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Taxmen's loss is SEZs' gain

Areas of over 10,000 hectares will be a part of the dozens of approved and planned SEZs, reports Neelesh Misra.

india Updated: Oct 16, 2006 03:22 IST
Neelesh Misra
Neelesh Misra

India’s taxmen are set to lose 100,000 hectares of industrial area, more than the area of sprawling New York City, to a new country — which is constantly growing in size.

That new territory, scattered all over India, will be part of the dozens of approved and planned Special Economic Zones (SEZ), billed as low-tax, no-hassle, high-priority enclaves that are fast becoming the supreme policy initiative of Prime Minister Manmohan Singh’s government.

They will be part of an unprecedented tax regime, with flexible economic laws that will save businesses there much more money than those located outside their walls. For tax purposes, they will be considered “foreign territory.”

Assuming that all is farmland, the 100,000 hectares used for building the zones would produce 250 million kilograms of rice or 70 million kilograms of sugarcane, going by national crop averages. With those concerns in mind, the central government has now told the states to make sure only barren land is used to build SEZs.

The SEZs will range from 10 hectares to self-contained townships across thousands of hectares. There will be airports, immaculately designed roads, state-of-the art hospitals,schools, movie theatres, shopping malls, homes and manicured parks. It is conceivable that overseas visitors would be able to fly in and out of these picturesque preserves without having to face the real India.

“I think in our lifetime this is the biggest intervention of economic policy that we have seen,’’ Vinayak Chatterjee, chairman of the National Council on Infrastructure at the Confederation of Indian Industry, said.

Indian criminal laws will apply to these special economic zones. Thefts and murders will be investigated by a single enforcement agency, and offenders will be tried in special courts. Labour unions will be allowed.

Occupants of of these “zones” will be pampered with unheard-of tax breaks. So companies are lining up to develop them. More than 200 proposals have been approved and dozens of others are under consideration.

Those living outside the SEZ walls in the real India will not be barred by the walls of these mirage-like commercial oasis.

They will be able to work there, watch movies, send children to schools, get treated at SEZ hospitals and splurge at their shopping malls, just like those living inside them.

Not all are saying “hurrah,” though. The finance ministry says the creation of SEZs will mean revenue losses of about Rs 90,000 crore.

The Reserve Bank of India says SEZs could set off an uneven pattern of development by sucking out resources from less developed areas.

But the commerce ministry says these enclaves will bring in millions of dollars in new investment, give a push-button boost to economic growth, and create hundreds of thousands of jobs. Even if there are revenue losses of Rs 90,000 crore, says Commerce Secretary Gopal Pillai, the ministry estimates a net annual gain of Rs 50,000 crore.

First Published: Oct 16, 2006 03:22 IST