SPECIAL ECONOMIC Zones (SEZs) were a blatantly ‘silly idea’ for any State in the current wave of economic liberalisation, said eminent economist Bibek Debroy.
“It is like the government saying it could not open the economy two decades back, so it was opening it now in the form of SEZs. The government established a “free trade zone” in 1965 at Kandla in Gujarat, which was a failure,” he told reporters on his visit to the city on Thursday.
Debroy, who is also the secretary-general of the PHD Chamber of Commerce & Industry (PHDCCI), said the PHDCCI did not have a view on SEZs. “I am speaking in the personal capacity of an economist to say that the different labour laws being framed for the SEZs in various States are a violation of the Article 19 of the Indian Constitution. You cannot have different labour laws for different States,” he said.
Debroy said that he was not in favour of governments offering “tax sops” to developers and even the units which were to be established inside SEZs. “If you want to offer tax sops, offer it to the units which are being set up outside SEZs. By encouraging tax exemptions in SEZs, we are creating fresh distortions in revenue collection models,” he said.
“If you are bringing distortions in revenue collection models by offering tax sops to the SEZ developers and the units inside them, you are also creating distortions in land markets as developing SEZs means ignoring issues of compensation and rehabilitation of the people who have been displaced from their land,” he said.
“I am very unhappy with the way the government has been pushing the idea of SEZs across the country. This will result in soaring land prices and dissatisfied people who may end up with inadequate compensation for land used for developing SEZs,” Debroy said.
To a query on whether UP was on a sticky wicket by not adopting Value Added Tax (VAT) he commented: “The inter-State movement of goods is drastically affected in the absence of a VAT regime. Uttar Pradesh will ultimately adopt VAT to prevent this embarrassment.”
“Every State that has adopted the VAT regime has seen revenues shooting up. If Uttar Pradesh adopts VAT, the revenues could go up further in the State,” he said.
On whether the World Bank (WB) should stop funding projects in Uttar Pradesh to recover outstanding loans, he said the WB must have offered the loans to Uttar Pradesh only after studying the capacity of the State to repay. “The WB should be actually termed the “African Development Bank”. We (India) don’t need money from the WB, but require its vast pool of technical expertise for introducing reforms in various sectors of the Indian economy,” he added.