Tathya.in
 S B Mishra |
Bhubaneswar:3/May/2007
Special Economic Zone (SEZ) is one of the most sensitive and controversial issues in our country in recent times.
The government feels that SEZs will spawn rapid industrial and economic growth. How ever many economists, social activists and a dominant section of media question this rationale.
They feel that the benefits will be far less than the sacrifice.
There are two serious problems with SEZ. The first is land acquisition on which most criticisms are focused. Following Kalinga Nagar in Orissa and Nandigram in West Bengal, the land issue involving great human anguish and political sensitivity, have taken the center stage.
But the second and equally critical problem relates to colossal loss of public (Center and States) revenue through liberal tax sops.
According to the reply to a Parliament question, the first seventy or so SEZs involve tax breaks amounting to Rs.100,000 crores. Loss from over 400 SEZs expected to materialize, will be staggering.
Govt. says that the loss will be more than compensated by future revenues from new investments and employment generation. Experts say that while the estimate of loss is realistic, the net gain may not be substantial.
The way the present SEZ scheme is structured (an SEZ unit has to be net foreign exchange earner) most industries manufacturing products with low import content / duty structure will primarily cater to the domestic market putting the existing units outside SEZs in jeopardy.
In the present liberalized environment, much of the new investment would flow even without SEZs.
Mineral based industries like POSCO and Jindal Stainless Steel in Orissa do not need SEZ incentives to come up. As such, incremental investment / revenue / benefit on account of SEZ would not be substantial as argued by the Govt.
The Indian SEZ scheme is ostensibly modeled after China. In China, despite the human cost to rural farmers, SEZs have propelled the economy through FDI flow and booming foreign trade.
Sadly, the Indian SEZ scheme is a distortion of the Chinese version. China, a closed economy in the 1980s and desperately in need of foreign investment / exchange, had to adopt liberalized policies (including flexible labour laws) in sheltered SEZ enclaves.
In India, times are different now, with massive foreign exchange reserve and free FDI flow in the liberalized regime. Prof. Jagdish Bhagabati, famous economist and “Globalisation Guru” has said that India does not need SEZs at this juncture.
One does not need the scaffolding when the building is ready. He says that SEZ is a wrong policy at the wrong time.
China has only 6 large sized SEZs (the largest, Senzen, comprises about 50,000 hect) in coastal locations with world-class infrastructure and facilities like captive ports, airports and international financial hubs.
Indian SEZs are tiny by comparison (10 hect for IT sector), too many (over 400) and in all kinds of locations. Many are suspected to be primarily real estate ventures.
All States are competing for new SEZs. Most leading Industrial / Business houses and prominent Real Estate Developers want to put up SEZs.
A free for all situation prevails. Unlike China, the emphasis here is on tax sops and not on world-class infrastructure. On the other hand, most SEZs will put tremendous strain on the creaking infrastructure in nearby urban areas.
Chinese SEZs are State controlled, most Indian SEZs are established by private developers. The Chinese SEZ hosts diverse manufacturing / service enterprises.
Indian law permits single company / single product facilities to get SEZ status. Mineral processing ventures of POSCO, Jindal, Hindalco, Vedanta, etc.
in Orissa are examples. Chinese SEZ units are mostly export oriented while many of the Indian counterparts may cater primarily to the domestic market.
In India, tax exemptions for SEZs are far wider and deeper than in China – 5 years full tax exemption (customs duty, excise duty, income tax, VAT, CST, etc. for developers as well as resident units) followed by 50% exemption for another 5 years, compared to mostly 2 years followed by another 2 years in China.
Thus, the Indian SEZ policy seems to be a grave policy error combining farmers woes with gratuitous revenue giveaways without commensurate benefits. Unfortunately, the issue is not adequately mainstreamed in political establishments.
The political parties are mostly quiet; only recently Left parties seem to have given up their ambivalence and have started questioning the rationale of the policy. Clearly, the collective conscience of the nation needs to resist this misadventure.
