • SEZ

    Exports from SEZs continued to rise unabated, even though merchandise shipments from the country as a whole plummeted during the worldwide financial crisis. In 2009-10, exports from SEZs stood at Rs 13,937.04 crore, while exports to the domestic tariff area were Rs 19,201.78 crore. Between April and September of this fiscal, exports from SEZs topped Rs 1,39,842 crore, up 55.8 per cent over the corresponding period of 2009-10.

    Can u focus few lines on SEZ in Mumbai & its implications on residential sector asof today? Curious to view ur ideas.
    Savvy_v

    Can u focus few lines on SEZ in Mumbai & its implications on residential sector asof today? Curious to view ur ideas.
    Savvy_v
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  • Many of Mumbai SEZ's including that of L & T , Ambani's may be getting scrapped . NMSEZ authority seems to going ahead, with a few, but i am not really clear on that . Scrapping of SEZ's is definitely going to negatively impact residential's around it, but as such i have not found any reports of any studies, done on this .



    Blaming the global economic slowdown and uncertainty over tax laws governing special economic zones, or SEZs, India’s largest private engineering firm Larsen and Toubro Ltd (L&T) plans to drop its proposed 25-acre information technology (IT) SEZ in Mumbai.

    The commerce ministry’s board of approval for SEZs will take up L&T’s request for withdrawal at its 8 June meeting, according to the agenda of the meeting, a copy of which was reviewed by Mint. An L&T spokesperson declined to comment on the issue.

    “Larsen and Toubro was granted formal approval for setting up of sector-specific SEZ for information technology and information technology-enabled services at Powai, Mumbai, Maharashtra, over an area of 10 hectares,” the agenda of the board meeting noted.

    Acquired in 1948, L&T’s Powai campus is spread over 100 acres and is one of the few large industrial campuses still left in Mumbai. Only the Godrej group’s Vikhroli campus can boast of a larger area.

    The agenda attributed L&T’s change in stance to a changed “environment for the IT business, which is a fallout of global recession”, along with “uncertainty in tax provisions”.

    The firm’s IT subsidiary, L&T Infotech Ltd, had reported a 6.3% drop in revenue in the year ended 31 March, blaming it on falling global demand.

    Tax experts agree that firms need to worry about the new tax regime that is being finalized and is expected to be imposed from 1 April.

    “Companies which already have or were planning to set up SEZ units are now worried that the draft of new Direct Tax Code does not mention anything about tax holiday benefits for companies operating in SEZ units,” said Naveen Aggarwal, executive director at audit and consultancy firm KPMG.

    Under current laws, developers of SEZ units are eligible for tax benefits up to 10 years, while business units operating from SEZs are eligible for 100% tax holiday for the first five years, and 50% for the next 10 years where the benefit during the last five years is subject to conditions. These provisions will not be applicable after 31 March.

    IT firms have been trying to set up operations in SEZs as the tax holiday scheme for Technology Parks of India, introduced in 2000-01, will also expire on 31 March.

    “The hope now is that the revised draft of the new tax code, expected in early June, will likely address the issue of tax holiday for business units in SEZs, which most experts believe is an oversight,” Aggarwal said. - lison.jlivemint.com , 30th MAY 2010
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