THE POSCO ISSUE :
POSCO is the largest FDI in India and provides an opportunity for any mineral rich State.
“Orissa is poor despite its vast natural resources” has become a favourite refrain of all and sundry. A global economic boom is noticeable all round as never before.
Indian economy, too, is growing rapidly. This is the best time for Orissa, rich in mineral reserves, to harness these resources to take advantage of the high international price / demand for metals and convert natural resources into actual wealth.
In this context, POSCO and other mega mineral based industries offer great opportunities for the State.
Of course, the process of establishing mega ventures should be all-inclusive and should address, satisfactorily, issues like environment, rehabilitation and optimal State-interest.
However, in the State’s interest, according SEZ status to POSCO is unnecessary and uncalled for. Similarly, the proposal for exporting substantial quantities of mineral ore is outrageous.
Thirdly, if the sourcing of water for POSCO is from Mahanadi irrigation system in coastal Orissa as reported, the impact on irrigated farmlands would be considerable.
If these issues are re-negotiated and popular consensus at the grass root level for land acquisition is settled through dialogue and if required by redefining the project area, POSCO would be a good harbinger of the State’s progress.
Unfortunately, the situation at the project site, as at Kalinga Nagar for the Tata Steel project, is getting more and more complicated, thanks to the inept handling of the situation.
The State is over-dependent on bureaucracy and doesn’t seem to encourage grass root political mobilization for consensus building.
Why can’t local MLAs at Kujang and Kalinga Nagar (both most powerful functionaries of the ruling party in Orissa) and PRI representatives of the ruling coalition work towards grass root engagement of affected people through dialogue and debate and persuade their Govt. to apply correctives, as needed?
Clearly, the political/administrative leadership of the State is clueless about this messy situation of its own- making and is caught in the quagmire of ambivalence and inaction.
By Mr.S. B. Mishra,Former Chief Secretary,Orissa.
Special Economic Zone (SEZ) is one of the most sensitive and controversial issues in our country in recent times.
The government feels that SEZs will spawn rapid industrial and economic growth. How ever many economists, social activists and a dominant section of media question this rationale.
They feel that the benefits will be far less than the sacrifice.
There are two serious problems with SEZ. The first is land acquisition on which most criticisms are focused. Following Kalinga Nagar in Orissa and Nandigram in West Bengal, the land issue involving great human anguish and political sensitivity, have taken the center stage.
But the second and equally critical problem relates to colossal loss of public (Center and States) revenue through liberal tax sops.
According to the reply to a Parliament question, the first seventy or so SEZs involve tax breaks amounting to Rs.100,000 crores. Loss from over 400 SEZs expected to materialize, will be staggering.
Govt. says that the loss will be more than compensated by future revenues from new investments and employment generation. Experts say that while the estimate of loss is realistic, the net gain may not be substantial.
The way the present SEZ scheme is structured (an SEZ unit has to be net foreign exchange earner) most industries manufacturing products with low import content / duty structure will primarily cater to the domestic market putting the existing units outside SEZs in jeopardy.
In the present liberalized environment, much of the new investment would flow even without SEZs.
Mineral based industries like POSCO and Jindal Stainless Steel in Orissa do not need SEZ incentives to come up. As such, incremental investment / revenue / benefit on account of SEZ would not be substantial as argued by the Govt.
The Indian SEZ scheme is ostensibly modeled after China. In China, despite the human cost to rural farmers, SEZs have propelled the economy through FDI flow and booming foreign trade.
Sadly, the Indian SEZ scheme is a distortion of the Chinese version. China, a closed economy in the 1980s and desperately in need of foreign investment / exchange, had to adopt liberalized policies (including flexible labour laws) in sheltered SEZ enclaves.
In India, times are different now, with massive foreign exchange reserve and free FDI flow in the liberalized regime. Prof. Jagdish Bhagabati, famous economist and “Globalisation Guru” has said that India does not need SEZs at this juncture.
One does not need the scaffolding when the building is ready. He says that SEZ is a wrong policy at the wrong time.
China has only 6 large sized SEZs (the largest, Senzen, comprises about 50,000 hect) in coastal locations with world-class infrastructure and facilities like captive ports, airports and international financial hubs.
Indian SEZs are tiny by comparison (10 hect for IT sector), too many (over 400) and in all kinds of locations. Many are suspected to be primarily real estate ventures.
All States are competing for new SEZs. Most leading Industrial / Business houses and prominent Real Estate Developers want to put up SEZs.
A free for all situation prevails. Unlike China, the emphasis here is on tax sops and not on world-class infrastructure. On the other hand, most SEZs will put tremendous strain on the creaking infrastructure in nearby urban areas.
Chinese SEZs are State controlled, most Indian SEZs are established by private developers. The Chinese SEZ hosts diverse manufacturing / service enterprises.
Indian law permits single company / single product facilities to get SEZ status. Mineral processing ventures of POSCO, Jindal, Hindalco, Vedanta, etc.
in Orissa are examples. Chinese SEZ units are mostly export oriented while many of the Indian counterparts may cater primarily to the domestic market.
In India, tax exemptions for SEZs are far wider and deeper than in China – 5 years full tax exemption (customs duty, excise duty, income tax, VAT, CST, etc. for developers as well as resident units) followed by 50% exemption for another 5 years, compared to mostly 2 years followed by another 2 years in China.
Thus, the Indian SEZ policy seems to be a grave policy error combining farmers woes with gratuitous revenue giveaways without commensurate benefits. Unfortunately, the issue is not adequately mainstreamed in political establishments.
The political parties are mostly quiet; only recently Left parties seem to have given up their ambivalence and have started questioning the rationale of the policy. Clearly, the collective conscience of the nation needs to resist this misadventure.
THE POSCO ISSUE :
POSCO is the largest FDI in India and provides an opportunity for any mineral rich State.
“Orissa is poor despite its vast natural resources” has become a favourite refrain of all and sundry. A global economic boom is noticeable all round as never before.
Indian economy, too, is growing rapidly. This is the best time for Orissa, rich in mineral reserves, to harness these resources to take advantage of the high international price / demand for metals and convert natural resources into actual wealth.
In this context, POSCO and other mega mineral based industries offer great opportunities for the State.
Of course, the process of establishing mega ventures should be all-inclusive and should address, satisfactorily, issues like environment, rehabilitation and optimal State-interest.
However, in the State’s interest, according SEZ status to POSCO is unnecessary and uncalled for. Similarly, the proposal for exporting substantial quantities of mineral ore is outrageous.
Thirdly, if the sourcing of water for POSCO is from Mahanadi irrigation system in coastal Orissa as reported, the impact on irrigated farmlands would be considerable.
If these issues are re-negotiated and popular consensus at the grass root level for land acquisition is settled through dialogue and if required by redefining the project area, POSCO would be a good harbinger of the State’s progress.
Unfortunately, the situation at the project site, as at Kalinga Nagar for the Tata Steel project, is getting more and more complicated, thanks to the inept handling of the situation.
The State is over-dependent on bureaucracy and doesn’t seem to encourage grass root political mobilization for consensus building.
Why can’t local MLAs at Kujang and Kalinga Nagar (both most powerful functionaries of the ruling party in Orissa) and PRI representatives of the ruling coalition work towards grass root engagement of affected people through dialogue and debate and persuade their Govt. to apply correctives, as needed?
Clearly, the political/administrative leadership of the State is clueless about this messy situation of its own- making and is caught in the quagmire of ambivalence and inaction.
By Mr.S. B. Mishra,Former Chief Secretary,Orissa.
posted by Sandip K. Dasverma @ 3:44 AM
0 comments
0 Comments:
Post a Comment
<< Home